Theranos and Elizabeth Holmes: Judge grants class action in civil suit led by San Jose resident

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Former Theranos CEO Elizabeth Holmes (left) appears in federal court for a status hearing on July 17, 2019 in San Jose, Calif.

Former Theranos CEO Elizabeth Holmes (left) appears in federal court for a status hearing on July 17, 2019 in San Jose, Calif. (Kimberly White/Getty Images/TNS)

A federal court judge has granted class-action status to plaintiffs in a civil suit against Theranos founder Elizabeth Holmes. The decision opens the way for thousands of people allegedly defrauded by Holmes, her failed blood-testing startup, and Walgreens to be included as plaintiffs in the lawsuit and potentially to obtain compensation and damages.

The lead plaintiffs, including a San Jose resident identified in court records only as “A.R.,” allege that Theranos’ blood tests were unreliable and they never would have bought them if Holmes, Theranos and Walgreens – which sold Theranos blood tests in California and Arizona – hadn’t committed an alleged massive fraud, U.S. District Court Judge H. Russel Holland wrote in his decision, which was unsealed Monday.

Walgreens has said in court filings in the civil case, filed in Arizona, that it didn’t commit fraud. “What the allegations describe is Theranos’ failed attempt to provide a revolutionary service,” the company said in a 2017 filing. “Walgreens did not try to swindle or experiment upon the unsuspecting public.” Holmes has argued in a filing that the plaintiffs have not alleged they were harmed by buying Theranos tests, and that they have not put forward sufficient facts to support the claim that they were victimized by “fraudulent misrepresentations.”

In California, the plaintiffs have said, thousands of people bought Theranos tests, and the defendants have not disputed that number, Holland wrote. Arizona’s attorney general has identified 175,000 consumers from that state who purchased tests, the judge wrote.

Holland laid out what he sees as the core factual and legal issues in the case. “Was the Theranos blood testing program market-ready? If not, would anyone deem Theranos/Walgreens’ blood test results reliable?” the judge wrote. “Resolution of the plaintiffs’ contention that defendants’ test results were all unreliable is central to the validity of all of plaintiffs’ claims.”

The plaintiffs are seeking compensation for the test costs, plus damages including punitive damages, but their lawyers have said the plaintiffs have agreed not to seek damages for emotional distress, re-testing or medical care, Holland wrote. In Arizona, information from the state’s attorney general suggests the average test cost was around $60, Holland noted.

The defendants already have filed notice that they appeal Holland’s order granting class certification.

Holmes is representing herself in the civil case, after lawyers representing her withdrew, telling the court in October that she hadn’t paid them for more than a year and she didn’t expect she ever would.

Separately from the civil case, Holmes and former Theranos president Sunny Balwani face federal criminal fraud charges in a case currently in pre-trial proceedings in federal court in San Jose.

Prosecutors allege Holmes and Balwani claimed their “miniLab” system could use a “nanotainer” containing a few drops of blood from a finger-prick to quickly conduct a full range of tests, when in fact the machine had accuracy and reliability problems, performed limited tests, and was slower than some competing devices.

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