21-168. Special litigation committee.

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A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

(RULLCA 905)

(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 enforcing a person's right to information under section 21-139 or, for good cause shown, granting extraordinary relief in the form of a temporary restraining order or preliminary injunction.

(b)A special litigation committee may be composed of one or more disinterested and independent individuals, who may be members.

(c)A special litigation committee may be appointed:

(1)in a member-managed limited liability company:

(A)by the consent of a majority of the members not named as defendants or plaintiffs in the proceeding; and

(B)if all members are named as defendants or plaintiffs in the proceeding, by a majority 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 defendants or plaintiffs in the proceeding; and

(B)if all managers are named as defendants or plaintiffs 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, giving notice to the plaintiff. 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

(a)of this section and allow the action to proceed under the direction of the plaintiff.

An appellate court reviews de novo on the record a district court's determination pursuant to subsection

(e)of this section that a special litigation committee "conducted its investigation and made its recommendation in good faith, independently, and with reasonable care." Under such a review, an appellate court reaches a conclusion independent of the findings of the trial court, provided that where credible evidence is in conflict on a material issue of fact, the appellate court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another. Tegra Corp. v. Boeshart, 317 Neb. 100, 8 N.W.3d 786 (2024).

Derivative actions brought pursuant to the Nebraska Uniform Limited Liability Company Act are not special proceedings, and any proceedings under this section are merely a step in the underlying derivative action. Tegra Corp. v. Boeshart, 311 Neb. 783, 976 N.W.2d 165 (2022).