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LLC Derivative Action Attorney Fees

A derivative action in limited liability company (“LLC”) litigation is generally when a member (i.e., owner) brings an action against the manager or managing member for causing a loss to the LLC. The action is “derivative” in that the member is suing on behalf of the LLC to recover an injury that the LLC sustained. Any monies recovered in the litigation would be given to the LLC, not the individual owner/member bringing the lawsuit. One of the added benefits of LLC derviative actions is that, unlike with most litigation, there is a statutory attorney fee provision that may be utilized in Section 347.175, RSMo: “[i]f a derivative action is successful, in whole or in part, or if anything is received by the plaintiff as a result of a judgment, compromise or settlement of an action or claim, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees, and shall direct him to remit to the limited liability company the remainder of those proceeds received by him.” 

Note that this statute provides the court discretion to award reasonable expenses. It is not a madatory award. Accordingly, if you are engaged in LLC litigation relating to losses to the LLC, it would be wise to request attorney fees and expenses. While, based on experience, generally courts are reluctant to award fees-costs, there is often more willingness to do so if the underlying conduct is more egregious.