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TravelCenters of America, LLC v. Brog, et al., No. 3516-CC (Del. Ch. March 31, 2008)

March 31, 2008

In this action, the plaintiff, TravelCenters of America, LLC, a Delaware limited liability company (“TravelCenters”), sought a declaratory judgment to invalidate the defendants’ notice of intent to present business and to nominate candidates for TravelCenters’ board of directors. The plaintiff argued that the defendants’ notice did not comply with TravelCenters’ advance notice bylaw. Certain defendants then counterclaimed for access to “any and all” books and records of TravelCenters pursuant to Section 18-305 of the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101, et seq. (the “LLC Act”), and the plaintiff moved to dismiss such counterclaim. Under Section 18-305 of the LLC Act, by default, each member of a limited liability company is entitled to have the right, subject to reasonable standards and subject to certain limitations contained in Section 18-305 of the LLC Act, to obtain certain books and records information from the limited liability company for any purpose reasonably related to its interest as a member of such limited liability company. Section 18-305 of the LLC Act, most notably Section 18-305(g) of the LLC Act, however, permits a limited liability company in its limited liability company agreement to restrict, or presumably eliminate, all rights of a member or a manager to obtain books, records and other information.

In dismissing the counterclaim, the Court did not address whether the limited liability company agreement of TravelCenters successfully restricted or eliminated the rights of members, including the defendants, to inspect its books and records. Rather, after noting that the defendants’ failed to state a proper purpose in their pleading, the Court stated that, as a general rule under case law, claims involving books and records demands should be litigated in a separate and distinct proceeding unless extenuating circumstances demonstrate that they should be consolidated with other claims (i.e., the plaintiff’s advance notice bylaw claim). The Court held that, with the “unhurried nature” of their actions, the defendants failed to illustrate any circumstances that would warrant departure from the general rule and consolidation of the claims, although they did leave the defendants with the ability to bring a books and records claim against TravelCenters by filing a separate action if the defendants chose to do so.

The full opinion is available here