On December 28, 2023, Vice Chancellor Lori W. Will of the Delaware Court of Chancery issued a post-trial ruling supporting the board of directors of AIM Immunotech Inc.'s decision to dismiss a director nomination notice from a plaintiff stockholder. In the case of Kellner v. AIM Immunotech Inc., et al., C.A. No. 2023-0879-LWW (Del. Ch. Dec. 28, 2023), the Board rejected the notice based on recently revised bylaws (referred to as the “Amended Bylaws”). While the Court invalidated certain amendments, it ultimately found that the valid bylaws were fairly applied, and the plaintiff's failure to adhere to these bylaws proved detrimental to their nomination attempt.
After a series of proxy contests initiated by activist investors, the Board revised the Company's notice bylaws to include advanced notice procedures concerning stockholder proposals and director nominations. Later that same year, the plaintiff submitted a letter indicating his plan to nominate himself along with two other candidates for the Board during the Company's annual meeting (referred to as the “Notice”). The Board dismissed the Notice due to non-compliance with the Amended Bylaws. Subsequently, the plaintiff promptly initiated expedited litigation, contesting both the validity of the Amended Bylaws and their enforcement.
The Court, applying the Unocal standard, determined that the Board correctly identified a threat "to an important corporate interest" and that some of the Amended Bylaws were "reasonable given the presented threat." Notably, the Court noted that during the preceding proxy contest, the concealment of identities necessitated the Board's action to prevent "manipulative, misleading, and improper conduct." While the Court deemed certain aspects of the Bylaws requirements excessive, it upheld mandates that (i) the Notice must reveal the initial communication date among those involved in the nomination, and (ii) any nominee must complete a D&O questionnaire.
Additionally, the Court determined that the Board did not unfairly enforce the Amended Bylaws. The Court ruled that the Notice failed to include or accurately represent significant agreements that the stockholder was required to disclose, and therefore, its rejection by the Board was justified.
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