Young v. Bush, 2012COA47 (March 15, 2012)

When one member of a two member LLC decides that a derivative action by the other member is not in the best interest of the LLC, is that decision the product of an independent and adequate inquiry?  Here, the trial court said “yes” and dismissed the plaintiff’s derivative claims before discovery.  The court of appeals reversed, in part, holding that business, personal, or familial relationships may raise factual questions about whether the decision-maker is “independent” under section 7-80-716, C.R.S. 2011.  Although plaintiffs have the burden to prove lack of independence, defendants must also have some evidence that the member(s) had sufficient information to make a good-faith decision that maintenance of the derivative action was not in the LLCs’ best interest.  In this case, plaintiff was entitled to discovery; therefore, the appeals court reversed dismissal of the derivative claims.

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