7 ms·
Theranos investors cannot pursue class action: U.S. judge
- whatshisface 8y ago>“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.
- jimbokun 8y agoThat is the same stupid quote that jumped out at me. The friend may have suggested investing it because of the false technology claim. The vague insight percolating through the grapevine may have been initially triggered by the false technology claim. So even if the individual investor did not know about the specific false technology claim, they were still harmed by the lie. This sentence is so aggressively stupid, it makes me wonder about this judge's impartiality.
- dnautics 8y agoIf the investor was harmed by the lie as you describe, i would think they would still have grounds to sue, just not as part of a class action?
- deleted 8y ago[deleted]
- duxup 8y agoThere has to be more than that... because I don't know how any class action could climb over that bar.
- amarkov 8y agoThe 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.
- andrewla 8y agoExactly -- this does not prohibit each defrauded investor from pursuing their own case, but their reliance on the fraudulent claims has to be individually established rather than automatically assumed.
- dv_dt 8y agoWouldn't all these investors be considered accredited investors and thus be expected to make their own assessments and take their own risks?
- s73v3r_ 8y agoIs "the company flat out lied to everyone" usually considered one of the risks you have to take?
- jacquesm 8y agoNo, but that is why you do due diligence.
- MR4D 8y agoRegardless of investor accreditation (AI, QC, or even QP), you still can't lie to investors. Other than minimum levels of wealth, it just establishes different reporting and structures for the investments (usually things like K-1s, non-traded vehicles, and little to no liquidity). Madoff is a great example of this - he took advantage of his investors by lying to them about results. He went to prison for securities fraud (I'm summarizing here), and the investors pursued various lawsuits to get their money back. In the Madoff case, JPMorgan was not only fined over a billion dollars [1], but also sued (and settled) for over 2 billion with defrauded shareholders [2]. This was basically for their knowing about the fraud and not informing shareholders (again, a legalistic simplification). [1] https://dealbook.nytimes.com/2014/01/07/jpmorgan-settles-with-federal-authorities-in-madoff-case/ https://dealbook.nytimes.com/2014/01/07/jpmorgan-settles-wit... [2] https://www.cnbc.com/2014/01/06/jpmorgan-to-pay-26-billion-to-settle-madoff-case.html https://www.cnbc.com/2014/01/06/jpmorgan-to-pay-26-billion-t...
- Mononokay 8y agoCheaters never lose, and losers never cheat.
- whatshisface 8y agoUnless nature has a say.
- Thriptic 8y agoHolmes will never be able to start a company ever again and has basically been black listed out of the medical industry. The whole industry hates her.
- colechristensen 8y agoThere 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.
- JumpCrisscross 8y agoDoes anyone have a link to the actual decision?
- ciscoriordan 8y agohttps://cases.justia.com/federal/district-courts/california/candce/5:2016cv06822/305531/63/0.pdf?ts=1492593367 https://cases.justia.com/federal/district-courts/california/...
- JumpCrisscross 8y agoThis appears to be from April 2017. Do we know how it was resolved?
- deleted 8y ago[deleted]
- throwaway13456 8y agoI 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?
- deleted 8y ago[deleted]
- faramarz 8y agoI beleive it's not in the SEC's mandate/scope to pursue civil cases. They simply enforce Securities laws.
- iosDrone 8y agoThe criminal investigation is still underway. I will be shocked if she does not end up in prison.
- lovich 8y agoI'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 8y agoMartin Shkreli
- tehlike 8y agoHe went too far on the direction that disturbed everyone though :)
- AmericanChopper 8y agoHe 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.
- gweinberg 8y agoSo small investors get screwed, because they'll never get enough in an individual action to pay the litigation costs.
- gnicholas 8y agoI'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).
- deleted 8y ago[deleted]
- lisper 8y agoThe 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.
- gnicholas 8y ago> 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.
- tracker1 8y agoHow is the FTC/SEC not involved?
- nkw 8y agoIf anyone wants it, I put a copy of the actual order here: https://www.woodlaw.com/casedocs/gov.uscourts.cand.305531.240.0.pdf https://www.woodlaw.com/casedocs/gov.uscourts.cand.305531.24... 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/
- toomuchtodo 8y agoThank you!
- harry8 8y agoHow 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?
- repsilat 8y agoYou 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.
- harry8 8y agoSo 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.