Carsanaro v. Bloodhound Techs., Inc.

Bloodhound Technologies, Inc. (Bloodhound) created web-based software applications for healthcare providers. Plaintiffs were five software developers, including Bloodhound's founder, whose work laid the foundation for Bloodhound's success. Plaintiffs all held common stock. Plaintiffs claimed that after Bloodhound raised its initial rounds of venture capital financing, the venture capitalists obtained control of Bloodhound's board of directors, after which the venture capitalists financed the company through self-interested and dilutive stock issuances. Plaintiffs did not learn of the issuances until Bloodhound was sold for $82.5 million. At that point, Plaintiffs discovered their overall equity ownership had been diluted to under one percent. After members of management received transaction bonuses and the preferred stockholders received millions in liquidation preferences, Plaintiffs were left collectively with less than $36,000. Plaintiffs filed this action against Bloodhound's board members who approved the transactions and their affiliated funds, challenging the dilutive transactions, the allocation of $15 million to management, and the fairness of the merger. Defendants moved to dismiss the complaint on a wide range of theories. With limited exceptions, the Court of Chancery denied the motions, holding that Plaintiffs stated claims on many of their theories. View "Carsanaro v. Bloodhound Techs., Inc." on Justia Law