DOROTHY C. DAVIS, DERIVATIVELY ON BEHALF OF WOODSIDE PROPERTIES, LLC
MKR DEVELOPMENT, LLC, ET AL.
THE CIRCUIT COURT OF THE CITY OF HOPEWELL James F.
D'Alton, Jr., Judge. 
STEPHEN R. McCULLOUGH JUSTICE.
circuit court dismissed without prejudice this derivative
action on the ground that the plaintiff had failed to first
make a demand for the limited liability company to take
action. The plaintiff appeals from this ruling, arguing that
the law does not require such a demand when doing so would be
futile. The applicable statute, Code § 13.1-1042, and
related provisions present us with a conundrum because
competing canons of statutory construction point in opposite
directions. We resolve this conundrum by concluding that the
2011 amendments to Code § 13.1-1042 did not abolish the
futility exception to the demand requirement as established
in case law preceding enactment of the statute. Consequently,
we reverse and remand the case for further proceedings.
to the allegations in the amended complaint, Melvin Davis
Sr., the husband of Dorothy and the father of Kaye, Melvin
Jr. and Rex, founded and owned Melvin L. Davis Oil Company.
He sold the company stock to his three children. Melvin and
Dorothy also owned real estate that the oil company leased.
Melvin and Dorothy formed Woodside Properties as a limited
liability company to take ownership of this real estate.
Melvin and Dorothy intended to establish a vehicle through
which they would receive income from Davis Oil's rental
of these properties. The operating agreement for Woodside
Properties appoints MKR Development, LLC as the manager of
Woodside Properties. Under MKR's operating agreement,
Rex, Melvin Jr., and Kaye are its managers.
who presently owns 72 percent of Woodside Properties, alleges
that as of December 31, 2011, Woodside Properties should have
received $1, 374, 147 in rent under the lease. Instead, she
alleges, the bank account established for Woodside Properties
had a balance of $35, 000. She also asserts that funds that
should have gone to Woodside Properties were used for
improper purposes. When she asked Melvin Jr. and Rex for
payment of funds due, they refused. They also refused to provide
13, 2014, Dorothy filed a complaint, which she later amended,
against MKR Development, LLC and her two sons, Melvin Jr. and
Rex, as well as Woodside Properties, LLC. She alleges
inter alia that MKR and her sons, as managers, had
breached their fiduciary duties towards Woodside Properties,
were wasting corporate assets, and unjustly enriching
themselves. She asked for MKR to be removed as manager of
Woodside Properties, and for a decree imposing a constructive
trust and requiring an accounting.
the amended complaint states that
Mrs. Davis did not make demand on MKR, Mel, and/or Rex to
bring this action on behalf of Woodside Properties because
such demand would have been a futile, wasteful, and useless
act as they were the parties who authorized and ratified the
alleged wrongful conduct complained of herein and were the
direct beneficiaries thereof, and are incapable of making an
independent and disinterested decision to institute and
vigorously prosecute this action.
response, the defendants filed a plea in bar and demurrer,
alleging, among other things, that the complaint was barred
because Dorothy had not made a "proper demand as
required by" Code § 13.1-1042. The court agreed,
granted the plea in bar, and dismissed the complaint on that
basis. Dorothy appeals from this decision.
question before us is one of statutory construction, which we
review de novo. Perreault v. Free Lance-Star, 276
Va. 375, 384, 666 S.E.2d 352, 357 (2008).
derivative form of action permits an individual shareholder
to bring "suit to enforce a corporate cause of
action against officers, directors, and third parties."
Ross v. Bernhard, 396 U.S. 531, 534 (1970). Devised
as a suit in equity, the purpose of the derivative action is
to place in the hands of the individual shareholder a means
to protect the interests of the corporation from the
misfeasance and malfeasance of "faithless directors and
managers." Cohen v. Beneficial Indus. Loan
Corp., 337 U.S. 541, 548 (1949). See also Simmons v.
Miller, 261 Va. 561, 573, 544 S.E.2d 666, 674 (2001)
("A derivative action is an equitable proceeding in
which a shareholder asserts, on behalf of the corporation, a
claim that belongs to the corporation rather than the
prevent abuse of this remedy, however, equity courts required
the shareholder to "allege and prove that a request or demand has been made upon the
board of directors, or other body managing the corporation
that they institute proceedings on the part of the
corporation against the wrong-doers, and their refusal to do
so after reasonable request, or demand." Mountv. Radford Trust Co., ...