Iowa Code 489.805 – Special litigation committee
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1. 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 discovery for the time reasonably necessary to permit the committee to make its investigation. This subsection does not prevent the court from doing any of the following:
a. Enforcing a person‘s right to information under section 489.410.
b. Granting extraordinary relief in the form of a temporary restraining order or preliminary injunction.
Terms Used In Iowa Code 489.805
- Discovery: Lawyers' examination, before trial, of facts and documents in possession of the opponents to help the lawyers prepare for trial.
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Injunction: An order of the court prohibiting (or compelling) the performance of a specific act to prevent irreparable damage or injury.
- Litigation: A case, controversy, or lawsuit. Participants (plaintiffs and defendants) in lawsuits are called litigants.
- Manager-managed limited liability company: means a limited liability company that qualifies under section 489. See Iowa Code 489.102
- Member-managed limited liability company: means a limited liability company that is not a manager-managed limited liability company. See Iowa Code 489.102
- Person: includes a protected series, however denominated, of an entity if the protected series is established under law that limits, or limits if conditions specified under law are satisfied, the ability of a creditor of the entity or of any other protected series of the entity to satisfy a claim from assets of the protected series. See Iowa Code 489.102
- Plaintiff: The person who files the complaint in a civil lawsuit.
- Temporary restraining order: Prohibits a person from an action that is likely to cause irreparable harm. This differs from an injunction in that it may be granted immediately, without notice to the opposing party, and without a hearing. It is intended to last only until a hearing can be held.
2. A special litigation committee must be composed of one or more disinterested and independent individuals, who may be members.
3. A special litigation committee may be appointed as follows:
a. In a member-managed limited liability company, any of the following:
(1) By the affirmative vote or consent of a majority of the members not named as parties in the proceeding.
(2) If all members are named as parties in the proceeding, by a majority of the members named as defendants.
b. In a manager-managed limited liability company, any of the following:
(1) By a majority of the managers not named as parties in the proceeding.
(2) If all managers are named as parties in the proceeding, by a majority of the managers named as defendants.
4. After appropriate investigation, a special litigation committee may determine that it is in the best interests of the limited liability company that the proceeding comply with any of the following:
a. Continue under the control of the plaintiff.
b. Continue under the control of the committee.
c. Be settled on terms approved by the committee.
d. Be dismissed.
5. After making a determination under subsection 4, 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 discovery entered under subsection 1 and allow the action to continue under the control of the plaintiff.