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Consolidated Class Action Complaint 22 Jury Trial Demanded 23 24 25 26 27 28 Case 2:16-cv-02138-HRH Document 88 Filed 11/22/16 Page 1 of 89 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) LIEFF CABRASER HEIMANN 8 & BERNSTEIN, LLP 275 Battery Street, 29th Floor 9 San Francisco, CA 94111-3339 Telephone: (415) 956-1000 10 Facsimile: (415) 956-1008 Email: [email protected] 11 Email: [email protected] 12 Interim Co-Lead Plaintiffs’ Counsel 13 [Additional counsel listed on signature page] 14 15 UNITED STATES DISTRICT COURT 16 DISTRICT OF ARIZONA 17 In re: No. 2:16-cv-2138-HRH (Consolidated with) 18 Arizona THERANOS, INC., No. 2:16-cv-2373-HRH Litigation No. 2:16-cv-2660-HRH 19 No. 2:16-cv-2775-HRH -and- 20 No. 2:16-cv-3599-HRH 21 CONSOLIDATED CLASS ACTION COMPLAINT 22 JURY TRIAL DEMANDED 23 24 25 26 27 28 Case 2:16-cv-02138-HRH Document 88 Filed 11/22/16 Page 2 of 89 TABLE OF CONTENTS 1 2 I. INTRODUCTION .................................................................................................. 1 3 II. JURISDICTION AND VENUE ............................................................................. 4 4 III. PARTIES ................................................................................................................ 5 5 IV. FACTUAL BACKGROUND ................................................................................ 7 6 A. Theranos ...................................................................................................... 7 7 8 B. Walgreens Knowingly Ignored Repeated Red Flags About the Reliability of Theranos’s Testing .............................................................. 10 9 10 C. Defendants Widely Marketed Theranos Testing as Accurate and Reliable ............................................................................................... 14 11 D. Defendants’ Statements About Theranos Tests Were 12 Knowingly False ....................................................................................... 21 13 E. FDA, CMS, and Other Regulators Crack Down on Theranos .................. 25 14 F. Defendants Continued to Fail to Protect Customers ................................. 33 15 16 G. Defendants’ Misconduct Has Significantly Harmed Consumers ................................................................................................. 35 17 H. Factual Allegations Regarding Plaintiffs .................................................. 36 18 19 V. CLASS ACTION ALLEGATIONS ..................................................................... 50 20 VI. CAUSES OF ACTION ........................................................................................ 54 21 FIRST CAUSE OF ACTION (Arizona Consumer Fraud Act, A.R.S. 22 § 44-1521, et seq.) (Against All Defendants) (On Behalf of Arizona Subclass Only) ............................................................................. 54 23 SECOND CAUSE OF ACTION (Fraud) (Against All Defendants) ................... 57 24 25 THIRD CAUSE OF ACTION (Negligence) (Against All Defendants) ................................................................................................................... 59 26 27 28 i Case 2:16-cv-02138-HRH Document 88 Filed 11/22/16 Page 3 of 89 1 FOURTH CAUSE OF ACTION (Negligent Misrepresentation) 2 (Against All Defendants) .......................................................................... 61 3 FIFTH CAUSE OF ACTION (Breach of Contract) (Against Theranos and Walgreens) .......................................................................................... 62 4 5 SIXTH CAUSE OF ACTION (Unjust Enrichment) (Against All Defendants) ............................................................................................... 64 6 SEVENTH CAUSE OF ACTION (Aiding and Abetting Fraud) 7 (Against Walgreens) .................................................................................. 65 8 EIGHTH CAUSE OF ACTION (Civil Conspiracy to Commit Fraud) 9 (Against All Defendants) .......................................................................... 67 10 NINTH CAUSE OF ACTION (Racketeer Influenced and Corrupt 11 Organizations Act, 18 U.S.C. § 1962(c)) (Against All Defendants) ............................................................................................... 69 12 13 TENTH CAUSE OF ACTION Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(d) (Against All 14 Defendants) ............................................................................................... 72 15 ELEVENTH CAUSE OF ACTION (Violation of California Business 16 & Professions Code Sections 17200, et seq.) (Against All Defendants) ............................................................................................... 74 17 TWELFTH CAUSE OF ACTION (Violation of California Business 18 & Professions Code Sections 17500, et seq.) (Against All 19 Defendants) ............................................................................................... 77 20 THIRTEENTH CAUSE OF ACTION (Violation of California Civil 21 Code Section 1750 et seq.) (Against All Defendants) .............................. 78 22 FOURTEENTH CAUSE OF ACTION (California Civil Code §§ 1709- 1710 - Deceit) (Against All Defendants) ........................................ 81 23 24 VII. PRAYER FOR RELIEF ....................................................................................... 82 25 VIII. DEMAND FOR JURY TRIAL ............................................................................ 83 26 27 28 ii Case 2:16-cv-02138-HRH Document 88 Filed 11/22/16 Page 4 of 89 I. INTRODUCTION 1 2 1. Blood tests and other clinical lab tests (“test results”) are an everyday and 3 invaluable part of the practice of modern medicine. Test results can offer crucial details 4 about an individual’s health and doctors rely on test results to detect everything from 5 cholesterol and glucose levels to infections, blood cell counts and cancer. 6 7 2. Test results aid in the process of medical diagnosis and treatment decisions, 8 and in some cases are a prerequisite for additional medical tests. Because test results are 9 such a foundational part of medical treatment, test results that are unreliable or inaccurate 10 can be catastrophic: serious conditions may go undetected, patients may not receive the 11 12 treatments and medications that they need, and patients may be misdiagnosed and receive 13 treatments or medications that they have no need for. It is absolutely critical that 14 consumers be able to rely on test results. 15 3. This consumer class action is based on Defendants’ promotion and sale of 16 17 blood tests that were unreliable, Defendants’ false and misleading promises that Theranos 18 test results were reliable and accurate, and should be relied on by consumers and their 19 medical providers in making health decisions, and on Defendants’ long-standing 20 concealment from customers of information demonstrating that such tests were not, in 21 22 fact, reliable or accurate. Defendants have failed to deliver the products and services they 23 promised, and that their customers reasonably expected, and have endangered their 24 customers’ health and well-being, the very thing they promised to promote and protect. 25 4. Theranos test results were marketed by Defendants as a “disruptive” 26 technology in the blood testing and laboratory services business. What allegedly made 27 28 1 Case 2:16-cv-02138-HRH Document 88 Filed 11/22/16 Page 5 of 89 1 Theranos’s technology a breakthrough was its proprietary “Edison” blood testing devices. 2 In contrast to the large needle and numerous tubes required in a typical venipuncture 3 blood draw, Theranos’s Edison devices were handheld devices, supposedly able to take a 4 5 few drops of blood from a patient’s finger placed into a nanotainer capsule, and reliably 6 conduct hundreds of blood tests, all outside a lab. 7 5. Theranos sold its new “tiny blood test” at Wellness Centers at Defendant 8 Walgreens Boots Alliance, Inc.-owned Walgreens pharmacies in Arizona and California, 9 10 at a Capital BlueCross Capital Blue retail store in Pennsylvania, and at Theranos-owned 11 Wellness Centers in Arizona and California. Theranos and Walgreens assured customers 12 that these tests were highly accurate and reliable, industry-leading in quality, and that 13 they had been developed and validated under, and were compliant with, federal 14 15 guidelines, and encouraged customers to use the Theranos test results to make health and 16 treatment decisions. 17 6. Defendants’ promises and representations were false. For starters, the 18 Edison devices did not work and Theranos’s tests conducted on Edison were not accurate 19 20 or reliable. While Defendants have long known this, it was confirmed publicly on May 21 18, 2016, when Theranos conceded that it had informed regulators that it had voided “all” 22 blood-testing results from its proprietary Edison devices.1 23 7. Theranos also tested thousands of customers’ blood on devices other than 24 25 the Edison machine without explaining this fact to consumers, and in fact misled 26 27 1 John Carreyrou, Theranos Voids Two Years of Edison Blood-Test Results, Wall St. J. (May 18, 2016) (Ex. A). 28 2 Case 2:16-cv-02138-HRH Document 88 Filed 11/22/16 Page 6 of 89 1 consumers to think that its Edison technology was
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