Kellner v. AIM ImmunoTech Inc.

Delaware corporation AIM ImmunoTech, Inc. (AIM) (defendant) had a four-person board of directors. AIM shareholders thought the board was mismanaging the company, resulting in two shareholder activism campaigns and proxy contests to elect new directors. Both times, the board rejected the nomination notices for failure to comply with AIM’s bylaws, thus preventing the nominees from being considered at the respective annual shareholder meetings. The insurgents reshuffled their membership to make a third attempt to nominate new directors, with the new lineup consisting of leader Ted Kellner plus Todd Deutsch and Robert Chioini. Meanwhile, the existing board amended AIM’s bylaws concerning the advance notice required for board nominations. The amended bylaws included six advance-notice provisions: (1) an agreements, arrangements, or understandings (AAU) provision; (2) a consulting provision; (3) a known-supporter provision; (4) an ownership provision; (5) a first-contact provision; and (6) a questionnaire provision. The first three provisions were broad in scope, requiring substantial disclosures but stating the requirements in ambiguous terms. The fourth provision consisted of an extremely complex, 1,099-word run-on sentence. The board claimed the amendments were necessary to increase transparency in board elections. As AIM’s 2023 annual meeting approached, Kellner submitted notice of intent to nominate himself, Deutsch, and Chioini as director candidates. The board rejected Kellner’s notice for failure to comply with the amended bylaws and notified Kellner that the deadline for submitting notice had now passed for the 2023 meeting. Kellner sued AIM and the current directors (defendants), seeking a declaration that the amended bylaws were unlawful. The trial court concluded that four of the six advance-notice provisions were invalid but that Kellner had failed to comply with the remaining two. The court thus held in the directors’ favor. Both parties appealed.