2021 Arizona Revised Statutes
Title 29 - Partnership
§ 29-3805 - Special litigation committee

29-3805. Special litigation committee

A. If a limited liability company is named as or made a party in a derivative proceeding, the company may appoint a special litigation committee to investigate the claims asserted in the proceeding and determine whether pursuing the action is in the best interests of the company. If the company appoints a special litigation committee, on motion by the committee made in the name of the company, except for good cause shown, the court shall stay the derivative proceeding for the time reasonably necessary to permit the committee to make its investigation, make a determination under subsection D of this section and file with the court a statement of its determination and supporting report under subsection E of this section. This subsection does not prevent the court from either of the following:

1. Enforcing a person's right to information under section 29-3410.

2. Granting extraordinary relief in the form of a temporary restraining order or preliminary injunction.

B. A special litigation committee must be composed of one or more disinterested and independent individuals who may be members.

C. A special litigation committee may be appointed:

1. In a member-managed limited liability company, by either of the following:

(a) The affirmative vote or consent of a majority in interest of the members that are not named as parties in the proceeding.

(b) If all members are named as parties in the proceeding, a majority in interest of the members that are named as defendants.

2. In a manager-managed limited liability company, by either of the following:

(a) A majority of the managers that are not named as parties in the proceeding.

(b) If all managers are named as parties in the proceeding, a majority of the managers that are named as defendants.

D. After appropriate investigation, a special litigation committee may determine that it is in the best interests of the limited liability company that the proceeding:

1. Continue under the control of the plaintiff.

2. Continue under the control of the committee.

3. Be settled on terms approved by the committee.

4. Be dismissed.

E. After making a determination under subsection D of this section, a special litigation committee shall file with the court a statement of its determination and its report supporting its determination and shall serve each party with a copy of the determination and report. The court shall determine whether the members of the committee were disinterested and independent and whether the committee conducted its investigation and made its recommendation in good faith, independently and with reasonable care, with the committee having the burden of proof. If the court finds that the members of the committee were disinterested and independent and that the committee acted in good faith, independently and with reasonable care, the court shall enforce the determination of the committee. Otherwise, the court shall dissolve the stay of the derivative proceeding entered under subsection A of this section and allow the action to continue under the control of the plaintiff.