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Theranos Indirect Investor Class Certification Denied

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By George Khoury, Esq. on June 05, 2018 12:07 PM

In what is surely an upset to many investors, but particularly to the potential class representatives who were seeking to hold Theranos liable for misrepresenting their technology, a federal judge in the Northern District of California has denied their motion for class certification. For Theranos, this may be the first break they've caught in a while (though it could be appealed or potentially refiled).

In short, the court found that the plaintiffs' claims were best resolved as individual claims due to the issue of reliance requiring individualized assessments. Central to the class claims is the assertion that the investors relied on Theranos's representations to the public in investing money in firms that would invest in Theranos. And while federal law would protect Theranos from indirect investors, California law does not.

Indirect Reliance

While the court did not seem to question whether there was or was not reliance, it did explicitly suggest that these claims are better suited for individual lawsuits. After all, in some cases, we're talking about millions of dollars, while others are just tens of thousands of dollars. Also, the facts of what exactly each of the few hundred alleged indirect investors relied upon matters.

Theranos was as hot as a company could get when it announced its plans and then its subsequent partnership with Walgreens. The company promised to revolutionize blood testing by delivering blood test results for a whole host of tests using only a couple drops of blood. Sadly, the promise was too good to be true and the company was not able to actually deliver, which led to the tailspin of the company and then CEO Elizabeth Holmes.

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