Code Section Group

Corporations Code - CORP

TITLE 2. PARTNERSHIPS [15800 - 16962]

  ( Title 2 added by Stats. 1949, Ch. 383. )

CHAPTER 4.5. Uniform Limited Partnership Act of 2008 [15900 - 15912.07]

  ( Heading of Chapter 4.5 renumbered from Chapter 5.5 by Stats. 2013, Ch. 76, Sec. 26. )

ARTICLE 10. Actions by Partners [15910.01 - 15910.06]
  ( Article 10 added by Stats. 2006, Ch. 495, Sec. 20. )

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.

(Added by Stats. 2006, Ch. 495, Sec. 20. Effective January 1, 2007. Section operative January 1, 2008, pursuant to Section 15912.04.)

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.

(Added by Stats. 2006, Ch. 495, Sec. 20. Effective January 1, 2007. Section operative January 1, 2008, pursuant to Section 15912.04.)

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.

(Added by Stats. 2006, Ch. 495, Sec. 20. Effective January 1, 2007. Section operative January 1, 2008, pursuant to Section 15912.04.)

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.

(Added by Stats. 2006, Ch. 495, Sec. 20. Effective January 1, 2007. Section operative January 1, 2008, pursuant to Section 15912.04.)

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.

(Added by Stats. 2006, Ch. 495, Sec. 20. Effective January 1, 2007. Section operative January 1, 2008, pursuant to Section 15912.04.)

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 ($50,000), 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 ($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, 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.

(Added by Stats. 2006, Ch. 495, Sec. 20. Effective January 1, 2007. Section operative January 1, 2008, pursuant to Section 15912.04.)

CORPCorporations Code - CORP10.