2007 California Corporations Code Article 10. Actions By Partners

CA Codes (corp:15910.01-15910.06)

15910.01.  (a) Subject to subdivision (b), a partner may maintain a
direct action against the limited partnership or another partner for
legal or equitable relief, with or without an accounting as to the
partnership's activities, to enforce the rights and otherwise protect
the interests of the partner, including rights and interests under
the partnership agreement or this chapter or arising independently of
the partnership relationship.
   (b) A partner bringing a direct action under this section is
required to plead and prove an actual or threatened injury that is
not solely the result of an injury suffered or threatened to be
suffered by the limited partnership.
   (c) The accrual of, and any time limitation on, a right of action
for a remedy under this section is governed by other law. A right to
an accounting upon a dissolution and winding up does not revive a
claim barred by law.



15910.02.  A partner may bring a derivative action to enforce a
right of a limited partnership if:
   (1) the partner first makes a demand on the general partners,
requesting that they cause the limited partnership to bring an action
to enforce the right, and the general partners do not bring the
action within a reasonable time; or
   (2) a demand would be futile.



15910.03.  (a) A derivative action may be maintained only by a
person that is a partner at the time the action is commenced and:
   (1) that was a partner when the conduct giving rise to action
occurred; or
   (2) whose status as a partner devolved upon the person by
operation of law or pursuant to the terms of the partnership
agreement from a person that was a partner at the time of that
conduct.
   (b) Notwithstanding the foregoing, any partner who does not meet
the foregoing 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 such evidence, by
affidavit or testimony, as it deems material that (1) there is a
strong prima facie case in favor of the claim asserted on behalf of
the partnership, (2) no other similar action has been or is likely to
be instituted, (3) the plaintiff acquired the shares before there
was disclosure to the public and to the plaintiff of the wrongdoing
of which plaintiff complains, (4) unless the action can be maintained
the defendant may retain a gain derived from the defendant's willful
breach of a fiduciary duty, and (5) the requested relief will not
result in unjust enrichment of the partnership or any partner.



15910.04.  In a derivative action, the complaint must state with
particularity:
   (1) the date and content of plaintiff's demand and the general
partners' response to the demand; or
   (2) why demand is excused as futile.



15910.05.  (a) Except as otherwise provided in subdivision (b):
   (1) any proceeds or other benefits of a derivative action, whether
by judgment, compromise, or settlement, belong to the limited
partnership and not to the derivative plaintiff;
   (2) if the derivative plaintiff receives any of those proceeds,
the derivative plaintiff shall immediately remit them to the limited
partnership.
   (b) If a derivative action is successful in whole or in part, the
court may award the plaintiff reasonable expenses, including
reasonable attorney's fees, from the recovery of the limited
partnership.



15910.06.  (a) In any derivative action, at any time within 30 days
after service of summons upon the limited partnership or the general
partner, the limited partnership or general partner 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 limited partnership or its partners.
   (2) That the moving party, if other than the partnership, did not
participate in the transaction complained of in any capacity. The
court on application of the limited partnership or the general
partner may, for good cause shown, extend the 30-day period for an
additional period or periods not exceeding 60 days.
   (b) At the hearing upon any motion pursuant to subdivision (a) 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 limited
partnership and the general partner which will be incurred in 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 (,000), to be furnished by the plaintiff
for reasonable expenses, including attorneys fees, which may be
incurred by the moving party and the limited partnership in
connection with the action, including expenses for which the limited
partnership may become liable pursuant to subdivision (c) of Section
15904.06. 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 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 the defendant or defendants, unless
the bond required by the court has been furnished within such
reasonable time as may be fixed by the court.
   (c) If the plaintiff shall, either before or after a motion is
made pursuant to subdivision (a), or any order or determination
pursuant to the motion, furnish a bond in the aggregate amount of
fifty thousand dollars (,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, any such motion then pending shall be dismissed and
no further additional bond shall be required.
   (d) If a motion is filed pursuant to subdivision (a), no pleadings
need to be filed by the limited partnership or any other defendant
and the prosecution of the action shall be stayed until 10 days after
the motion has been disposed of.