Connecticut General Statutes 34-271d – Derivative action. 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 discovery for the time reasonably necessary to permit the committee to make its investigation. This subsection does not prevent the court from: (1) Enforcing a person’s right to information under § 34-255i; or (2) granting extraordinary relief in the form of a temporary restraining order or preliminary injunction.
Terms Used In Connecticut General Statutes 34-271d
- Discovery: Lawyers' examination, before trial, of facts and documents in possession of the opponents to help the lawyers prepare for trial.
- 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.
- 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.
(b) A special litigation committee must be composed of one or more disinterested individuals, who may be members or managers.
(c) A special litigation committee may be appointed: (1) In a member-managed limited liability company: (A) By the consent of a majority in interest of the members not named as parties in the proceeding; or (B) if all members are named as parties in the proceeding, by a majority in interest of the members named as defendants; or (2) in a manager-managed limited liability company: (A) By a majority of the managers not named as parties in the proceeding; or (B) if all managers are named as parties in the proceeding, by a majority of the managers 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; or (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 individuals 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 individuals, 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 (a) of this section and allow the action to continue under the control of the plaintiff.