David O. Russell's Niece -- The Fight Ain't Over Yet!!!

David O. Russell's transgender niece isn't giving up after cops refused to file charges against the director -- family sources tell TMZ, she plans to do whatever she can to reopen the case.

TMZ broke the story ... the Broward County Sheriff's Office has closed the case against Russell -- after his niece claimed the director groped her breasts -- "because it's an allegation of simple battery that was not witnessed by law enforcement."

Her only option now is to take her case to the State's Attorney on her own -- and we're told she's strongly considering making the move. If successful, Russell could still face criminal charges.

As we previously reported, Russell's 19-year-old niece told police the "Fighter" director inappropriately grabbed her breasts during a workout session at a Florida hotel.

A family source tells us ... Russell's niece really looked up to him ... and she believes he lured her into a false sense of security before taking advantage of her.

But Russell has proclaimed his innocence from the beginning. According to the police report, Russell admits touching her breast -- out of curiosity and with her consent -- during a discussion about the hormone treatments she was undergoing.