Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 1 of 21 1 2 3 4 5 6 7 8 9 10 11 12 13 Richard D. McCune, State Bar No. 132124 rdm@mccunewright.com David C. Wright, State Bar No. 177468 dcw@mccunewright.com Elaine S. Kusel (NY #2654754)* esk@mccunewright.com MCCUNEWRIGHT LLP 2068 Orange Tree Lane, Suite 216 Redlands, California 92374 Telephone: (909) 557-1250 Facsimile: (909) 557-1275 Joseph G. Sauder (PA #82467)* jgs@mccunewright.com.com Matthew D. Schelkopf (PA #89143)* mds@mccunewright.com Joseph B. Kenney (PA #316557)* jkb@mccunewright.com MCCUNEWRIGHT LLP 1055 Westlakes Drive, Suite 300 Berwyn, Pennsylvania 19312 Telephone: 610.200.0580 *Pro Hac Vice applications to be submitted Attorneys for Plaintiff and Putative Class 14 15 IN THE UNITED STATES DISTRICT COURT 16 FOR THE NORTHERN DISTRICT OF CALIFORNIA 17 M.P.B. on behalf of himself and all others similarly situated, CLASS ACTION COMPLAINT 18 19 20 21 22 Case No.: Plaintiff, v. THERANOS, INC., and DOES 1 through 10, inclusive, Defendants. 23 24 25 26 27 1. VIOLATION OF UNFAIR BUSINESS PRACTICES ACT [CALIFORNIA BUSINESS & PROFESSIONS CODE § 17200, ET SEQ.] 2. VIOLATION OF FALSE ADVERTISING LAWS [CALIFORNIA BUSINESS & PROFESSIONS CODE § 17500, ET SEQ.] 3. VIOLATION OF CALIFORNIA’S CONSUMER LEGAL REMEDIES ACT [CALIFORNIA CIVIL CODE § 1750, ET SEQ.] 4. FRAUD 5. NEGLIGENT MISREPRESENTATION 6. DECEIT [CALIFORNIA CIVIL CODE § 1710] 7. VIOLATION OF ARIZONA CONSUMER FRAUD ACT [A.R.S. § 44-1521, ET SEQ.] DEMAND FOR JURY TRIAL 28 -1CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 2 of 21 1 I 2 INTRODUCTION 1. 3 This consumer fraud class action is based on Defendant Theranos’s false and misleading 4 marketing of itself as a disruptive technology in the laboratory services business. What allegedly made 5 Theranos a breakthrough was its proprietary Edison blood testing devices. In contrast to the large 6 needle and numerous tubes required in a typical venipuncture blood draw, Theranos’s Edison devices 7 were handheld machines, supposedly able to take a few drops of blood from a patient’s finger placed 8 into a nanotainer capsule, and conduct hundreds of blood tests, all outside a lab. 2. 9 Theranos sold its new “tiny blood test” at Wellness Centers at Walgreens Pharmacies in 10 Arizona and California. Theranos assured its customers that these tests were highly accurate, industry 11 leading in quality, and developed and validated under, and compliant with, federal guidelines. 12 Thousands of people, including Plaintiff M.P.B., believed the Company’s representations and paid for 13 Theranos’s tests. 14 3. However, the Edison machines did not work, and Theranos’s tests were not accurate. 15 This became evident on May 19, 2016, when Theranos conceded that it had informed regulators that it 16 had voided “all” of the Company’s blood-testing results from its proprietary Edison machines, as well 17 as many tests run on traditional machines from 2014 and 2015.1 As a result, tens of thousands of 18 patients may have been given incorrect blood-test results, been subject to unnecessary or potentially 19 harmful treatments, and/or been denied the opportunity to seek treatment for a treatable condition. 4. 20 Plaintiff M.P.B., for himself, and all others similarly situated, (i.e., the members of the 21 Plaintiff Class described and defined within this Complaint), brings this action for damages, including 22 reimbursement of the purchase price of the tests as well as an order enjoining Theranos from engaging 23 in further deceptive advertisements, pursuant to the Unfair Advertising, California Business and 24 Professional Code §17200, et seq.; False Advertising, California Business & Professional Code 25 § 17500, et seq.; Consumer Legal Remedies Act, California Civil Code §1750, et seq.; statutory deceit, 26 27 28 1 In the Scottsdale Facility, regulators found that the Company used misprogrammed machines to evaluate blood coagulation tests, failed to properly gauge water purity in machines it used, and failed to meet laboratory quality standards. -2CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 3 of 21 1 California Civil Code §1710; and common law fraud and negligent misrepresentation, and alleges as 2 follows: 3 II 4 JURISDICTION AND VENUE 5 5. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. 6 § 1332(d)(2) because Plaintiff and Defendant are citizens of different states and because, upon 7 information and belief, the aggregate amount in controversy exceeds $5,000,000 exclusive of costs and 8 interest. 9 6. This Court has personal jurisdiction over the Defendant because Defendant has 10 conducted and continues to conduct business in the State of California, and because Defendant has 11 committed the acts and omissions complained of herein in the State of California. 12 7. Venue as to Defendant is proper in this judicial district. Defendant Theranos, Inc., is 13 headquartered in Palo Alto, California, and operates a laboratory in Newark, California, and many of 14 Defendant’s acts complained of herein occurred in this district. 15 III 16 PARTIES 17 8. Plaintiff M.P.B. is a resident and citizen of Arizona. He purchased a Theranos test at a 18 Walgreen’s in Tempe, Arizona, in or around December 2015. Plaintiff M.P.B. purchased the Theranos 19 test to get accurate results about his health. Plaintiff M.P.B. would not have purchased a Theranos test 20 if he had known that the Theranos Edison device did not work as described, and that the Company did 21 not conduct accurate testing. 22 9. Defendant Theranos (hereinafter the “Company”) is a blood testing company based in 23 Palo Alto, California. The Company operates two laboratories, one in Newark, California, and another 24 in Scottsdale, Arizona. Through Wellness Centers located predominantly in Walgreens pharmacies in 25 Arizona and California, Theranos sells blood tests to individuals. Since it began offering testing 26 services in 2013, the company has conducted 6.1 million diagnostic tests. 27 28 10. The true names and capacities of Defendants sued herein as DOES 1 through 10, inclusive, are currently unknown to Plaintiff, who therefore sues such Defendants by such fictitious -3CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 4 of 21 1 names. Each of the Defendants designated herein as a DOE is legally responsible in some manner for 2 the unlawful acts referred to herein. Plaintiff will seek leave of Court to amend this Complaint to 3 reflect the true names and capacities of the Defendants designated herein as DOES when such identities 4 become known. 5 11. Based upon information and belief, Plaintiff alleges that at all times mentioned herein, 6 each and every Defendant was acting as an agent and/or employee of each of the other Defendants, and 7 at all times mentioned was acting within the course and scope of said agency and/or employment with 8 the full knowledge, permission, and consent of each of the other Defendants. In addition, each of the 9 acts and/or omissions of each Defendant alleged herein were made known to, and ratified by, each of 10 the other Defendants. 11 IV 12 FACTUAL BACKGROUND 13 12. Theranos was founded in 2003 by Elizabeth Holmes who has maintained that she 14 developed the idea for the company as a result of her self-professed phobia of needles. According to 15 published reports, the Company initially focused on development of a hand held device that would use 16 a tiny needle to obtain a small drop of blood for analysis. By 2008, the project had grown into what is 17 now known as the Edison device. 18 13. In contrast to the large needle and numerous tubes required in a typical veinipuncture 19 blood draw, Theranos’s Edison device was designed to eliminate the need for laboratories all together. 20 The concept was that a nanotainer containing a few drops of blood from a finger stick would be placed 21 into a cartridge which would, in turn, be placed into a proprietary Edison device (which Theranos 22 executives have never allowed to be photographed) where a button pushed by a staff person generates 23 results that are automatically transmitted to Theranos’s databases. This concept would have enabled 24 Theranos to conduct all testing outside of the laboratory in the Wellness Centers and thus – according 25 to Theranos – revolutionize testing by significantly reduing costs. 26 27 14. People believed Theranos’s Edison Technology was a true disruptive technology breakthrough. The Company’s founding CEO, Elizabeth Holmes, was hailed as the next Steve Jobs and 28 -4CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 5 of 21 1 by 2014, Theranos was valued at $9 billion – approximately the same as each of its two largest and 2 long established competitors in the blood testing industry. 15. 3 By 2010, Theranos was in talks with Safeway and Walgreens to offer Edison testing in 4 its stores. After several years of discussions, in 2013, Theranos entered into a partnership agreement 5 with Walgreens, under which Walgreens invested $50 million in Theranos, and Theranos agreed to 6 operate blood drawing centers, which it called “Wellness Centers” at Walgreens Pharmacies in 7 Arizona and California. The Theranos Walgreens partnership agreement launched in 2013 with a plan 8 to build Theranos Wellness Centers in more than 8,200 Walgreen stores nationwide. 16. 9 Before entering the partnership with Theranos, Walgreens’ Chief Medical Officer 10 neither reviewed Theranos’s technology nor independently validated or verified the results of the 11 tests,2 but the Company nevertheless said it was confident in the data before introducing the services. 12 When the Walgreens partnership was announced, the press release stated that the deal would offer 13 consumers access to “less invasive and more affordable clinician-directed lab-testing, from blood 14 samples as small as a few drops, or 1/1000 the size of a typical blood draw.” 17. 15 Theranos relied on the joint venture agreement with Walgreens, under which Theranos 16 has opened 40 wellness centers within Walgreen’s pharmacy stores in Arizona, and one in a pharmacy 17 in California, to sell most of its tests. In its sales materials to Walgreens customers, Theranos 18 highlighted the proprietary technology and described its offerings as a “tiny blood test,” a “new way” 19 of testing. The materials repeatedly referenced smaller sample size and depicted the nanotainer. 20 Additionally, the materials assured that Theranos was “industry leading in quality and its tests were 21 highly accurate and developed and validated under and to Federal guidelines.” Thousands of people, 22 including Plaintiff believed the Company’s representations, and paid for blood testing at Walgreen 23 Wellness Centers. 24 // 25 // 26 27 28 2 http://www.economist.com/news/business/21697273-pressure-mounting-startup-has-tried-shake-uplab-test-market-blood-sports (last visited May 23, 2016). -5CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 6 of 21 1 18. Theranos described its technology as follows: 19. In its marketing to Walgreens’ customers, Theranos focused its advertising message on 2 3 4 5 6 7 8 9 10 11 the idea that its lab services were based on proprietary technology and a different model which 12 required far smaller samples and far less blood than typical blood testing: 13 14 15 16 17 18 19 20 20. 21 On another webpage advertisement to Walgreen’s customers, the Company stated that 22 smaller samples had a direct benefit on patients by dramatically reducing the time it takes to analyze 23 samples because its technology enabled a “more timely diagnosis to support better, more informed 24 treatment.”3 25 // 26 // 27 28 3 http://www.walgreens.com/pharmacy/lab-testing/home.jsp (last visited May 22, 2016). -6- CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 7 of 21 1 2 3 4 5 6 7 8 9 10 11 12 21. At Walgreens, Theranos offered a variety of testing directly to consumers: 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 8 of 21 1 2 3 4 5 6 7 8 9 10 11 Theranos’s Statements About its Wellness Center Testing Were False 22. 12 Though Holmes had spent years working to perfect the Edison device in order to 13 achieve a lofty goal, by the time the Wellness Centers opened, the Edison machines were not yet 14 beyond the prototype stage. 23. 15 Theranos did not have the necessary FDA approval, known as a CLIA waiver, to use 16 the Edison Device for conducting on-site blood testing at the Wellness Centers, with the sole 17 exception of a single test (Herpes Simplex HSV-1), for which the company obtained approval in July 18 2015. 24. 19 Despite the Company’s representations to the public about the importance of the 20 nanotainer and its proprietary technology, by the end of 2014, Theranos was using its proprietary 21 Edison machines and nanotainers for only 15 out of 205 tests. 25. 22 In a report detailing objectionable conditions at Theranos dated September 16, 2015, 23 the FDA informed Theranos that, among other things, the agency considered the nanotainer devices to 24 be uncleared medical devices being shipped in interstate commerce.4 25 26 27 28 4 http://www.fda.gov/ucm/groups/fdagov-public/@fdagov-afdaorgs/documents/document/ucm469395.pdf (last visited May 23, 2016). -8CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 9 of 21 1 26. Because Theranos did not have FDA approval to conduct tests on the Edison device 2 outside of a laboratory setting (with the limited exception discussed above), when Theranos drew 3 blood at the Walgreen’s Wellness Centers, the samples obtained then had to be couriered to one of the 4 Company’s two centralized labs, either in Newark, California, or Scottsdale, Arizona. The proprietary 5 Edison devices were only located in the Newark laboratory and, accordingly, all the finger stick blood 6 samples were analyzed at that facility. 7 8 9 27. The Scottsdale Lab only performed analyses on venipuncture tests, and only analyized those samples on machines purchased from outside companies such as Siemens. 28. In the context of a regulated laboratory, Theranos did not need FDA approval to 10 perform testing using the Edison devices, so long as the Company complied with proficiency testing 11 and other safeguards; however, the blood labs failed to comply with such testing and guidelines 12 according to published reports. 13 The Lab Testing at Theranos’s Offisite Labs Was Not Accurate and/or Accomplished in 14 Accordance With Federal Guidelines 15 16 29. Theranos advertised that its labs were accurate “validated” or compliant with federal regulations or law. Specifically: 17 18 19 20 21 22 23 24 25 26 27 28 -9CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 10 of 21 30. 1 However, these representations were false. In January 2016, the Centers for Medicare 2 and Medicaid Services cited the Newark lab for multiple serious deficiencies. Among other things, in 3 October 2014, 29 percent of quality control checks performed on the Company’s Edison devices 4 produced results outside the acceptable range. Regardless, Theranos continued to rely on the Edison 5 devices. 31. 6 7 percent of quality control checks. 32. 8 9 In February 2015, an Edison device used for testing certain hormone levels failed 87 In addition, the FDA observed that there were no quality audits being performed at the Newark lab in contravention of FDA regulations.5 33. 10 At the very time that Theranos was advertising compliance with federal regulations, it 11 had been repeatedly sanctioned by federal authorities. For example, on March 18, 2016, the Company 12 had received a letter from the Centers for Medicare and Medicaid Services (CMS) referenced “RE: 13 PROPOSED SANCTIONS - CONDITIONS NOT MET IMMEDIATE JEOPARDY”, which stated 14 that the Company was not in compliance with accepted clinical laboratory standards. That letter 15 stated, “This letter provides notice of sanctions the Centers for Medicare & Medicaid Services (CMS) 16 is proposing to impose against the laboratory's Clinical Laboratory Improvement Amendments of 1988 17 (CLIA) certificate and of the laboratory's opportunity to submit in writing any evidence or information 18 as to why the proposed sanctions should not be imposed.” The letter noted that, based on a December 19 23, 2015, survey, Theranos was found to be out of compliance with five CLIA Condition-level 20 requirements and CMS determined that various CLIA Standard-level requirements were not met.6 34. 21 22 Company’s own accuracy requirements, including a test to detect prostate cancer. 35. 23 24 Inspection reports found that Edison machines in the lab often failed to meet the Theranos’s conventional laboratory operations in both Scottsdale and Newark were found to be flawed by government regulators. 25 26 5 27 http://www.fda.gov/ucm/groups/fdagov-public/@fdagov-afdaorgs/documents/document/ucm469395.pdf (last visited May 23, 2016). 28 6 http://www.wsj.com/public/resources/documents/hhslettertheranos.pdf (last visited May 23, 2016). -10- CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 11 of 21 1 36. According to published reports, at Theranos’s Scottsdale lab, the Company performed 2 lab tests with certain Siemens lab equipment programmed to the wrong settings, and failed to 3 adequately guage the purity of the water input into Siemens lab equipment, which could effect the 4 outcome of the results of testing run on such devices. 5 37. Finally, a peer reviewed study by researchers at the Icahn School of Medicine at Mount 6 Sinai showed that results for cholesterol tests done by Theranos differed enough from the two largest 7 laboratory companies that it could negatively impact patient care. 8 9 10 38. Accordingly, those staments to customers, asserting that testing was accomplished through proprietary analysis, which was accurate and compliant with federal regulations and guidelines, were false. V 11 CLASS ACTION ALLEGATIONS 12 13 14 39. Plaintiff bring this action on behalf of himself and two potential classes pursuant to Federal Rules of Civil Procedure, Rule 23(a), 23(b)(2), and/or 23(b)(3), defined as follows: 15 National Class: 16 All purchasers of Theranos lab panels and blood testing services 17 40. In the alternative, pursuant to Federal Rules of Civil Procedure, Rule 23(c)(5), Plaintiff 18 seeks to represent the following state class only in the event that the Court declines to certify the 19 Nationwide Class above. Specifically, the State Class is defined as follows: 20 Arizona Subclass: 21 All purchasers of Theranos lab panels and blood testing services in Arizona. 22 41. This action is brought as a class action and may properly be so maintained pursuant to 23 the provisions of Rule 23 of the Federal Rules of Civil Procedure. Plaintiff reserves the right to amend 24 or modify the Class description with greater specificity or further division into subclasses or limitation 25 to particular issues, based on the results of discovery. Excluded from the Class are Defendant, its 26 affiliates, employees, officers and directors, persons or entities, and the Judge(s) assigned to this case. 27 Plaintiff reserves the right to modify, change, or expand the Class definition. 28 -11CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 12 of 21 1 42. Numerosity of the Class – The members of the Class are so numerous that their 2 individual joinder is impracticable. There were approximately 6.1 million tests performed by 3 Theranos. Plaintiff believes there are thousands of members in the class. Inasmuch as the class 4 members may be identified through business records regularly maintained by Defendant and its 5 employees and agents, and through the media, the number and identities of class members can be 6 ascertained. Members of the Class can be notified of the pending action by e-mail, mail, and 7 supplemented by published notice, if necessary. 8 9 43. Existence and Predominance of Common Question of Fact and Law – There are questions of law and fact common to the Class. These questions predominate over any questions 10 affecting only individual class members. These common legal and factual issues include, but are not 11 limited to: 12 a. Whether the laboratory tests performed by Theranos were accurate; 13 b. Whether the Edison devices performed as advertised; 14 c. Whether Theranos’s testing delivered the highest degree of accuracy; 15 d. Whether Theranos’s statements about its laboratories were materially misleading; 16 e. Whether Theranos’s conduct violates the laws as set forth in the causes of action. 17 44. Typicality – The claims of the representative Plaintiff are typical of the claims of each 18 member of the Class. Plaintiff, like all other members of the Class, has sustained damages arising 19 from Defendant’s violations of the law, as alleged herein. The representative Plaintiff and the 20 members of the Class were and are similarly or identically harmed by the same unlawful, deceptive, 21 unfair, systematic, and pervasive pattern of misconduct engaged in by Defendant. 22 45. Adequacy – The representative Plaintiff will fairly and adequately represent and 23 protect the interests of the Class members and have retained counsel who are experienced and 24 competent trial lawyers in complex litigation and class action litigation. There are no material 25 conflicts between the claims of the representative Plaintiff and the members of the Class that would 26 make class certification inappropriate. Counsel for the Class will vigorously assert the claims of all 27 Class members. 28 -12CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 13 of 21 1 46. Predominance and Superiority – This suit may be maintained as a class action under 2 Federal Rule of Civil Procedure 23(b)(3) because questions of law and fact common to the Class 3 predominate over the questions affecting only individual members of the Class and a class action is 4 superior to other available means for the fair and efficient adjudication of this dispute. The damages 5 suffered by individual class members are small compared to the burden and expense of individual 6 prosecution of the complex and extensive litigation needed to address Defendant’s conduct. Further, it 7 would be virtually impossible for the members of the Class to individually redress effectively the 8 wrongs done to them. Even if Class members themselves could afford such individual litigation, the 9 court system could not. In addition, individualized litigation increases the delay and expense to all 10 parties and to the court system resulting from complex legal and factual issues of the case. 11 Individualized litigation also presents a potential for inconsistent or contradictory judgments. By 12 contrast, the class action device presents far fewer management difficulties; allows the hearing of 13 claims which might otherwise go unaddressed because of the relative expense of bringing individual 14 lawsuits; and provides the benefits of single adjudication, economies of scale, and comprehensive 15 supervision by a single court. 16 47. The Plaintiff contemplates the eventual issuance of notice to the proposed Class 17 members setting forth the subject and nature of the instant action. Upon information and belief, 18 Defendant’s own business records and electronic media can be utilized for the contemplated notices. 19 To the extent that any further notices may be required, the Plaintiff would contemplate the use of 20 additional media and/or mailings. 21 22 23 48. This action is properly maintained as a Class Action pursuant to Rule 23(b) of the Federal Rules of Civil Procedure, in that: a. Without class certification and determination of declaratory, injunctive, statutory and 24 other legal questions within the class format, prosecution of separate actions by individual 25 members of the Class will create the risk of: 26 i. Inconsistent or varying adjudications with respect to individual members of the 27 Class which would establish incompatible standards of conduct for the parties 28 opposing the Class; or -13CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 14 of 21 ii. Adjudication with respect to individual members of the Class which would as a 1 2 practical matter be dispositive of the interests of the other members not parties to 3 the adjudication or substantially impair or impede their ability to protect their 4 interests; b. The parties opposing the Class have acted or refused to act on grounds generally 5 6 applicable to each member of the Class, thereby making appropriate final injunctive or 7 corresponding declaratory relief with respect to the Class as a whole; or c. Common questions of law and fact exist as to the members of the Class and 8 predominate over any questions affecting only individual members, and a Class Action is 9 10 superior to other available methods of the fair and efficient adjudication of the controversy, 11 including consideration of: i. 12 The interests of the members of the Class in individually controlling the prosecution or defense of separate actions; 13 ii. 14 The extent and nature of any litigation concerning controversy already commenced by or against members of the Class; 15 iii. The desirability or undesirability of concentrating the litigation 16 of the claims in the particular forum; 17 iv. The difficulties likely to be encountered in the management of a 18 Class Action. 19 20 VI 21 CAUSES OF ACTION 22 FIRST CAUSE OF ACTION 23 (Violation of California Business & Professions Code Sections 17200, et seq. – 24 Unfair Business Practices Act) 25 (On Behalf of the Nationwide Class) 49. 26 27 Plaintiff incorporates by reference and re-alleges all paragraphs previously alleged herein. 28 -14CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 15 of 21 50. 1 2 Plaintiff brings this claim on behalf of himself and on behalf of the National Class defined above. 51. 3 The Unfair Business Practices Act defines unfair business competition to include any 4 “unfair,” “unlawful,” or “fraudulent” business act or practice. The Act also provides for injunctive 5 relief, restitution, and disgorgement of profits for violations. 52. 6 Defendant’s unlawful, unfair, and fraudulent business acts and practices are described 7 throughout this Complaint and include, but are not limited to the following: 1) advertising that it will 8 provide testing using proprietary Edison devices when, in fact, Theranos did not actually use the 9 Edison devices for most laboratory testing; and 2) conducting testing that was a not carried out within 10 proper federal regulations. In addition to the above, the conduct as alleged throughout the complaint 11 constitutes a violation of False Advertising Laws, Cal. Bus. & Prof. Code § 17500, et seq., the 12 Consumer Legal Remedies Act, Cal. Civ. Code § 1750, et seq., statutory deceit, Cal. Civ. Code 13 § 1710) and fraud and negligent misrepresentation that not only result in liability as to the individual 14 causes of action, they also provide a basis for a finding of liability under California Business and 15 Professions Code § 17200, et seq. 53. 16 Furthermore, Defendant’s practices violate the declared legislative policies as set forth 17 by the federal government in 40 C.F.R. § 600.307(a)(ii)(A); 40 C.F.R. § 600.302-08(b)(4) and 16 18 C.F.R. § 259.2(a). 19 54. Plaintiff and the Class members have been damaged by said practices. Pursuant to 20 California Business and Professions Code §§ 17200 and 17203, Plaintiff, on behalf of himself and all 21 others similarly situated, seeks relief as prayed for below. 22 SECOND CAUSE OF ACTION 23 (Violation of California Business & Professions Code Sections 17500, et seq. – 24 False Advertising Laws) 25 (On Behalf of the Nationwide Class) 55. 26 27 Plaintiff incorporates by reference and re-alleges all paragraphs previously alleged herein. 28 -15CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 16 of 21 56. 1 2 Plaintiff brings this claim on behalf of himself and on behalf of the National Class defined above. 57. 3 Defendant disseminated materially misleading and deceptive information and omitted 4 material information, as discussed throughout the Complaint, for purposes of inducing customers to 5 purchase the tests, in violation of California Business and Professions Code § 17500, et seq. 58. 6 7 Plaintiff and the Class, and each of them, have been damaged by said practice and seeks relief as prayed below. 8 THIRD CAUSE OF ACTION 9 (Violation of California Civil Code Section 1750 et seq. –Consumer Legal Remedies Act) 10 (On Behalf of the Nationwide Class) 11 12 13 14 15 16 59. Plaintiff incorporates by reference and re-alleges all paragraphs previously alleged 60. Plaintiff brings this claim on behalf of himself and on behalf of the National Class herein. defined above. 61. The following definitions come within the meaning of the Consumer Legal Remedies Act (Cal. Civ. Code § 1750, et seq.): a. The members of the Class, all of whom purchased tests sold by Theranos are 17 “consumers,” Cal. Civ. Code § 1761(d); 18 19 b. Defendant Theranos is a “person,” Cal. Civ. Code § 1761(c); 20 c. Plaintiff and each and every Class members’ purchase of the subject test constitute a “transaction,” Cal. Civ. Code § 1761(e); and 21 d. The subject tests are “goods,” Cal. Civ. Code § 1761 (a). 22 23 62. The acts and practices of Defendant as discussed throughout the Complaint, constitute 24 “unfair or deceptive acts or practices” by Defendant, that are unlawful, as enumerated in section 25 1770(a) of the California Civil Code. 26 27 28 63. Such misconduct materially affected the purchasing decisions of Plaintiff and the members of the Classes. 64. Plaintiff seeks injunctive relief pursuant to California Civil Code § 1780. -16CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 17 of 21 65. 1 2 As a result of the California Civil Code section 1770 violations described above, Plaintiff and each and every member of the Class have suffered actual damages. 3 FOURTH CAUSE OF ACTION 4 (Fraud) 5 (On Behalf of the Nationwide and Arizona Classes) 6 7 Plaintiff incorporates by reference and re-alleges all paragraphs previously alleged 67. Plaintiff brings this claim on behalf of himself and on behalf of the National Class, or herein. 8 9 66. the Arizona Class in the alternative, as defined above. 68. 10 The misrepresentations, nondisclosure, and/or concealment of material facts made by 11 Defendant to Plaintiff and the members of the Class, as set forth above, were known, or through 12 reasonable care should have been known, by Defendant to be false and material and were intended by 13 Defendant to mislead Plaintiff and the members of the Class. 69. 14 15 Plaintiff and the Class were actually misled and deceived and were induced by Defendant to purchase the testing which they would not otherwise have purchased. 70. 16 As a result of the conduct of Defendant, Plaintiff and the Class members have been 17 damaged. In addition to such damages, Plaintiff seeks punitive or exemplary damages pursuant to 18 California Civil Code § 3294 in that Defendant engaged in “an intentional misrepresentation, deceit, or 19 concealment of a material fact known to the defendant with the intention on the part of the defendant 20 of thereby depriving a person of property or legal rights or otherwise causing injury.” 21 FIFTH CAUSE OF ACTION 22 (Negligent Misrepresentation) 23 (On Behalf of the Nationwide and Arizona Classes) 24 25 26 27 71. Plaintiff incorporates by reference and re-alleges all paragraphs previously alleged 72. Plaintiff brings this claim on behalf of himself and on behalf of the National Class, or herein. the Arizona Class in the alternative, as defined above. 28 -17CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 18 of 21 73. 1 2 that customers could make informed decisions on the purchase laboratory testing. 74. 3 4 75. Defendant knew, or in the exercise of reasonable diligence should have known, that the ordinary consumer would be misled by Defendant’s misleading and deceptive advertisements. 76. 7 8 Defendant specifically and expressly misrepresented material facts to Plaintiff and the Class members, as discussed above. 5 6 Defendant had a duty to provide honest and accurate information to its customers so Plaintiff and the Class members justifiably relied on Defendant’s misrepresentations and have been damaged thereby. 9 SIXTH CAUSE OF ACTION 10 (California Civil Code § 1710 - Deceit) 11 (On behalf of the Nationwide Class) 12 13 Plaintiff incorporates by reference and re-alleges all paragraphs previously alleged 78. Plaintiff brings this claim on behalf of himself and on behalf of the National Class, or herein. 14 15 77. the Arizona Class in the alternative, as defined above. 79. 16 Based on Defendant’s conduct as discussed above, Defendant has engaged in fraud and 17 deceit as set forth in California Civil Code § 1710. Plaintiff and the Class members have reasonably 18 relied on the material misrepresentations and omissions made by Defendant and have been damaged 19 thereby. 20 SEVENTH CAUSE OF ACTION 21 (Violation of Arizona Consumer Fraud Act, A.R.S. § 44-1521, et seq.) 22 (On Behalf of the Arizona Class) 23 24 25 26 27 28 80. Plaintiff incorporates by reference and re-alleges all paragraphs previously alleged 81. Plaintiff brings this claim on behalf of himself and on behalf of the National Class, or herein. the Arizona Class in the alternative, as defined above. 82. Plaintiff brings this claim on behalf of himself and on behalf of the National Class, as defined above. -18CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 19 of 21 1 83. Defendants are “persons” within the meaning of A.R.S. § 44-1521(6). 2 84. Theranos lab panels and blood tests sold in Arizona are “merchandise” within the 3 4 meaning of A.R.S. § 44-1521(5). 85. The Arizona Consumer Fraud Act provides that “[t]he act, use or employment by any 5 person of any deception, deceptive or unfair act or practice, fraud, false pretense, false promise, 6 misrepresentation, or concealment, suppression or omission of any material fact with intent that others 7 rely upon such concealment, suppression or omission, in connection with the sale or advertisement of 8 any merchandise whether or not any person has in fact been misled, deceived or damaged thereby, is 9 declared to be an unlawful practice.” A.R.S. § 44-1522(A). 10 86. Based on Defendant’s conduct as discussed above, Defendant has engaged in fraud and 11 deceit as set forth in Arizona Arizona Consumer Fraud Act. Plaintiff and the Class members have 12 reasonably relied on the material misrepresentations and omissions made by Defendant and have been 13 damaged thereby. 14 87. Pursuant to the Arizona Consumer Fraud Act, Plaintiff seeks damages described above 15 as well as judicial orders of an equitable nature against Defendant, including, but not limited to, orders 16 declaring such practices as are complained of herein to be unlawful, unfair, fraudulent and/or 17 deceptive and enjoining them from undertaking any further unfair, unlawful, fraudulent and/or 18 deceptive acts or omissions. 19 20 21 22 88. 8. In addition, Plaintiff seeks disgorgement of profits and restitution plus interest due thereon at the legal rate. 89. Plaintiff also seeks punitive damages according to proof and reasonable costs and attorneys fees. PRAYER FOR RELIEF 23 24 25 26 WHEREFORE, Plaintiff, on behalf of himself and the members of the Class, demands judgment against and general and special relief from Defendant as follows: 1. An order certifying that the action may be maintained as a Class Action under Federal 27 Rule of Civil Procedure 23 as defined herein and appointing Plaintiff and his counsel of record to 28 represent the defined Class; -19CLASS ACTION COMPLAINT Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 20 of 21 1 2 2. An order enjoining Defendant under California Business and Professions Code §§ 17203 and 17535, California Civil Code §§ 1780 and 1781, and Arizona Revised Statue § 44-1521, et seq.: 3 a. To reimburse Plaintiff and the Class members the purchase price for all Theranos tests 4 as restitution of all funds improperly obtained by Defendant as a result of such acts 5 and practices declared by this Court to be an unlawful, fraudulent, or an unfair 6 business act or practice, a violation of laws, statutes, or regulations, or constituting 7 unfair competition; b. To disgorge all profits and compensation improperly obtained by Defendant as a 8 result of such acts and practices declared by this Court to be an unlawful, fraudulent, 9 10 or an unfair business act or practice, a violation of laws, statutes, or regulations, or 11 constituting unfair competition; and c. To cease engaging in false advertising and to disseminate an informational campaign 12 to correct its misrepresentations and material omissions. 13 14 15 16 17 18 19 3. For damages under the causes of action for fraud, negligent misrepresentation, statutory Deceit, and the Arizona Consumer Fraud Act; 4. For punitive damages, pursuant to California Civil Code § 3294 and the Arizona Consumer Frad Act; 5. For reasonable attorney’s fees and costs, pursuant to California Code of Civil Procedure § 1021.5, the Arizona Consumer Fraud Act, and other statutes as may be applicable; 20 6. For prejudgment interest to the extent allowed by law; 21 7. For costs of suit incurred herein; 22 8. For such other and further relief as the Court deems appropriate. 23 DATED: May 25, 2016 MCCUNEWRIGHT, LLP 24 BY: 25 26 27 28 -20CLASS ACTION COMPLAINT _/s/Richard D. McCune___________ Richard D. McCune Attorney for Plaintiff Case 3:16-cv-02810 Document 1 Filed 05/25/16 Page 21 of 21 DEMAND FOR JURY TRIAL 1 2 Plaintiff, and all others similarly situated, hereby demand a trial by jury herein. 3 4 DATED: May 25, 2016 MCCUNEWRIGHT, LLP 5 BY: 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -21CLASS ACTION COMPLAINT _/s/Richard D. McCune___________ Richard D. McCune Attorney for Plaintiff