121-1002. Limited partners' derivative action. (a) A limited partner may bring an action in the right of a limited partnership to recover a judgment in its favor if all general partners with authority to do so have refused to bring the action or if an effort to cause those general partners to bring the action is not likely to succeed.
(b) In a derivative action, at least one plaintiff must be a limited partner at the time of bringing the action and (i) at the time of the transaction of which he complains, or (ii) his status as a limited partner had devolved upon him by operation of law or in accordance with the terms of the partnership agreement from a person who was a partner at the time of the transaction of which he complains.
(c) In a derivative action, the complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by a general partner, or the reasons for not making such effort.
(d) A derivative action shall not be discontinued, compromised or settled without the approval of the court having jurisdiction of the action. If the court shall determine that the interests of the limited partners will be substantially affected by such discontinuance, compromise or settlement, the court, in its discretion, may direct that notice, by publication or otherwise, shall be given to the limited partners whose interests it determines will be so affected. If notice is so directed to be given, the court may determine which one or more of the parties to the action shall bear the expenses of giving the same, in such amount as the court shall determine and find to be reasonable in the circumstances, and the amount of such expense shall be awarded as special costs of the action and recoverable in the same manner as statutory taxable costs.
(e) If the derivative action on behalf of the limited partnership is successful, in whole or in part, or if anything is received by the plaintiff or plaintiffs or a claimant or claimants as a result of a judgment, compromise or settlement of an action or claim, the court may award the plaintiff or plaintiffs, claimant or claimants reasonable expenses, including reasonable attorneys' fees, and shall direct him or them to account to the limited partnership for the remainder of the proceeds so received by him or them. This subdivision shall not apply to any judgment rendered for the benefit of injured limited partners only and limited to a recovery of the loss or damage sustained by them.
Last modified: February 3, 2019