
Theranos investors cannot pursue class action: U.S. judge - petethomas
https://www.reuters.com/article/us-theranos-lawsuit/theranos-investors-cannot-pursue-class-action-u-s-judge-idUSKCN1IX4U4
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whatshisface
> _“It is easy to imagine, for example, that someone invested simply because a
> friend suggested it, or because all that percolated down the grapevine was
> vague insight that Theranos was a fast-growing company, or had promising
> (but unspecified) technology,”_

How would it ever be possible to convict anyone on these grounds, period? Even
if I had the fraudulent claims in my internet history I wouldn't be able to
prove that they were specifically what misled me. This precedent sounds like a
blanket license to lie to investors through any channels other than official
communications.

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amarkov
The question at this stage of the lawsuit isn't whether the investors actually
did rely on the fraudulent claims, but whether each of the investors should
have to show they did. The judge isn't saying that "well maybe it was a
friend" contradicts their case.

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dv_dt
Wouldn't all these investors be considered accredited investors and thus be
expected to make their own assessments and take their own risks?

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s73v3r_
Is "the company flat out lied to everyone" usually considered one of the risks
you have to take?

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jacquesm
No, but that is why you do due diligence.

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nkw
If anyone wants it, I put a copy of the actual order here:
[https://www.woodlaw.com/casedocs/gov.uscourts.cand.305531.24...](https://www.woodlaw.com/casedocs/gov.uscourts.cand.305531.240.0.pdf)

Even though it is marked as an opinion (and should be free) I don't see an
easy way to access N.D.Cal. opinions from their webpage without a pacer login
unless it is whatever they deem a "Case of Interest".

I also downloaded it with the RECAP extension[1] so it should be available on
CourtListener[2] soon.

[1] [https://free.law/recap/](https://free.law/recap/)

[2] [https://www.courtlistener.com/](https://www.courtlistener.com/)

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toomuchtodo
Thank you!

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throwaway13456
I don't understand American law. Why isn't Elizabeth Holmes behind bars yet?
She's been accused of massive fraud by SEC and yet, she's still serving her
role in Theranos?

~~~
iosDrone
The criminal investigation is still underway. I will be shocked if she does
not end up in prison.

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lovich
I'll be shocked if she does. When was the last time a CEO went to jail for
something they did as part of their business? There is one set of rules for
the rich and business owners and one set for everyone else

~~~
mpd
Martin Shkreli

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tehlike
He went too far on the direction that disturbed everyone though :)

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AmericanChopper
He was simply unpopular. I don’t think you could argue he did anything worse
than Holmes. But since she was a media darling, and the model female CEO, it’s
kinda hard to see her being brought to justice. I’m not defending Shkreli, but
it’s not very comforting to see the justice system as a popularity contest.

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gnicholas
> _Michael Mugmon, a lawyer for Theranos, said the company was pleased with
> the ruling “as it brings the company a step closer to resolving its
> outstanding legal issues.”_

Either that, or one step closer to a clusterf--- of individual lawsuits. The
fact that the class was not approved doesn't mean there are fewer lawsuits
left — it probably means there will be more lawsuits, not fewer.

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harry8
How can a class action by shareholders against the company they hold shares in
/ever/ be a sensible thing for anyone other than lawyers?

You own a proportion of the assets you are suing for. $100 worth of company
assets you own becomes say $20, with $80 being returned to you as your class
action win. But of course the lawyer fees come out so you get $30 of your $80
so $100 of assets just became $50. Your win is a huge loss.

Is this class action by investors against the company just the lawyers
capturing the system to their profit? Can there ever be anything like justice
at all with this?

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repsilat
You should be able to sue if you sold after the story broke. In that case you
were wronged, but you are not shooting yourself in the foot by suing.

Also: if the net worth of the company is less than its book value (possible),
suing could increase your net worth.

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harry8
So the person buying from you factors in the discount for losing the law suit
and you are not ahead. The lawyers are, investors are worse off.

I can't imagine many companies with a market cap less than disposal value of
their assets. That's free money for any corporate raider it other acquirer.
You do find money putting in the street but rarely and it doesn't stay there
long.

These class actions are just an abject disaster for everyone. Except the
lawyers, who make bank while enhancing their reputations in all the wrong
ways. And it costs tax dollars to run the courts for them to vampire like so.

Insane. The money is gone, giving the remnants to lawyers won't bring any
back. The correct remedy is jail for those who committed fraud acting as a
deterrent j in the future.

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JumpCrisscross
Does anyone have a link to the actual decision?

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ciscoriordan
[https://cases.justia.com/federal/district-
courts/california/...](https://cases.justia.com/federal/district-
courts/california/candce/5:2016cv06822/305531/63/0.pdf?ts=1492593367)

~~~
JumpCrisscross
This appears to be from April 2017. Do we know how it was resolved?

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gweinberg
So small investors get screwed, because they'll never get enough in an
individual action to pay the litigation costs.

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gnicholas
I'd be curious to know how small the "small investors" are.

Also, smaller investors can ride the coattails of larger lawsuits, if those
are successful. Findings that Theranos fails to refute in those trials can be
used against Theranos by subsequent parties, under the _res judicata_ doctrine
(specifically, collateral estoppel).

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tracker1
How is the FTC/SEC not involved?

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Mononokay
Cheaters never lose, and losers never cheat.

~~~
colechristensen
There is evolutionary pressure towards a non-zero but limited proportion of
cheaters in any system.

The 'reward' for cheating goes up as the proportion of cheaters goes down, and
goes down as the proportion of cheaters goes up. There is an optimum somewhere
in the middle.

It takes energy to detect cheaters and that amount of energy dictates how many
there are.

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lisper
The U.S. really has turned into a banana republic. This, together with
Monday's SCOTUS decision barring employee class actions (EPIC SYSTEMS CORP. v.
LEWIS), means that if you aren't playing for sufficiently high stakes to make
it worthwhile to hire your own legal team, you're pretty much fair game for
those who can.

