ALAN R. KAHN, Plaintiff, v. BARRY PORTNOY, THOMAS O'BRIEN, ARTHUR G. KOUMANTZELIS, BARBARA D. GILMORE, PATRICK F. DONELAN - HOPSITALITY PROPERTIES

"ALAN R. KAHN, Plaintiff, v. BARRY M. PORTNOY, THOMAS M. O'BRIEN, ARTHUR G. KOUMANTZELIS, BARBARA D. GILMORE, PATRICK F. DONELAN and HOPSITALITY PROPERTIES TRUST, Defendants, and TRAVELCENTERS OF AMERICA LLC, Nominal Defendant.

Civil Action No. 3515-CC

COURT OF CHANCERY OF DELAWARE, SUSSEX

2008 Del. Ch. LEXIS 184

December 3, 2008, Submitted

December 11, 2008, Decided

COUNSEL: [*1] Joseph A. Rosenthal, of ROSENTHAL MONHAIT & GODDESS, P.A., Wilmington, Delaware; OF COUNSEL: James S. Notis of GARDY & NOTIS, LLP, Englewood Cliffs, New Jersey; Harold B. Obstfeld, of HAROLD B. OBSTFELD, P.C., New York, New York, Attorneys for Plaintiff.

Robert S. Saunders, Ronald N. Brown, III, and Joseph O. Larkin, of SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Wilmington, Delaware, Attorneys for Defendants Barry M. Portnoy, Thomas M. O'Brien, Arthur G. Koumantzelis, Barbara D. Gilmore, Patrick F. Donelan and for Nominal Defendant TravelCenters of America LLC.

JUDGES: Chancellor CHANDLER.

OPINION BY: Chandler

OPINION

MEMORANDUM OPINION

CHANDLER, Chancellor

Limited liability companies are primarily creatures of contact, and the parties have broad discretion to design the company as they see fit in an LLC agreement. With this discretion, however, comes the risk--for both the parties and this Court--that the resulting LLC agreement will be incomplete, unclear, or even incoherent.

In this case, plaintiff alleges that the director defendants breached their fiduciary duties to the company by approving a transaction that was allegedly designed to benefit a director at the expense of the company. As the company in this case [*2] is an LLC, the fiduciary duties of the directors are defined in the LLC agreement. This agreement, however, explicitly imports and modifies the familiar and well defined fiduciary duties from Delaware corporate law. The result is a company whose directors are governed by a modified version of the fiduciary duties of directors of Delaware corporations. Unfortunately, the agreement in this case fails to clearly articulate the contours of these contractual fiduciary duties. The result is an LLC agreement that provides an ambiguous definition of fiduciary duties and is open to more than one reasonable interpretation.

Since I am faced with a motion to dismiss for failure to state a claim, I am not allowed to choose between reasonable interpretations of ambiguous provisions of a contract. Accordingly, and for the reasons stated below, I must deny the motion to dismiss.

I. BACKGROUND

A. Procedural History

Plaintiff initiated this case by filing a derivative complaint on February 1, 2008, followed by an amended complaint on June 23, 2008. The pending motion to dismiss, filed on July 2, 2008 by the individual director defendants and the nominal defendant, seeks dismissal under Court of Chancery Rules 12(b)(6) [*3] and 23.1."

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