On November 25, 2025, the Appellate Court of Maryland issued a landmark decision in Special Situations Fund III QP L.P. v. Travel Centers of America Inc., upholding the dismissal of stockholder challenges to a public company merger. The opinion provides important guidance on the scope and application of Maryland’s statutory business judgment rule, the obligations of boards of Maryland corporations in evaluating or pursuing M&A transactions, the cleansing effect of stockholder ratification, and the ability of courts to consider exculpation clauses at the motion to dismiss stage.
The dispute arose from BP Products North America Inc.’s acquisition of Travel Centers of America Inc., a Maryland corporation. After the merger was announced, but before stockholders voted to approve the transaction, a third party, ARKO Corp., submitted a competing proposal to acquire Travel Centers. The Travel Centers board promptly reviewed ARKO’s offer, concluded it was not superior to BP’s, and rejected it. Travel Centers stockholders later approved the BP merger.
After the merger closed, several former Travel Centers stockholders filed suit challenging the board’s decision to reject ARKO’s competing proposal and other alleged flaws in the merger process. The actions were consolidated, and the Circuit Court for Baltimore City dismissed all claims. The stockholders then appealed. The appellate court’s decision affirming dismissal addresses several significant issues for Maryland corporations and their boards.
Maryland’s Business Judgment Rule
Maryland’s statutory business judgment rule, codified at MGCL § 2-405.1, affords directors a strong presumption that their actions are made in good faith, in a manner they reasonably believe to be in the best interests of the corporation, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. The Special Situations decision reinforces that this presumption is not easily overcome. The court held that, to rebut the presumption, plaintiffs must plead specific facts showing that the board acted either with fraud or bad faith or with a disabling conflict of interest. General criticisms of the sales process, such as the existence of a higher competing bid or disagreement with the board’s process, are insufficient.
Merger Process Obligations
The Special Situations decision confirms that Maryland law does not require a pre-signing market check (i.e., a formal auction or broad solicitation of bids) before a board approves entry into a merger agreement. The court found that a board can satisfy its fiduciary duties in this context by including a “fiduciary out” in the merger agreement, which allows the board to consider and accept superior proposals that may be submitted after signing. This approach contrasts with Delaware’s Revlon doctrine, which in certain circumstances may require a more active market check.
Stockholder Ratification
The Special Situations decision also underscores the cleansing effect of an informed stockholder vote. Under Maryland law, a transaction involving interested directors, or one alleged to result from other breaches of fiduciary duty, may be cleansed if the conflicts of interest or the facts underlying the purported breaches of fiduciary duty are disclosed or known and the transaction is approved by a majority of disinterested stockholders. When these conditions are met, claims are extinguished and directors generally cannot be held personally liable.
Director Exculpation
Maryland law permits corporations to include exculpation provisions in their charters, which eliminate or limit a director’s personal liability to the corporation or stockholders, subject to two exceptions: (1) liability to the extent a director has received an “improper benefit”; and (2) liability for acts involving "active and deliberate dishonesty." The Special Situations decision confirms that courts may properly consider these exculpation clauses at the motion to dismiss stage—particularly when the provision is publicly available and its existence is not disputed—providing directors with an early and effective defense against claims that do not meet these statutory exceptions.
Takeaway
The Special Situations decision is a clear reminder that Maryland law affords boards substantial discretion when acting in good faith and with transparency. By leveraging the protections of Maryland’s business judgment rule, informed stockholder approval, and charter-based exculpation provisions, directors can significantly reduce litigation risk. For Maryland corporations and their boards, the takeaway is simple: careful process and proactive governance are not just best practices, they are also powerful shields against personal liability.
If you have any questions, or would like additional information, please contact one of the attorneys on our Securities Litigation team.
You can subscribe to future advisories and other Alston & Bird publications by completing our publications subscription form.