SECTIONS 17500-17501 - California Statutes

CORPORATIONS CODE

SECTION 17500-17501

17500. Any member of a foreign or domestic limited liability
company may bring a class action on behalf of all or a class of
members to enforce any claim common to those members and any such
action shall be governed by the law governing class actions
generally, provided that in order to maintain the class action there
shall be no requirement that the class be so numerous that joinder of
all members of the class is impracticable.

17501. (a) No action shall be instituted or maintained in right of
any domestic or foreign limited liability company by any member of
the limited liability company unless both of the following conditions
exist:
(1) The plaintiff alleges in the complaint that plaintiff was a
member of record, or beneficiary, at the time of the transaction or
any part thereof of which plaintiff complains, or that plaintiff's
interest thereafter devolved upon plaintiff by operation of law from
a member who was a member at the time of the transaction or any part
thereof complained of. Any member who does not meet these
requirements may nevertheless be allowed in the discretion of the
court to maintain the action on a preliminary showing to and
determination by the court, by motion and after a hearing at which
the court shall consider any evidence, by affidavit or testimony, as
it deems material, of all of the following:
(A) There is a strong prima facie case in favor of the claim
asserted on behalf of the limited liability company.
(B) No other similar action has been or is likely to be
instituted.
(C) The plaintiff acquired the interest before there was
disclosure to the public or to the plaintiff of the wrongdoing of
which plaintiff complains.
(D) Unless the action can be maintained, the defendant may retain
a gain derived from defendant's willful breach of a fiduciary duty.
(E) The requested relief will not result in unjust enrichment of
the limited liability company or any member of the limited liability
company.
(2) The plaintiff alleges in the complaint with particularity
plaintiff's efforts to secure from the managers the action plaintiff
desires or the reasons for not making that effort, and alleges
further that plaintiff has either informed the limited liability
company or the managers in writing of the ultimate facts of each
cause of action against each defendant or delivered to the limited
liability company or the managers a true copy of the complaint that
plaintiff proposes to file.
(b) In any action referred to in subdivision (a), at any time
within 30 days after service of summons upon the limited liability
company or upon any defendant who is a manager of the limited
liability company or held that position at the time of the acts
complained of, the limited liability company or the 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 limited liability company or its members.
(2) That the moving party, if other than the limited liability
company, did not participate in the transaction complained of in any
capacity. The court, on application of the limited liability company
or any defendant, may, for good cause shown, extend the 30-day period
for an additional period not exceeding 60 days.
(c) At the hearing upon any motion pursuant to subdivision (b),
the court shall consider evidence, written or oral, by witnesses or
affidavit, as may be material (1) to the ground upon which the motion
is based, or (2) to a determination of the probable reasonable
expenses, including attorneys' fees, of the limited liability company
and the moving party that 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, that may be
incurred by the moving party and the limited liability company in
connection with the action. 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 a 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 that defendant
or defendants, unless the security required by the court has been
furnished within any reasonable time as may be fixed by the court.
The limited liability company and the moving party shall have
recourse to the security in the amount that the court determines upon
the termination of the action.
(d) If the plaintiff, either before or after a motion is made
pursuant to subdivision (b), or any order or determination pursuant
to that motion, posts 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 shall be deemed to have complied with the requirements of
this section and with any order for security made pursuant to this
section. Any motion then pending shall be dismissed and no further or
additional bond or other security shall be required.
(e) If a motion is filed pursuant to subdivision (b), no pleadings
need be filed by the limited liability company or any other
defendant and the prosecution of the action shall be stayed until 10
days after the motion has been disposed of.