What happens when a Maryland board leaves money on the table in a sale and public stockholders are shortchanged? Stockholders may wish to challenge such corporate decisions in court, but Maryland law does not always make that easy.

The recent Special Situations Fund III QP, L.P. v. Travel Centers of America Inc. (“Special Situations”), 2025 WL 3280907 (Md. App. Nov. 25, 2025), decision illustrates the numerous hurdles that stockholders and their attorneys may need to overcome when challenging a board’s decision to reject a higher bid and accept of a facially inferior bid. The Special Situations decision centered around a stockholder challenge to the board of directors’ (“Board”) of Travel Centers of America Inc. (“Travel Company”) decision to sell Travel Company to BP Products North America, Inc. (“BP”) for $86 per Travel Company share (“Merger”), despite the fact that ARKO Corp. (“ARKO”) offered a topping bid of $92 per share.

I. Background To The Merger

A. Travel Company Introduction

Travel Company was a publicly traded full-service travel center network incorporated in Maryland. It offered diesel and gasoline fuel, truck maintenance and repair, restaurants, travel stores, and parking services.

Travel Company was also the subsidiary and largest tenant of Service Properties Trust (“Service Properties”). Service Properties had a right of first refusal to acquire any interest the Company owns in any travel center before the Company sold or leased that travel center. 

B. BP’s $86 Per Share Offer and Merger Agreement

On February 7, 2023, BP offered $86 per share to purchase Travel Company. Following a Travel Company Board meeting on February 8, 2023, Travel Company’s financial advisor notified BP on February 9, 2023 that the Company would agree to BP’s proposal on the condition that the parties negotiate a satisfactory merger agreement. BP and Service Properties apparently negotiated and reached agreement between February 11 and 15. On February 15, 2023, the Travel Company Board accepted the negotiated deal and signed the merger agreement (“Merger Agreement”). Also on February 15, 2023, Travel Company issued a press release announcing the Merger.

C. ARKO’s $92 Per Share Topping Proposal

Less than one month later, on March 14, 2023, ARKO submitted a topping proposal to acquire Travel Company for $92 per share. ARKO planned to finance the transaction through cash, external financing, and lines of credit. ARKO contemplated a thirty-day timeline to conduct due diligence and sign the requisite documentation. ARKO was also prepared to enter into lease documentation substantially similar to BP's agreement.

Notably, Special Situations does not state that ARKO’s bid required Service Properties to permit Travel Company to assign its leases, and did not require any special arrangements with Service Properties.

A few days later, the Board met to discuss ARKO's proposal with its financial and legal advisors. During this meeting, they discussed how the Merger agreement with BP provided that Travel Company could entertain an unsolicited offer that the Board deemed superior or that could reasonably be expected to lead to a superior proposal. The Board considered the proposal and decided to meet again the following week.

On March 22, 2023, the attendees from the previous Board meeting reconvened. The Board’s Chairman informed the Board that Service Properties opposed the deal with ARKO and would not engage in negotiations with or consent to assigning Travel Company’s leases to ARKO. After an executive session, Travel Company’s independent directors concluded that ARKO's proposal was not a superior proposal and could not reasonably be expected to lead to one as outlined in the Merger agreement. The Board reconvened and determined to inform ARKO that its proposal was not superior.

In April 2023, ARKO and Travel Company exchanged correspondence about whether ARKO could make a superior offer under the Merger agreement.

On May 1, 2023, Travel Company issued a press release stating that the Board was recommending that the stockholders vote for the BP transaction. On May 10, 2023, the stockholders voted to approve the transaction with BP.

II. The Stockholder’s Lawsuit

On January 5, 2024, certain Travel Company stockholders (“Plaintiffs”) filed a three-count Amended Complaint in the Circuit Court for breach of fiduciary duties against the Board and other defendants, alleging that the Board breached their fiduciary duties by:

• • • placing Parent’s interests above those of Travel Company’s stockholders;
    • failing to disclose all relevant information about the Merger to stockholders; and
    • failing to maximize stockholder value.

On May 8, 2024, the Circuit Court granted defendants’ motion to dismiss on the grounds that it the complaint failed to state a claim. Plaintiffs appealed.

III. The Special Situations Decision

The Special Situations decision is from an intermediate appeal to the Appellate Court of Maryland, which upheld the Circuit Court’s dismissal of Plaintiffs’ Amended Complaint reasoning that Plaintiffs failed to overcome the business judgment rule.

A. Maryland’s Codified Standards of Director Conduct

The Maryland General Assembly codified directors’ fiduciary duties, thus requiring directors to act:

1. 1. 1. In good faith;
      2. In a manner the director reasonably believes to be in the best interests of the corporation; and
      3. With the care that an ordinarily prudent person in a like position would use under similar circumstances.”

Md. Code (1975, 2014 Repl. Vol., Supp. 2024), § 2-405.1(c) of the Corporations & Associations Article (“CA”).

This three-prong standard is “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.” CA § 2-405.1(i).

The General Assembly also codified the business judgment rule: an “act of a director of a corporation is presumed to be in accordance with [CA § 2-405.1(c)].” Special Situations explained that a plaintiff can overcome the rebuttable presumption of the business judgment rule by adequately alleging fraud, bad faith, or a director conflict of interest.

B. Plaintiffs’ Failure to State a Claim

Special Situations held that Plaintiffs failed to adequately allege bad faith, anddid not fault the Board for deferring to Parent’s preferred bidder because Parent “had a contractual right to veto the Company assigning its leases. [Parent] informed the Directors that it would only consent to transfer the leases if satisfied with a potential buyer’s creditworthiness,” and ARKO did not satisfy Parent’s preferred level of creditworthiness. Special Situations continued to reason that “[w]hat happened here was that the Directors recognized that [Parent] would have to approve the ultimate purchaser, and they proceeded with a bidder that the Directors concluded met [Parent’s] criteria—BP. This decision was entitled to the business judgment presumption.”

Special Situations also did not fault the Board for rejecting a topping bid. It reasoned that although ARKO's offer was higher, directors of Maryland corporations are not required to act solely on the “amount or type of consideration that may be offered or paid to stockholders of the corporation in an acquisition or a potential acquisition of control of the corporation.” CA § 2-405.1(f)(5)(ii).

With regard to director conflicts,Special Situations effectively reasoned that even if Plaintiffs adequately alleged sufficient director conflicts, such conflicts were ratified by Travel Company’s stockholder vote approving the Merger. Special Situations reasoned that Travel Company’s stockholders were fully informed in approving the Merger.

Although Special Situations holds that “[r]atification in Maryland arises under statutory law,” the statute it cites in support of this assertion makes plain that “a contract or other transaction . . . is not void or voidable . . . ” if ratified by stockholders. CA § 2-419(a)–(b). Arguably, the plain language of this statute permits stockholders to ratify void or voidable contracts or transactions, not director actions that breach their statutory fiduciary duties.

III. Special Situations Potential Forward-Looking Impact

Although Special Situations is an intermediate Maryland Appellate Court decision that could potentially be overturned by the Maryland Supreme Court, ithighlights a structural reality that public stockholders may find alarming: Maryland law may provide exceptionally weak judicial oversight of board conduct in sale transactions, even when a board chooses a materially lower bid. A few potential consequences of this ruling stand out.

First, the decision suggests that Maryland courts may not only accept virtually any explanation offered by a board, but may even supply one on the board’s behalf. Special Situations appears to have drawn the defendant-friendly inference that Parent “would have to approve the ultimate purchaser” of Travel Company, because a fact that does not appear to be supported by the record, because:

• • • Special Situations does not appear to state that ARKO needed or sought lease assignments from Parent as a condition to closing a deal based on its $92 per share bid;
    • Special Situations does not appear to state whether a sale of Travel Company—structured so as to preserve Travel Company as an on-going company—would violate Parent’s anti-assignment rights;
    • Special Situations does not mention that “[t]he policy against restraints on alienation does not flatly prohibit nonassignment clauses, but it subjects them to strict construction.” Citizens Bank & Trust Co. of Md. v. Barlow Corp., 456 A.2d 1283, 1288 (Md. 1983); and
    • The defendants themselves do not appear to have contended that a sale of Travel Company required Parent’s approval.

To the extent necessary, future plaintiffs may potentially attempt to distinguish Special Situations by explaining why limited operational control (i.e., lease assignments) does not automatically translate to corporate-level veto power over mergers.

Second, public stockholders may also find the decision’s reliance on stockholder approval as a cure-all for conflicts to be troubling. The opinion appears to collapse the distinction between (1) stockholder ratification of a transaction and (2) stockholder ratification of director conduct. The decision relies on CA § 2-419—a statute that addresses ratification of otherwise void or voidable transactions—to ratify alleged breaches of fiduciary duty. Under the plain text of the statute, however, it appears that stockholders may ratify transactions, not fiduciary misconduct. By extending ratification beyond the statute’s scope, the Appellate Court may have effectively insulated directors from judicial review whenever a board-approved transaction is later accepted by stockholders, even if the vote occurred under structural coercion, time pressure, or a lack of practical alternatives. This broad reading may further weaken the already limited tools available to Maryland stockholders seeking accountability.

Maryland investors who have suffered losses may consider these developments in the law and should consult qualified counsel to explore their legal options.

Disclaimer: This memorandum is provided by Levi & Korsinsky, LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. Prior results may not be predictive of future outcomes.