Jonthan Thomas Jorgl v. AIM ImmonoTech Inc.

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
LORI W. WILL LEONARD L. WILLIAMS JUSTICE CENTER
VICE CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734

February 3, 2025

Jeffrey J. Lyons, Esquire Michael A. Pittenger, Esquire
Michael E. Neminski, Esquire Matthew F. Davis, Esquire
Bakers & Hostetler LLP Nicholas D. Mozal, Esquire
1201 North Market Street, Suite 1407 Potter Anderson & Corroon LLP
Wilmington, Delaware 19801 1313 North Market Street
Wilmington, Delaware 19801

RE: Jonathan Thomas Jorgl v. AIM ImmunoTech Inc., et al.
C.A. No. 2022-0669-LWW

Dear Counsel:

Before me are cross-motions for attorneys’ fees filed by plaintiff Jonathan

Thomas Jorgl and defendants AIM ImmunoTech Inc., Thomas K. Equels, William

Mitchell, and Stewart Appelrouth. Each side seeks fee shifting under the bad faith

exception to the American Rule. For the reasons that follow, both motions are

denied.

I. RELEVANT BACKGROUND

The background of this case is detailed in an October 28, 2022 memorandum

opinion.1 There, I denied Jorgl’s request for a preliminary mandatory injunction

that would have required AIM’s board to accept his nomination of director

1
Mem. Op. Regarding Mot. for Prelim. Inj. (Dkt. 203) (“Mem. Op.”); Jorgl v. AIM
ImmunoTech Inc., 2022 WL 16543834 (Del. Ch. Oct. 28, 2022).
C.A. No. 2022-0669-LWW
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candidates and include his nominees on AIM’s universal proxy card. The “limited

record before me” suggested that AIM’s board reasonably “concluded a

clandestine plan was afoot” when it rejected Jorgl’s notice for failure to disclose

arrangements and understandings, as required by AIM’s advance notice bylaws.2

In the subsequent proxy season, Jorgl was out and another AIM

stockholder—Ted Kellner—slotted in. Like Jorgl, Kellner sought to nominate a

slate of AIM board candidates, including one of Jorgl’s nominees. The board

rejected Kellner’s nomination for non-compliance with the expansive advance

notice bylaws it had adopted after the Jorgl nomination. That rejection spawned a

new action brought by Kellner, an expedited trial, and an appeal. 3 After the appeal

was resolved in July 2024, Kellner asked the Delaware Supreme Court to remand

the case for an award of attorneys’ fees and costs.4 That request was swiftly

denied.5

2
Mem. Op. 3.
3
See Kellner v. AIM ImmunoTech Inc., 307 A.3d 998 (Del. Ch. 2023), aff’d in part, rev’d
in part, 320 A.3d 239 (Del. 2024).
4
Mot. for Rearg., Ted Kellner v. AIM ImmunoTech Inc., et al., No. 3, 2024, 320 A.3d 239
(Del 2024) (Dkt. 56) (Del. July 26, 2024).
5
Order, Kellner, No. 3, 2024 (Dkt. 57) (Del. July 29, 2024).
C.A. No. 2022-0669-LWW
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The parties then resurrected the cross-motions for attorneys’ fees they had

filed a year prior in the dormant Jorgl action.6 Oppositions and replies were filed

in September 2024.7 Jorgl’s motion for leave to file a sur-reply was denied in

October.8 The parties asked that I resolve the motions on the papers.9

II. ANALYSIS

Delaware courts follow the American Rule, requiring each party to pay its

own attorneys’ fees.10 There are recognized exceptions, including for bad faith

conduct.11 The bad faith exception permits a court to shift attorneys’ fees in

“extraordinary circumstances” to deter abusive litigation and protect the integrity

of the judicial process.12 The party seeking fee shifting must show by “clear

6
Pl.’s Mot. for Att’ys’ Fees (Dkt. 213) (“Pl.’s Mot.”); Defs.’ Mot. for Fee Shifting (Dkt.
214) (“Defs.’ Mot.”).
7
Defs.’ Opp’n to Pl.’s Mot. for Att’ys’ Fees (Dkt. 255) (“Defs.’ Opp’n”); Pl.’s Response
in Opp’n to Defs.’ Mot. for Fee Shifting (Dkt. 256) (“Pl.’s Opp’n”); Defs.’ Reply in
Supp. of their Mot. for Fee Shifting (Dkt. 260) (“Defs.’ Reply”); Pl.’s Reply in Supp. of
Mot. for Att’ys’ Fees (Dkt. 261).
8
Dkt. 267.
9
Dkt. 252.
10
See Montgomery Cellular Hldg. Co., Inc. v. Dobler, 880 A.2d 206, 227 (Del. 2005).
11
See Scion Breckenridge Managing Member, LLC v. ASB Allegiance Real Est. Fund, 68
A.3d 665, 687 (Del. 2013) (outlining exceptions to the American Rule).
12
Shawe v. Elting, 157 A.3d 142, 149 (Del. 2017) (quoting Montgomery Cellular, 880
A.2d at 227).
C.A. No. 2022-0669-LWW
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evidence” that the opposing party acted in “subjective bad faith.”13 This “more

stringent ‘clear evidence’ standard of proof” requires a showing that the conduct

was “so fraudulent, frivolous, vexatious, wanton or oppressive as to amount to

egregiousness.”14

Here, each side accuses the other of such misconduct. Neither meets its

burden.

A. Jorgl’s Motion

Jorgl asks me to shift fees incurred from the defendants’ issuance of

subpoenas to his litigation counsel at BakerHostetler LLP and a motion to compel

compliance with those subpoenas.15 He insists that the subpoenas were “frivolous

and duplicative,” and meant to harass and prejudice his counsel’s ability to

represent him effectively during expedited discovery.16 He points to the

defendants’ withdrawal of their motion to compel just before it was to be heard as

evidence of the defendants’ bad faith.17

13
Id. at 150.
14
Reagan v. Randall, 2002 WL 1402233, at *3 (Del. Ch. June 21, 2002).
15
Pl.’s Mot. 1.
16
Id. at 1, 3.
17
Id. at 12.
C.A. No. 2022-0669-LWW
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This grievance is deficient. Discovery of important non-party, non-resident

individuals who allegedly conspired with Jorgl proved complex—partly due to the

highly expedited schedule Jorgl sought. The subpoenas to counsel sought

documents to fill that gap. They appear tailored to seek relevant information about

the alleged co-conspirators and avoid privileged communications.18 But even if the

subpoenas were troublesome, I see no indication that they were issued to harass or

oppress Jorgl and his counsel. As to the withdrawal of the defendants’ motion to

compel, it appropriately followed BakerHostetler’s certification that it lacked

responsive communications.19

B. Defendants’ Motion

The defendants assert that Jorgl prosecuted this suit in bad faith by

advancing a bogus story.20 For example, they say that Jorgl’s complaint and

subsequent filings falsely denied the involvement of certain individuals in the

nomination process, despite evidence to the contrary.21 The defendants further

18
See Defs.’ Opp’n 2.
19
See id. at 9.
20
Defs.’ Mot. 1, 8, 10-13; see also Defs.’ Reply 1.
21
Defs.’ Reply 2-3; see Beck v. Atl. Coast PLC, 868 A.2d 840, 853 (Del. Ch. 2005)
(awarding fees under the bad faith exception for plaintiff’s “mindset to mislead” and
“paint[ing] a fundamentally deceptive picture”).
C.A. No. 2022-0669-LWW
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contend that Jorgl’s discovery responses were evasive and delayed the disclosure

of critical information.22

The defendants’ arguments come closer to supporting fee shifting than

Jorgl’s. As I indicated in denying Jorgl’s motion for a preliminary injunction,

Jorgl’s nomination was bizarre. He learned of AIM when his “surfing buddy,”

who wanted a board seat, asked him to buy shares, and submitted a nomination

days later.23 It seems that Jorgl buried his head in the sand when it came to the

broader scheme to unseat AIM’s board.

Still, I lack “clear evidence” of bad faith conduct. This litigation did not

proceed past the preliminary injunction stage. I neither held that Jorgl’s narrative

was untrue nor issued factual findings on the merits of his claims.24 In fact, I

denied the defendants’ request for an adverse inference on similar grounds.25

Much of the evidence cited by the defendants in their fee-shifting motion concerns

the Kellner action—a separate matter where the Delaware Supreme Court declined

to permit the parties to pursue fee petitions.

22
Defs.’ Reply 8.
23
Mem. Op. 1.
24
Pl.’s Opp’n 1.
25
Mem. Op. 18 n.91 (“Even if Jorgl was not forthcoming, his conduct d[id] not rise to the
level that would justify an adverse inference.”).
C.A. No. 2022-0669-LWW
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III. CONCLUSION

Both parties’ motions for fees are denied. Neither party has demonstrated

the sort of extraordinary circumstances or clear evidence of bad faith that would

warrant fee shifting. Consistent with the American Rule, each party will bear its

own fees and costs. This long-pending saga is over.

Sincerely yours,

/s/ Lori W. Will

Lori W. Will
Vice Chancellor