Sheldon, et al. v. Pinto Technology Ventures, L.P., et al.Annotate this Case
Appellants Jeffrey Sheldon and Andras Konya, M.D., Ph.D., alleged in the Delaware 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. Appellants argued their dilution claims were both derivative and direct under Gentile v. Rosette, 906 A.2d 91 (Del. 2006) because the venture capital firms constituted a “control group.” The Court of Chancery rejected that argument and held that Appellants’ dilution claims were solely derivative. Because Appellants did not make a demand on the IDEV board or plead demand futility, and because Appellants lost standing to pursue a derivative suit after Abbott Laboratories purchased IDEV and acquired Appellants’ shares, the court dismissed their complaint. On appeal, Appellants raised one issue: that, contrary to the Court of Chancery’s holding, they adequately pleaded that a control group existed, rendering their claims partially “direct” under Gentile. Therefore, according to Appellants, their complaint should not have been dismissed. The Delaware Supreme Court agreed with the Court of Chancery’s determination that Appellants failed to adequately allege that the venture capital firms functioned as a control group. Accordingly, the Supreme Court affirmed dismissal of the complaint with prejudice.