On December 28, 2023, Vice Chancellor Lori W. Will of the Delaware Court of Chancery issued a post-trial ruling upholding the decision by the board of directors of AIM Immunotech Inc. to reject a director nomination notice submitted by plaintiff stockholder. Kellner v. AIM Immunotech Inc., et al., C.A. No. 2023-0879-LWW (Del. Ch. Dec. 28, 2023). The Board rejected the notice pursuant to recently amended bylaws (the “Amended Bylaws”) and, while the Court invalidated certain of the amendments, the Court ultimately concluded that the valid bylaws were equitably applied and plaintiff’s failure to comply with those bylaws was fatal to his nomination effort.

Following several attempted proxy contests by a group of activist investors, the Board amended the Company’s notice bylaws to add various advance notice procedures governing stockholder proposals and director nominations. Later that year, plaintiff submitted a letter providing notice of his intent to nominate himself and two other candidates for the Board at the Company’s annual meeting (the “Notice”). The Board rejected the Notice for failure to comply with the Amended Bylaws. Plaintiff filed expedited litigation shortly thereafter, challenging both the Amended Bylaws and their application.

The Court found under Unocal that the Board properly identified a threat “to an important corporate interest” and that certain of the Amended Bylaws were “reasonable in relation to the threat posed.” The Court observed that, during the prior proxy contest, the concealment of the identities of the involved individuals made it necessary for the Board to act to prevent “manipulative, misleading, and improper conduct.” Although the Court found the scope of certain requirements in the Bylaws invalid, the Court upheld requirements that (i) the Notice disclose the first date of communication among those involved with the nomination, and (ii) any nominee must complete a D&O questionnaire.

The Court also concluded that the Board had not applied the Amended Bylaws inequitably. The Court found that the Notice omitted or misrepresented meaningful agreements that the stockholder was obligated to disclose and thus was properly rejected by the Board.

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Kellner v. AIM Immunotech Inc., et al.

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