LANMAN LITHOTECH, INC., Etc., et al., Petitioners,
v.
Stanley GURWITZ, et al., Respondents.
District Court of Appeal of Florida, Fifth District.
*426 Harlan Tuck of Giles, Hedrick & Robinson, P.A., Orlando, for petitioners.
Jeffrey Allen Tew and Robert B. Galt III, of Kirkpatrick & Lockhart, Miami, for respondents.
COWART, Judge.
Two main issues are presented in this petition for writ of common law certiorari. The first is whether the right to jury trial exists in a shareholder's derivative action. The second is whether punitive damages are recoverable in such actions.
Three sharеholders of Lanman Lithotech, Inc. (Lanman) initiated a derivative action against three officers and directors of Lаnman and their third person business organizations. Although Lanman was named a defendant in this action, Lanman is the real party in interеst with the shareholders being at best the nominal plaintiffs. The first three counts of plaintiffs-shareholders' four count amended cоmplaint demanded judgment for breach of fiduciary duty, fraud, and conversion. The fourth count requested the appointment оf a receiver to liquidate the assets of Lanman. The plaintiffs sought punitive damages in each of the first three counts, and demanded a jury trial for all issues triable as of right by jury. The defendants filed a motion to strike certain matters from the amended complaint, including the demands for jury trial and punitive damages. The trial court denied the motion to strike. The defendants petition this court for a writ of common law certiorari.
Historically, a shareholder's derivative action could be brought only in еquity. The federal constitutional right to a civil jury trial (U.S. Const. amend. VII) attached only to suits at common law that were tried to the jury in 1791 when the seventh amendment was adopted. Actions in equity, which were tried to the court, were unaffected by the seventh amendment.[1] Shareholders' derivative actions, which were not recognized until the 19th century,[2] were likewise unaffected by the seventh amendment until 1970. In that year, the U.S. Supreme Court in Ross v. Bernhard,
The seventh amendment is not incorpоrated in the fourteenth amendment and therefore is not applicable to state proceedings. See Florida East Coast R. Co. v. Hayes,
Although the U.S. Supreme Court in Ross v. Bernhard assumes a shareholder's *427 derivative action has a dual nature, traditionally a derivative action in practice was always treated as a single cаuse tried exclusively in equity. Before Ross v. Bernhard, commentators agreed that there was no constitutional right to a jury trial in a sharehоlder's derivative action even where there might have been one had the corporation itself brought the actiоn. See Ross v. Bernhard, supra (Stewart, J. dissenting).
The U.S. Supreme Court grounded its decision in Ross v. Bernhard partly on the change in the federal rules which procedurally merged actions at law and suits in equity.[3] The U.S. Supreme Court reasoned that the historical rule preventing a court of law from entertaining a shareholder's derivative suit had becоme obsolete and it was no longer reasonable for a court which administers both law and equity in the same action to deny legal remedies to a corporation merely because the corporate claim is presented by its shareholders rather than its directors. However, a shareholder's derivative action since its inception has been wholly a creature of equity, not because of procedural impediments later removed by the federal rules, but bеcause the law refused to borrow from equity the idea that shareholders could litigate the claims of their corpоration. Therefore, a shareholder's derivative action in equity was the only way to seek redress before a court when the corporation refused to pursue its own remedies.
Florida's constitutional right to jury trial guarantees a right to trial by jury in those cases in which such right was recognized when Florida's first constitution became effective in 1845. See Dudley v. Harrison, McCready and Co.,
As a shareholder's derivative action is an equitable action, plaintiffs' demand for relief as to punitive damages runs counter to the traditional view that equity will not award punitive damages unless authorized by statute. See Hoppe v. Hoppe,
WRIT GRANTED. ORDER QUASHED.
COBB, C.J., and SHARP, J., concur.
NOTES
Notes
[1] However, historians have discovered that in 1791 juries were sometimes used in еquity actions, which means that although the use of juries in equity was not guaranteed in 1791, its use was not foreclosed. See Comment, The Right to Strike the Jury Trial Demand in Complex Litigation, 34 U. of Miami L.Rev. 243, 257 (1980). Compare Chesnin and Hazard, Chancery Procedure and the Seventh Amendment: Jury Trial of Issues in Equity Cases Before 1791, 83 Yale L.J. 999 (1974), with Langbein, Fact Finding in the English Court of Chancery: A Rebuttal, 83 Yale L.J. 1620 (1974).
[2] See 13 W. Fletcher, Cyclopedia of the Law of Private Corporations § 5940 (rev. perm. ed. 1984).
[3] The drafters of the Floridа Rules of Civil Procedure followed the federal rules, and designated one form of action to be known as a "civil action." See Florida Rule of Civil Procedure 1.040.
[4] This, of course, would not prevent the trial judge from granting a jury trial as a matter of discretion.