§ 489.805 — Special litigation committee

Iowa § 489.805

• Jurisdiction: Iowa
• Title XII: BUSINESS ENTITIES
• Ch. 489: UNIFORM LIMITED LIABILITY COMPANY ACT

Text

1. Ifalimitedliabilitycompanyisnamedasormadeapartyinaderivativeproceeding, the
company may appoint a special litigation committee to investigate the claims asserted in the
proceedinganddeterminewhetherpursuingtheactionisinthebestinterestsofthecompany.
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.
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.