SECTIONS 12490 - California Statutes

CORPORATIONS CODE

SECTION 12490

12490. (a) Subdivisions (c) through (f) notwithstanding, no motion
to require security shall be granted in an action brought by the
lesser of 100 members or 5 percent of the members.
(b) No action may be instituted or maintained in the right of any
corporation by any member of such corporation unless both of the
following conditions exist:
(1) The plaintiff alleges in the complaint that plaintiff was a
member at the time of the transaction or any part thereof of which
plaintiff complains, or that plaintiff's membership thereafter
devolved upon plaintiff by operation of law from a holder who was a
holder at the time of transaction or any part thereof complained of;
and
(2) The plaintiff alleges in the complaint with particularity
plaintiff's efforts to secure from the board such action as plaintiff
desires, or the reasons for not making such effort, and alleges
further that plaintiff has either informed the corporation or the
board in writing of the ultimate facts of each cause of action
against each defendant or delivered to the corporation or the board a
true copy of the complaint which plaintiff proposes to file.
(c) Subject to subdivision (a), in any action referred to in
subdivision (b), at any time within 30 days after service of summons
upon the corporation or upon any defendant who is an officer or
director of the corporation, or held such office at the time of the
acts complained of, the corporation or such defendant may move the
court for an order, upon notice and hearing, requiring the plaintiff
to furnish security as hereinafter provided. The motion shall be
based upon one or both of the following grounds:
(1) That there is no reasonable possibility that the prosecution
of the cause of action alleged in the complaint against the moving
party will benefit the corporation or its members economically or
otherwise.
(2) That the moving party, if other than the corporation, did not
participate in the transaction complained of in any capacity.
The court on application of the corporation or any defendant may,
for good cause shown, extend the 30-day period for an additional
period or periods not exceeding 60 days.
(d) At the hearing upon any motion pursuant to subdivision (c),
the court shall consider such evidence, written or oral, by witnesses
or affidavit, as may be material (1) to the ground or grounds upon
which the motion is based, or (2) to a determination of the probable
reasonable expenses, including attorneys' fees, of the corporation
and the moving party which will be incurred in the defense of the
action. If the court determines, after hearing the evidence adduced
by the parties, that the moving party has established a probability
in support of any of the grounds upon which the motion is based, the
court shall fix the nature and amount of security, not to exceed
fifty thousand dollars ($50,000), to be furnished by the plaintiff
for reasonable expenses, including attorneys' fees, which may be
incurred by the moving party and the corporation in connection with
the action, including expenses for which the corporation may become
liable pursuant to Section 12377. A ruling by the court on the motion
shall not be a determination of any issue in the action or of the
merits thereof. The amount of the security may thereafter be
increased or decreased in the discretion of the court upon a showing
that the security provided has or may become inadequate or is
excessive, but the court may not in any event increase the total
amount of the security beyond fifty thousand dollars ($50,000) in the
aggregate for all defendants. If the court, upon any such motion,
makes a determination that security shall be furnished by the
plaintiff as to any one or more defendants, the action shall be
dismissed as to such defendant or defendants, unless the security
required by the court shall have been furnished within such
reasonable time as may be fixed by the court. The corporation and the
moving party shall have recourse to the security in such amount as
the court shall determine upon the termination of the action.
(e) If the plaintiff shall, either before or after a motion is
made pursuant to subdivision (c), or any order or determination
pursuant to such motion, post good and sufficient bond or bonds in
the aggregate amount of fifty thousand dollars ($50,000) to secure
the reasonable expenses of the parties entitled to make the motion,
the plaintiff has complied with the requirements of this section and
with any order for security theretofore made pursuant hereto, and any
such motion then pending shall be dismissed and no further or
additional bond or other security shall be required.
(f) If a motion is filed pursuant to subdivision (c), no pleadings
need be filed by the corporation or any other defendant and the
prosecution of the action shall be stayed until 10 days after the
motion has been disposed of.