Pennsylvania Consolidated & Unconsolidated Statutes
Chapter 86 - Limited Partnerships
Section 8694 - Special litigation committee

(a) General rule.--If a limited partnership or the general partners receive a demand to bring an action to enforce a right of the partnership, or if a derivative action is commenced before demand has been made on the partnership or the general partners, the general partners may appoint a special litigation committee to investigate the claims asserted in the demand or action and to determine on behalf of the limited partnership or recommend to the general partners whether pursuing any of the claims asserted is in the best interests of the partnership. The partnership must deliver a notice in record form to the person making the demand, or to the plaintiff if a derivative action has been commenced, promptly after the appointment of the committee under this section notifying the person making the demand or the plaintiff that a committee has been appointed and identifying by name the members of the committee.
(b) Discovery stay.--If the general partners appoint a special litigation committee and an action is commenced before a determination has been made under subsection (e):
(1) On motion by the limited partnership, or the committee made in the name of the partnership, the court shall stay discovery for the time reasonably necessary to permit the committee to make its investigation, except for good cause shown.
(2) The time for the defendants to plead shall be tolled until the process provided for under subsection (f) has been completed.
(c) Composition of committee.--A special litigation committee shall be composed of two or more individuals who:
(1) are not interested in the claims asserted in the demand or action;
(2) are capable as a group of objective judgment in the circumstances; and
(3) may, but need not, be general or limited partners.
(c.1) Committee members who are not general partners.--A member of a special litigation committee who is not a general partner, when acting as a member of the committee, is subject to the liabilities imposed, and entitled to the rights and immunities conferred, by sections 8648 (relating to reimbursement, indemnification, advancement and insurance) and 8649 (relating to standards of conduct for general partners).
(d) Appointment of committee.--A special litigation committee may be appointed:
(1) by a majority of the general partners not named as actual or potential parties in the demand or action; or
(2) if all general partners are named as actual or potential parties in the demand or action, by a majority of the general partners so named.
(e) Determination.--After appropriate investigation by a special litigation committee, the committee may determine, or the committee may recommend to the general partners that the general partners determine, that it is in the best interests of the limited partnership that:
(1) an action based on some or all of the claims asserted in the demand not be brought by the partnership but that the partnership not object to an action being brought by the party that made the demand;
(2) an action based on some or all of the claims asserted in the demand be brought by the partnership;
(3) some or all of the claims asserted in the demand be settled on terms determined or recommended by the committee;
(4) an action not be brought based on any of the claims asserted in the demand;
(5) an action already commenced continue under the control of:
(i) the plaintiff;
(ii) the limited partnership; or
(iii) the committee;
(6) some or all of the claims asserted in an action already commenced be settled on terms determined or recommended by the committee; or
(7) an action already commenced be dismissed.
(f) Court review and action.--If a special litigation committee is appointed and a derivative action is commenced before or after either the committee makes a determination under subsection (e) or the general partners determine under that subsection to accept the recommendation of the committee:
(1) The limited partnership or the committee shall file with the court after a determination is made under subsection (e) a statement of the determination and a report of the committee supporting the determination. The partnership or the committee shall serve each party with a copy of the determination and report. If the partnership or the committee moves to file the report under seal, the report shall be served on the parties subject to an appropriate stipulation agreed to by the parties or a protective order issued by the court.
(2) The partnership or the committee shall file with the court a motion, pleading or notice consistent with the determination under subsection (e).
(3) If the determination is one described in subsection (e)(2), (3), (4), (5)(ii), (6) or (7), the court shall determine whether the members of the committee met the qualifications required under subsection (c)(1) and (2) and whether the committee conducted its investigation and made its determination or recommendation in good faith, independently and with reasonable care. The plaintiff has the burden of proving that the committee did not meet those qualifications or act in the required manner. If the court finds that the members of the committee met the qualifications required under subsection (c)(1) and (2) and that the committee acted in good faith, independently and with reasonable care, the court shall enforce the determination of the committee or the general partners. Otherwise, the court shall:
(i) dissolve any stay of discovery entered under subsection (b);
(ii) allow the action to continue under the control of the plaintiff; and
(iii) permit the defendants to file preliminary objections and other appropriate motions and pleadings.
(g) Attorney General.--Nothing in this section shall limit the rights, powers and duties of the Attorney General under other applicable law with respect to a limited partnership organized for a charitable purpose.
(h) Interest of a defendant.--The fact that a person is named as a defendant does not make the person interested in the claims asserted in a demand or action for purposes of subsection (c)(1) if the claims against the person:
(1) are based only on an allegation that the person approved of or acquiesced in the transaction or conduct that is the subject of the claims; and
(2) do not otherwise allege with particularity facts that, if true, raise a significant prospect that the person would be adjudged liable.
(i) Cross reference.--See section 8615(c)(18) (relating to contents of partnership agreement).
(Nov. 3, 2022, P.L.1791, No.122, eff. 60 days)

2022 Amendment. Act 122 amended subsecs. (a), (b)(1), (e) intro. par., (3) and (6) and (f), added subsec. (c.1) and relettered former subsec. (h) to subsec. (i) and added present subsec. (h).
Cross References. Section 8694 is referred to in sections 8615, 8692 of this title.

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