In a sweeping ruling, the Appellate Court of Maryland, our intermediate appellate court, rejected the appellant-stockholders' claims that the directors of TravelCenters of America, Inc., a Maryland corporation ("TravelCenters"), breached their duties under Maryland law in failing to accept a "higher" unsolicited topping bid in a cash-out merger. See Special Situations Fund III QP, L.P., et al. v. TravelCenters of America Inc., et al., No. 678, September Term, 2024, 2025 Md. App. LEXIS 1006 (Md. App. Ct. Nov. 25, 2025), available here.
TravelCenters, a publicly traded operator of full-service travel centers, agreed to be acquired by BP Products North America Inc. ("BP") in a merger for $86.00 per share in cash. The agreement with BP was preceded by a pre-market check involving multiple rounds of bids, eleven potential counterparties and the assistance of an independent financial advisor. In connection with the merger and the transfer of its leases, TravelCenters obtained a consent that was required from Service Properties Trust ("SVC"), the landlord of most of TravelCenters' properties and a stockholder of TravelCenters. The RMR Group LLC ("RMR"), which provided business management services to TravelCenters and was also a stockholder of TravelCenters, entered into a voting agreement supporting the transaction with BP. Several directors, officers and executives of TravelCenters simultaneously served in senior roles at SVC and/or RMR. After TravelCenters entered into the merger agreement with BP and filed its preliminary proxy statement with the Securities and Exchange Commission ("SEC"), ARKO Corp., a competitor of TravelCenters ("ARKO"), submitted an unsolicited proposal to acquire TravelCenters at $92.00 per share in cash, which proposal was contingent on financing and other conditions. The Board of Directors, mindful of these contingencies as well as SVC's consent rights with respect to the TravelCenters leases, determined that ARKO's bid was not superior and could not reasonably be expected to lead to a superior proposal under the fiduciary-out provisions of the merger agreement between TravelCenters and BP and applicable Maryland law. TravelCenters' stockholders ultimately approved the transaction with BP by approximately 98% of votes cast, representing 72% of the votes entitled to be cast on the merger.
Southeastern Pennsylvania Transportation Authority and Special Situations Fund III QP, L.P., Special Situations Cayman Fund, L.P. and Special Situations Private Equity Fund, L.P., stockholders of TravelCenters (collectively, "SSF"), filed suit against the directors of TravelCenters and against SVC, RMR and BP (collectively, the "defendants") alleging, among other things, that the directors had breached their "fiduciary" duties by agreeing to proceed with the merger with BP rather than accepting ARKO's offer. On a motion to dismiss by the defendants, the trial court dismissed the complaint, and SSF appealed.
At the outset, the Court reiterated that the duties set forth in the Maryland General Corporation Law ("MGCL") are the "sole source of duties of a director to the corporation or the stockholders of the corporation, whether or not a decision has been made to enter into an acquisition or a potential acquisition of control of the corporation or enter into any other transaction involving the corporation" and that "[a]n act of a director of a corporation relating to or affecting an acquisition or a potential acquisition of control of the corporation or any other transaction or potential transaction involving the corporation may not be subject to a higher duty or greater scrutiny than is applied to any other act of a director," citing directly Sections 2-405.1(i)(1) and 2-405.1(h), respectively, of the MGCL. The Court added that the MGCL codifies the business judgment rule (i.e., "[a] director's actions are 'presumed to be in accordance' with [his or her duties]"), and to overcome the business judgment presumption, the claimant bears the burden of pleading facts sufficient to establish (a) fraud or bad faith or (b) a conflict of interest relating to the board of directors' decision.
SSF argued that the Board's decision was not entitled to the business judgment presumption because the directors had acted with bad faith by (a) advancing SVC's and RMR's personal interests ahead of TravelCenters' interests; (b) not providing all material information related to the transaction to the stockholders, such as TravelCenters' value; (c) failing to take steps to maximize TravelCenters' value; and (d) failing to inform themselves adequately about whether ARKO's proposal was a superior proposal or reasonably could lead to a proposal superior to the negotiated transaction with BP.
In rejecting each of these arguments, the Court reasoned that the Board's recognition of SVC's blocking right with respect to the merger and its determination to proceed with bidders that met SVC's tenant criteria was entitled to the business judgment presumption. The Court also correctly held that Maryland law does not require a board to transact with the party offering the highest price per share (directly citing to Section 2-405.1(f)(5)(ii) of the MGCL). While observing that TravelCenters engaged in a pre-market check, the Court noted that Maryland law does not require a pre-market check, an auction or a heated bidding contest, provided that a post-agreement market check provides a reasonable opportunity for other offers, citing the Maryland Corporation Law treatise.[1] Finally, the Court noted that the Board's conclusion that ARKO's offer was not superior or reasonably likely to lead to an offer that was superior to BP's was entitled to the business judgment presumption. The Court's analysis of the business judgment presumption was based on six separate findings, including the Board's concerns regarding ARKO's financing, track record and ability to obtain necessary third-party and regulatory approvals, each of which was factored into the Board's business judgment that the BP transaction represented the best value and other terms reasonably available for the stockholders of TravelCenters. The Court further rejected SSF's conflict of interest claims, noting that, after full disclosure of all potential conflicts of interest, the stockholders voted to approve the merger—thus extinguishing any conflict of interest claim.
After dealing with SSF's principal arguments, the Court concluded that it was appropriate for the trial court to consider the mandatory director liability exculpation provision in TravelCenters' charter in connection with a motion to dismiss.[2] The Court distinguished Delaware's case law in this regard by noting that Maryland's exculpation statute contains only two narrow exceptions to liability of directors for monetary damages to the corporation or stockholders, whereas Delaware law provides six separate exceptions. That is, the trial court's determination that directors could not be held liable for monetary damages based on the plaintiffs' claims could be considered in granting a motion to dismiss in favor of the defendant directors.
The Court's opinion in TravelCenters is a continuation of our trial and appellate courts' consistent, well-reasoned opinions on matters of Maryland corporate law that appropriately defer to the business judgment of well-informed, process-oriented boards of directors and management, consistent with the plain language of the MGCL.
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As always, we and our colleagues are available at any time to discuss these or other matters.
- Jim Hanks, Michael Leber, Jeff Keehn, Hirsh Ament, and Lauren Fields
This memorandum is provided for information purposes only and is not intended to provide legal advice. Such advice may be provided only after engagement for advice and analysis of specific facts and circumstances and consideration of issues that may not be addressed in this document.
[2] As a procedural matter, the Court disagreed with SSF's argument that because the exculpation clause was not alleged in SSF's complaint, but rather was raised in a memorandum in support of a motion to dismiss, it was not appropriate for the trial court to consider it. In this regard, the Court noted that SSF's complaint incorporated TravelCenter's proxy statement by reference, which, in turn, incorporated by reference TravelCenter's filings with the SEC, including TravelCenters' Annual Report, which contained disclosure of the exculpation provision. The Court added that "SSF stressed these filings, especially the proxy statement, in its complaint, and thus relied on them itself. That stretched the four corners of the complaint to include the exculpatory clause."