## Facts

- TravelCenters of America LLC (TA), a publicly traded Delaware LLC, operated truck stops; Hospitality Properties Trust (HPT), an affiliated REIT, owned and leased truck-stop real estate to TA.
- Barry M. Portnoy served on the governing bodies of both TA and HPT, creating an alleged conflict in transactions between the entities.
- In 2007, HPT acquired Petro Stopping Holdings (truck-stop real estate) and TA acquired Petro Stopping Centers (the operating business); HPT then leased the acquired properties to TA under a long-term lease.
- A TA unitholder filed a derivative action alleging TA’s directors approved lease terms (including allegedly above-market rent) that favored HPT and Portnoy at TA’s expense.
- TA’s LLC agreement purported to import and modify Delaware corporate fiduciary duties, created a presumption that directors complied with their duties unless rebutted by clear and convincing evidence, and included an exculpatory clause limiting monetary liability for good-faith conduct.
- Defendants moved to dismiss under Court of Chancery Rules 12(b)(6) and 23.1, arguing the LLC agreement and demand requirements barred the claims at the pleading stage.

## Issues

1. Whether the LLC agreement’s fiduciary-duty, presumption, and exculpation provisions unambiguously foreclosed the fiduciary-duty claims on a motion to dismiss.
2. Whether demand on TA’s board was excused because the complaint pled demand futility under Aronson v. Lewis.

## Decision

- The court denied the motion to dismiss.
- The court held the LLC agreement’s provisions defining and modifying fiduciary duties were ambiguous and reasonably susceptible to more than one interpretation, preventing dismissal based on defendants’ preferred construction at the pleading stage.
- The court held the complaint sufficiently pled demand futility under Aronson, including reasonable doubt that a majority of the board was independent given alleged interlocking relationships and Portnoy’s influence.

## Legal Principles

- LLC fiduciary duties may be contractually defined and modified by the LLC agreement; when such provisions are unclear, the court treats the duties as a contractual construct whose contours depend on the agreement’s language.
- On a Rule 12(b)(6) motion, the court does not select among reasonable interpretations of ambiguous contractual provisions; ambiguity generally precludes dismissal based solely on contract interpretation.
- In an LLC derivative action where corporate-style fiduciary duties are contractually adopted, the court may apply the Aronson demand-futility framework, focusing on director disinterestedness and independence at the time suit is filed.
- Allegations of conflicts, interlocking relationships, and control or influence by an interested fiduciary can support a reasonable doubt as to board independence sufficient to excuse demand under Rule 23.1.

## Conclusion

The Court of Chancery allowed a unitholder derivative action to proceed where a challenged affiliated-entity lease allegedly benefited an interested director and the counterparty, the LLC agreement’s modified fiduciary-duty scheme was ambiguous on its face, and the pleadings supported demand futility under Aronson based on alleged lack of board independence.


Kahn v. Portnoy, No. 3515-CC (Del. Ch. Dec. 11, 2008)