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Lynn Lincoln Sarko (pro hac vice) 1 T. David Copley Gretchen Freeman Cappio (pro hac vice) 2 KELLER ROHRBACK L.L.P. 1201 Third Ave., Ste. 3200 3 Seattle, WA 98101 Telephone: (206) 623-1900 4 Facsimile: (206) 623-3384 Email: [email protected] 5 Email: [email protected] Email: [email protected] 6 Michael W. Sobol (pro hac vice) 7 Roger N. Heller (pro hac vice) Melissa Gardner (pro hac vice) 8 LIEFF CABRASER HEIMANN & BERNSTEIN, LLP 9 275 Battery St., 29th Floor San Francisco, CA 94111-3339 10 Telephone: (415) 956-1000 Facsimile: (415) 956-1008 11 Email: [email protected] Email: [email protected] 12 Email: [email protected] 13 Interim Co-Lead Plaintiffs’ Counsel 14
15 UNITED STATES DISTRICT COURT 16 DISTRICT OF ARIZONA 17 In re: No. 2:16-cv-2138-HRH 18 (Consolidated with) Arizona THERANOS, INC., No. 2:16-cv-2373-HRH 19 Litigation No. 2:16-cv-2660-HRH No. 2:16-cv-2775-HRH 20 -and- No. 2:16-cv-3599-HRH 21 FIRST AMENDED 22 CONSOLIDATED CLASS ACTION COMPLAINT 23 JURY TRIAL DEMANDED 24 25 26 27 28 Case 2:16-cv-02138-HRH Document 107 Filed 01/27/17 Page 2 of 125
TABLE OF CONTENTS 1 2 Page 3 I. INTRODUCTION ...... 1
4 II. JURISDICTION AND VENUE ...... 4 5 III. PARTIES ...... 5 6 IV. FACTUAL BACKGROUND ...... 8 7 8 A. The Critical Importance of Reliable Blood Tests ...... 8
9 B. The Edison Device and Theranos’s Premature Rush to Market ...... 8 10 C. Theranos and Walgreens Join Forces ...... 13 11 D. Defendants Intentionally Concealed the Truth From 12 Consumers ...... 16 13 E. Defendants Falsely Promoted Theranos Testing as Reliable ...... 21 14 F. Theranos’s Tests Were Unreliable and Dangerous ...... 31 15 16 G. Defendants’ Fraudulent Scheme Unravels ...... 35 17 H. Defendants Continue to Fail to Protect Customers ...... 45
18 I. Defendants Misrepresented and Concealed the Purpose of the 19 Theranos Testing Offered to Plaintiffs and the Class ...... 49 20 J. Defendants’ Misconduct Has Significantly Harmed Consumers ...... 53 21 22 K. Factual Allegations Regarding Plaintiffs ...... 54 23 V. CLASS ACTION ALLEGATIONS ...... 74
24 VI. CAUSES OF ACTION ...... 78 25 VII. PRAYER FOR RELIEF ...... 119 26 VIII. DEMAND FOR JURY TRIAL ...... 120 27 28 i Case 2:16-cv-02138-HRH Document 107 Filed 01/27/17 Page 3 of 125
I. INTRODUCTION 1 2 1. Plaintiffs file this First Amended Consolidated Class Action Complaint 3 against Defendants Theranos, Inc., Walgreens Boots Alliance, Inc., Walgreen Arizona 4 Drug Company, Elizabeth Holmes, and Ramesh Balwani. 5 2. This consumer class action lawsuit concerns a massive fraud that 6 7 Defendants perpetrated on consumers and the public that has recently collapsed in 8 colossal fashion under its own weight. For years, Defendants marketed and sold 9 Theranos blood tests and other clinical lab tests that they knew were unreliable, not 10 ready-for-market, and failed to meet even basic industry standards. The tests in question 11 12 were sold at numerous “Wellness Centers” located in Walgreens pharmacies and at 13 Theranos-owned Wellness Centers, almost exclusively in Arizona and California.
14 3. In furtherance of the fraud, Defendants intentionally concealed vital 15 information from consumers, their doctors, and the public at large, about the tests’ 16 17 unreliability and about the deficient nature of the testing facilities and equipment. 18 Defendants also made pervasive misrepresentations—including in their marketing, in the
19 stores where the tests were sold, and in a steady stream of press releases and other media 20 statements—falsely stating and assuring that Theranos tests met the highest standards of 21 22 reliability, were industry-leading in quality, and had been developed and validated under, 23 and were compliant with, federal guidelines.
24 4. Defendants aggressively promoted Theranos tests as being ready-for- 25 market, and encouraged consumers and their doctors to use and rely on them in making 26 important health and treatment decisions, including, but not limited to, regarding such 27 28 1 Case 2:16-cv-02138-HRH Document 107 Filed 01/27/17 Page 4 of 125
1 critical health and treatment matters as cancer, HIV, diabetes, kidney disease, and heart 2 disease. 3 5. In reality, as Defendants knew but the consumers could not, Theranos tests 4 5 were dangerously unreliable, had not been validated as advertised, and did not meet
6 federal guidelines as advertised. Nevertheless, in a hurry to get the tests to market and 7 thereby assist Defendants in developing their still-in-development products and services, 8 and so that they could advance their own narrative that Theranos’s “disruptive” 9 10 technology had “revolutionized” the medical testing industry, Defendants prematurely
11 marketed and sold the tests to consumers who were, in essence, subjected to beta testing 12 and product development research without their knowledge or consent—a course of 13 conduct that would be wrong in any context but is shockingly improper and dangerous in 14 15 the context of blood testing.
16 6. Defendants’ scheme started to unravel when various governmental agencies 17 and others began investigating Theranos’s tests and facilities. After the Center for 18 Medicare and Medicaid Services cited Theranos’s Newark, California lab for numerous 19 20 deficiencies in 2016, Theranos informed regulators that it voided “all” blood-testing
21 results from its proprietary Edison blood testing devices, which consisted of tens of 22 thousands of test results.1 Other investigations and reports have revealed numerous other 23 serious deficiencies and problems regarding Theranos’s tests, including the manipulation 24 25 of test results, the dilution of blood samples used in testing, and deficiencies at 26 27 1 John Carreyrou, Theranos Voids Two Years of Edison Blood-Test Results, Wall St. J. (May 18, 2016) (Ex. 1). 28
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1 Theranos’s other testing facility, in Scottsdale, Arizona. Numerous additional test 2 results, in addition to the tens of thousands of voided Edison-device tests, have now been 3 voided or belatedly “corrected” by Theranos, including results that were “corrected” 4 5 several months (or even years) after the tests were conducted and the results relied upon
6 by the consumers. Defendant Holmes, Theranos’s founder and CEO, has now been 7 banned from owning or operating a blood-testing business for at least two years. 8 Defendant Balwani, Theranos’s second in command, was banned as well, and Theranos’s 9 10 license to operate a lab was revoked. Continuing the fallout, Walgreens has now sued
11 Theranos for breach of contract, and Theranos, Holmes, and Balwani have all been sued 12 by multiple investors for misrepresenting and concealing the truth about Theranos’s 13 technology and testing. 14 15 7. Before Defendants’ scheme collapsed, many thousands of consumers,
16 including Plaintiffs, were deceived by Defendants’ misconduct and paid for and were 17 subjected to Theranos tests. Defendants have failed to deliver the products and services 18 they promised and that their customers reasonably expected, and have endangered their 19 20 customers’ health and well-being, the very thing they promised to promote and protect.
21 8. None of the consumers who obtained test results from Theranos received 22 what they paid for and what they reasonably expected. None of them received tests that 23 they could reasonably rely on given the numerous problems alleged herein that have 24 25 come to light. Moreover, the consumers who submitted to Defendants’ testing were 26 unwittingly being used by Defendants to further Defendants’ research and product 27 development efforts. Worse yet, as a result of the unreliable and inaccurate Theranos test 28
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1 results, many consumers have been subjected to unnecessary or potentially harmful 2 treatments, and/or have been denied the opportunity to seek treatment for treatable 3 conditions. 4 5 9. Plaintiffs, for themselves and all others similarly situated, (i.e., the
6 members of the Classes described and defined herein), bring this action for, inter alia, 7 damages, restitution, punitive damages, statutory damages, other monetary relief, and an 8 order enjoining Defendants from engaging in further deceptive representations, 9 10 concealment and other unlawful acts, and requiring them to provide adequate notice to
11 their customers, pursuant to the Arizona Consumer Fraud Statute A.R.S. §§ 44-1521 et 12 seq.; California Business and Professional Code §§17200, et seq.; California Business & 13 Professional Code §§ 17500, et seq.; California Civil Code §§1750, et seq.; California 14 15 Civil Code §§1709-1710; Civil RICO 18 U.S.C. §§ 1961-1968; California Health &
16 Safety Code §§ 24170 et seq.; and common law causes of action for fraud, civil 17 conspiracy to commit fraud, negligent misrepresentation, unjust enrichment, aiding and 18 abetting, battery, and medical battery. 19 20 II. JURISDICTION AND VENUE 21 10. This Court has subject matter jurisdiction over this action pursuant to 28
22 U.S.C. § 1332(d)(2) because at least one member of the Class is a citizen of a state that is 23 different from at least one of the Defendants and because the aggregate amount in 24 controversy exceeds $5,000,000 exclusive of costs and interest, and there are more than 25 26 100 members in each of the proposed Class and Subclasses.
27 11. This Court has personal jurisdiction over Defendants because Defendants 28
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1 have conducted and continue to conduct business in the State of Arizona, and because 2 Defendants have committed acts and omissions complained of herein in the State of 3 Arizona. 4 5 12. Venue as to Defendants is proper in this judicial district because a
6 substantial part of the events and omissions giving rise to the claims alleged herein 7 occurred in this District. Venue is also proper because Defendants have conducted, and 8 continue to conduct, business within this District. 9 10 III. PARTIES 11 13. Plaintiff A.R. is a resident and citizen of San Jose, California and is using
12 his initials to protect his privacy in this litigation. 13 14. Plaintiff B.B. is a resident and citizen of Chandler, Arizona, and is using 14 15 her initials to protect her privacy in this litigation. 16 15. Plaintiff B.P. is a resident and citizen of Phoenix, Arizona and is using his
17 initials to protect his privacy in this litigation. 18 16. Plaintiff D.L. is a resident and citizen of Maricopa, Arizona and is using her 19 initials to protect her privacy in this litigation. 20 21 17. Plaintiff L.M. is a resident and citizen of Chandler, Arizona and is using her
22 initials to protect her privacy in this litigation. 23 18. Plaintiff M.P. is a resident and citizen of Scottsdale, Arizona and is using 24 his initials to protect his privacy in this litigation. 25 26 19. Plaintiff R.C. is a resident and citizen of Sun City West, Arizona and is
27 using his initials to protect his privacy in this litigation. 28
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1 20. Plaintiff R.G. is a resident and citizen of Gilbert, Arizona and is using his 2 initials to protect his privacy in this litigation. 3 21. Plaintiff S.J. is a resident and citizen of Mesa, Arizona and is using her 4 5 initials to protect her privacy in this litigation.
6 22. Plaintiff S.L. is a resident and citizen of Chandler, Arizona and is using his 7 initials to protect his privacy in this litigation. 8 23. Defendant Theranos, Inc. (“Theranos” or the “Company”) is based in Palo 9 10 Alto, California. Theranos operates, or during the relevant time period operated, two
11 laboratories: one in Newark, California, and another in Scottsdale, Arizona. Through 12 Wellness Centers located predominantly in Walgreens pharmacies in Arizona and 13 California, and also in Theranos-owned Wellness Centers in Arizona and California, 14 15 Theranos, along with Walgreens, sold blood and other clinical testing services to
16 individuals. According to reports, since it began offering testing services in 2013, 17 Theranos has conducted 6.1 million diagnostic tests. 18 24. Defendant Walgreens Boots Alliance, Inc., of Deerfield, Illinois, is a global 19 20 pharmacy-led health and well-being enterprise, which, among other segments, operates
21 the Walgreens retail pharmacy chain in the United States. Defendant Walgreen Arizona 22 Drug Company, an Arizona corporation, is a wholly-owned subsidiary of Walgreens 23 Boots Alliance, Inc. involved in operating Walgreens retail stores in Arizona. Walgreens 24 25 Boots Alliance, Inc. and Walgreen Arizona Drug Company are referred to collectively 26 herein as “Walgreens.” 27 25. Defendant Elizabeth Holmes, a citizen and resident of California, is the 28
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1 founder of Theranos and at all relevant times has been Theranos’s Chief Executive 2 Officer. On information and belief, Holmes has had a primary role in, and in significant 3 part has personally directed, Theranos’s misconduct as alleged herein. Further, Holmes 4 5 personally made material misrepresentations and omissions as alleged herein. On
6 information and belief, Holmes has personally received millions, if not billions, of dollars 7 in compensation as a result of the business and revenue generated through the misconduct 8 alleged herein. 9 10 26. Defendant Ramesh “Sunny” Balwani, a resident of California, is the former
11 President and Chief Operating Officer of Theranos, and was Theranos’s second in 12 command, behind Defendant Holmes, before he resigned from the Company in 2016 13 amid the various investigations. Balwani had a primary role in Theranos’s misconduct 14 15 alleged herein. Mr. Balwani personally directed misconduct alleged herein. Further,
16 Balwani personally made material misrepresentations and omissions as alleged herein. 17 On information and belief, Balwani has personally received millions of dollars in 18 compensation as a result of the business and revenue generated through the misconduct 19 20 alleged herein.
21 27. Based upon information and belief, Plaintiffs allege that at all times 22 mentioned herein, Theranos was acting as the agent and co-venturer of Walgreens, that 23 Walgreens was acting as agent and co-venturer of Theranos, and at all times mentioned 24 25 was acting within the course and scope of said agency and/or employment with the other 26 party’s full knowledge, permission, consent, and ratification. In addition, each of the acts 27 and/or omissions of each Defendant alleged herein were made known to, and ratified by, 28
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1 each of the other Defendants. 2 IV. FACTUAL BACKGROUND 3 A. The Critical Importance of Reliable Blood Tests 4 28. Blood tests and other clinical lab tests (“test results”) are an everyday and 5 6 invaluable part of the practice of modern medicine. Test results can offer crucial details
7 about an individual’s health, and doctors rely on test results to detect everything from 8 cholesterol and glucose levels to infections, blood cell counts and cancer. 9 29. Test results aid in the process of medical diagnosis and treatment decisions, 10 11 and in some cases are a prerequisite for additional medical tests. Because test results are
12 such a foundational part of medical treatment, test results that are unreliable or inaccurate 13 can be catastrophic: serious conditions may go undetected, patients may not receive the 14 treatments and medications that they need, and patients may be misdiagnosed and receive 15 16 treatments or medications that they have no need for. It is absolutely critical that
17 consumers be able to rely on test results. 18 30. As the Theranos “direct testing menu” (Ex. 2 hereto) reflects, the tests 19 offered and conducted by Defendants here, including in the Wellness Centers located at 20 21 Walgreens stores and in Theranos-owned facilities, included more than 200 different
22 medical tests and combinations of tests (panels). The tests offered by Defendants 23 included tests concerning critical medical and health issues including, but not limited to, 24 cancer, heart disease, diabetes, kidney disease, auto-immune disorders, and viruses. Id. 25 26 B. The Edison Device and Theranos’s Premature Rush to Market 27 31. Theranos was founded in 2003 by Elizabeth Holmes, then a sophomore at 28
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1 Stanford studying chemical engineering, who dropped out a few months later to focus on 2 the Company. Holmes, the Company’s CEO, has maintained that she developed the idea 3 for Theranos as a result of her self-professed phobia of needles.2 According to published 4 5 reports, Theranos initially focused on development of a hand-held device that would use
6 a tiny needle to obtain a small drop of blood for analysis. By 2008, the project had grown 7 into what is now known as the “Edison” device. 8 32. In contrast to the large needle and numerous tubes required in a typical 9 10 venipuncture blood draw, Theranos’s Edison device was designed to eliminate the need
11 for laboratories altogether. The Edison device (which Theranos has never allowed to be 12 photographed) was supposedly able to take a few drops of blood from a patient’s finger 13 placed into a nanotainer capsule, and reliably conduct hundreds of blood tests, all outside 14 15 a lab. This concept would have enabled Theranos to conduct all testing outside of the
16 laboratory in the Wellness Centers and thus—according to Defendants—revolutionize 17 testing by significantly reducing the time and costs involved. 18 33. Neither Holmes nor the other Defendants ever explained to the public the 19 20 science or technology underlying the Edison device, and they, in fact, refused to provide
21 any meaningful explanation based on the claimed need to protect Theranos’s intellectual 22 property. Despite the industry practice for companies to publish their results and allow 23 for peer review by experts in the field when launching a new medical product, Theranos 24 25 2 Marco della Cava, Change Agents: Elizabeth Holmes Wants Your Blood, USA Today 26 (July 26, 2014), available at http://www.usatoday.com/story/tech/2014/07/08/change- 27 agents-elizabeth-holmes-theranos-blood-testing-revolution/12183437/ (last visited Jan. 26, 2017). 28
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1 has still never published its data or allowed for peer review.3 One writer described 2 Holmes’s explanation of what Theranos does as “comically vague” after she explained, 3 “[a] chemistry is performed so that a chemical reaction occurs and generates a signal 4 5 from the chemical interaction with the sample, which is translated into a result, which is
6 then reviewed by certified laboratory personnel.”4 7 34. Despite the fact that Theranos testing was, to put it generously, still in 8 development and not ready-for-market, Defendants prematurely rushed to get the services 9 10 to market.
11 35. In connection with the launch of Theranos testing to the consumer public, 12 Defendants embarked on a large-scale media campaign designed to, inter alia, let the 13 medical profession and the consuming public know that Theranos’s testing technology 14 15 was revolutionary and ready for public use for the full range of medical testing offered.
16 In a September 8, 2013 interview with the Wall Street Journal, for example, Holmes 17 boasted that Theranos was able to “run any combination of tests, including sets of follow- 18 on tests” quickly from a single tiny blood sample.5 19 20 36. Various press releases and other statements to the media during that time
21 period trumpeted the same themes. For example, a September 9, 2013 joint press release 22 from Theranos and Walgreens stated: “For the first time, Theranos is introducing CLIA- 23
3 24 John Carreyrou, Hot Startup Theranos Has Struggled With Its Blood-Test Technology, Wall St. J. (Oct. 16, 2015) (Ex. 3). 25 4 Ken Auletta, Blood, Simpler, The New Yorker (Dec. 15, 2014), available at http://www.newyorker.com/magazine/2014/12/15/blood-simpler (last visited Jan. 26, 26 2017). 27 5 Joseph Rago, Elizabeth Holmes: The Breakthrough of Instant Diagnosis, Wall St, J. (Sept. 8, 2013) (Ex. 4). 28
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1 certified laboratory services with the ability to run its tests on micro-samples. Theranos’s 2 proprietary laboratory infrastructure minimizes human error through extensive 3 automation to produce high quality results. Test results are available to physicians in a 4 5 matter of hours, enabling fast diagnoses to help informed treatment choices. . . . For the
6 past 10 years, Theranos has worked relentlessly to reach a point at which we could help 7 make actionable information accessible to physicians and patients at the time it matters 8 most.”6 A second joint press release, issued on November 13, 2013, included many of 9 10 the same themes.7
11 37. Theranos’s website similarly began claiming that its “laboratory can 12 perform your tests quickly and accurately on samples as small as a single drop.” 13 38. In a recorded interview with Medscape’s Eric J. Topol, M.D., Holmes 14 15 reaffirmed her claims that Theranos tests were validated, run on tiny samples, and more
16 accurate than traditional blood tests: “We spent many years redeveloping every test that 17 is recognized by Medicare in the form of a CPT (Current Procedural Terminology) code 18 to be able to run it on a tiny sample” . . . “we focused a great deal on these tests and 19 20 validated and verified them over the years, building an infrastructure that was highly
21 automated and standardized such that the quality of the data that we generate could be 22 23 24 6 Press Release, Theranos, Inc., Theranos Selects Walgreens as a Long-Term Partner 25 Through Which to Offer Its New Clinical Laboratory Service (Sept. 9, 2013) (Ex. 5). 7 Press Release, Theranos, Inc., Theranos and Walgreens Expand Diagnostic Lab Testing 26 to the Phoenix Metropolitan Area; New Theranos™ Wellness Centers at Walgreens 27 stores provide consumers with less invasive, fast, affordable testing on samples as small as a few drops of blood (Nov. 13, 2013) (Ex. 6). 28
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1 used in an actionable manner.”8 2 39. Balwani publicly spread the misleading claims that Theranos testing was 3 safe, reliable, and ready for use by the public. In a presentation before the Arizona 4 5 Senate Health and Human Services Committee on March 12, 2014, Balwani stated that
6 Theranos was “able to provide a majority of the testing from only two or three drops of 7 blood,” and although those drops of blood could be taken from a traditional venipuncture, 8 “most likely patients will prefer a simple finger stick, and we are able to do that.”9 Later 9 10 in 2014, Balwani emphasized Theranos’s supposedly ready technological advancement in
11 an interview with the The New Yorker, claiming that “[o]ur platform is about 12 automation . . . We have automated the process from start to finish.” 10 13 40. Based on Defendants’ representations, people believed that Theranos’s 14 15 technology was a true disruptive technology breakthrough. Holmes was hailed as the
16 next Steve Jobs, and by 2014, Theranos was valued at $9 billion—approximately the 17 same as each of its two largest and long established competitors in the medical testing 18 19 20 21 22 8 Eric J. Topol, M.D., Creative Disruption? She’s 29 and Set to Reboot Lab Medicine, Medscape (Nov. 18, 2013), available at http://www.medscape.com/viewarticle/814233 23 (last visited Jan. 25, 2017). 9 24 Presentation by Dr. Ramesh Balwani to Arizona Senate Health and Human Services Committee (Mar. 12, 2014), at 3:08-3:22, available at 25 http://azleg.granicus.com/MediaPlayer.php?clip_id=13816 (last visited Jan. 24, 2017). 10 Ken Auletta, Blood, Simpler, One woman’s drive to upend medical testing, The New 26 Yorker (Dec. 15, 2014), available at 27 http://www.newyorker.com/magazine/2014/12/15/blood-simpler (last visited Jan. 25, 2017). 28
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1 industry.11 2 C. Theranos and Walgreens Join Forces 3 41. By 2011, Theranos was in talks with both Safeway and Walgreens to offer 4 5 Theranos testing in their stores. In or around 2012, Theranos entered into a partnership 6 agreement with Walgreens, under which Walgreens invested $140 million in Theranos,
7 $100 million of which was characterized as an “Innovation Fee,” and Theranos agreed to 8 operate clinics, which it called “Wellness Centers,” at Walgreens Pharmacies in Arizona 9 10 and California. Following the launch of the partnership in 2013, Theranos and 11 Walgreens planned to build Theranos Wellness Centers in Walgreens stores nationwide.12
12 42. Under the Theranos/Walgreens partnership agreement, Defendants opened 13 a total of 40 Wellness Centers within Walgreens pharmacy stores in Arizona, and one in a 14 13 15 Walgreens pharmacy in California, to sell the majority of Theranos’s tests. 16 43. At all times that Theranos tests were being sold in Walgreens stores,
17 Walgreens knew and/or should have known that the tests could not reasonably be relied 18 on by consumers and their doctors in making health and treatment decisions. Walgreens 19 was aware of numerous serious red flags about the tests that put it on notice about the 20 21 unreliability of the tests, and deliberately chose to ignore, not follow up on, and conceal 22 11 Steve Denning, Is Theranos Too Good To Be True?, Forbes (Feb. 13, 2016), available 23 at http://www.forbes.com/sites/stevedenning/2016/02/13/is-theranos-too-good-to-be- 24 true/#47de558857f8 (last visited Jan. 26, 2017). 12 Press Release, Theranos, Inc., Theranos Selects Walgreens as a Long-Term Partner 25 Through Which to Offer Its New Clinical Laboratory Service (Sept. 9, 2013) (Ex. 5). 13 James B. Stewart, A Marriage Gone Bad: Walgreens Struggles to Shake Off Theranos, 26 N.Y. Times (Apr. 21, 2016), available at http://www.nytimes.com/2016/04/22/business/a- 27 once-avid-ally-walgreens-is-struggling-to-shake-off-theranos.html (last visited Jan. 26, 2017). 28
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1 that information. 2 44. Before entering into the partnership with Theranos, Walgreens’s Chief 3 Medical Officer neither reviewed Theranos’s technology nor independently validated or 4 5 verified the accuracy, reliability, or results of the tests.14 Nevertheless, and despite the
6 fact that Walgreens executives had expressed doubts about the reliability of Theranos 7 tests and the quality of its equipment and/or facilities, Walgreens said it was confident in 8 the data before introducing the services.15 9 10 45. In fact, although a Johns Hopkins University scientist had requested, on
11 Walgreens’ behalf, that Theranos provide his researchers with an Edison device so that 12 they could verify the technology for Walgreens, and Holmes initially agreed to provide 13 one, the device was never provided.16 Instead, Walgreens got a prototype which the 14 15 Johns Hopkins team tried to evaluate, but the prototype was useless when evaluating the
16 accuracy and reliability of the tests because it produced results such as “low” or “high” 17 rather than numeric values that could be compared to other labs’ tests. As a result, there 18 was no way to compare results from the prototype Edison device to the results of other 19 17 20 commercially-available tests.
21 46. In the summer of 2011, just after Theranos and Walgreens signed an initial 22
23 14 Pressure is Mounting on a Startup That Has Tried to Shake Up the Lab-Test Market, 24 The Economist (Apr. 23, 2016), available at http://www.economist.com/news/business/21697273-pressure-mounting-startup-has- 25 tried-shake-up-lab-test-market-blood-sports (last visited Jan. 26, 2017). 15 Id. 26 16 Christopher Weaver and John Carreyrou, Craving Growth, Walgreens Dismissed Its 27 Doubts About Theranos, Wall St. J. (May 25, 2016) (Ex. 7). 17 Id. 28
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1 letter of agreement, Walgreens sent a delegation, including its finance chief, internal 2 auditor, and lab experts from a consulting firm called Colaborate, LLC, to a meeting at 3 Theranos headquarters in Palo Alto, the purpose of which was to gain a firsthand view of 4 5 the Theranos business and its capabilities.18
6 47. At that meeting, however, the consulting lab experts were chaperoned 7 during the entire visit, including during visits to the restroom, and were not allowed 8 access to Theranos’s lab area or Edison technology. Despite the lack of access, 9 10 Walgreens did discover problems with Theranos’s information management systems
11 meant to keep track of patients.19 12 48. According to published reports, throughout the process, despite their 13 concerns and the numerous red flags they identified, Walgreens executives nevertheless 14 15 looked the other way. They did not press for further verification, and instead went ahead
16 with the Theranos partnership, despite their concerns and known problems about the 17 reliability of Theranos’s facilities and tests. Walgreens apparently was afraid that 18 Theranos would respond to its questions by choosing another retail chain to work with as 19 20 20 a partner.
21 49. Later in 2011, Colaborate, LLC, issued a report concluding that Walgreens 22 needed more information to assess the proposed partnership with Theranos.21 23 50. Similarly, in October 2012, Walgreens sent two executives and a retired 24 25 18 Id. 26 19 Id. 27 20 Id. 21 Id. 28
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1 Quest Diagnostics Corp. executive to Theranos to review quality-control data. According 2 to reports, the retired Quest executive stated that they were not allowed inside Theranos’s 3 lab, and while they were led to believe the data they reviewed was from an Edison 4 5 device, Theranos did not confirm that it was.22 Walgreens continued to work on the
6 partnership agreement despite the lack of access to the technology and despite its 7 concerns about the reliability of Theranos’s facilities and tests. 8 51. According to published reports, Walgreens executives were privy to 9 10 information that Safeway, Inc. had also agreed to host Theranos testing sites at some of
11 its stores. According to reports, Safeway dissolved its partnership with Theranos before 12 it began hosting Theranos testing sites in Safeway stores due, in part, to its due diligence 13 that raised questions about the accuracy of Theranos’s testing. For example, the 14 15 unreliability of Theranos tests became apparent after Safeway employees in Pleasanton,
16 California had their blood tested by both Theranos and another conventional lab, and the 17 test results differed significantly.23 18 52. In response to pressure from Theranos, and despite its concerns and 19 20 knowledge about problems, Walgreens ceded even more control over the Wellness
21 Centers to Theranos in the final agreement reached between Walgreens and Theranos, 22 and Walgreens gave up the right to review Theranos’s clinical data or financial records. 23 D. Defendants Intentionally Concealed the Truth From Consumers 24 53. Defendants intentionally concealed known problems regarding Theranos 25 26 22 Id. 27 23 John Carreyrou, Safeway, Theranos Split After $350 Million Deal Fizzles, Wall St. J. (Nov. 10, 2015) (Ex. 8). 28
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1 testing equipment and facilities, and regarding the unreliability of Theranos testing. The 2 information that Defendants concealed was highly material information. 3 54. For example, Defendants knew, but concealed, that: (a) Theranos’s 4 5 laboratories were not in compliance with federal guidelines; (b) Theranos’s Edison
6 device lacked regulatory approval; (c) with the exception of a single approved test, 7 Theranos tests had not been approved by the FDA despite attempts to get such approval 8 for more than 100 tests; (d) internal testing and data showed that Theranos’s technology 9 10 was unreliable; (e) Theranos’s testing equipment had failed proficiency testing and
11 Theranos manipulated the testing process in an attempt to cover that up; (f) for some tests 12 that were to be conducted on “tiny blood samples,” Theranos diluted the samples prior to 13 conducting the tests; (g) Defendants knew that Theranos testing was not ready-for-market 14 15 and was using the consumer tests, in essence, to experimentally beta test their products
16 for research and product development purposes; (h) inspections by regulators had 17 revealed a wide range of serious deficiencies at Theranos; and (i) Walgreens had 18 identified numerous red flags regarding the reliability of Theranos testing, but had 19 20 nevertheless gone ahead with offering the tests in its stores while deliberately failing to
21 conduct any meaningful investigation or to follow up regarding the problems and 22 concerns identified. 23 55. With respect to the undisclosed material information, all such information 24 25 was known by Theranos. Theranos knowingly engaged in and assisted the concealment 26 of material information as alleged herein. 27 56. With respect to the undisclosed material information, all such information 28
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1 was known by Walgreens and/or would have been known but for Walgreens’ deliberate 2 choice to ignore and/or not obtain such information or conduct a reasonable investigation. 3 Walgreens knowingly engaged in and assisted the concealment of material information as 4 5 alleged herein.
6 57. Holmes and Balwani were personally privy to the material undisclosed 7 information by virtue of their extensive, hands-on involvement in these matters and their 8 respective roles as leader and second in command, at Theranos. Holmes and Balwani 9 10 knowingly engaged in and assisted the concealment of material information as alleged
11 herein. 12 58. Defendants went to great lengths to conceal the truth about Theranos 13 testing. For example, Theranos refused to allow its Edison device to be photographed; 14 15 would not permit peer review of its testing or technology, even though that is customary
16 in the medical testing and health care industry; and refused to even provide meaningful 17 explanations when asked about how its technology worked. Defendants affirmatively 18 covered up reliability problems when they were identified internally, and concealed and 19 20 downplayed the fact that Theranos had phased out, and then discontinued entirely, use of
21 the Edison device to conduct tests due to the fact that it did not work. When the 22 discontinuation of the Edison device occurred, Defendants misrepresented the reason.24 23 24 24 In an interview at Fortune’s Global Forum on November 2, 2015, Holmes claimed she 25 “was the person who chose, voluntarily, to stop using our nanotainer tubes” and that it was the “decision to transition our systems to the FDA framework, which led us right 26 now, as of this moment, for the last few weeks only, to run just one test” using the finger- 27 stick and nanotainer collection method. “Temporarily,” she emphasized, “as we transition, which has now been just a few weeks, we would not be using that [nanotainer] tube to 28
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1 59. When concerns were raised internally by Theranos employees, Defendants 2 minimized, mocked, and threatened the employees.25 And when media outlets began 3 questioning Theranos, Defendants attacked the sources and falsely denied there were any 4 5 problems. For example, when the Wall Street Journal published a story raising alleged
6 issues about Theranos in October 2015, Theranos responded by issuing a press release 7 which stated, in part: “Today’s Wall Street Journal story about Theranos is factually and 8 scientifically erroneous and grounded in baseless assertions by inexperienced and 9 10 disgruntled former employees and industry incumbents.”26 On Twitter, Theranos and
11 Holmes claimed: “We got FDA clearance of the exact system that @WSJ is questioning”; 12 “3.5 million successful tests, tens of thousands of patients, 1 article w/ anonymous 13 sources”; and “We offered to bring our technology to @WSJ offices… and they denied 14 27 15 that request to show it to them.”
16 60. Defendants intentionally concealed material information from Plaintiffs and 17 the proposed Class members. 18 61. Defendants had a duty to Plaintiffs and the proposed Class members, all of 19 20 whom were consumers of Theranos tests, to disclose material information concerning the
21 unreliability of Theranos testing. Defendants breached their duty. 22
23 collect our samples.” Recorded interview available at 24 http://fortune.com/2015/11/02/theranos-elizabeth-holmes-fda/ (last visited Jan. 24, 2017). 25 John Carreyrou, Theranos Whistleblower Shook the Company—And His Family, Wall 25 St. J., (Nov. 16, 2016.) (Ex. 9). 26 Press Release, Theranos, Inc., Statement from Theranos (Oct. 15, 2015) (Ex. 10). 26 27 Archived Twitter page of Elizabeth Holmes, @eholmes2003, retweeting posts by 27 Theranos (@Theranos) dated Oct. 15, 2015; Oct. 16, 2015, available at https://archive.is/iMEhb (last visited Jan. 24, 2017). 28
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1 62. The information Defendants did not disclose was within the exclusive 2 possession of Defendants, and Defendants were in a position of significantly far superior 3 knowledge, particularly in light of Defendants’ concealment of information. 4 5 63. Moreover, the scientific and technical nature of blood and other clinical
6 testing is such that Defendants knew that consumers depended and relied on Defendants 7 to provide accurate and complete material information for the consumers’ use in making 8 decisions. 9 10 64. Defendants’ duty to disclose also arose from the fact that they made
11 numerous misleading and/or partial statements to consumers and the public about, inter 12 alia, the readiness, quality, reliability, and regulatory approval and compliance of 13 Theranos testing. In promoting Theranos testing, Defendants (including Thearnos, 14 15 Walgreens, and Holmes and Balwani personally) repeatedly made statements, in
16 marketing and elsewhere, that the testing was accurate, reliable, and of the highest- 17 quality. Defendants also repeatedly expressly stated and implied that Theranos testing 18 was validated by, and compliant with, federal regulations and guidelines. Defendants had 19 20 a duty to disclose material information regarding the unreliability of Theranos testing and
21 the fact that such testing was not ready-for-market, because Defendants’ affirmative 22 representations were misleading and likely to deceive consumers in the absence of full 23 disclosure. 24 25 65. Defendants’ duty to disclose also arose from the very nature of the 26 information in question. Given the critical role that blood testing and other clinical 27 testing plays in monitoring one’s health and in making health and treatment decisions, 28
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1 and the corresponding importance of consumers’ ability to rely on their test results, 2 Defendants knew that the information not disclosed was highly material and that 3 reasonable consumers would not have entered into the transactions in question, and 4 5 would not have agreed to have their blood drawn and tested by Defendants, had the true
6 information about Theranos testing been disclosed, and knew that consumers submitting 7 to Theranos blood testing were doing so based on mistaken facts, without material 8 information and, in fact, with misleading information disseminated by Defendants. 9 10 E. Defendants Falsely Promoted Theranos Testing as Reliable 11 66. Not only did Defendants conceal and fail to disclose material information
12 about Theranos testing from consumers and their doctors, but they affirmatively and 13 falsely promoted the tests—including in their marketing, in the stores, and in press 14 15 releases and other media statements—as meeting the highest standards of reliability, 16 industry-leading in quality, and developed and validated under, and compliant with,
17 federal guidelines. Defendants promoted the testing services as being ready-for-market, 18 and aggressively encouraged consumers and their doctors to rely on the test results in 19 making critical health and treatment decisions. 20 21 67. Defendants’ representations were false and misleading.
22 68. Defendants’ representations were pervasive such that Plaintiffs and all 23 proposed Class members, as well as medical providers in all relevant geographic areas, 24 were exposed to them. 25 26 69. Defendants’ advertisements for Theranos were rampant, including in
27 Arizona and in California where Theranos testing was offered. In addition to prominent 28
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1 advertisements and disclosures in the Walgreens stores and Theranos Wellness Centers, 2 Defendants ran commercials on television, had billboards along the main interstate in 3 Phoenix, and had advertisements in the Phoenix Sky Harbor International Airport.28 4 5 70. Defendants designed their representations and marketing to give the false
6 impression to consumers and medical providers that Theranos testing was reliable and 7 accurate and could and should be used in making health and treatment decisions. 8 71. For example, Defendants advertised that Theranos testing was of “the 9 10 highest levels of accuracy,” and that the tests were “validated” under and in compliance
11 with federal regulations and guidelines: 12 13 14 15 16 17 18 19 20 21 22 23 24 72. Theranos’s website suggested that Theranos’s test results could be relied on 25
26 28 Seung Lee, Arizona: Where Theranos Still Has a Friend, Newsweek (June 14, 2016), 27 available at http://www.newsweek.com/arizona-where-theranos-still-has-friend-469942 (last visited Nov. 8, 2016). 28
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1 by consumers and their doctors in making health decisions, that they provided 2 “actionable health information at the time it matters” to consumers, and that they “lead 3 the industry in transparency and quality.” 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
24 73. Walgreens’ website stated that the Theranos technology supported “better, 25 26 27 28
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1 more informed treatment.”29 The Theranos website similarly claimed that Theranos’s 2 “laboratory can perform your tests quickly and accurately on samples as small as a single 3 drop.” 4 5 74. At Wellness Centers where Theranos tests were offered, including in
6 Walgreens stores, Defendants prominently advertised that Theranos’s “CLIA-certified 7 laboratory can perform your tests quickly and accurately using tiny samples.” 8 75. Theranos’s marketing further stated that “[w]e continuously conduct 9 10 proficiency testing and participate in multiple proficiency testing programs,” and that all
11 “tests are developed and validated under and to the CLSI, FDA Centers for Disease 12 Control, and World Health Organization guidelines.” 13 76. Similar, additional representations were made at the Wellness Centers to 14 15 consumers at the point of purchase. To obtain one or more of the testing services offered
16 by Defendants, the consumer needed to complete a one-page “Theranos direct testing 17 order form.” (Ex. 11). The testing services were marketed and sold directly to 18 consumers, as explained in the pamphlet “a guide to direct testing.” (Ex. 12). The 19 20 Theranos testing order form and guide to direct testing pamphlet, which Plaintiffs and the
21 Class were all exposed to, contained further representations and promises that Theranos 22 tests were reliable and could and should be used in medical treatment decisions and other 23 24 29 Walgreens website, Theranos, the Lab Test, Reinvented (archive, Mar. 30, 2014; Apr. 6, 25 2016), available at https://web.archive.org/web/20140330223244/http://www.walgreens.com/pharmacy/lab- 26 testing/home.jsp (last visited Jan. 26, 2017); 27 https://web.archive.org/web/20160407050109/http://www.walgreens.com/pharmacy/lab- testing/home.jsp (last visited Jan. 26, 2017). 28
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1 health decisions. For example, the testing order form encouraged consumers to consult 2 with their doctors for “interpretation of the test results.” The guide to direct testing 3 touted that the Theranos tests would allow consumers to “own your own health like never 4 5 before,” allow consumers to “get vital information about their health when it matters
6 most,” allow them to “become better informed earlier” and enable them to “work with 7 their physician to be proactive and address potential problems sooner.” The guide also 8 stated that consumers could use Theranos test results to monitor their vital health issues 9 10 such as “monitor[ing their] thyroid, blood glucose, sexual health, and more,” and directed
11 consumers to consult with their physicians using the test results once they received them. 12 77. These same themes were consistently advanced and highlighted by 13 Defendants in press releases and in statements to mainstream and industry media. 14 15 78. For example, when the Theranos-Walgreens partnership was publicly
16 announced in September 2013, a joint press release from Theranos and Walgreens stated 17 that the deal would offer consumers access to “less invasive and more affordable 18 clinician-directed lab-testing, from blood samples as small as a few drops, or 1/1000 the 19 30 20 size of a typical blood draw.” The joint press release touted Theranos’s “CLIA-certified
21 laboratory services,” and promised that its “proprietary laboratory infrastructure 22 minimizes human error through extensive automation to produce high quality results.” 31 23 It further stated, “[t]his is the next step in Walgreens’ efforts to transform community 24 25 pharmacy, giving our patients and customers convenient access to the comprehensive
26 30 Press Release, Theranos, Inc., Theranos Selects Walgreens as a Long-Term Partner 27 Through Which to Offer Its New Clinical Laboratory Service, (Sept. 9, 2013) (Ex. 5). 31 Id. 28
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1 care they need, right in their communities.”32 2 79. In November 2013, Theranos and Walgreens issued another joint press 3 release, announcing the opening of Theranos Wellness Centers in Walgreens stores in 4 5 Arizona, which stated that “Theranos test results can be made available to physicians in a
6 matter of hours, enabling fast diagnoses to help make informed treatment choices.”33 7 80. Numerous other press releases and statements to the media by Defendants 8 repeatedly promoted these same themes, including that Theranos tests were government 9 10 approved and reliable. By way of example only:
11 • Theranos Files Comment In Support Of Food and 12 Drug Administration Oversight Of Laboratory-Developed Tests (Mar. 6, 2015) (“[We] believe that FDA oversight plays 13 a critical role in ensuring that individuals and their physicians get the most accurate test results….there are limits on the 14 adequacy of the peer review system….That is why we will 15 continue to submit our work to the FDA and why we believe the decision to do so is essential in providing accurate results 16 for individuals and patients.”) (Ex. 13). 17 • Theranos receives FDA clearance and review and 18 validation of revolutionary finger stick technology, test, and associated test system (July 2, 2015) (Ex. 14). 19 • Theranos Receives CLIA Waiver, Paving the Way for 20 Greater Accessibility of Health Information at the Time and 21 Place it Matters (July 16, 2015) (“FDA has concluded that the Theranos test and technology is eligible for waiver under 22 CLIA. The waiver means FDA determined the Theranos test 23 and technology is reliable and accurate and can be used in a broader set of locations outside of a traditional CLIA certified 24 25 32 Id. 33 Press Release, Theranos, Inc., Theranos and Walgreens Expand Diagnostic Lab 26 Testing to the Phoenix Metropolitan Area; New Theranos™ Wellness Centers at 27 Walgreens stores provide consumers with less invasive, fast, affordable testing on samples as small as a few drops of blood, (Nov. 13, 2013) (Ex. 6). 28
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1 laboratory, including Theranos Wellness Centers.”) (Ex. 15). 2 81. Holmes told The New Yorker that Theranos “ha[s] data that show you can 3 get a perfect correlation between a finger stick and a venipuncture for every test that we 4 34 5 run.” Holmes knew that statement to be false and misleading when she made it. 6 82. Walgreens CFO, Wade Miquelon, told The Arizona Republic that Theranos
7 could perform tests “more accurately” than traditional blood tests.35 8 83. Defendants’ sales materials also highlighted the proprietary “tiny blood 9 10 test” technology and described its offerings as “revolutionary” and a “new way” of 11 testing. The materials repeatedly referenced a smaller sample size and depicted the
12 nanotainer, leading customers to be believe that if they had their blood tested by 13 Theranos it would be via this “tiny blood test” technology, and that such testing was 14 15 reliable and had been validated. For example: 16 17 18 19 20 21 22 23 24 34 Ken Auletta, Blood, Simpler, The New Yorker, (Dec. 15, 2014), available at 25 http://www.newyorker.com/magazine/2014/12/15/blood-simpler (last visited Jan. 26, 2017). 26 35 Ken Alltucker, Get Your Blood Tested at the Store, The Arizona Republic (Nov. 13, 27 2013), available at http://archive.azcentral.com/business/news/articles/20131113get-your- blood-tested-store.html (last visited Jan. 26, 2017). 28
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1 2 3 4 5 6 7 8 9 10 84. According to reports, prior to October 2015, promotional materials 11 promised that “usually only three tiny micro vials” of blood would be collected “instead 12 13 of the six or more large ones,” because “many” of Theranos’s tests required no more than
14 “a few drops of blood.” Theranos reportedly deleted the highlighted portions of the 15 materials below in mid-2015 to supposedly improve its “marketing accuracy,” after it 16 moved away from Edison testing following a surprise inspection by the FDA:36 17 18 19 20 21 22 23 24 25 26 27 36 John Carreyrou, Hot Startup Theranos Dials Back Lab Tests at FDA’s Behest, Wall St. J. (Oct. 16, 2015) (Ex. 16). 28
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 85. On another webpage advertisement to Walgreens customers, Defendants
16 stated that smaller samples directly benefited patients by dramatically reducing the time it 17 takes to analyze samples because its technology enabled a “more timely diagnosis to 18 support better, more informed treatment.”37 19 20 86. Defendants’ advertising served another purpose as well: to lobby the State
21 of Arizona to pass a law allowing consumers to purchase a blood test without a 22 healthcare provider’s order. Theranos’s lobbying and advertising efforts were successful 23 and the bill was signed in April 2015, despite opposition from the Arizona Medical 24 25 Association. At the bill’s signing, Holmes stated that “Theranos is about access— 26 37 Walgreens website, Theranos, the Lab Test, Reinvented (archive, Apr. 7, 2016), 27 https://web.archive.org/web/20160407050109/http://www.walgreens.com/pharmacy/lab- testing/home.jsp (last visited Jan. 26, 2017). 28
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1 eliminating the need for painful needles and vials of blood, replacing that with tiny 2 samples taken in convenient locations at convenient hours of operation, always for a 3 fraction of the cost charged elsewhere—to build a health care system in which early 4 5 detection and prevention become reality. That is why we worked to pass this law; it is
6 why we believe Arizona’s law can and should serve as a model for the nation for direct 7 access testing.”38 The law also allowed laboratories to provide blood test results directly 8 to patients, bypassing involvement by doctors, who are trained to question unusual 9 10 results.
11 87. Walgreens and Theranos jointly marketed Theranos testing services to 12 consumers. On information and belief, marketing decisions about the representations that 13 Plaintiffs and Class members saw were made by Theranos and Walgreens, in California 14 15 and Arizona, and Theranos maintained its website from California. Holmes and Balwani
16 knowingly engaged in and assisted the dissemination of false and misleading 17 representations as alleged herein. 18 88. Defendants knew and intended for consumers to rely on their 19 20 representations, knew that, by the very nature of blood tests and also based on
21 Defendants’ representations, consumers who purchased and submitted to Theranos 22 testing would reasonably expect the test results to be reliable, and knew that the Theranos 23 partnership with Walgreens, a well-established pharmacy entity, and the presence of 24 25 Wellness Centers in Walgreens stores, would further lead customers to believe that the 26 27 38 Press Release, Theranos, Inc., Theranos Founder and CEO Elizabeth Holmes Speaks at Arizona Bill Signing, (Apr. 6, 2015) (Ex. 17). 28
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1 Theranos tests were reliable and trustworthy. 2 F. Theranos’s Tests Were Unreliable and Dangerous 3 89. Defendants’ pervasive representations to customers, including that the 4 5 Theranos tests were reliable, CLIA-certified, and complaint with federal guidelines, were 6 knowingly false and misleading.
7 90. In fact, Theranos testing—including testing conducted using the Edison 8 device and the other testing performed with other devices—was decidedly unreliable and 9 10 posed a serious danger to any consumer who might rely on it. Defendants knew this to be 11 the case, and yet represented otherwise to consumers and concealed that material
12 information from consumers for years. 13 91. Defendants also concealed that information from regulatory authorities. 14 15 For example, in order to maintain CLIA certification, laboratories are required to 16 administer “proficiency testing” of samples provided by CMS in order to prove that they
17 can produce accurate results. According to reports, Theranos split some of the 18 proficiency-testing samples it got into two pieces: One was tested with Edison machines 19 and the other with instruments from other companies. When Theranos lab employees 20 21 asked Balwani, by email, which results should be reported back to test administrators and
22 the government, he replied, copying Holmes, that “samples should have never run on 23 Edisons to begin with.” 39 Balwani reportedly ordered lab personnel to stop using Edison 24 machines on any of the proficiency-testing samples and report only the results from 25 26 27 39 John Carreyrou, Hot Startup Theranos Has Struggled With Its Blood-Test Technology, Wall St. J. (Oct. 15, 2015) (Ex. 3). 28
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1 instruments bought from other companies. The former employees say they did what they 2 were told but were concerned that the instructions violated federal rules, which state that 3 a lab must handle “proficiency testing samples…in the same manner as it tests patient 4 5 specimens” and by “using the laboratory’s routine methods.”40
6 92. Theranos tests were not fit for their ordinary purposes and the purposes for 7 which they were sold by Defendants. 8 93. Theranos tests were neither CLIA-certified, nor “validated” under or 9 10 compliant with federal guidelines, as Defendants represented.
11 94. Any consumer who had a Theranos test could not reasonably rely on the 12 results of such test in light of the litany of problems that have now come to light. 13 95. When the Theranos and Walgreens Wellness Centers opened, the Edison 14 15 devices were not yet beyond the prototype stage.
16 96. As Theranos, Holmes, and Balwani knew, and Walgreens knew or would 17 have known at the time had it conducted a reasonable inquiry, Theranos did not have the 18 necessary FDA approval, known as a CLIA waiver, to use the Edison device for 19 20 conducting on-site blood testing at the Wellness Centers, with the sole exception of a
21 single test (Herpes Simplex HSV-1), for which the Company obtained approval in July 22 2015.41 Theranos sought FDA approval for more than 120 of its tests, none of which 23 24 40 Id. 25 41 Press Release, Theranos, Inc., Statement from Theranos (Oct. 28, 2015) (Ex. 18); Lauren F. Friedman, Controversial Multibillion-Dollar Health Startup Theranos Just Got 26 a Huge Seal of Approval from the US Government (July 2, 2015), available at 27 http://www.businessinsider.com/theranos-gets-fda-approval-2015-7 (last visited Jan. 26, 2017). 28
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1 have been approved at this time.42 2 97. Despite Defendants’ representations to the public about the centrality of the 3 nanotainer and Theranos’s proprietary technology, by the end of 2014, Theranos was 4 5 using its proprietary Edison devices and nanotainers for only 15 out of 205 tests.43 By
6 June 2015, Theranos had stopped using the Edison device altogether.44 In a report 7 detailing objectionable conditions at Theranos dated September 16, 2015, the FDA 8 informed Theranos that, among other things, the agency considered the nanotainer 9 10 devices to be uncleared medical devices being shipped in interstate commerce between
11 California, Arizona, and Pennsylvania.45 12 98. Thousands of consumers arrived at the Wellness Centers expecting a finger 13 prick, but instead they received conventional venous blood draws. Defendants knew that 14 15 customers were receiving venous blood draws and therefore knew, or should have
16 known, that Theranos was not in fact using its finger prick Edison devices. At no point 17 did Defendants disclose to consumers that the blood draw would be anything other than 18 the minimal blood draw they were advertising. 19 20 42 Roger Parloff, A Second FDA Approval Frees Theranos to Do a Blood Test Outside 21 Lab, Fortune (July 16, 2015), available at http://fortune.com/2015/07/16/fda-clears- 22 theranos-to-do-test-outside-lab/ (last visited Jan. 26, 2017). 43 John Carreyrou, Hot Startup Theranos Has Struggled With Its Blood-Test Technology, 23 Wall St. J. (Oct. 16, 2015) (Ex. 3). 44 24 Beth Mole, Theranos Throws in the Towel on Clinical Labs, Officially Pivots to Devices, Ars Technica (Oct. 5, 2016), available at 25 http://arstechnica.com/science/2016/10/theranos-throws-in-the-towel-on-clinical-labs- officially-pivots-to-devices/ (last visited Jan. 26, 2017). 26 45 Department of Health and Human Services, Form FDA-483 (Inspection Report) (Sept. 27 16, 2015), available at http://www.fda.gov/ucm/groups/fdagov-public/@fdagov-afda- orgs/documents/document/ucm469395.pdf (last visited Jan. 26, 2017). 28
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1 99. Because Theranos did not have FDA approval to conduct tests on the 2 Edison device outside of a laboratory setting (with the limited exception for HSV-1 noted 3 above), when Defendants drew blood at the Wellness Centers, the samples obtained then 4 5 had to be couriered to one of two centralized labs, either in Newark, California, or
6 Scottsdale, Arizona. The proprietary Edison devices were only located in the Newark 7 laboratory. Accordingly, all the finger stick blood samples were analyzed at the Newark 8 facility, with the potential exception of samples that Theranos diluted in order to run 9 10 them on conventional machinery.46
11 100. The Scottsdale Lab only performed analyses on venipuncture tests. 12 According to reports, over 90 percent of Theranos’s testing was done at its Scottsdale lab. 13 Theranos has also disclosed that it outsourced certain “highly complex” tests to third- 14 15 party, university-affiliated labs, despite its statements that it was able to run all of the
16 over 200 tests it offers on its Edison devices. 17 101. In the context of a regulated laboratory, Theranos did not need FDA 18 approval to perform testing using the Edison devices (because they were not selling the 19 20 Edison devices), so long as Theranos’s lab operations were in compliance with federal
21 guidelines and met proficiency testing and other safeguards. However, the labs that 22 Theranos used failed to comply with such testing and guidelines. 23 102. Defendants’ statements to customers—that testing was accomplished 24 25 through proprietary analysis, which was accurate and compliant with federal regulations 26 27 46 John Carreyrou, Hot Startup Theranos Has Struggled With Its Blood-Test Technology, Wall St. J. (Oct. 16, 2015) (Ex. 3). 28
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1 and guidelines—were false, both as to the Edison-device tests and the other tests. Simply 2 put, consumers did not receive what they paid for and what they reasonably expected 3 when they obtained testing services from Defendants. None of them could reasonably 4 5 rely on the test results they received, in light of the litany of problems that have come to
6 light. 7 G. Defendants’ Fraudulent Scheme Unravels 8 103. In March 2014, a former Theranos employee alleged to New York State’s 9 10 public-health lab that Theranos may have manipulated the proficiency testing process, in 11 part by intentionally excluding data that showed Theranos’s technology to be
12 unreliable.47 The New York State lab responded that the practices described would be a 13 “violation of the state and federal requirements,” and forwarded the allegations to the 14 48 15 Centers for Medicare and Medicaid Services (“CMS”). 16 104. In April 2015, Arizona Department of Health Services inspectors identified
17 multiple deficiencies at Theranos’s Scottsdale laboratory, including serious issues with 18 Theranos’s proficiency testing.49 For example, in the Scottsdale facility, regulators found 19 that Theranos used mis-programmed machines to evaluate blood coagulation tests, failed 20 21 to properly gauge water purity in machines it used, and failed to meet laboratory quality 22
23 47 John Carreyrou, Theranos Whistleblower Shook the Company—And His Family, Wall 24 St. J. (Nov. 16, 2016) (Ex. 9). 48 John Carreyrou, Hot Startup Theranos Has Struggled With Its Blood-Test Technology, 25 Wall St. J. (Oct. 16, 2015) (Ex. 3). 49 Ken Alltucker, Arizona Inspectors Find Theranos Lab Issues, The Arizona Republic, 26 (Nov. 30, 2015), available at 27 http://www.azcentral.com/story/money/business/consumers/2015/11/27/arizona- inspectors-find-theranos-lab-issues/76021416/ (last visited Jan. 26, 2017). 28
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1 standards. 2 105. In September 2015, a former Theranos lab employee filed a complaint with 3 CMS alleging that Theranos instructed lab employees to keep testing patients with the 4 5 Edison devices despite indications of “major stability, precision and accuracy” problems
6 with those devices.50 7 106. In October 2015 the FDA released inspection reports of Theranos declaring 8 the nanotainer to be an “uncleared medical device.” The investigation also found 9 10 deficiencies in Theranos’s processes for handling customer complaints, monitoring
11 quality and vetting suppliers.51 12 107. In January 2016, CMS cited the Theranos Newark, California lab for 13 multiple serious deficiencies. Among other things, the report stated that in October 2014, 14 15 29 percent of quality control checks performed on the Edison devices produced results
16 outside the acceptable range, and that in February 2015, quality checks on an Edison test 17 measuring a hormone affecting testosterone levels failed 87 percent of the time. 18 108. The letter from CMS, dated January 25, 2016, noted that, based on a 19 20 December 2015 survey, Theranos was found to be out of compliance with five CLIA
21 Condition-level requirements, at least one of which posed “immediate jeopardy to patient 22 health and safety,” meaning the condition had “already caused, is causing, or is likely to 23 cause, at any time, serious injury or harm, or death, to individuals served by the 24 25
26 50 John Carreyrou, U.S. Probes Theranos Complaints, Wall St. J. (Dec. 20, 2015) (Ex. 27 19). 51 Id. 28
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1 laboratory or the health and safety of the general public.”52 2 109. Inspection reports found that Edison devices in the lab often failed to meet 3 the Company’s own accuracy requirements, including a test to detect prostate cancer. In 4 5 one report, inspectors found that 81 of 81 final patient results of a blood clotting test
6 reported to patients on the blood thinner Warfarin were not accurate.53 7 110. In addition, the FDA observed that there were no quality audits being 8 performed at Theranos’s Newark lab, in contravention of FDA regulations.54 9 10 111. At the very time that Defendants were widely touting Theranos’s
11 compliance with federal regulations, Theranos had been repeatedly sanctioned by federal 12 authorities for non-compliance, yet Defendants failed to disclose that fact and in fact 13 continued to represent that there were no problems. After CMS issued findings regarding 14 15 the Newark facility, Theranos made statements to reassure the public that its Scottsdale,
16 Arizona facility was “not impacted” by the CMS findings and Theranos remained “open 17 for business, confident in our technologies, and unwavering in our commitment to 18 19 20 21 52 Carolyn Y. Johnson, Deficiencies at Theranos ‘Pose Immediate Jeopardy to Patient 22 Health,’ Washington Post (Jan. 27, 2016), available at https://www.washingtonpost.com/news/wonk/wp/2016/01/27/regulators-find- 23 deficiencies-at-theranos-that-pose-immediate-jeopardy-to-patient-health/ (last visited Jan. 24 26, 2017). 53 Andrew Pollack, Report Shows Theranos Testing Plagued by Problems, N.Y. Times 25 (Mar. 31, 2015), available at http://www.nytimes.com/2016/04/01/business/report-shows- theranos-testing-plagued-by-problems.html?_r=0 (last visited Jan. 26, 2017). 26 54 Department of Health and Human Services, Form FDA-483 (Inspection Report) (Sept. 27 16, 2015), available at http://www.fda.gov/ucm/groups/fdagov-public/@fdagov-afda- orgs/documents/document/ucm469395.pdf (last visited Jan. 26, 2017). 28
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1 provide Arizonans with the care and service they deserve.”55 2 112. On March 18, 2016, Theranos received another letter from CMS referenced, 3 “RE: PROPOSED SANCTIONS - CONDITIONS NOT MET IMMEDIATE 4 5 JEOPARDY,” which stated that the Company had not remedied the deficiencies
6 identified by CMS in its January letter. Outlining Theranos’s failures to meet quality- 7 control standards, such as improper freezer temperatures, lack of proper documentation, 8 improper equipment calibration, and unqualified personnel, CMS notified Theranos that 9 10 it was out of compliance with accepted clinical laboratory standards, still had not
11 established compliance with the CLIA requirements previously identified, and had not 12 demonstrated that the laboratory had “abated immediate jeopardy.” Notice of Sanctions 13 pursuant to the Clinical Laboratory Improvement Amendments of 1988 (CLIA) was 14 56 15 provided.
16 113. As these reports indicate, Theranos’s conventional laboratory operations in 17 both Scottsdale and Newark were found to be deeply flawed and deficient by government 18 regulators. According to published reports, at Theranos’s Scottsdale lab, the Company 19 20 performed lab tests with certain Siemens lab equipment programmed to the wrong
21 settings, and failed to adequately gauge the purity of the water input into Siemens lab 22 equipment, which could affect the outcome of the results of testing run on such devices. 23 24 55 Geoff Weiss, Walgreens Pumps the Brakes on Theranos Partnership Amid 25 Problematic Lab Audit, Entrepreneur (Jan. 28, 2016), available at https://www.entrepreneur.com/article/270154 (last visited Jan. 26, 2017). 26 56 CMS, Notice of Proposed Sanctions (Mar. 18, 2016), available at 27 http://www.wsj.com/public/resources/documents/hhslettertheranos.pdf (last visited Jan. 26, 2017). 28
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1 114. The personnel in charge of operating Theranos’s laboratories were 2 dangerously underqualified. For example, the Director of Theranos’s Newark laboratory 3 was Dr. Sunil Dhawan, a dermatologist who had no prior experience running a blood lab. 4 5 115. A peer-reviewed study published March 28, 2016 by researchers at the
6 Icahn School of Medicine at Mount Sinai showed that results for cholesterol tests done by 7 Theranos differed enough from the two largest laboratory companies that it could 8 negatively impact patient care. 9 10 116. Regardless, Defendants continued to conceal this critical information, to
11 falsely market Theranos testing services as accurate and reliable, and to encourage 12 consumers to use Theranos test results to make decisions about their health and treatment. 13 117. In April 2016, Theranos revealed that it was under investigation by the U.S. 14 15 Department of Justice as well as the Securities and Exchange Commission, and that the
16 Department of Justice had requested documents. Walgreens and the New York State 17 Department of Health also received subpoenas. Investigators are also examining whether 18 Theranos misled government officials. 57 19 20 118. On June 30, 2016, members of the House Energy and Commerce
21 Committee requested briefing from Theranos regarding Theranos’s failure to comply 22 with federal regulatory standards governing clinical laboratory testing, and the resulting 23 impact on patients nationwide. The Committee expressed concern over “Theranos’s 24 25 disregard for patient safety and its failure to immediately address concerns by federal 26 27 57 Christopher Weaver, John Carreyrou, and Michael Siconolfi, Theranos Is Subject of Criminal Probe by U.S., Wall St. J. (Apr. 18, 2016) (Ex. 20). 28
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1 regulators,” and requested “information about how company policies permitted 2 systematic violations of federal law.”58 3 119. On July 7, 2016, CMS issued a 33-page Notice to Theranos executives 4 5 stating that it was revoking the CLIA certificate of Theranos’s Newark laboratory and
6 banning the owners and operator(s) of Theranos, including Defendants Holmes and 7 Balwani, from owning or running a lab for at least two years. Citing deficiencies in 8 Theranos’s training of lab personnel, quality assurance, and procedures for assessing the 9 10 “patient impact” of its proficiency testing, among other shortcomings, CMS also
11 threatened to impose a monetary penalty of $10,000 per day for each day of non- 12 compliance.59 13 120. As a result of revelations regarding problems with Theranos’s technology 14 15 and laboratory standards, Theranos test results have lost all credibility within the medical
16 community. Dr. Geoffrey Baird, a pathology professor at the University of Washington, 17 reportedly said about Theranos: “I’m incredibly confused by what these people [at 18 Theranos] are doing. No lab is run like this.”60 Tim Hamill, medical director of UC San 19 20 58 Press Release, Committee on Energy & Commerce Democrats, Democratic Committee 21 Leaders Request Information from FDA and CMS on Theranos’ Inaccurate Blood Tests 22 (July 26, 2016), available at http://democrats- energycommerce.house.gov/newsroom/press-releases/democratic-committee-leaders- 23 request-information-from-fda-and-cms-on (last visited Jan. 26, 2017). 59 24 CMS, Notice of Imposition of Sanctions (July 7, 2016), available at http://online.wsj.com/public/resources/documents/r_Theranos_Inc_CMS_07-07- 25 2016_Letter.pdf (last visited Jan. 26, 2017). 60 Matthew Herper, Something May Be Working At Theranos, But You Don’t Know What 26 It Is, Forbes (June 17, 2016), available at 27 http://www.forbes.com/sites/matthewherper/2016/06/17/something-may-be-working-at- theranos-but-you-dont-know-what-it-is/#42ced77176a8 (last visited Jan. 25, 2017). 28
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1 Francisco’s clinical labs at China Basin and Parnassus reportedly stated: “The fact that 2 there are so many [deficiencies identified by CMS] gives me the impression that these 3 guys don’t know what they’re doing.”61 Other doctors “stopped steering patients to 4 5 Theranos because of results they didn’t trust.”62 In the words of one Forbes reporter, “If
6 there is working technology at Theranos . . . you wouldn’t be able to tell.”63 7 121. In 2016, Theranos whistleblower Tyler Schultz stepped forward to provide 8 a disturbing, detailed account of his experience as a Theranos employee. Mr. Schultz 9 10 was reportedly the first to report Defendants’ fraudulent conduct to state regulators.64
11 122. Mr. Schultz was employed by Theranos as an assay validation team 12 member and was responsible for verifying and documenting the accuracy of tests run on 13 Edison devices before they were deployed in the lab for use with patients. 14 15 123. Mr. Schultz stated that he found the results varied widely when tests were
16 rerun with the same blood samples. In order to reduce this variability, he states that 17 Theranos routinely discarded outlying values from validation reports it compiled. 18 124. For example, one validation report about an Edison test to detect a 19 20 sexually-transmitted infectious disease said the test was sensitive enough to detect the 21 61 Nick Stockton, Theranos’s Lab Problems Go Way Deeper Than Its Secret Tech, Wired 22 (Apr. 27, 2016), available at https://www.wired.com/2016/04/theranos-lab-problems-go- way-deeper-secret-tech/ (last visited Jan. 26, 2017). 23 62 John Carreyrou, Hot Startup Theranos Has Struggled With Its Blood-Test Technology, 24 Wall St. J. (Oct. 16, 2015) (Ex. 3). 63 Matthew Herper, Something May Be Working At Theranos, But You Don’t Know What 25 It Is, Forbes (June 17, 2016), available at http://www.forbes.com/sites/matthewherper/2016/06/17/something-may-be-working-at- 26 theranos-but-you-dont-know-what-it-is/#42ced77176a8 (last visited Jan. 26, 2017). 27 64 John Carreyrou, Theranos Whistleblower Shook the Company–and His Family, Wall St. J. (Nov. 16, 2016) (Ex. 9). 28
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1 disease 95% of the time. But when Mr. Shultz looked at the two sets of experiments 2 from which the report was compiled, they showed sensitivities of 65% and 80%. Thus, if 3 100 people infected with the disease were tested only with the Edison device, as many 4 5 as 35 of them would likely incorrectly get a result concluding they were disease-free.
6 125. Mr. Schultz then moved to Theranos’s production team, where he was 7 responsible for quantifying how much patient tests should be allowed to vary during daily 8 quality-control checks. Labs are permitted to set those parameters subject to them being 9 10 within the bounds of accepted industry guidelines.
11 126. Mr. Schultz observed that the Edison devices often failed Theranos’s 12 quality-control standards. Mr. Schultz further stated that Balwani, the No. 2 executive at 13 Theranos under Holmes, pressured lab employees to ignore the failures and run blood 14 15 tests on the devices anyway, contrary to accepted lab practices.
16 127. Mr. Schultz also states that he informed Holmes of his concerns in early 17 2014. 18 128. Unsatisfied with the actions that Balwani and Holmes had taken, Mr. 19 20 Schultz states that he anonymously emailed his complaint to New York officials who
21 administered a proficiency-testing program in which Theranos was enrolled. 22 129. In April 2014, Mr. Schultz again informed Holmes of the quality-control 23 failures. A few days later, Balwani responded to Mr. Schultz with the following email: 24 25 We saw your email to Elizabeth. Before I get into specifics, let me share with you that had this email come from anyone 26 else in the company, I would have already held them 27 accountable for the arrogant and patronizing tone and reckless 28
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1 comments.65 2 130. Mr. Schultz resigned from his position with Theranos shortly thereafter. 3 131. On November 8, 2016, Walgreens filed a lawsuit against Theranos in 4 5 federal court the District of Delaware, alleging that Theranos breached its contractual 6 obligations by, inter alia, providing testing services to Walgreens customers that
7 Theranos knew lacked accuracy or reliability, and by misrepresenting that its testing was 8 ready-for-market, reliable and accurate and concealing that the opposite was true.66 9 10 132. Partner Fund Management, which invested $96.1 million in Theranos in 11 early 2014, filed a shareholder suit on October 10, 2016. The lawsuit names Holmes,
12 Balwani, and Theranos and alleges that the three engaged in securities fraud, negligent 13 misrepresentation and violations of the Delaware deceptive trade practices act, among 14 67 15 other things. 16 133. On November 28, 2016, a second Theranos investor filed a putative class
17 action against Theranos, Holmes, and Balwani alleging, inter alia, that they concealed 18 material information about reliability problems and concerns with Theranos tests, and 19 affirmatively misrepresented that the tests were ready-for-market and reliable.68 20 21 134. In January 2017, it was reported that Theranos’s Scottsdale, Arizona 22
23 65 John Carreyrou, Theranos Whistleblower Shook the Company—And His Family, Wall 24 St. J. (Nov. 16, 2016) (Ex. 9). 66 Case No. 1:16-cv-01040-SLR (D. Del.), Amended Complaint, Dkt. 14. 25 67 Reed Abelson and Katie Benner, Theranos Sued by Investor Who Accuses It of Securities Fraud, N.Y. Times (Oct. 10, 2016), available at 26 http://www.nytimes.com/2016/10/11/business/theranos-sued-by-investor-who-accuses-it- 27 of-securities-fraud.html (last visited Jan. 26, 2017). 68 Case No. 5:16-cv-06822-NC (N.D. Cal.), Complaint, Dkt. 1. 28
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1 laboratory, where the majority of Theranos tests were conducted, had failed a September 2 2016 inspection by CMS, thus subjecting Theranos to a new round of potential sanctions. 3 According to reports, Theranos responded to the inspection findings with a plan to correct 4 5 the deficiencies found, but CMS rejected the plan as deficient.69 Defendants failed to
6 disclose any of these developments. 7 135. In May 2016, as its scheme was collapsing, Theranos announced that it had 8 voided all blood tests conducted on its Edison device in 2014 and 2015 (which consisted 9 10 of tens of thousands of tests), and had belatedly “corrected” thousands of other test
11 results it had provided to consumers. In December 2016, Theranos further voided and/or 12 belatedly “corrected” numerous additional test results for tests conducted at its 13 Scottsdale, Arizona laboratory. Defendants have failed to provide adequate notice or 14 15 disclosure regarding the nature and extent of the tests it has already voided or belatedly
16 “corrected,” leaving consumers in the dark. Based on the limited information disclosed 17 by Defendants, however, it is apparent that a very substantial portion of the tests have 18 already been voided or belatedly “corrected.” For example, the complaint in Walgreens’ 19 20 action against Theranos indicates that the voided Edison-device tests represented some
21 10% or more of the overall tests conducted at Walgreens stores. That does not include 22 the thousands of other tests that have been, and continue to be, voided and/or belatedly 23 “corrected.” 24 25 26 27 69 Christopher Weaver and John Carreyrou, Second Theranos Lab Failed U.S. Inspection, Wall St. J. (Jan. 17, 2017) (Ex. 21). 28
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1 H. Defendants Continue to Fail to Protect Customers 2 136. Defendants’ misrepresentations, omissions, and fraudulent conduct alleged 3 herein persisted from before the tests were first offered to the public all the way through 4 5 the present. 6 137. Even after the highly damning CMS report became public in January 2016,
7 Defendants still did not take immediate steps to protect the consumers who obtained 8 testing services from Theranos. Walgreens, for its part, failed to take immediate action 9 10 even at this stage and instead gave Theranos 30 days to resolve the critical issues CMS 11 identified at the Newark lab, and closed only a single Wellness Center. Not only did
12 Walgreens permit the remaining 40 Wellness Centers to remain open at that time, it made 13 no effort to notify prospective patients about potential concerns about the reliability of 14 15 Theranos’s testing. Nor did Walgreens notify patients who had previously received 16 Theranos’s tests at the Wellness Centers that their test results may not have been accurate
17 or reliable. 18 138. Because it had no choice due to regulatory action, Theranos has now 19 completely voided and belatedly “corrected” many thousands of its tests results. In many 20 21 cases, it took months (or even a year or more) to inform customers and their doctors that
22 the test results should not be relied on. 23 139. Defendants’ belated “correction” of test results, long after Defendants even 24 had access to the blood samples in question, is inconsistent with industry standards. The 25 26 Wall Street Journal reported on Theranos sending so-called “corrected results” to some
27 patients. Disturbingly, in some instances, the “corrected” results were even more 28
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1 inaccurate than the initial inaccurate and unreliable results Theranos provided.70 2 140. Even beyond the many thousands of tests that have already been 3 completely voided and belatedly “corrected,” no consumer who had a Theranos test could 4 5 reasonably rely on the results they received given the sweeping litany of compliance
6 issues and the extensive list of other accuracy and reliability problems that have come to 7 light, a list that seems to be expanding on a near-weekly basis. 8 141. Defendants have failed to keep customers informed and notified, including 9 10 but not limited to by: failing to inform customers about the numerous problems when
11 Defendants were aware of them; pervasively misrepresenting that Theranos tests could 12 and should be trusted when they knew that was not the case; and failing to promptly and 13 properly notify customers about voided and belatedly “corrected” tests results. Even 14 15 after their scheme began collapsing under its own weight, Defendants continued to
16 engage in a pattern of denying and downplaying the problems, further leaving customers 17 in the dark. 18 142. It was not until June 14, 2016, almost six months after CMS’s report first 19 20 became public, and long after Defendants were aware of reliability problems across the
21 Theranos testing spectrum, that Walgreens announced it was ending its relationship with 22 Theranos.71 Days later, Theranos sent letters to providers encouraging them to direct 23 patients to one of four Theranos-operated Wellness Centers in Arizona. The letters 24 25 70 Christopher Weaver, Agony, Alarm and Anger for People Hurt by Theranos’s Botched 26 Blood Tests, Wall St. J. (Oct. 20, 2016) (Ex. 22). 27 71 Michael Siconolfi, Christopher Weaver, and John Carreyrou, Walgreen Terminates Partnership with Blood-Testing Firm Theranos, Wall St. J. (June 13, 2016) (Ex. 23). 28
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1 assured providers that Theranos was “open for business, confident in our technologies, 2 and steadfast in our commitment to make lab tests fast, convenient, and affordable for 3 everyone.” (emphasis in original). The letters did not disclose, among other things, 4 5 CMS’s sanctions, that Theranos no longer used the Edison device and finger prick tests,
6 the numerous other problems identified with both the Newark and Scottsdale testing 7 facilities, that it had voided all Edison tests performed in 2014 and 2015 as well as other 8 tests, or that the tests were unreliable. To the contrary, Theranos continued to suggest 9 10 that its test were accurate and reliable. In the provider letters, Defendants also directed
11 providers and their patients to Theranos’s website, which also concealed the material 12 information omitted from the provider letters. 13 143. On July 19, 2016, Theranos issued a statement on the CMS findings that 14 15 included further misleading statements and falsehoods:
16 What practices do you undertake to ensure that your test 17 results are accurate? What processes do you use to ensure compliance and quality results? 18 We undertake quality and compliance measures including the following that ensures: 19 • Our laboratory leadership, including our lab director and 20 testing personnel, are highly qualified and well trained • Processes are properly reviewed and maintained 21 • Quality control and quality assessment programs are 22 followed • Lab processes, including assay verification, calibration, 23 equipment maintenance and environmental controls, are 72 24 followed 25 144. Given, inter alia, the lack of transparency and outright fraud from 26 27 72 Press Release, Theranos, Inc., Theranos Statement and Q&A on CMS Findings (July 19, 2016) (Ex. 24). 28
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1 Defendants, the fundamental and sweeping nature of the numerous deficiencies that have 2 been identified regarding Theranos testing, and the fact that both the list of serious 3 deficiencies made public and the list of tests that have been voided and belatedly 4 5 “corrected” have continued to expand with no apparent end in sight, the only reasonable
6 conclusion for any Plaintiff or Class member here to reach is that they cannot and should 7 not be relying on the results of their Theranos tests. 8 145. Theranos has apparently not learned its lesson, despite endangering the 9 10 health and lives of thousands of patients. CMS banned Holmes and Balwani from
11 owning or operating a blood-testing business for at least two years and revoked 12 Theranos’s license to operate a lab in California. 73 Yet Theranos and Holmes, apparently 13 undeterred, are now working on developing a “miniLab” to run diagnostic tests on small 14 15 amounts of blood. One doctor, after watching Holmes’s presentation at the annual
16 meeting of the American Association for Clinical Chemistry, noted that it was not clear 17 how the Edison and miniLab differed, and that Holmes had not actually shown that the 18 device could perform a large number of tests on a single drop of blood.74 Theranos’s 19 20 deception and secrecy continues; the miniLab has not been evaluated by a third party and
21 lacks FDA approval. 22 23 24 73 John Carreyrou, Michael Siconolfi, and Christopher Weaver, Theranos Dealt Sharp 25 Blow as Elizabeth Holmes is Banned From Operating Labs, Wall St. J. (July 8, 2016) (Ex. 25). 26 74 Abigail Tracy, The Medical Community Isn’t Letting Theranos Off the Hook, Vanity 27 Fair (Aug. 4, 2016), available at http://www.vanityfair.com/news/2016/08/theranos- interview-what-went-wrong (last visited Jan. 26, 2017). 28
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1 I. Defendants Misrepresented and Concealed the Purpose of the Theranos 2 Testing Offered to Plaintiffs and the Class 3 146. Defendants prematurely rushed Theranos testing to market in an attempt to
4 “disrupt” and capitalize upon the market for medical laboratory testing, a highly 5 competitive and fast-growing market estimated to be worth $198.5 billion by 2024.75 6 Defendants’ over-eagerness led them to promote and market their testing services 7 8 prematurely, when the services were not market ready, and when Defendants lacked
9 sufficient data validating the services. On information and belief, the premature opening 10 of Wellness Centers and release of Theranos testing to the public was part of Defendants’ 11 strategy for competing in the lucrative laboratory testing market. 12 13 147. Defendants intentionally misled Plaintiffs and the Class about the essential
14 purpose of the blood draws to which they submitted. In permitting Defendants to engage 15 in the procedure of drawing blood from their bodies, Plaintiffs and the Class were 16 misinformed about the essential purpose of such procedure and thus they did not provide, 17 18 and could not have provided, consent for such procedure and intrusion.
19 148. While not disclosed to consumers, the medical field, or otherwise, Theranos 20 technology was still experimental and not ready-for-market at the time it was released. 21 By testing its services on many thousands of unwitting customers who thought they were 22 23 purchasing a ready-for-market service, Defendants intended to develop their product so 24 that it might compete with more established laboratories. In essence, though not 25 75 Press Release, Grand View Research, Inc., Clinical Laboratory Tests Market Size 26 Worth USD 198.5 Billion by 2024 (Dec. 2016), available at 27 https://www.grandviewresearch.com/press-release/global-clinical-laboratory-tests-market (last visited Jan. 26, 2017). 28
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1 disclosed to consumers and indeed represented very differently, Defendants’ Wellness 2 Centers, throughout the relevant period, were used to gather blood samples and other data 3 for use in Defendants’ research and product development. 4 5 149. Offering blood tests to the general public enabled Defendants to collect
6 blood samples from human subjects without sacrificing the time and money necessary to 7 recruit volunteers for formal clinical trials. Defendants’ Wellness Center pretense also 8 helped them evade regulatory scrutiny and in particular the additional regulatory scrutiny 9 10 that accompanies human testing, such as the requirement to obtain approval for such
11 research by an Institutional Review Board (IRB) in order to protect patient safety. 12 150. Theranos’s disregard for IRB standards and patient safety is well- 13 established. For example, in 2016 it was revealed that Theranos had conducted a study 14 15 on a blood test for the Zika virus using data that was collected from human test subjects
16 without any IRB approval.76 17 151. Defendants’ hidden strategy was also designed to avoid the costs associated 18 with alternative methods for obtaining blood samples for research, such as to purchase 19 20 the samples (which would be provided without personal identifying information about the
21 subject) from facilities that have obtained research approval from ethical review boards. 22 On information and belief, because most samples available for research are collected 23 through venous draws, samples taken with a finger-stick method (the type most important 24 25 to Theranos’s development of its technology) were particularly costly and difficult to
26 76 Carolyn Y. Johnson, Theranos withdraws Zika test after regulators flag problems, L.A. 27 Times (Aug. 31, 2016), available at http://www.latimes.com/business/la-fi-theranos-zika- 20160831-snap-story.html (last visited Jan. 26, 2017). 28
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1 obtain. By disguising their research agenda and activity as a legitimate, ready-for-market 2 testing service, Defendants misled consumers not only into providing Defendants with 3 valuable blood samples for their research, but in fact to pay Defendants in the process, in 4 5 exchange for unreliable test results.
6 152. According to reports, Elizabeth Holmes has claimed that Theranos 7 possesses “data that show you can get a perfect correlation between a finger stick and a 8 venipuncture for every test that we run.” 77 Defendants have refused to identify how 9 10 these comparison test results were obtained, except to say that “[t]he clinical tests were
11 conducted by a combination of Theranos and external labs.”78 The fact that Theranos has 12 belatedly “corrected” test results several months (and even years) after taking customers’ 13 blood samples indicates that customers’ blood samples, submitted at Wellness Centers, 14 15 were likely used in generating that data.
16 153. There is additional evidence that Defendants misled consumers about the 17 essential purposes of Wellness Center blood draws. For example, in the case of Plaintiff 18 B.P., Defendants sometimes took blood using both finger stick and traditional methods, 19 20 and sometimes used only one method or the other—for the same panel of tests. On
21 information and belief, Defendants took multiple samples in different ways in an attempt 22 to analyze the results obtained by Theranos technology using a variety of sample types, to 23 generate more data correlating the results of finger stick tests and venous draws. 24 25 77 Ken Auletta, Blood, Simpler, One woman’s drive to upend medical testing, The New Yorker (Dec. 15, 2014), available at 26 http://www.newyorker.com/magazine/2014/12/15/blood-simpler (last visited Jan. 26, 27 2017). 78 Id. 28
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1 154. A related undisclosed purpose underlying Theranos’s premature rush to 2 market was to collect and analyze highly confidential health data about large numbers of 3 people. Like other Silicon Valley companies that collect and analyze “big data,” 4 5 Theranos recognized that sufficiently numerous blood samples, if combined with
6 biographical and other information, could reveal patterns that could help Theranos to 7 develop lucrative products. On information and belief, data analysis at Theranos was 8 overseen by Balwani who reportedly said about his decision to join the Company: “When 9 10 I saw what they were doing at Theranos, [] I thought this will be a really good application
11 for machine learning,79 because we are going to generate a lot of data, and we'll be able to 12 do some interesting work around that.”80 On information and belief, the most direct way 13 for Theranos to obtain a data set sufficiently large to support a machine learning 14 15 application was to convince, by deception, many thousands of people to submit to blood
16 draws and provide blood samples and other valuable personal information. 17 155. According to the Wall Street Journal, when a Theranos employee emailed 18 Holmes in April 2014 to voice his concerns about quality control failures at Theranos, 19 20 she forwarded the internal inquiry to Balwani, who—contrary to his representations to
21 Arizona’s Senate Health and Human Services Committee just weeks before—responded 22 to the employee that the failures were due to the “newness of some of our processes, 23 79 24 Machine learning is a branch of artificial intelligence through which machines, such as laboratory testing equipment, are exposed to enormous data sets and use statistical 25 analysis and predictive analytics to draw inferences, identify patterns, and generate predictions. 26 80 Roger Parloff, Theranos Resignation Is a Major Bid for Atonement, Fortune (May 12, 27 2016), available at http://fortune.com/2016/05/12/presidents-departure-atonement/ (last visited Jan. 26, 2017). 28
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1 which we are improving every day.” “This is product development,” he continued, 2 “this is how startups are built.”81 3 156. Defendants concealed from consumers that Theranos testing services were 4 5 experimental and not ready-for-market, and in fact affirmatively misled them to believe
6 the services were ready-for-market and that the corresponding test results could and 7 should be relied upon in making health and treatment decisions. Defendants 8 misrepresented the purpose of the blood draws and did not disclose to Plaintiffs and the 9 10 Class that the purpose of the blood draws to which they were submitting was for
11 Defendants’ use in research and product development. 12 157. Defendants persuaded Plaintiffs and the Class to submit to blood draws 13 under false pretenses and without their consent. No Plaintiff or Class member knew or 14 15 could have known the truth, and any purported consent by them in submitting to blood
16 draws by Defendants was obtained through fraud, concealment, and substantial 17 misrepresentation. 18 158. All Defendants engaged in and assisted Defendants’ tortious conduct 19 20 alleged herein.
21 J. Defendants’ Misconduct Has Significantly Harmed Consumers
22 159. As a direct result of Defendants’ misconduct alleged herein, Plaintiffs and 23 the other consumers who comprise the proposed Class and Subclasses in this case have 24 been harmed in numerous respects, including but not limited to: (a) paying—out-of- 25 26 27 81 John Carreyrou, At Theranos, Many Strategies and Snags, Wall St. J. (Dec. 27, 2015) (Ex. 26). 28
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1 pocket, through health insurance, or through another collateral source—for Theranos tests 2 that they cannot reasonably rely upon, that unknown to them were experimental in nature, 3 and that in some cases have already been voided or belatedly “corrected”; (b) paying for 4 5 subsequent replacement testing services from other companies; (c) paying additional
6 money to doctors or other health professionals as a result of the inaccurate and unreliable 7 Theranos tests; (d) being subject to unnecessary or potentially harmful treatments, and/or 8 being denied the opportunity to seek treatment for a treatable condition; (e) harm to their 9 10 health, injury, and/or death, and corresponding monetary and other damages; (f) invasion
11 of privacy and bodily integrity without their consent, and corresponding damages 12 therefrom; and (g) severe emotional stress and anxiety. 13 160. Defendants have all benefited, financially and otherwise, from their 14 15 misconduct alleged herein, including but not limited to from revenue that all of the
16 Defendants have received for Plaintiffs’ and the Class members’ tests, from the 17 development of their products through research Plaintiffs and the Class were unwittingly 18 being used for, and additional business that Walgreens has generated as a result of having 19 20 Theranos testing facilities in its retail stores. On information and belief, Holmes and
21 Balwani, respectively, have each personally received millions of dollars as a direct result 22 of their misconduct alleged herein. 23 K. Factual Allegations Regarding Plaintiffs 24 Plaintiff A.R. 25 26 161. On or around June 19, 2015, Plaintiff A.R. purchased Theranos blood tests
27 at a Walgreens Pharmacy in Palo Alto, California. The tests that he purchased included 28
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1 tests regarding protein, blood sugar, cholesterol, and vitamin levels. A.R. purchased 2 Theranos tests to get accurate and reliable results about his health. He trusted Theranos 3 and Walgreens to provide accurate and reliable test results. 4 5 162. A.R. had received orders from his medical care provider to have blood
6 testing performed. A.R. was referred to Theranos by his medical care provider. In 7 choosing to have his blood tested by Theranos, he relied on the representations in 8 Defendants’ materials regarding the reliability of Defendants’ services. He also expected 9 10 tests conducted at Walgreens to be trustworthy and reliable.
11 163. A.R. paid approximately $41.79 out of pocket for the Theranos tests. 12 164. When he purchased Theranos tests, one or more vials of blood were drawn 13 from a vein in A.R.’s arm. A.R. did not know that Defendants drew his blood for the 14 15 purpose of research and product development and he did not consent to such procedure
16 for such purpose. He believed that Defendants’ services were ready-for-market. 17 165. Having been led to believe the Theranos results were reliable, A.R. relied 18 on them, using the results to make decisions concerning his health. 19 20 166. Approximately one year before having his blood tested by Theranos, A.R.
21 had his blood tested by another company, and the results showed that A.R.’s blood 22 contained a normal level of Vitamin D. His Theranos tests indicated that his Vitamin D 23 levels were low, his blood sugar was high, and his LDL (cholesterol) level was high, and 24 25 medication was prescribed for him as a result. The medication that A.R.’s doctor 26 prescribed to supplement his Vitamin D levels caused excess absorption and buildup of 27 calcium in A.R.’s blood, and caused pain and other adverse effects to A.R. 28
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1 167. The Theranos tests that A.R. purchased were unreliable and/or inaccurate. 2 168. After learning that his Theranos tests were unreliable and/or inaccurate, he 3 revisited his doctor, and had his blood tested by another company. The results reflected 4 5 that he is healthier than the Theranos tests had indicated.
6 169. Plaintiff A.R. would not have purchased any Theranos tests if he had 7 known that the Theranos testing facilities were not as described, and that Theranos’s tests 8 were inaccurate or unreliable. Plaintiff A.R. would not have submitted to Theranos tests 9 10 if he had known that Defendants were using his blood tests for research and product
11 development. 12 170. Plaintiff A.R. was battered, injured, damaged and harmed by Defendants’ 13 misconduct. 14 15 171. Plaintiff A.R. suffered damages as a result of Defendants’ conduct, in an
16 amount to be proven at trial. 17 172. In addition to the other harm described herein, Plaintiff A.R. suffered 18 emotional distress, stress, and anxiety as a result of the unreliable Theranos blood tests he 19 20 purchased and the invasion of his body under false pretenses and without his consent.
21 173. Any purported consent by A.R. to have his blood drawn by Defendants was 22 induced by fraud, concealment and misrepresentation, and was not effective. 23 Plaintiff B.B. 24 25 174. On or around October 3, 2014, Plaintiff B.B. purchased eight Theranos 26 blood tests at a Walgreens Pharmacy in Gilbert, Arizona. The tests that she purchased 27 included tests regarding her thyroid. B.B. purchased Theranos tests to get accurate and 28
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1 reliable results about her health. She trusted Theranos and Walgreens to provide accurate 2 and reliable test results. 3 175. B.B. had received orders from her medical care provider to have blood 4 5 testing performed. B.B. was informed by her medical care provider that Theranos was
6 the least invasive alternative for blood testing, and also that Theranos tests were cheaper 7 and that the Walgreens locations provided extended hours for her to get tested. In 8 choosing to have her blood tested by Theranos, she relied on representations in 9 10 Defendants’ materials (including on the Theranos and Walgreens websites, and in press
11 releases) regarding the reliability of Defendants’ services. She also expected tests 12 conducted at Walgreens to be trustworthy and reliable. 13 176. B.B. paid approximately $81.04 out of pocket for the Theranos tests. 14 15 177. When she purchased Theranos tests, one or more vials of blood were drawn
16 from a vein in B.B.’s arm. This was different from the less invasive test that she had 17 expected based on the representations from Defendants that she saw. B.B did not know 18 that Defendants drew her blood for the purpose of research and product development and 19 20 she did not consent to such procedure for such purpose. She believed that Defendants’
21 services were ready-for-market. 22 178. On information and belief, B.B.’s tests were conducted at Theranos’s 23 Newark, California facility. 24 25 179. Having been led to believe the results were reliable, B.B. relied on them, 26 using the results to make decisions concerning her health. 27 180. The Theranos tests that B.B. purchased were unreliable and/or inaccurate. 28
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1 181. After learning that her Theranos tests were unreliable and/or inaccurate, she 2 had her blood retested multiple times by another company. 3 182. Plaintiff B.B. would not have purchased any Theranos test if she had 4 5 known that the Theranos testing facilities were not as described, and that Theranos’s tests
6 were inaccurate or unreliable. Plaintiff B.B. would not have submitted to Theranos tests 7 if she had known that Defendants were using her blood tests for research and product 8 development. 9 10 183. Plaintiff B.B. was battered, injured, damaged and harmed by Defendants’
11 misconduct. 12 184. Plaintiff B.B. suffered damages as a result of Defendants’ conduct, in an 13 amount to be proven at trial. 14 15 185. In addition to the other harm described herein, Plaintiff B.B. suffered
16 emotional distress, stress, and anxiety as a result of the unreliable Theranos blood tests 17 she purchased and the invasion of her body under false pretenses and without her 18 consent. 19 20 186. Any purported consent by B.B. to have her blood drawn by Defendants was
21 induced by fraud, concealment and misrepresentation, and was not effective. 22 Plaintiff B.P. 23 187. Beginning approximately in early 2014, Plaintiff B.P. purchased Theranos 24 25 blood tests several times at a Walgreens Pharmacy in Ahwatukee Village, Phoenix, 26 Arizona. The tests that he purchased included tests regarding diabetes and cholesterol. 27 B.P. purchased Theranos tests to get accurate and reliable results about his health. He 28
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1 trusted Theranos and Walgreens to provide accurate and reliable test results. 2 188. B.P. had received orders from his medical care provider to have blood 3 testing performed. B.P. was informed by his physician that Theranos was the cheapest 4 5 and least invasive alternative for the tests. In choosing to have his blood tested by
6 Theranos, he relied on representations in Defendants’ materials (including at the 7 Walgreens store) regarding the reliability of Defendants’ services. He also expected tests 8 conducted at Walgreens to be trustworthy and reliable. 9 10 189. B.P. paid hundreds of dollars out of pocket for the Theranos tests.
11 190. The first several times that B.P. underwent blood testing by Theranos, 12 nanotainer technology was used to draw relatively small blood samples. Starting in or 13 around mid-2015, Theranos began collecting both nanotainer vials and one or more larger 14 15 vials of blood from a vein in B.P.’s arm. By around early 2016, Theranos collected one
16 or more larger vials of blood from a vein in B.P.’s arm during each of his quarterly visits. 17 B.P. did not know that Defendants drew his blood for the purpose of research and product 18 development and he did not consent to such procedure for such purpose. He believed that 19 20 Defendants’ services were ready-for-market.
21 191. On information and belief, at least one of B.P.’s tests was conducted at 22 Theranos’s Newark, California laboratory. 23 192. Having been led to believe the results were reliable, B.P. relied on them, 24 25 using the results to make decisions concerning his health. 26 193. Based on his Theranos test results, his doctor diagnosed him with diabetes 27 and high cholesterol, and prescribed certain medications. 28
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1 194. The Theranos tests that B.P. purchased were unreliable and/or inaccurate. 2 195. After learning that his Theranos tests were unreliable and/or inaccurate, he 3 had his blood tested by another company. The results reflected that he is healthier than 4 5 the Theranos tests had indicated.
6 196. Plaintiff B.P. would not have purchased any Theranos test if he had known 7 that the Theranos testing facilities were not as described, and that Theranos’s tests were 8 inaccurate or unreliable. Plaintiff B.P. would not have submitted to Theranos tests if he 9 10 had known that Defendants were using his blood tests for research and product
11 development. 12 197. Plaintiff B.P. was battered, injured, damaged and harmed by Defendants’ 13 misconduct. 14 15 198. Plaintiff B.P. suffered damages as a result of Defendants’ conduct, in an
16 amount to be proven at trial. 17 199. In addition to the other harm described herein, Plaintiff B.P. suffered 18 emotional distress, stress, and anxiety as a result of the unreliable Theranos blood tests he 19 20 purchased and the invasion of his body under false pretenses and without his consent.
21 200. Any purported consent by B.P. to have his blood drawn by Defendants was 22 induced by fraud, concealment and misrepresentation, and was not effective. 23 Plaintiff D.L. 24 25 201. On or around June 1, 2015, and December 14, 2015, Plaintiff D.L. 26 purchased Theranos blood tests at a Walgreens Pharmacy in Chandler, Arizona. D.L. 27 purchased Theranos tests to get accurate and reliable results about her health. She trusted 28
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1 Theranos and Walgreens to provide accurate and reliable test results. 2 202. D.L. had received orders from her medical care provider to have blood 3 testing performed. D.L. was informed by her physician that Theranos was the quickest 4 5 and cheapest alternative for the tests. In choosing to have her blood tested by Theranos,
6 she relied on representations in Defendants’ materials (including at the Walgreens store) 7 regarding the reliability of Defendants’ services. She also expected tests conducted at 8 Walgreens to be trustworthy and reliable. 9 10 203. D.L. paid for the Theranos tests out of pocket and/or through her health
11 insurer. 12 204. Each time she purchased a Theranos test, one or more vials of blood were 13 drawn from a vein in D.L.’s arm. D.L. did not know that Defendants drew her blood for 14 15 the purpose of research and product development and she did not consent to such
16 procedure for such purpose. She believed that Defendants’ services were ready-for- 17 market. 18 205. On information and belief, tests of D.L. were conducted at Theranos’s 19 20 Newark, California and Scottsdale, Arizona laboratories.
21 206. Having been led to believe the results were reliable, D.L. relied on them, 22 using the results to make decisions concerning her health. 23 207. Based on the results of her Theranos tests, D.L. tested positive for Sjogrens 24 25 syndrome, which required her to seek treatment from her doctor, to be tested for food 26 allergies, and to spend considerable time learning about Sjogrens syndrome and the 27 impact her diagnosis would have on her lifestyle. 28
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1 208. The Theranos tests that D.L. purchased were unreliable and/or inaccurate. 2 209. After learning that her Theranos tests were unreliable and/or inaccurate, she 3 had her blood tested by another company and consulted with her doctor, who after 4 5 reviewing the new test results has now confirmed that she does not have Sjogrens
6 syndrome. 7 210. Plaintiff D.L. would not have purchased any Theranos test if she had 8 known that the Theranos testing facilities were not as described, and that Theranos’s tests 9 10 were inaccurate or unreliable. Plaintiff D.L. would not have submitted to Theranos tests
11 if she had known that Defendants were using her blood tests for research and product 12 development. 13 211. Plaintiff D.L. was battered, injured, damaged and harmed by Defendants’ 14 15 misconduct.
16 212. Plaintiff D.L. suffered damages as a result of Defendants’ conduct, in an 17 amount to be proven at trial. 18 213. In addition to the other harm described herein, Plaintiff D.L. suffered 19 20 emotional distress, stress, and anxiety as a result of the unreliable Theranos blood tests
21 she purchased and the invasion of her body under false pretenses and without her 22 consent. 23 214. Any purported consent by D.L. to have her blood drawn by Defendants was 24 25 induced by fraud, concealment and misrepresentation, and was not effective.
26 Plaintiff L.M. 27 215. On or around October 5, 2015, Plaintiff L.M. purchased Theranos blood 28
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1 tests at a Walgreens Pharmacy in Chandler, Arizona. The tests that she purchased 2 included tests regarding her thyroid. L.M. purchased Theranos tests to get accurate and 3 reliable results about her health. She trusted Theranos and Walgreens to provide accurate 4 5 and reliable test results.
6 216. L.M. had received orders from her medical care provider to have blood 7 testing performed. L.M. was informed by her physician that Theranos was the cheapest 8 alternative for the tests. In choosing to have her blood tested by Theranos, she relied on 9 10 representations in Defendants’ materials regarding the reliability of Defendants’ services.
11 She also expected tests conducted at Walgreens to be trustworthy and reliable. 12 217. L.M. paid approximately $59.34 out of pocket for the Theranos tests. 13 218. When she purchased Theranos tests, one or more vials of blood were drawn 14 15 from a vein in L.M.’s arm. This was different from the less invasive test that she had
16 expected based on the representations from Defendants that she saw. L.M. did not know 17 that Defendants drew her blood for the purpose of research and product development and 18 she did not consent to such procedure for such purpose. She believed that Defendants’ 19 20 services were ready-for-market.
21 219. Having been led to believe the results were reliable, L.M. relied on them, 22 using the results to make decisions concerning her health. 23 220. Based on the results of her Theranos tests, L.M. was diagnosed by her 24 25 physician as having Hashimoto’s Disease, which was devastating to her and required 26 lifestyle changes, medical appointments, and taking unnecessary medication. 27 221. The Theranos tests that L.M. purchased were unreliable and/or inaccurate. 28
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1 222. In approximately March 2016, at her physician’s direction, L.M. had her 2 blood re-tested by a different testing company, repeating the same tests that Theranos had 3 conducted. These results were dramatically different than the Theranos test results, and 4 5 as per her physician invalidated the diagnosis of Hashimoto’s Disease, meaning L.M. had
6 been needlessly pursuing a course of treatment for a condition she did not have. 7 223. Plaintiff L.M. would not have purchased any Theranos test if she had 8 known that the Theranos testing facilities were not as described, and that Theranos’s tests 9 10 were inaccurate or unreliable. Plaintiff L.M. would not have submitted to Theranos tests
11 if she had known that Defendants were using her blood tests for research and product 12 development. 13 224. Plaintiff L.M. was battered, injured, damaged and harmed by Defendants’ 14 15 misconduct.
16 225. Plaintiff L.M. suffered damages as a result of Defendants’ conduct, in an 17 amount to be proven at trial. 18 226. In addition to the other harm described herein, Plaintiff L.M. suffered 19 20 emotional distress, stress, and anxiety as a result of the unreliable Theranos blood tests
21 she purchased and the invasion of her body under false pretenses and without her 22 consent. 23 227. Any purported consent by L.M. to have her blood drawn by Defendants 24 25 was induced by fraud, concealment and misrepresentation, and was not effective.
26 Plaintiff M.P. 27 228. On or around November 2015, Plaintiff M.P. purchased Theranos blood 28
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1 tests at a Walgreens Pharmacy in Tempe, Arizona. The tests that he purchased included 2 STI panels. M.P. purchased Theranos tests to get accurate and reliable results about his 3 health. He trusted Theranos and Walgreens to provide reliable test results. 4 5 229. In choosing to have his blood tested by Theranos, he relied on
6 representations in Defendants’ materials (including at the Walgreens store and the 7 information he viewed on the Theranos website) regarding the reliability of Defendants’ 8 services. He also expected tests conducted at Walgreens to be trustworthy and reliable. 9 10 230. Plaintiff M.P. had his blood drawn by Defendants. M.P. did not know that
11 Defendants drew his blood for the purpose of research and product development and he 12 did not consent to such procedure for such purpose. He believed that Defendants’ 13 services were ready-for-market. 14 15 231. M.P. paid for the Theranos tests out-of-pocket.
16 232. The tests that M.P. purchased were unreliable and/or inaccurate. 17 233. M.P. paid out-of-pocket to be retested with STI panels after learning that 18 the Theranos tests were unreliable and/or inaccurate. 19 20 234. Plaintiff M.P. would not have purchased any Theranos test if he had known
21 that the Theranos testing facilities were not as described, and that Theranos’s tests were 22 inaccurate or unreliable. Plaintiff M.P. would not have submitted to Theranos tests if he 23 had known that Defendants were using his blood tests for research and product 24 25 development. 26 235. Plaintiff M.P. was battered, injured, damaged and harmed by Defendants’ 27 misconduct. 28
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1 236. Plaintiff M.P. suffered damages as a result of Defendants’ conduct, in an 2 amount to be proven at trial. 3 237. In addition to the other harm described herein, Plaintiff M.P. suffered 4 5 emotional distress, stress, and anxiety as a result of the unreliable Theranos blood tests he
6 purchased and the invasion of his body under false pretenses and without his consent. 7 238. Any purported consent by M.P. to have his blood drawn by Defendants was 8 induced by fraud, concealment and misrepresentation, and was not effective. 9 10 Plaintiff R.C.
11 239. On or around February 2015, Plaintiff R.C. purchased Theranos blood tests 12 at a Walgreens Pharmacy in Sun City West, Arizona. The tests that he purchased 13 included tests regarding his heart health. R.C. purchased Theranos tests to get accurate 14 15 and reliable results about his health. He trusted Theranos and Walgreens to provide
16 accurate and reliable test results. 17 240. R.C. had received orders from his medical care provider to have blood 18 testing performed to monitor his heart health. In choosing to have his blood tested by 19 20 Theranos, he relied on representations in Defendants’ materials (including at the
21 Walgreens store) regarding the reliability of Defendants’ services. He also expected tests 22 conducted at Walgreens to be trustworthy and reliable. 23 241. R.C. paid for the Theranos tests through Medicare. 24 25 242. When R.C. purchased Theranos tests, Theranos drew relatively small blood 26 samples from him. Unlike what had been advertised, however, the process was painful 27 and was not quick as advertised. The phlebotomist struggled to secure enough blood 28
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1 from R.C.’s finger and had to repeat the painful process several times before collecting 2 enough to test. R.C. did not know that Defendants drew his blood for the purpose of 3 research and product development and he did not consent to such procedure for such 4 5 purpose. He believed that Defendants’ services were ready-for-market.
6 243. Having been led to believe the results were reliable, R.C. relied on them, 7 using the results to make decisions concerning his health. 8 244. The results from his Theranos tests indicated that R.C. was in good health. 9 10 Based on these results, his doctor recommended that R.C. maintain his current
11 medication regimen and to return in one year for repeat testing, and R.C. believed his 12 current lifestyle and medication regimen was working for him and that he had been 13 successful in getting his heart health under control. 14 15 245. The Theranos tests that R.C. purchased were unreliable and/or inaccurate.
16 246. Less than one month later, R.C. suffered a heart attack. R.C. was admitted 17 to the hospital, had two stents placed, and had numerous follow up medical appointments. 18 R.C. and his cardiologist were particularly concerned that R.C. had suffered a heart attack 19 20 given that his blood panels came back clear (from his Theranos tests) less than a month
21 prior. Additional blood work performed during his hospitalization strongly suggested 22 that the near-contemporaneous Theranos blood tests were inaccurate. 23 247. Subsequently, as alleged above, Theranos voided the results of all of the 24 25 “tiny” blood tests, which on information and belief would have included R.C.’s tests. 26 248. Since his 2015 heart attack, R.C. has been receiving medical care using 27 traditional blood testing procedures from companies other than Theranos. 28
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1 249. Plaintiff R.C. would not have purchased any Theranos test if he had known 2 that the Theranos testing facilities were not as described, and that Theranos’s tests were 3 inaccurate or unreliable. Plaintiff R.C. would not have submitted to Theranos tests if he 4 5 had known that Defendants were using his blood tests for research and product
6 development. 7 250. Plaintiff R.C. was battered, injured, damaged and harmed by Defendants’ 8 misconduct. 9 10 251. Plaintiff R.C. suffered damages as a result of Defendants’ conduct, in an
11 amount to be proven at trial. 12 252. In addition to the other harm described herein, Plaintiff R.C. suffered 13 emotional distress, stress, and anxiety as a result of the unreliable Theranos blood tests he 14 15 purchased and the invasion of his body under false pretenses and without his consent.
16 253. Any purported consent by R.C. to have his blood drawn by Defendants was 17 induced by fraud, concealment and misrepresentation, and was not effective. 18 Plaintiff R.G. 19 20 254. On or around September 10, 2015, Plaintiff R.G. purchased Theranos blood
21 tests at a Walgreens Pharmacy in Gilbert, Arizona. The tests that he purchased included 22 tests regarding his sexual health. R.G. purchased Theranos tests to get accurate and 23 reliable results about his health. He trusted Theranos and Walgreens to provide accurate 24 25 and reliable test results. 26 255. R.G. had seen and heard advertisements for Theranos that caused him to 27 believe it was a revolutionary technology. In choosing to have his blood tested by 28
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1 Theranos, he relied on representations in Defendants’ materials (including a billboard) 2 regarding the reliability of Defendants’ services. He also expected tests conducted at 3 Walgreens to be trustworthy and reliable. 4 5 256. R.G. paid approximately $121.63 out of pocket for the Theranos tests.
6 257. When he purchased Theranos tests, one or more vials of blood were drawn 7 from a vein in R.G.’s arm. R.G. did not know that Defendants drew his blood for the 8 purpose of research and product development and he did not consent to such procedure 9 10 for such purpose. He believed that Defendants’ services were ready-for-market.
11 258. On information and belief, one or more of R.G.’s tests were conducted at 12 Theranos’s Newark, California laboratory. 13 259. Having been led to believe the results were reliable, R.G. relied on them, 14 15 using the results to make decisions concerning his health.
16 260. The results from his Theranos tests indicated that he had tested positive for 17 HIV (specifically, the HIV 1+2 Antigen/Antibody Combo was “reactive”). 18 261. After receiving the test results from Theranos, R.G., he was extremely 19 20 concerned and visited his physician, began doing research about HIV/AIDS, and had his
21 blood re-tested by two different companies. These test results came back negative. 22 262. The Theranos tests that R.G. purchased were unreliable and/or inaccurate. 23 263. Plaintiff R.G. would not have purchased any Theranos test if he had known 24 25 that the Theranos testing facilities were not as described, and that Theranos’s tests were 26 inaccurate or unreliable. Plaintiff R.G. would not have submitted to Theranos tests if he 27 had known that Defendants were using his blood tests for research and product 28
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1 development. 2 264. Plaintiff R.G. was battered, injured, damaged and harmed by Defendants’ 3 misconduct. 4 5 265. Plaintiff R.G. suffered damages as a result of Defendants’ conduct, in an
6 amount to be proven at trial. 7 266. In addition to the other harm described herein, Plaintiff R.G. suffered 8 emotional distress, stress, and anxiety as a result of the unreliable Theranos blood tests he 9 10 purchased and the invasion of his body under false pretenses and without his consent.
11 267. Any purported consent by R.G. to have his blood drawn by Defendants was 12 induced by fraud, concealment and misrepresentation, and was not effective. 13 Plaintiff S.J. 14 15 268. In or around July 2015, Plaintiff S.J. purchased her first Theranos blood test
16 and urinalysis at a Theranos Wellness Center located at a Walgreens retail store in Mesa, 17 Arizona. The tests that she purchased were for a routine health check including diabetes 18 and triglyceride levels. S.J. purchased Theranos tests to get accurate and reliable results 19 20 about her health. She trusted Theranos and Walgreens to provide accurate and reliable
21 test results. 22 269. S.J. was referred to Theranos by her physician, based on plaintiff’s 23 financial needs and Theranos’s reputation for affordable testing. In choosing to have her 24 25 blood tested by Theranos, S.J. relied on representations in Defendants’ materials 26 (including at the Walgreens store) regarding the reliability of Defendants’ services. S.J. 27 trusted Theranos and Walgreens to provide reliable test results. She expected tests 28
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1 conducted at Walgreens to be trustworthy and reliable. 2 270. S.J.’s results from her first Theranos test indicated that she had diabetes, 3 and S.J.’s physician immediately ordered her to be placed on diabetic medications. 4 5 271. S.J. firmly believed she did not have diabetes and obtained a re-test. For
6 the re-test, she went back to the same Theranos Wellness Center located at a Walgreens 7 retail store in Mesa, Arizona. 8 272. S.J. paid for her Theranos tests through Medicare. 9 10 273. Plaintiff S.J. had her blood drawn by Defendants, and had urine collected
11 by Defendants, for her Theranos tests. S.J. did not know that Defendants drew her blood 12 or collected her urine for the purpose of research and product development and she did 13 not consent to such procedures for such purpose. She believed that Defendants’ services 14 15 were ready-for-market.
16 274. Having been led to believe the test results were reliable, following two 17 similarly reported Theranos tests, S.J. and her physician relied on the results to make 18 decisions concerning her health, including a course of medications which ultimately 19 20 made S.J. very ill. S.J. became so ill that she was treated at urgent care where she made
21 the decision to cease all medications prescribed for diabetes. 22 275. Following her reaction to the diabetes medication, along with her original 23 belief that she did not have diabetes, S.J. began seeing another physician who ordered 24 25 repeat lab testing to be done at a non-Theranos facility. The results confirmed that S.J. 26 did not have diabetes, and had been improperly diagnosed and treated based on the 27 Theranos test results. 28
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1 276. The Theranos tests that S.J. purchased were unreliable and/or inaccurate. 2 277. Plaintiff S.J. would not have purchased any Theranos test if she had known 3 that the Theranos testing facilities were not as described, and that Theranos’s tests were 4 5 inaccurate or unreliable. Plaintiff S.J. would not have submitted to Theranos tests if she
6 had known that Defendants were using her blood and urine tests for research and product 7 development. 8 278. Plaintiff S.J. was battered, injured, damaged and harmed by Defendants’ 9 10 misconduct.
11 279. Plaintiff S.J. suffered damages as a result of Defendants’ conduct, in an 12 amount to be proven at trial. 13 280. In addition to the other harm described herein, Plaintiff S.J. suffered 14 15 emotional distress, stress, and anxiety as a result of the unreliable Theranos tests she
16 purchased and the invasion of her body under false pretenses and without her consent. 17 281. Any purported consent by S.J. to have her blood drawn or her urine 18 collected by Defendants was induced by fraud, concealment and misrepresentation, and 19 20 was not effective.
21 Plaintiff S.L. 22 282. On or about February 19, 2015, and October 5, 2015, Plaintiff S.L. 23 purchased Theranos blood tests at a Walgreens Pharmacy in Chandler, Arizona. The 24 25 tests that he purchased included tests regarding diabetes and his liver. S.L. purchased 26 Theranos tests to get accurate and reliable results about his health. He trusted Theranos 27 and Walgreens to provide accurate and reliable test results. 28
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1 283. Prior to each visit, S.L. had seen and heard advertisements for Theranos 2 that caused him to believe that Theranos test results would be as reliable as other labs’ 3 results, and that Theranos was the cheapest and least invasive alternative option for blood 4 5 testing. In choosing to have his blood tested by Theranos, he relied on representations in
6 Defendants’ materials (including on Theranos’s website and in advertisements) regarding 7 the reliability of Defendants’ services. He also expected tests conducted at Walgreens to 8 be trustworthy and reliable. 9 10 284. S.L. paid approximately $100 out of pocket for the Theranos tests.
11 285. When he purchased Theranos tests, one or more vials of blood were drawn 12 from a vein in S.L.’s arm. This was different from the less invasive test that he had 13 expected based on the representations from Defendants that he saw. S.L. did not know 14 15 that Defendants drew his blood for the purpose of research and product development and
16 he did not consent to such procedure for such purpose. He believed that Defendants’ 17 services were ready-for-market. 18 286. Having been led to believe the results were reliable, S.L. relied on them, 19 20 using the results to make decisions concerning his health.
21 287. The results from his Theranos test indicated certain levels that were 22 elevated from the prior year and that he was diabetic. His doctor ordered an ultrasound 23 of the liver, and he took medication for diabetics. 24 25 288. The Theranos tests that S.L. purchased were unreliable and/or inaccurate. 26 289. At his doctor’s direction, S.L. had his blood re-tested by another company 27 and his results were in the normal range, including showing he was pre-diabetic, 28
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1 significantly different from his Theranos tests. 2 290. Plaintiff S.L. would not have purchased any Theranos test if he had known 3 that the Theranos testing facilities were not as described, and that Theranos’s tests were 4 5 inaccurate or unreliable. Plaintiff S.L would not have submitted to Theranos tests if he
6 had known that Defendants were using his blood tests for research and product 7 development. 8 291. Plaintiff S.L. suffered damages as a result of Defendants’ conduct, in an 9 10 amount to be proven at trial.
11 292. In addition to the other harm described herein, Plaintiff S.L. suffered 12 emotional distress, stress, and anxiety as a result of the unreliable Theranos blood tests he 13 purchased and the invasion of his body under false pretenses and without his consent. 14 15 293. Any purported consent by S.L. to have his blood drawn by Defendants was
16 induced by fraud, concealment and misrepresentation, and was not effective. 17 V. CLASS ACTION ALLEGATIONS 18 294. Plaintiffs bring this action on behalf of themselves and proposed Class and 19 Subclasses pursuant to Federal Rules of Civil Procedure Rule 23, defined as follows: 20 21 Class: All purchasers of Theranos testing services, including consumers who paid out-of-pocket, through health insurance, or through any other 22 collateral source (collectively, “Purchasers”). 23 Arizona Subclass: All Purchasers of Theranos testing services in Arizona. 24 California Subclass: All Purchasers of Theranos testing services in 25 California.
26 295. This action is brought as a class action and may properly be so maintained 27 pursuant to the provisions of Rule 23 of the Federal Rules of Civil Procedure. Plaintiffs 28
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1 reserve the right to amend or modify the Class and Subclass descriptions with greater 2 specificity or further division into subclasses or limitation to particular issues, based on 3 the results of discovery. Excluded from the Class and Subclasses are Defendants, their 4 5 affiliates, employees, officers and directors, persons or entities, and the Judge(s) assigned
6 to this case. 7 296. Numerosity – The members of the Class and Subclasses are so numerous 8 that their individual joinder is impracticable. On information and belief, there are at least 9 10 thousands of members in each Class/Subclass. The membership of the Class and
11 Subclasses are determinable by objective criteria using Defendants’ own records. 12 297. Common Question of Fact and Law – There are questions of law and fact 13 common to the Class and Subclasses. These questions predominate over any questions 14 15 affecting only individual Class members. These common legal and factual issues
16 include, but are not limited to: 17 a) Whether Defendants intentionally concealed material information about the 18 reliability of Theranos test results and/or about the compliance of Theranos’s 19 20 testing facilities and/or equipment;
21 b) Whether Defendants had a duty to disclose to Plaintiff and the Class material 22 information regarding the reliability of Theranos’s testing services; 23 c) Whether Defendants’ representations regarding Theranos tests were likely to 24 25 deceive a reasonable consumer; 26 d) Whether Theranos and Walgreens had contractual obligations with Plaintiffs and 27 the Class regarding Theranos’s testing services; 28
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1 e) Whether Defendants were obligated to provide testing services and test results that 2 were reliable; 3 f) Whether Defendants agreed to a partnership through which they would enter the 4 5 market for direct-to-consumer testing by advertising, promoting, and selling
6 products and services that consumers would use to make decisions about their 7 health; 8 g) Whether Defendants together constitute an association-in-fact enterprise within the 9 10 meaning of 18 U.S.C. §§ 1961(4) and 1962(c);
11 h) Whether Defendants misrepresented and concealed the essential purpose of the 12 blood draw procedures Plaintiffs and the Class members submitted to; 13 i) Whether Defendants’ conduct violates the laws as set forth in the causes of action; 14 15 j) Whether Plaintiffs and the Class have been harmed as a result of Defendants’
16 conduct alleged herein; and 17 k) Whether Defendants have been unjustly enriched as a result of their conduct 18 alleged herein. 19 20 298. Typicality – The claims of the representative Plaintiffs are typical of the
21 claims of the Class and Subclasses. Plaintiffs and the Class and Subclasses were subject 22 to the same common pattern of conduct by Defendants, and the Plaintiffs, like the other 23 members of the Class and Subclasses, have sustained damages arising from Defendants’ 24 25 violations of the law, as alleged herein. 26 299. Adequacy – The representative Plaintiffs will fairly and adequately 27 represent and protect the interests of the Class and Subclass members and have retained 28
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1 counsel who are experienced and competent trial lawyers in complex litigation and class 2 action litigation. There are no material conflicts between the claims of the representative 3 Plaintiffs and the members of the Class and Subclasses that would make class 4 5 certification inappropriate. Counsel for the classes will vigorously assert the claims of all
6 Class and Subclass members. 7 300. Predominance and Superiority – This suit may be maintained as a class 8 action under Federal Rule of Civil Procedure 23(b)(3) because questions of law and fact 9 10 common to the Class and Subclasses predominate over the questions affecting only
11 individual members, and a class action is superior to other available means for the fair 12 and efficient adjudication of this dispute. The damages suffered by individual Class and 13 Subclass members are small compared to the burden and expense of individual 14 15 prosecution of the complex and extensive litigation needed to address Defendants’
16 conduct. Further, it would be virtually impossible for each of the Class members to 17 individually redress effectively the wrongs done to them. Even if Class members 18 themselves could afford such individual litigation, the court system could not. In 19 20 addition, individualized litigation increases the delay and expense to all parties and to the
21 court system resulting from complex legal and factual issues of the case. Individualized 22 litigation also presents a potential for inconsistent or contradictory judgments. By 23 contrast, the class action device presents far fewer management difficulties; allows the 24 25 hearing of claims which might otherwise go unaddressed because of the relative expense 26 of bringing individual lawsuits; and provides the benefits of single adjudication, 27 economies of scale, and comprehensive supervision by a single court. Plaintiffs 28
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1 anticipate no unusual difficulties in managing this class action. 2 301. Plaintiffs contemplate the eventual issuance of notice to the proposed Class 3 and Subclass members setting forth the subject and nature of the instant action. On 4 5 information and belief, Defendants’ own business records and electronic media can be
6 utilized for the contemplated notice. To the extent that any further notice may be 7 required, Plaintiffs would contemplate the use of additional media and/or mailings. 8 VI. CAUSES OF ACTION 9 10 FIRST CAUSE OF ACTION (Arizona Consumer Fraud Act, A.R.S. § 44-1521, et seq.) 11 (Against All Defendants) (On Behalf of Arizona Subclass Only) 12 13 302. Plaintiffs incorporate the substantive allegations contained in all prior and 14 succeeding paragraphs as if fully set forth herein.
15 303. Plaintiffs bring this claim on behalf of themselves and the Arizona 16 Subclass. 17 304. Defendants are “persons” within the meaning of A.R.S. § 44-1521(6). 18 19 305. Theranos lab panels and blood and other clinical tests sold in Arizona are
20 “merchandise” within the meaning of A.R.S. § 44-1521(5). 21 306. Defendants have engaged in deception, unfair acts or practices, fraud, false 22 pretenses, false promises, misrepresentation, concealment, suppression and omission of 23 24 material facts, as prohibited by A.R.S. § 44-1522(A).
25 307. Defendants marketed and sold unreliable Theranos testing services that 26 they knew to be unreliable and/or which they failed to take sufficient steps to ensure the 27 28
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1 reliability of, and encouraged consumers to rely on such tests to make decisions about 2 their health and treatment. 3 308. Defendants marketed Theranos testing services as being ready-for-market 4 5 when they knew such testing was still in development and not ready for market, and that
6 Defendants were using the tests conducted on consumers for research and product 7 development purposes. 8 309. Defendants knew that Plaintiffs and the Class would reasonably expect 9 10 Theranos tests to be reliable, given, inter alia, the nature and importance of blood and
11 other clinical testing, Defendants’ representations, and the involvement of Walgreens. 12 310. Defendants made material misrepresentations, false promises, and 13 omissions regarding Theranos testing services, as alleged above and herein, including but 14 15 not limited to:
16 a) False and misleading statements that Theranos tests were reliable, CLIA-certified, 17 and validated and compliant with federal guidelines; 18 b) False and misleading statements that Theranos’s testing facilities and equipment 19 20 were compliant with laws and regulations;
21 c) False and misleading statements that Theranos’s testing services were industry 22 leading in quality; 23 d) False and misleading statements that Theranos’s testing services were ready-for- 24 25 market; 26 e) False and misleading statements that Theranos’s testing services were less 27 invasive than traditional tests and/or were quicker than traditional tests; 28
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1 f) False and misleading statements that Theranos’s laboratory infrastructure 2 minimized human error to produce high quality results; 3 g) Failure to disclose and intentional concealment of known material information 4 5 about the unreliability of Theranos’s testing services;
6 h) Failure to disclose and intentional concealment of known material information 7 about deficiencies and non-compliance of Theranos’s testing facilities and/or 8 equipment; 9 10 i) Failure to disclose and intentional concealment of the fact that Theranos’s testing
11 services were not ready-for-market and that Defendants were using the tests 12 conducted on consumers for research and product development; 13 j) Failure to disclose and intentional concealment of the fact that Walgreens had 14 15 agreed not to require or obtain objective proof that Theranos’s testing services
16 were reliable despite the fact that it had identified numerous red flags and 17 concerns that put it on notice of the problems; 18 k) Failure to disclose and intentional concealment of the fact that Walgreens had 19 20 agreed to conduct no oversight of Theranos’s laboratory testing practices despite
21 the fact that it had identified numerous red flags and concerns that put it on notice 22 of the problems; 23 l) Failure to disclose and intentional concealment of the fact that Theranos 24 25 employees were not adequately trained to perform their job functions without 26 endangering patients, including as described in letters from CMS; 27 m) Failure to disclose and intentional concealment of the fact that Theranos 28
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1 manipulated its internal proficiency testing process and covered up known 2 reliability problems; and 3 n) Failure to disclose and intentional concealment of the fact that Theranos’s internal 4 5 validation tests showed that Theranos testing was unreliable.
6 311. Defendants knew, or with reasonable care should have known, that their 7 promises and representations were false and misleading and material, and that the facts 8 they failed to disclose and concealed were material. 9 10 312. Defendants owed a duty to Plaintiffs and the Arizona Class to provide them
11 material information about the unreliability of Theranos tests, including but not limited to 12 because they had exclusive and far superior knowledge regarding the material 13 information, because of the nature of the information in question, because they knew that 14 15 customers would rely on them to provide accurate and complete material information
16 about the reliability and readiness of the tests, and because they had disseminated 17 pervasive false and/or partial representations about Theranos tests that were misleading 18 absent full disclosure. 19 20 313. Defendants’ misrepresentations and omissions were likely to deceive and
21 had a tendency to deceive reasonable consumers, and have deceived Plaintiffs and the 22 Arizona Subclass. The facts misrepresented and concealed by Defendants would be 23 material to a reasonable consumer. Defendants’ misrepresentations and omissions were 24 25 pervasive. 26 314. Defendants intended for Plaintiffs and Arizona Subclass members to rely 27 on their misrepresentations, false promises, and omissions concerning Theranos testing. 28
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1 315. Plaintiffs and the Arizona Subclass members have reasonably relied on the 2 false promises, material misrepresentations and omissions made by Defendants, including 3 but not limited to by paying (out-of-pocket and/or through health insurance or another 4 5 collateral source) for Theranos testing services, permitting Defendants to take blood
6 samples from them under false pretenses, and relying on unreliable Theranos test results 7 to make decisions about their health. 8 316. Defendants’ conduct was wanton and reckless, and Defendants 9 10 demonstrated reckless indifference to the rights, health, and safety of Plaintiffs and
11 members of the Arizona Subclass. 12 317. As a result of the A.R.S. § 44-1522(A) violations described above, 13 Plaintiffs and each and every Arizona Subclass member have suffered actual damages. 14 15 318. On behalf of themselves and Arizona Subclass members, Plaintiffs seek
16 relief as prayed for below. 17 SECOND CAUSE OF ACTION 18 (Fraud) (Against All Defendants) 19 319. Plaintiffs incorporate the substantive allegations contained in all prior and 20 21 succeeding paragraphs as if fully set forth herein.
22 320. Plaintiffs bring this claim on behalf of themselves and the Class. 23 321. Defendants marketed and sold unreliable Theranos testing services that 24 they knew to be unreliable and/or which they failed to take sufficient steps to ensure the 25 26 reliability of, and encouraged consumers to rely on such tests to make decisions about
27 their health and treatment. 28
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1 322. Defendants marketed Theranos testing services as being ready-for-market 2 when they knew such testing was still in development and not ready for market, and that 3 Defendants were using the tests conducted on consumers for research and product 4 5 development purposes.
6 323. Defendants knew that Plaintiffs and the Class would reasonably expect 7 Theranos tests to be reliable, given, inter alia, the nature and importance of blood and 8 other clinical testing, Defendants’ representations, and the involvement of Walgreens. 9 10 324. Defendants, who had superior knowledge regarding Theranos testing, were
11 in a unique position to prevent harm to their customers. Instead, Defendants made false 12 and misleading representations to Plaintiffs and the Class about Theranos tests and the 13 accuracy and reliability of same, and concealed material information from them regarding 14 15 the true nature of Theranos tests and Theranos’s facilities and equipment.
16 325. At all relevant times, Defendants had a duty to disclose all facts material to 17 Plaintiffs’ and the Class members’ submission to Theranos testing, purchase of Theranos 18 testing, and reliance upon Theranos test results. Defendants have intentionally 19 20 misrepresented, concealed, and otherwise not disclosed material facts as alleged herein.
21 326. Defendants owed a duty to Plaintiffs and the Class to provide them material 22 information about the unreliability of Theranos tests, including but not limited to because 23 they had exclusive and far superior knowledge regarding the material information, 24 25 because of the nature of the information in question, because they knew that customers 26 would rely on them to provide accurate and complete material information about the 27 reliability of the tests, and because they had disseminated pervasive false and and/or 28
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1 partial representations about Theranos tests that were misleading absent full disclosure. 2 327. Defendants’ misrepresentations and omissions were known by Defendants 3 to be false, misleading, and material. 4 5 328. Defendants’ misrepresentations and omissions were likely to deceive and
6 had a tendency to deceive reasonable consumers, and have deceived Plaintiffs and the 7 Class. The facts misrepresented and concealed by Defendants would be material to a 8 reasonable consumer. 9 10 329. Walgreens also deliberately ignored and intentionally remained ignorant of
11 material facts about the unreliability of Theranos testing. Defendants failed to disclose 12 and intentionally concealed the fact that Walgreens had agreed not to require or obtain 13 objective proof that Theranos’s testing services were reliable despite the fact that it had 14 15 identified numerous red flags and concerns that put it on notice of the problems.
16 Defendants failed to disclose and intentionally concealed the fact that Walgreens had 17 agreed to conduct no oversight of Theranos’s laboratory testing practices despite the fact 18 that it had identified numerous red flags and concerns that put it on notice of the 19 20 problems.
21 330. Defendants’ misrepresentations and omissions were pervasive. 22 331. Defendants intended for Plaintiffs and Class members to rely on their 23 misrepresentations and omissions concerning Theranos testing. 24 25 332. Plaintiffs and the Class members have reasonably relied on the 26 misrepresentations and omissions made by Defendants, including but not limited to by 27 paying (out-of-pocket and/or through health insurance or another collateral source) for 28
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1 Theranos testing services, permitting Defendants to take blood samples from them under 2 false pretenses, and relying on unreliable Theranos test results to make decisions about 3 their health. 4 5 333. Plaintiffs and the Class were actually misled and deceived. As a direct
6 result of Defendants’ conduct, they were induced to undergo blood draws they would not 7 have undergone, to pay for Theranos products and/or services that they would not have 8 purchased (out-of-pocket and/or through health insurance or another collateral source), 9 10 and to rely on unreliable Theranos test results they would not have relied upon had they
11 known the truth, to make decisions concerning their health. 12 334. As a foreseeable and natural consequence of Defendants’ conduct, 13 Plaintiffs and the Class have suffered actual damages. 14 15 335. Defendants’ misconduct alleged herein was intentional, deliberate, and
16 willful. 17 336. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for 18 below. 19 20 THIRD CAUSE OF ACTION (Battery) 21 (Against All Defendants)
22 337. Plaintiffs incorporate the substantive allegations contained in all prior and 23 succeeding paragraphs as if fully set forth herein. 24 338. Plaintiffs bring this claim on behalf of themselves and the Class. 25 26 339. Plaintiffs and all Class members submitted to blood draws performed by
27 Defendants which involved Defendants penetrating their skin and tissue to draw blood, 28
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1 and/or to other clinical procedures as alleged herein. 2 340. Defendants misrepresented and concealed from Plaintiffs and the Class the 3 essential purpose of the blood draws and procedures that they submitted to. Through 4 5 misrepresentations and omissions, as alleged herein, Defendants led Plaintiffs and the
6 Class to believe that Theranos testing was ready-for-market and that the purpose of the 7 blood draws and procedures submitted to was to provide Plaintiffs and the Class reliable 8 information that they could and should rely upon in making health and treatment 9 10 decisions. In fact, not disclosed by Defendants, Defendants had prematurely rushed
11 Theranos testing services to market, the procedures that Plaintiffs and the Class submitted 12 to were experimental in nature and being used by Defendants for research and product 13 development, and the essential purpose of the blood draws and procedures that Plaintiffs 14 15 and the Class submitted to was to aid in Defendants’ research and product development.
16 341. Defendants induced Plaintiffs and Class members to submit to blood draws 17 and other procedures through fraud, concealment, and substantial misrepresentations, and 18 without informing them about the essential purpose of the procedures. 19 20 342. Any purported consent that Plaintiffs and the Class gave to Defendants to
21 draw their blood or to conduct other procedures alleged herein was induced by fraud, 22 concealment, and misrepresentations, and was not effective. Defendants drew blood 23 from and conducted other procedures on Plaintiffs and the Class members without their 24 25 consent. Consent obtained by fraud, concealment, and misrepresentation is not effective 26 consent. 27 343. Defendants willfully and tortiously battered Plaintiffs and the Class 28
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1 members. 2 344. Defendants willfully and tortiously experimented on Plaintiffs and the 3 Class members. 4 5 345. Plaintiffs and Class members did not consent to be subjects for testing,
6 experimentation, research, or product development by Defendants. 7 346. Defendants knew or should have known that conducting blood draws and 8 other procedures on Plaintiffs and the Class for product development purposes, and 9 10 willfully experimenting upon Plaintiffs and the Class, without obtaining their consent
11 would be an affront to the dignity of Plaintiffs and the Class members as human beings. 12 347. Defendants’ misconduct alleged herein was intentional, deliberate, and 13 willful. 14 15 348. As a foreseeable, proximate, and direct result of Defendants’ conduct,
16 Plaintiffs and Class members each have suffered a battery and have been damaged, 17 including but not limited to money they paid out of pocket, being subject to unnecessary 18 or potentially harmful treatments, and/or being denied the opportunity to seek treatment 19 20 for a treatable condition, harm to their health, injury, and/or death and corresponding
21 monetary and other damages, invasion of privacy and bodily integrity without their 22 consent and corresponding damages therefrom, and severe emotional stress and anxiety. 23 349. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for 24 25 below. 26 27 28
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1 FOURTH CAUSE OF ACTION 2 (Negligence) (Against All Defendants) 3 350. Plaintiffs incorporate the substantive allegations contained in all prior and 4 5 succeeding paragraphs as if fully set forth herein. 6 351. Plaintiffs bring this claim on behalf of themselves and the Class.
7 352. Defendants, who had or should have had superior knowledge regarding 8 Theranos testing, were in a unique position to prevent harm to their customers. Instead, 9 10 Defendants made false and misleading representations to Plaintiffs and the Class about 11 Theranos tests and the accuracy and reliability of same, and concealed material
12 information from them regarding the true nature of Theranos tests and Theranos’s 13 facilities and equipment. 14 15 353. At all relevant times, Defendants had a duty to disclose all facts material to 16 Plaintiffs’ and the Class members’ submission to Theranos testing, purchase of Theranos
17 testing, and reliance upon Theranos test results. 18 354. Defendants breached these duties by, inter alia, making material 19 misrepresentations and omissions as alleged herein and by promoting and selling tests 20 21 that were unreliable, not ready-for-market, not safe for consumers to rely on, conducted
22 in a manner that did not satisfy applicable laws, regulations, and/or standards for quality 23 control, conducted in laboratories that did not meet applicable laws, regulations, and/or 24 standards for safety and training, and conducted on inadequately maintained and 25 26 calibrated equipment.
27 355. At all relevant times, Defendants had a duty to provide Plaintiffs and the 28
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1 Class with testing that was safe, reliable, and compliant with applicable laws and 2 regulations. Such duty arose from, inter alia, the medical related nature of the services at 3 issue, the special position of trust occupied by Defendants in the context of blood and 4 5 clinical testing, and the fact that Defendants advertised their services as reliable,
6 compliant, and safe. 7 356. Defendants breached these duties by selling tests that were unreliable, not 8 ready-for-market, not safe for consumers to rely on, conducted in a manner that did not 9 10 satisfy applicable laws, regulations, and/or standards for quality control, conducted in
11 laboratories that did not meet applicable laws, regulations, and/or standards for safety and 12 training, and conducted on inadequately maintained and calibrated equipment. 13 357. At all relevant times, Walgreens had a duty to Plaintiffs and the Class to 14 15 take reasonable steps to ensure that Theranos’s testing was reliable and safe.
16 358. Walgreens breached this duty and acted unreasonably by deliberately 17 ignoring and intentionally remaining ignorant of material facts about Theranos testing, 18 and by promoting and selling Theranos tests to its patrons as reliable, less invasive, 19 20 quicker than traditional testing methods, safe, and highly accurate, despite the fact that it
21 had identified numerous red flags and concerns that put it on notice of the problems, 22 without requiring objective evidence from Theranos that the tests were reliable, and while 23 deliberately and knowingly maintaining no oversight of Theranos’s testing services. 24 25 359. Walgreens knew and expected that consumers would look to it for 26 information concerning “care they need.” With full knowledge that consumers would 27 rely on its endorsement of Theranos, Walgreens failed to take reasonable steps to prevent 28
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1 consumers from submitting to, paying for, and relying upon unreliable and unsafe 2 Theranos testing services. 3 360. By promoting the Theranos tests without adequately investigating the truth 4 5 of promotional statements, and by permitting such tests to be conducted in Walgreens
6 clinics, despite identifying numerous red flags and concerns that put it on notice about the 7 unreliability of Theranos tests, and after it had knowledge that the tests were in fact 8 unreliable, Walgreens acted unreasonably under the circumstances. 9 10 361. Plaintiffs and the Class were damaged as a direct and proximate result of
11 Defendants’ negligent conduct, including by submitting to blood draws they would not 12 have undergone, paying for Theranos products and/or services that they would not have 13 purchased (out-of-pocket and/or through health insurance or another collateral source), 14 15 submitting to blood testing under false pretenses, relying on unreliable Theranos test
16 results, they would not have relied upon had they known the truth, to make decisions 17 concerning their health, by taking harmful actions and not taking necessary actions due to 18 their unreliable Theranos test results, and suffering out-of-pocket losses, emotional 19 20 distress, and other damages as a direct result of the unreliable Theranos tests they were
21 subjected to. 22 362. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for 23 below. 24 25 FIFTH CAUSE OF ACTION (Negligent Misrepresentation) 26 (Against All Defendants)
27 363. Plaintiffs incorporate the substantive allegations contained in all prior and 28
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1 succeeding paragraphs as if fully set forth herein. 2 364. Plaintiffs bring this claim on behalf of themselves and the Class. 3 365. Defendants specifically and expressly misrepresented material facts to 4 5 Plaintiffs and the Class, as alleged herein.
6 366. Defendants knew, or in the exercise of reasonable diligence should have 7 known, that their express representations regarding Theranos testing were false and 8 misleading. Defendants made such statements without reasonable grounds for believing 9 10 them to be true.
11 367. Defendants’ misrepresentations were pervasive. 12 368. Defendants’ misrepresentations were likely to deceive and had a tendency 13 to deceive reasonable consumers, and have deceived Plaintiffs and the Class. The facts 14 15 misrepresented by Defendants would be material to a reasonable consumer.
16 369. Defendants knew, or in the exercise of reasonable diligence should have 17 known, that the ordinary consumer would rely on and be misled by Defendants’ 18 misrepresentations. 19 20 370. Plaintiffs and the Class justifiably relied on Defendants’
21 misrepresentations. 22 371. As a result of Defendants’ conduct, Plaintiffs and the Class have suffered 23 actual damages. 24 25 372. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for 26 below. 27 28
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1 SIXTH CAUSE OF ACTION 2 (Breach of Contract) (Against Theranos and Walgreens) 3 373. Plaintiffs incorporate the substantive allegations contained in all prior and 4 5 succeeding paragraphs as if fully set forth herein. 6 374. Plaintiffs bring this claim on behalf of themselves and the Class.
7 375. To Plaintiffs and the Class, Defendants offered to provide reliable, ready- 8 for-market testing services using proprietary Theranos technology, in exchange for 9 10 submission to blood draws and other clinical procedures and payment of financial 11 compensation, paid out-of-pocket by the consumer and/or paid through the consumer’s
12 health insurance or other collateral sources. Defendants assured customers that their 13 testing services were ready-for-market, that they had the expertise and capability to 14 15 provide reliable test results, and that their services were reliable and of the highest 16 quality.
17 376. Defendants’ promises and obligations were set forth in, among other places, 18 the Theranos direct testing order form (Ex. 11), the Theranos guide to direct testing (Ex. 19 12), and in marketing materials and other statements by Defendants regarding Theranos’s 20 21 testing services that were pervasive, as alleged herein.
22 377. Defendants had express and/or implied contracts with Plaintiffs and the 23 Class members. 24 378. In the context of a consumer purchases of blood and clinical testing 25 26 services, even if Defendants had not represented and promised that their testing services
27 were ready-for-market and reliable (which they did, pervasively), such attributes are 28
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1 implied terms of the purchase contract. A reasonable consumer would not purchase 2 blood or clinical testing services unless such services were expected to be reliable. 3 379. Plaintiffs and the Class relied on Defendants’ promises and covenants 4 5 regarding Theranos testing services in agreeing to have their blood and urine tested by
6 Theranos. 7 380. Plaintiffs and the Class members all accepted Defendants’ offers, creating 8 uniform or substantially similar implied and/or express contracts to perform testing and to 9 10 provide reliable test results.
11 381. Plaintiffs and the Class performed all of their obligations under the 12 contracts. They each submitted to blood draws and/or other clinical procedures 13 performed by Defendants. They each paid money for Theranos test results offered by 14 15 Defendants, either out of pocket or through their health insurance or other collateral
16 sources. 17 382. Defendants breached their contracts with Plaintiffs and the Class by, inter 18 alia: (1) failing to deliver testing services that were ready-for-market; (2) failing to 19 20 deliver testing services and test results that were reliable or of the quality promised; (3)
21 conducting testing using traditional blood testing methodologies and equipment instead 22 of the promised minimally invasive state-of-the art proprietary technology; (4) not 23 ensuring that Theranos’s equipment met its own and/or reasonable quality standards; (5) 24 25 not ensuring that their services were tendered with reasonable care and workmanlike 26 effort, including by failing to comply with applicable laws, regulations, and standards for 27 laboratory testing services; and (5) failing to timely notify customers of the test results’ 28
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1 unreliability and known inaccuracies. 2 383. Each Class member did not receive the benefit of their bargain—including 3 reliable test results. 4 5 384. As a result of Defendants’ breaches described above, Plaintiffs and the
6 Class have suffered damages. 7 385. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for 8 below. 9 10 SEVENTH CAUSE OF ACTION (Unjust Enrichment) 11 (Against All Defendants)
12 386. Plaintiffs incorporate the substantive allegations contained in all prior and 13 succeeding paragraphs as if fully set forth herein. 14 15 387. Plaintiffs bring this claim on behalf of themselves and the Class, and as 16 appropriate bring this claim in the alternative to their legal claims.
17 388. Plaintiffs lost money as a result of Defendants’ conduct alleged herein. 18 389. Defendants were unjustly enriched by their conduct alleged herein, 19 including but not limited through revenues received in connection with Plaintiffs’ and the 20 21 Class members’ Theranos tests, through development of their products, accumulation and
22 storage of valuable patient information and usable blood samples, and through additional 23 business and revenues that Walgreens received by virtue of having Wellness Centers in 24 their stores. 25 26 390. All Defendants were unjustly enriched, including Holmes and Balwani,
27 who on information and belief personally received at least millions of dollars each as a 28
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1 direct result of their personal conduct alleged herein, which conduct constituted a 2 fundamental part of Theranos’s operations and business. 3 391. It would be inequitable and unjust for Defendants to retain the money that 4 5 they have received by their conduct.
6 392. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for 7 below. 8 EIGHTH CAUSE OF ACTION 9 (Aiding and Abetting Fraud) 10 (Against Walgreens) 11 393. Plaintiffs incorporate the substantive allegations contained in all prior and
12 succeeding paragraphs as if fully set forth herein. 13 394. Plaintiffs bring this claim on behalf of themselves and the Class. 14 15 395. Theranos, Holmes, and Balwani committed fraud resulting in injury to 16 Plaintiffs and the Class, as alleged herein. Walgreens’ conduct alleged herein enabled,
17 substantially assisted, encouraged, and was a substantial factor in, the commission of 18 such fraud. 19 396. Walgreens knew that Theranos testing was not reliable and that consumers 20 21 should not be relying on Theranos testing in making health and treatment decisions.
22 397. Walgreens identified numerous red flags and concerns about Theranos 23 testing that put it on notice of the problems, but nevertheless made the deliberate choice 24 to partner with Theranos, offer Theranos testing to customers at its stores, and to facilitate 25 26 the transfer of blood samples and other clinical samples from Walgreens customers to
27 Theranos for use in research and product development. 28
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1 398. Walgreens had actual knowledge of the truth and had access to more than 2 sufficient information to understand that Theranos tests were not reliable and were unsafe 3 for consumers. To the extent Walgreens lacked any more detailed knowledge, it was by 4 5 virtue of Walgreens’ own deliberate choices and conduct in ignoring the problems it
6 identified, deliberately failing to follow up on the concerns and information it had, and 7 ceding to Theranos’s requests to carry on without further information being provided. 8 399. Walgreens had actual knowledge of measures that it could have taken to 9 10 prevent Walgreens clinics and marketing from being used to perpetrate fraud, to provide
11 consumers with accurate information, and to reduce the reach of Defendants’ fraudulent 12 conduct, but nevertheless knowingly and deliberately decided not to adopt such 13 measures, and instead chose to maintain policies that enabled and assisted the fraud. 14 15 400. Before and during the commission of the fraud, Walgreens intended to aid
16 and abet, and did substantially assist, Theranos, Holmes, and Balwani in fraud 17 perpetrated on Plaintiffs and the Class members by, inter alia, marketing, promoting, and 18 otherwise treating Theranos testing as reliable and compliant with applicable laws and 19 20 standards, although Walgreens knew and/or or knowingly and deliberately failed to
21 discover that this information was false, by concealing material information about the 22 reliability and safety of Theranos tests, by allowing Theranos tests to be sold and 23 conducted in its pharmacies, and by making available Walgreens employees to facilitate 24 25 the sale and conducting of Theranos testing services, and transmission of blood samples 26 from Walgreens customers to Theranos for use in research and product development. 27 401. Walgreens’ conduct alleged herein was knowing and intentional, and was 28
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1 carried out by Walgreens in order to benefit Walgreens, including in the form of ill- 2 gotten revenues. On information and belief, Walgreens received revenue from assisting 3 in the perpetration of fraud by Theranos, Holmes and Balwani, including through sales of 4 5 Theranos tests and through increased sales of other Walgreens products to new and
6 existing customers. On information and belief, Walgreens also benefited financially and 7 reputationally as a result of being the first national retail store to provide direct-to- 8 consumer testing services. 9 10 402. Plaintiffs and the Class suffered actual damages as a result of Walgreens’
11 conduct in aiding and abetting fraud. 12 403. Walgreens’ misconduct alleged herein was intentional, deliberate, and 13 willful. 14 15 404. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for
16 below. 17 NINTH CAUSE OF ACTION 18 (Civil Conspiracy to Commit Fraud) (Against All Defendants) 19 405. Plaintiffs incorporate the substantive allegations contained in all prior and 20 21 succeeding paragraphs as if fully set forth herein.
22 406. Plaintiffs bring this claim on behalf of themselves and the Class. 23 407. Defendants agreed to a partnership through which they would enter the 24 market for direct-to-consumer testing by advertising, promoting, and selling products and 25 26 services that consumers would use to make decisions about their health, while knowing
27 that the products and services provided were not as advertised and were unreliable, and 28
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1 that their promotions and other statements in marketing such products and services were 2 false, misleading, and/or unproven. 3 408. The object of Defendants’ conspiracy was to perpetrate fraud, and in 4 5 particular to market and sell testing unreliable and not ready-for-market services to
6 unwitting consumers, obtain blood and other clinical samples for research and product 7 development purposes, and assure customers and the public that the tests were reliable— 8 thereby becoming the primary participants in the new, profitable, national market for 9 10 direct-to-consumer testing services—while concealing that Theranos’s testing services
11 were unreliable, unsafe, and should not be used by consumers to make decisions about 12 their health. 13 409. In furtherance of the conspiracy, Walgreens, Theranos, Holmes, and 14 15 Balwani agreed to, and did, commit fraud and other violations of law as described herein.
16 410. In furtherance of the conspiracy, Theranos, Holmes, and Balwani 17 committed the acts alleged herein, including but not limited providing the unreliable test 18 results to consumers and encouraging consumers to rely on those results, manipulating 19 20 proficiency testing and otherwise covering up problems known internally, fraudulently
21 concealing material facts, and falsely representing Theranos’s testing services as reliable, 22 ready-for-market, and compliant with applicable laws and regulatory standards. 23 411. In furtherance of the conspiracy, Walgreens committed the acts alleged 24 25 herein. Among other things, Walgreens deliberately and intentionally ignored problems 26 about the reliability of Theranos testing, and deliberately and knowingly concealed from 27 Plaintiffs and the Class that it had identified numerous red flags about Theranos and 28
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1 Theranos testing that put it on notice of the problems, and that it had conducted a grossly 2 inadequate investigation of Theranos. Walgreens further executed an agreement with 3 Theranos to market and provide Theranos products and services to Walgreens customers, 4 5 concealed material information from consumers, and disseminated, endorsed and
6 promoted misrepresentations about Theranos testing services with knowledge of their 7 falsity and/or ignorance of their truth. Walgreens further deliberately prevented its staff 8 from conducting any oversight or review of Theranos’s conduct, including, but not 9 10 limited to, toward Walgreens customers, despite having identified numerous red flags and
11 concerns about the reliability of Theranos tests, in an effort to conceal the truth from 12 Defendants’ customers, and the public, for as long as possible. Walgreens further agreed 13 to provide space for Theranos inside its stores to drive retail consumers toward its 14 15 services, and agreed to make available Walgreens employees who would facilitate the
16 sale and performance of Theranos testing services. 17 412. Holmes agreed to, among other things, falsely promote Theranos testing as 18 reliable, ready-for-market, and compliant with applicable laws and regulations, to cover 19 20 up internally known problems, to conceal material information from consumers, and to
21 dismiss, deny and downplay reported problems once Defendants’ scheme began to 22 collapse. 23 413. Balwani agreed to, among other things, use consumer tests that were being 24 25 falsely marketed as being ready-for-market, in order to conduct research and product 26 development, to cover up internally known problems, conceal material information from 27 consumers, to spread, repeat, and otherwise reinforce misleading representations and 28
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1 omissions about Theranos testing, to cover up quality control failures and falsify 2 information submitted to regulatory authorities, and to make every effort to prevent 3 Defendants’ scheme from being reported by employees or otherwise discovered. 4 5 414. As a result of the Defendants’ conspiracy, Plaintiffs and the Class have
6 suffered actual damages. 7 415. Defendants’ misconduct alleged herein was intentional, deliberate, and 8 willful. 9 10 416. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for
11 below. 12 TENTH CAUSE OF ACTION 13 (Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c)) (Against All Defendants) 14 15 417. Plaintiffs incorporate the substantive allegations contained in all prior and 16 succeeding paragraphs as if fully set forth herein.
17 418. Plaintiffs bring this claim on behalf of themselves and the Class. 18 419. 18 U.S.C. § 1962(c) makes it “unlawful for any person employed by or 19 associated with any enterprise engaged in, or the activities of which affect, interstate or 20 21 foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such
22 enterprise’s affairs through a pattern of racketeering activity.” 23 420. Theranos, Walgreens, Holmes, and Balwani are “persons” within the 24 meaning of 18 U.S.C. § 1961(3). 25 26 421. Theranos, Walgreens, Holmes, and Balwani together constitute an
27 association-in-fact enterprise within the meaning of 18 U.S.C. §§ 1961(4) and 1962(c), 28
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1 and will be referred to herein as the “Clinic RICO Enterprise.” 2 422. The Clinic RICO Enterprise engaged in and affected interstate commerce 3 within the meaning of 18 U.S.C. § 1962(c), including but not limited to commerce on the 4 5 internet, and between residents of California, Arizona, and Pennsylvania.
6 423. The Clinic RICO Enterprise had an ongoing organization with an 7 ascertainable structure, and functioned as a continuing unit with separate roles and 8 responsibilities. For example: Theranos concealed material information from consumers 9 10 and advertised Theranos testing services as revolutionary, ready-for-market, and reliable,
11 when in fact its laboratories were staffed by inadequately trained personnel, used 12 improperly calibrated equipment, and its test results were unreliable. Walgreens 13 concealed material information from consumers, promoted and agreed to assist in 14 15 promoting Theranos testing services to consumers, agreed to refrain from conducting any
16 oversight or rigorous investigation regarding Theranos or its facilities and equipment, 17 agreed to provide space for Theranos inside its stores to drive retail consumers toward its 18 services, and agreed to make available Walgreens employees who would facilitate the 19 20 sale and performance of Theranos testing services. Holmes agreed to falsely promote
21 Theranos testing as reliable, ready-for-market, and compliant with applicable laws and 22 regulations, to cover up internally known problems, to conceal material information from 23 consumers, and to dismiss, deny and downplay reported problems once Defendants’ 24 25 scheme began to collapse. Balwani agreed to use consumer tests that were being falsely 26 marketed as being ready-for-market, in order to conduct research and product 27 development, cover up internally known problems, conceal material information from 28
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1 consumers, spread, repeat, and otherwise reinforce misleading representations and 2 omissions about Theranos testing, cover up quality control failures and falsify 3 information submitted to regulatory authorities, and to make every effort to prevent 4 5 Defendants’ scheme from being reported by employees or otherwise discovered.
6 424. At all relevant times, Defendants operated, controlled, or managed the 7 Clinic RICO Enterprise, and profited from the Clinic RICO Enterprise. Defendants were 8 responsible for the content of all marketing, advertisements, and other public-facing 9 10 representations regarding Theranos, and for the material omissions alleged herein.
11 425. The Clinic RICO Enterprise has had a common purpose: to perpetrate 12 fraud, and in particular to market and sell testing services that were unreliable and not 13 ready-for-market services to unwitting consumers, obtain under false pretenses blood and 14 15 other clinical samples for research and product development purposes, and assure
16 customers and the public that the tests were reliable—thereby becoming the primary 17 participants in the new, profitable, national market for direct-to-consumer testing 18 services—while concealing that Theranos’s testing services were unreliable, unsafe, and 19 20 should not be used by consumers to make decisions about their health.
21 426. Defendants conducted and participated in the conduct of the affairs of the 22 Clinic RICO Enterprise through a pattern of racketeering activity, beginning at the latest 23 in 2013, and continuing until at least 2016, and consisting of numerous and repeated 24 25 violations of the federal mail and wire fraud statutes, which prohibit the use of any 26 interstate or foreign mail or wire facility for the purpose of executing a scheme to 27 defraud, in violation of 18 U.S.C. §§ 1341 and 1343. Defendants’ violations of the 28
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1 federal mail and wire fraud included, but were not limited to, to: (a) the numerous 2 specific false statements in press releases and other media statements alleged herein (the 3 time and place of which are identified herein); (b) the misrepresentations, alleged herein, 4 5 that Defendants made on their respective websites and in electronic advertisements,
6 which representations were pervasive in the locations in question during a substantial part 7 or all of the time that Defendants sold Theranos testing services; (c) the transmission of 8 test results through the mail, telephone, fax and internet, which transmissions were 9 10 occurring consistently throughout the relevant time period; and (d) the processing of
11 customer payments and payments among and between Defendants, by electronic 12 transmission, which transmissions were occurring consistently throughout the relevant 13 time period; and (e) shipping an “uncleared medical device in interstate commerce, 14 82 15 between California, Arizona, and Pennsylvania,” as reported by the FDA.
16 427. Defendants devised and furthered the scheme to defraud by use of the mail, 17 telephone, and internet, and caused to be transmitted, by means of mail and wire 18 communications traveling in interstate commerce, writing(s), and/or signal(s), including 19 20 the Theranos and Walgreens websites, online, mailed, televised, or other advertising,
21 press releases, Theranos test results and other materials, and invoices for, and processing 22 of, payments. 23 428. The conduct alleged herein was part of a scheme that Defendants 24 25 formulated to defraud Plaintiffs and the Class, to receive financial and other benefits, and
26 82 Department of Health and Human Services, Form FDA-483 (Inspection Report) (Sept. 27 16, 2015), available at http://www.fda.gov/ucm/groups/fdagov-public/@fdagov-afda- orgs/documents/document/ucm469395.pdf (last visited Jan. 26, 2017). 28
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1 to become the primary participants in the new, profitable, national market for direct-to- 2 consumer testing services. Defendants perpetrated this scheme with the specific intent to 3 deceive and defraud Plaintiffs and the Class, and Defendants did deceive and defraud 4 5 Plaintiffs and the Class.
6 429. These acts of racketeering spanned at least three years and are not isolated 7 or long-ago completed events. Through the conduct of the Clinic RICO Enterprise, 8 Defendants have fraudulently sold at least many thousands of unreliable and dangerous 9 10 Theranos tests to consumers.
11 430. As a foreseeable and natural consequence of Defendants’ scheme, 12 Defendants injured Plaintiffs and the Class, including but not limited to in the form of 13 their submission to and payment, out-of-pocket and/or through their health insurance or 14 15 other collateral sources, for testing services that were unreliable, did not hold the
16 promised value and were dangerous when used for their advertised purposes, and in the 17 form of steps taken and not taken by Plaintiffs and the Class in reliance upon the test 18 results and the corresponding monetary and other damages therefrom. 19 20 431. Defendants’ acts also present a threat of continued racketeering activity,
21 including but not limited to insofar as the Clinic RICO Enterprise has not issued formal 22 invalidation notices for all Theranos test results. 23 432. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for 24 25 below. 26 27 28
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1 ELEVENTH CAUSE OF ACTION 2 Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(d) (Against All Defendants) 3 433. Plaintiffs incorporate the substantive allegations contained in all prior and 4 5 succeeding paragraphs as if fully set forth herein. 6 434. Plaintiffs bring this claim on behalf of themselves and the Class.
7 435. Section 1962(d) makes it unlawful for “any person to conspire to violate” 8 Section 1962(c), among other provisions. 18 U.S.C. § 1962(d). 9 10 436. For years, Defendants aggressively sought to induce and increase sales of 11 Theranos testing services in an effort to bolster their revenues, augment profits, and
12 increase their market share of the new, profitable, national market for direct-to-consumer 13 testing services. Finding it impossible to achieve their ambitious goals lawfully, 14 15 Defendants resorted to cheating through their fraudulent scheme and conspiracy. 16 437. Theranos, Holmes, Balwani, and Walgreens objectively manifested an
17 agreement to participate in the scheme to defraud consumers through the Clinic RICO 18 Enterprise. Theranos, Holmes, Balwani, and Walgreens objectively manifested an 19 agreement on the common purpose of the Clinic RICO Enterprise, deliberately and 20 21 knowingly selling unreliable and dangerous lab tests to consumers while making false
22 representations and material omissions regarding their accuracy, reliability, fundamental 23 purpose, and compliance with applicable laws and standards. 24 438. Defendants objectively manifested an agreement to perpetrate this scheme 25 26 through predicate acts amounting to a pattern of racketeering activity. Walgreens,
27 Holmes, Balwani, and Theranos agreed that some members of the Clinic RICO 28
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1 Enterprise would commit the predicate acts for the benefit of the Enterprise. Defendants 2 further agreed to commit predicate crimes and to aid and abet the commission of 3 predicate crimes by other members of the Clinic RICO Enterprise. 4 5 439. As a foreseeable and natural consequence of Defendants’ conspiracy,
6 Defendants injured Plaintiffs and the Class, including but not limited to in the form of 7 their submission to and payment for, out-of-pocket and/or through their health insurance 8 or other collateral sources, testing services that were unreliable and did not hold the 9 10 promised value and were dangerous when used for their advertised purposes, and in the
11 form of steps taken and not taken by Plaintiffs and the Class in reliance upon the test 12 results and the corresponding monetary and other damages therefrom. 13 440. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for 14 15 below.
16 TWELFTH CAUSE OF ACTION 17 (Violation of California Business & Professions Code Sections 17200, et seq.) (Against All Defendants) 18 441. Plaintiffs incorporate the substantive allegations contained in all prior and 19 succeeding paragraphs as if fully set forth herein. 20 21 442. Plaintiffs bring this claim on behalf of themselves and the Class.
22 443. California’s Unfair Competition Law (“UCL”) defines unfair business 23 competition to include any “unfair,” “unlawful,” or “fraudulent” business act or practice. 24 444. Defendants’ unlawful, unfair, and fraudulent business acts and practices are 25 26 described throughout this Complaint and include, but are not limited to: (a) marketing
27 and selling unreliable Theranos tests that they knew to be unreliable and/or which they 28
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1 failed to take sufficient steps to ensure the reliability of, and encouraging consumers to 2 rely on such tests to make decisions about their health and treatment; (b) marketing 3 Theranos testing services as being ready-for-market when they knew that was not the 4 5 case and that Defendants were using the tests conducted on consumers for research and
6 product development; and (c) material misrepresentations and omissions as alleged 7 herein. 8 445. Defendants’ conduct alleged herein constitutes unlawful, unfair, and 9 10 fraudulent business practices.
11 446. Defendants have violated the “fraudulent” prong of the UCL through their 12 conduct, misrepresentations, and omissions alleged herein. Defendants’ 13 misrepresentations and omissions were pervasive. Defendants’ misrepresentations and 14 15 omissions are likely to deceive and have a tendency to deceive reasonable consumers,
16 and have deceived Plaintiffs and the Class. The facts misrepresented and concealed by 17 Defendants would be material to a reasonable consumer. 18 447. Defendants had exclusive and superior knowledge regarding the material 19 20 information that they concealed.
21 448. Plaintiff and the Class reasonably relied upon Defendants’ 22 misrepresentations and omissions to their detriment. 23 449. Defendants have violated the “unfair” prong of the UCL through their 24 83 25 misconduct alleged herein, under both the Cel-Tech “tethering” test and “balancing” 26 test. 27 83 Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163 (1999). 28
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1 450. Defendants’ conduct alleged herein violates California public policy, 2 including but not limited to as such policy is reflected in California’s Consumer Legal 3 Remedies Act (Cal. Civ. Code § 1750, et seq.), Cal. Civ. Code § 1710, Cal. Comm. Code 4 5 §§ 2314-2315, and in California common law.
6 451. Defendants’ conduct alleged herein is immoral, unethical, oppressive, 7 unscrupulous, and substantially injurious to consumers. Defendants have engaged in a 8 years-long, pervasive scheme of: (a) promoting and selling unreliable Theranos tests and 9 10 encouraging consumers to rely on those tests in making decisions about their health; (b)
11 misrepresenting the reliability and other details about Theranos testing services, including 12 that they were ready-for-market when that was not the case; and (c) concealing from 13 consumers material information about the reliability of Theranos tests and the compliance 14 15 of Theranos with applicable laws and standards. This conduct is immoral, unethical, and
16 unscrupulous. Moreover, Defendants’ conduct is oppressive and substantially injurious 17 to consumers. Among other things, as a direct result of Defendants’ conduct alleged 18 herein, Plaintiffs and the Class have paid money and submitted to Theranos testing that 19 20 was not only unreliable, but put their health and lives at risk. There is no countervailing
21 utility to Defendants’ conduct, and certainly none that outweighs the substantial 22 detriment to Plaintiffs and the Class. 23 452. Defendants’ conduct is also unlawful in that it violates Civil RICO (18 24 25 U.S.C. §§ 1961-1968); California’s False Advertising Law, (Cal. Bus. & Prof. Code 26 §§ 17500, et seq.), California’s Consumer Legal Remedies Act, (Cal. Civ. Code § 1750, 27 et seq.), statutory deceit, (Cal. Civ. Code § 1710), the Arizona Racketeering Act, (A.R.S. 28
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1 §§ 13-2301-04), California Health & Safety Code §§ 24170, et seq., and common law 2 fraud, civil conspiracy to commit fraud, battery, medical battery, negligence, and 3 negligent misrepresentation, which not only result in liability as to the individual causes 4 5 of action, they also provide a basis for a finding of liability under the UCL.
6 453. Furthermore, Defendants’ conduct violates declared legislative policies as 7 set forth by the federal government in 40 C.F.R. § 600.307(a)(ii)(A); 40 C.F.R. 8 § 600.302-08(b)(4) and 16 C.F.R. § 259.2(a). 9 10 454. As a result of Defendants’ violations of California’s Unfair Competition
11 Law, Plaintiffs and the Class have suffered actual damages, including the loss of money 12 and/or property to Defendants in exchange for testing they would not, with knowledge of 13 the truth, have allowed to be performed, and which is unreliable, not worth the promised 14 15 value, and dangerous, and other money they have spent out-of-pocket as a result of the
16 unreliable test results they received. 17 455. Absent injunctive relief, Defendants’ violations will continue to harm 18 consumers. 19 20 456. Pursuant to California Business and Professions Code §§ 17200 and 17203,
21 on behalf of themselves and the Class, Plaintiffs seek relief as prayed for below. 22 THIRTEENTH CAUSE OF ACTION 23 (Violation of California Business & Professions Code §§ 17500, et seq.) (Against All Defendants) 24 457. Plaintiffs incorporate the substantive allegations contained in all prior and 25 26 succeeding paragraphs as if fully set forth herein.
27 458. Plaintiffs bring this claim on behalf of themselves and the Class. 28
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1 459. California Bus. & Prof. Code § 17500 states: “It is unlawful for any … 2 corporation … with intent directly or indirectly to dispose of real or personal property … 3 to induce the public to enter into any obligation relating thereto, to make or disseminate 4 5 or cause to be made or disseminated … from this state before the public in any state, in
6 any newspaper or other publication, or any advertising device, … or in any other manner 7 or means whatever, including over the Internet, any statement … which is untrue or 8 misleading, and which is known, or which by the exercise of reasonable care should be 9 10 known, to be untrue or misleading.”
11 460. Defendants have committed acts of untrue and misleading advertising, by 12 disseminating materially misleading and deceptive information, and omitting material 13 information, as alleged herein, for purposes of inducing consumers to purchase and 14 15 submit to Theranos testing services.
16 461. Defendants’ misrepresentations and omissions were pervasive. 17 462. Defendant’s misrepresentations deceived, and have a tendency to deceive 18 the general public regarding the reliability and value of Theranos tests. The 19 20 misrepresentations and omissions by Defendants alleged herein were material in that a
21 reasonable person would attach importance to them and would be induced to act on the 22 information in making decisions. 23 463. Defendants had exclusive and superior knowledge regarding the material 24 25 information that they concealed. 26 464. Plaintiffs and the Class reasonably relied on Defendants’ 27 misrepresentations and omissions to their detriment. 28
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1 465. As a result of Defendants’ violations, Plaintiffs and the Class have suffered 2 actual damages, including the loss of money and/or property to Defendants in exchange 3 for testing they would not, with knowledge of the truth, have allowed to be performed, 4 5 and which is unreliable and dangerous, and other money they have spent out-of-pocket as
6 a result of the unreliable test results they received.. 7 466. Absent injunctive relief, Defendants’ violations will continue to harm 8 consumers. 9 10 467. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for
11 below. 12 FOURTEENTH CAUSE OF ACTION 13 (Violation of California Civil Code Section 1750 et seq.) (Against All Defendants) 14 15 468. Plaintiffs incorporate the substantive allegations contained in all prior and 16 succeeding paragraphs as if fully set forth herein.
17 469. Plaintiffs bring this claim on behalf of themselves and the Class. 18 470. Defendants are “persons” under Cal. Civ. Code § 1761(c). 19 471. Plaintiffs and the members of the Class are “consumers” under Cal. Civ. 20 21 Code § 1761(d).
22 472. Plaintiffs and each Class member’s purchase of Theranos tests constitute 23 “transactions” under Cal. Civ. Code § 1761(e). 24 473. Theranos tests are “goods” and/or “services” under Cal. Civ. Code § 1761 25 26 (a-b).
27 474. Plaintiff and Class members purchased Theranos tests for personal, family, 28
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1 and household purposes within the meaning of California Civil Code § 1761(d). 2 475. As alleged herein, Defendants have engaged in unfair or deceptive acts or 3 practices that violated California’s Consumer Legal Remedies Act (“CLRA”), Cal. Civ. 4 5 Code § 1750, et seq. by, among other things, representing that Theranos testing services
6 have characteristics, uses, benefits, and qualities which they do not have; representing 7 that Theranos testing services are of a particular standard, quality, and grade when they 8 are not; and advertising Theranos testing services with the intent not to sell them as 9 10 advertised. Cal Civ. Code § 1770 (5), (7), and (9).
11 476. Defendants actively failed to disclose and concealed material facts about 12 Theranos tests, and otherwise engaged in activities with a tendency or capacity to 13 deceive, as described herein. 14 15 477. Defendants’ misrepresentations and omissions were pervasive.
16 478. Defendants’ CLRA violations materially affected the decisions of Plaintiffs 17 and Class members. Plaintiffs and the Class members reasonably relied upon 18 Defendants’ material misrepresentations and omissions, and would not have purchased 19 20 Theranos tests or submitted their blood for testing to Defendants had they known the
21 truth. 22 479. As a result of the CLRA violations described herein, Plaintiffs and the 23 Class have suffered actual damages. 24 25 480. On behalf of themselves and the Class, Plaintiffs seek injunctive relief to 26 enjoin the CLRA violations alleged herein. Plaintiffs also seek attorneys’ fees and costs. 27 481. In accordance with California Civil Code § 1782(a), Defendants Theranos, 28
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1 Walgreens Boots Alliance, Inc., and Holmes were sent notice of their CLRA violations 2 by certified mail, return receipt requested. (See Dkt. 88, Ex. P). Theranos, Walgreens 3 Boots Alliance, Inc., and Holmes have failed to provide appropriate relief for their CLRA 4 5 violations within 30 days of these notification letters. On behalf of themselves and the
6 Class, Plaintiffs seek actual and punitive damages for the CLRA violations by Theranos, 7 Walgreens Boots Alliance, Inc., and Holmes alleged herein. Plaintiffs further intend to 8 send a notice to Defendants Balwani and Walgreen Arizona Drug Company concerning 9 10 their violations of the CLRA. If Balwani and Walgreen Arizona Drug Company fail to
11 provide appropriate relief for their violations within 30 days thereof, Plaintiffs intend to 12 amend this Complaint to request actual damages and punitive damages for those 13 defendants’ CLRA violations. 14 15 482. Venue is proper under California Civil Code § 1780(d) because Defendants
16 do business in this county and a substantial portion of the transactions at issue occurred in 17 this county. Plaintiffs’ declaration establishing that this Court has proper venue for this 18 action was attached as Exhibit Q to Plaintiffs’ Consolidated Class Action Complaint 19 20 (Dkt. 88).
21 FIFTEENTH CAUSE OF ACTION (California Civil Code §§ 1709- 1710 - Deceit) 22 (Against All Defendants) 23 483. Plaintiffs incorporate the substantive allegations contained in all prior and 24 succeeding paragraphs as if fully set forth herein. 25 26 484. Plaintiffs bring this claim on behalf of themselves and the Class.
27 485. California Civil Code § 1709 provides that “[o]ne who willfully deceives 28
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1 another with intent to induce him to alter his position to his injury or risk, is liable for any 2 damage which he thereby suffers.” 3 486. California Civil Code § 1710 defines “deceit” as (1) The suggestion, as a 4 5 fact, of that which is not true, by one who does not believe it to be true; (2) The
6 assertion, as a fact, of that which is not true, by one who has no reasonable ground for 7 believing it to be true; (3) The suppression of a fact, by one who is bound to disclose it, 8 or who gives information of other facts which are likely to mislead for want of 9 10 communication of that fact; or, (4) A promise, made without any intention of performing
11 it. 12 487. Defendants’ material misrepresentations and omissions alleged herein 13 constitute deceit under California Civil Code § 1710. Defendants’ misrepresentations 14 15 and omissions were pervasive. Plaintiffs and the Class have reasonably relied on the
16 material misrepresentations and omissions made by Defendants. As a result, Plaintiffs 17 and the Class have suffered actual damages. 18 488. Defendants’ misconduct alleged herein was intentional, deliberate, and 19 20 willful, and was perpetrated by Defendants with the intent to, inter alia, cause Plaintiffs
21 and the Class to rely on Theranos’s unreliable test results in making decisions about their 22 health and treatment. 23 489. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for 24 25 below. 26 27 28
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1 SIXTEENTH CAUSE OF ACTION 2 (Medical Battery) (Against All Defendants) 3 490. Plaintiffs incorporate the substantive allegations contained in all prior and 4 5 succeeding paragraphs as if fully set forth herein. 6 491. Plaintiffs bring this claim on behalf of themselves and the Class.
7 492. Plaintiffs and all Class members submitted to blood draws performed by 8 Defendants which involved Defendants penetrating their skin and tissue to draw blood, 9 10 and/or to other clinical procedures as alleged herein. 11 493. Defendants are, and acted as, a medical provider in performing blood draws
12 and blood tests, and other clinical procedures and tests alleged herein, regarding Plaintiffs 13 and the Class. 14 15 494. Defendants’ drawing and testing of blood constitute medical procedures. 16 495. Defendants’ performing other clinical procedures and tests as alleged herein
17 constitute medical procedures. 18 496. Defendants performed blood draws and other clinical procedures on 19 Plaintiffs and the Class without their consent. Defendants misrepresented and concealed 20 21 the essential purpose of the blood draws and other clinical procedures. Any purported
22 consent that Plaintiffs and the Class provided was induced by fraud, concealment, and 23 misrepresentation and was not effective. 24 497. Defendants willfully and tortiously battered Plaintiffs and the Class 25 26 members.
27 498. Defendants willfully and tortiously experimented on Plaintiffs and the 28
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1 Class members. 2 499. Plaintiffs and Class members did not consent to be subjects for testing, 3 experimentation, research, or product development by Defendants. 4 5 500. Defendants knew or should have known that conducting blood draws and
6 other clinical procedures on Plaintiffs and the Class for product development purposes, 7 and willfully experimenting upon Plaintiffs and the Class, without obtaining their consent 8 would be an affront to the dignity of Plaintiffs and the Class members as human beings. 9 10 501. Defendants’ misconduct alleged herein was intentional, deliberate, and
11 willful. 12 502. As a foreseeable, proximate, and direct result of Defendants’ conduct, 13 Plaintiffs and Class members each have suffered a medical battery and have been 14 15 damaged, including but not limited to money they paid out of pocket, being subject to
16 unnecessary or potentially harmful treatments, and/or being denied the opportunity to 17 seek treatment for a treatable condition, harm to their health, injury, and/or death and 18 corresponding monetary and other damages, invasion of privacy and bodily integrity 19 20 without their consent and corresponding damages therefrom, and severe emotional stress
21 and anxiety. 22 503. On behalf of themselves and the Class, Plaintiffs seek relief as prayed for 23 below. 24 25 26 27 28
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1 SEVENTEENTH CAUSE OF ACTION 2 (Violation of Protection of Human Subjects in Medical Experimentation Act, California Health & Safety Code §§ 24170 et seq.) 3 (Against All Defendants)
4 504. Plaintiffs incorporate the substantive allegations contained in all prior and 5 succeeding paragraphs as if fully set forth herein. 6 505. Plaintiff A.R. brings this claim on behalf of himself and the California 7 8 Subclass.
9 506. Defendants concealed from Plaintiff A.R. and the California Subclass that 10 the purpose for drawing their blood, taking blood samples from them, and conducting 11 other clinical procedures and tests on them as alleged herein, was to aid Defendants’ 12 13 research and product development.
14 507. The California Protection of Human Subjects in Medical Experimentation 15 Act (“Human Subjects Act”) provides minimum statutory protection for the citizens of 16 [the] state with regard to human experimentation.” Cal. Health & Saf. Code § 24171. 17 18 The statute lays out detailed guidelines for informed consent, which must be obtained
19 before a person can be subjected to any “medical experiment.” Id. § 24175(a); § 24173. 20 508. A “medical experiment” under the Human Subject Act includes “[t]he 21 severance or penetration or damaging of tissues of a human subject or the use of a drug or 22 23 device . . ., in or upon a human subject in the practice or research of medicine in a 24 manner not reasonably related to maintaining or improving the health of the subject or 25 otherwise directly benefiting the subject.” Id., § 24174. 26 509. The instruments used by Defendants to perform blood draws and tests, and 27 28
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1 other clinical procedures and tests as alleged herein, on Plaintiff A.R. and California 2 Subclass are “devices.” 3 510. The blood draws, clinical procedures, and blood and other clinical tests 4 5 performed on Plaintiff A.R. and the California Subclass were “medical experiments.”
6 511. Defendants were primarily responsible for the conduct of the medical 7 experiments. The experiments conducted on Plaintiff A.R. and the California Subclass 8 took place in Defendants’ facilities, and were performed by and for the benefit of 9 10 Defendants, in the development of their products and services, and not for the benefit of
11 Plaintiff A.R. and the California Subclass. 12 512. Defendants violated the Human Subjects Act by failing to obtain informed 13 consent prior to conducting medical experiments on Plaintiff A.R. and the California 14 15 Subclass, including by failing to provide both verbal and written disclosure, in
16 nontechnical terms, of the following facts regarding the medical experiments: 17 a) An explanation of the procedure and medical device to be utilized, including the 18 purposes of the procedures, drugs, or devices; 19 20 b) Disclosure of any appropriate alternative procedures, drugs, or devices that might
21 be advantageous to the subject, and their relative risks and benefits; 22 c) An instruction to the subject that he or she is free to withdraw his or her prior 23 consent to the medical experiment and discontinue participation in the medical 24 25 experiment at any time, without prejudice to the subject; 26 d) The name, institutional affiliation, if any, and address of the person or persons 27 actually performing and primarily responsible for the conduct of the experiment; 28
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1 e) The name of the sponsor or funding source, if any, or manufacturer if the 2 experiment involves a drug or device, and the organization, if any, under whose 3 general aegis the experiment is being conducted; 4 5 f) The name, address, and phone number of an impartial third party, not associated
6 with the experiment, to whom the subject may address complaints about the 7 experiment; and 8 g) The material financial stake or interest, if any, that the investigator or research 9 10 institution has in the outcome of the medical experiment. Id.
11 513. Defendants willfully, or, in the alternative, negligently did not provide the 12 above information in writing to Plaintiff A.R. or the California Subclass. 13 514. On behalf of the California Subclass, Plaintiff A.R. seeks relief as prayed 14 15 for below.
16 VII. PRAYER FOR RELIEF
17 WHEREFORE, Plaintiffs, on behalf of themselves and the members of the Class 18 and Subclasses, demand judgment against and general and special relief from Defendants 19 as follows: 20 21 1. An order certifying that the action may be maintained as a class action
22 under Federal Rule of Civil Procedure 23 as defined herein and appointing Plaintiffs and 23 Interim Co-Lead Counsel to represent the defined Class and Subclasses; 24 2. An order permanently enjoining Defendants’ misconduct alleged herein; 25 26 3. An order requiring Defendants to promptly and adequately notify Plaintiffs
27 and the Class regarding the problems with, and unreliability of, their Theranos tests; 28
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1 4. An order awarding Plaintiffs and the Class damages, special damages, 2 general damages, and restitution; 3 5. An order requiring Defendants to disgorge all profits and compensation 4 5 improperly obtained by Defendants as a result of such acts and practices declared by this
6 Court to be an unlawful; 7 6. An order requiring Defendants to pay punitive, exemplary, and treble 8 damages; 9 10 7. An order awarding statutory damages to Plaintiff A.R. and the California
11 Subclass for violations of the California Protection of Human Subjects in Medical 12 Experimentation Act; 13 8. An order requiring Defendants to pay attorneys’ fees, costs, and expenses; 14 15 9. An order requiring Defendants to pay pre-judgment and post-judgment
16 interest; and 17 10. Such other and further relief as the Court deems appropriate. 18 VIII. DEMAND FOR JURY TRIAL 19 Plaintiffs hereby demand a trial by jury for all claims so triable. 20 21 DATED this 27th day of January, 2017. 22 23 24 25 26 27 28
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1 By: s/ T. David Copley 2 Lynn Lincoln Sarko (pro hac vice) T. David Copley 3 Gretchen Freeman Cappio (pro hac vice) KELLER ROHRBACK L.L.P. 4 1201 3rd Ave., Ste. 3200 5 Seattle, WA 98101 Telephone: (206) 623-1900 6 Facsimile: (206) 623-3384 7 Email: [email protected] Email: [email protected] 8 Email: [email protected]
9 Mark D. Samson 10 Christopher Graver KELLER ROHRBACK L.L.P. 11 3101 North Central Ave., Suite 1400 12 Phoenix, AZ 85012 Telephone: (601) 248-0088 13 Facsimile: (602) 248-2822 Email: [email protected] 14 15 Michael Walter Sobol (pro hac vice) Roger N. Heller (pro hac vice) 16 Melissa Gardner (pro hac vice) LIEFF CABRASER HEIMANN 17 & BERNSTEIN LLP 18 Embarcadero Ctr West 275 Battery St, 29th Floor 19 San Francisco, CA 94111 20 Telephone (415) 956-1000 Facsimile: (415) 956-1008 21 Email: [email protected] Email: [email protected] 22 Email: [email protected] 23 Interim Co-Lead Plaintiffs’ Counsel 24 25 26 27 28
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1 Joseph G. Sauder 2 Matthew D. Schelkopf Joseph B. Kenney 3 MCCUNEWRIGHT LLP 555 Lancaster Avenue 4 Berwyn, PA 19312 5 Telephone: (610) 200-0580 Email: [email protected] 6 Email: [email protected] 7 Email: [email protected] 8 Laurence D. King KAPLAN FOX & KILSHEIMER LLP 9 350 Sansome Street, Suite 400 10 San Francisco, CA 94104 Phone: 415-772-4700 11 Fax: 415-772-4707 12 Email: [email protected] 13 Additional Plaintiffs’ Counsel 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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1 CERTIFICATE OF SERVICE 2 I hereby certify that on January 27, 2017, I electronically transmitted the foregoing 3 document to the Clerk’s Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to all CM/ECF registrants. 4 5 By: s/ T. David Copley T. David Copley 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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