SECTIONS 7710 - California Statutes

CORPORATIONS CODE

SECTION 7710

7710. (a) Subdivisions (c) through (f) notwithstanding, no motion
to require a bond shall be granted in an action brought by 100
members or the authorized number (Section 5036), whichever is less.
(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 a bond 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 amount of the bond, 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 7237. A ruling by the court on the motion shall
not be a determination of any issue in the action or of the merits
thereof. If the court, upon any such motion, makes a determination
that a bond 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 bond required by the court has been furnished
within such reasonable time as may be fixed by the court.
(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, furnish a 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 a bond theretofore made, and any such motion then pending shall
be dismissed and no further or additional bond 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.