Jeffery J. SHELDON and Andras Konya, M.D., Ph.D., Plaintiffs-Below, Appellants,
PINTO TECHNOLOGY VENTURES, L.P., Pinto TV Annex Fund, L.P., PTV Sciences II, L.P., Rivervest Venture Fund I, L.P., Rivervest Venture Fund II, L.P., Rivervest Venture Fund II (Ohio), L.P., Bay City Capital Fund IV, L.P., Bay City Capital Fund IV Co-Investment Fund, L.P., Reese Terry and Craig Walker, M.D., Defendants-Below, Appellees.
September 11, 2019
[Copyrighted Material Omitted]
Below: Court of Chancery of the State of Delaware, C.A. No.
appeal from the Court of Chancery of the State of Delaware:
Bracegirdle, Esquire (argued), Scott B. Czerwonka, Esquire,
Wilks, Lukoff & Bracegirdle, LLC, Wilmington, Delaware, for
Appellants Jeffery J. Sheldon and Andras Konya, M.D., Ph.D.
E. Jameson, Esquire (argued), Samuel L. Closic, Esquire,
Prickett, Jones & Elliott, P.A., Wilmington, Delaware. Of
Counsel: B. Russell Horton, Esquire, Gary L. Lewis, Esquire,
George Brothers Kincaid & Horton LLP, Austin, Texas, for
Appellees Pinto Technology Ventures, L.P., Pinto TV Annex
Fund, L.P., PTV Sciences II, L.P., Rivervest Venture Fund I,
L.P., Rivervest Venture Fund II, L.P., Rivervest Venture Fund
II (Ohio), L.P., Bay City Capital Fund IV, L.P., and Bay City
Capital Fund IV Co-Investment Fund, L.P.
C. Ralston, Esquire, Jacqueline A. Rogers, Esquire, Potter
Anderson Corroon LLP, Wilmington, Delaware. Of Counsel: Danny
David, Esquire (argued), Rebeca Huddle, Esquire, Baker Botts
L.L.P., Houston, Texas, for Appellees Resse Terry and Craig
VALIHURA, SEITZ, and TRAYNOR, Justices.
Jeffrey J. Sheldon and Andras Konya, M.D., Ph.D., alleged in
the Court of Chancery that several venture capital firms and
certain directors of IDEV Technologies, Inc.
("IDEV") violated their fiduciary duties by
diluting the Appellants economic and voting interests in
IDEV. The Appellants argued that their dilution claims are
both derivative and direct under Gentile v. Rosette
because the venture capital firms constituted a "control
group." The Court of Chancery rejected that argument and
held that the Appellants dilution claims were solely
derivative. Because the Appellants did not make a
demand on the IDEV board or plead demand futility, and
because the Appellants lost standing to pursue a derivative
suit after Abbott Laboratories purchased IDEV and acquired
the Appellants shares, the court dismissed their complaint.
On appeal, the Appellants raise a single issue: They contend
only that, contrary to the Court of Chancerys holding, they
adequately pleaded that a control group existed, rendering
their claims partially "direct" under
Gentile . Therefore, according to the Appellants,
their complaint should not have been dismissed. We agree with
the Court of Chancerys determination that the Appellants
failed to adequately allege that the venture capital firms
functioned as a control group. Accordingly, we affirm the
dismissal of the complaint with prejudice.
a Delaware corporation based in Texas, develops and
manufactures devices used in interventional radiology,
vascular surgery, and interventional cardiology. Sheldon
founded IDEV in 1999 and served
as its Chief Executive Officer from its founding until 2008.
Konya invented certain devices licensed by IDEV and served as
a consultant to IDEV between 2000 and late 2012.
2004 and 2008, IDEV completed three rounds of financing
through which three venture capital firms (the "Venture
Capital Firms") acquired a substantial proportion of
IDEVs outstanding shares. In 2009, IDEV went through a
management change, restructured its sales force, and
implemented a new strategic plan focused on leveraging and
developing its core technologies. It ...