Elizabeth Holmes and her company Theranos: The Boies law firm and lessons about aggressive lawyering
As the trial of Elizabeth Holmes for promoting a sham blood analysis device begins, it is timely to revisit John Carreyrou’s book Bad Blood: Secrets and Lies in a Silicon Valley Startup (Knopf). In that book Wall Street Journal reporter John Carreyrou reviewed his investigative reporting about the bad behavior of Elizabeth Holmes and her company Theranos. It was Carreyrou who broke the story in the Wall Street Journal that Theranos was essentially a scam, falsely promising new technology that yielded valuable analytical results from a pin prick of blood. In fact the new technique was not reliable. Elizabeth Holmes ended up being charged by the SEC with defrauding investors.
Theranos board members included some famous people, such as Henry Kissinger and George Shultz. When Theranos needed legal counsel, Elizabeth Holmes hired the well known firm of Boies, Schiller, and Flexner, led by David Boies.
An interesting aspect of the Carreyrou book is its focus on the tactics of David Boies and his firm. Author Carreyrou, who apparently is not a lawyer himself, expresses surprise and dismay about aggressive tactics used by the Boies firm.
What Carreyrou seems to find most upsetting is the Boies firm’s aggressive behavior toward whistle-blowers who exposed Theranos, including Tyler Shultz, the grandson of George Shultz. Tyler was an important early source for Carreyrou’s investigative reporting.
In a book chapter called “The Ambush,” Carreyrou recounts how Tyler visited his grandfather to discuss the grandfather’s concern that Tyler was speaking to the press and saying unflattering things about Theranos. Tyler had specifically asked that no lawyers be present for the meeting, but grandfather George Shultz had two Boies partners waiting out of sight in an upstairs room.
After some conversation with Tyler that George Shultz found unsatisfactory, the grandfather brought the lawyers downstairs. The lawyers told Tyler that they had identified him as the person who had leaked Theranos information to the Wall Street Journal. The lawyers handed Tyler a temporary restraining order, a notice to appear in court, and a letter saying that Theranos believed Tyler had violated confidentiality obligations. The lawyers communicated that Theranos was prepared to file a law suit.
The next day Tyler met again with a Boies firm lawyer, who asked Tyler to sign an affidavit swearing he had not spoken to a reporter, and to name anyone he knew who did. Tyler did not sign. Instead he ended the meeting and consulted with a lawyer of his own.
Tyler then engaged in some days of lawyer-led negotiations. The topics were the affidavit the Boies firm asked for, and the threats of litigation. Tyler eventually agreed to sign an affidavit saying he had spoken to the press, but he refused to include any information about other press sources.
What happened next, says Carreyrou, is that Boies Schiller resorted to the “bare-knuckles tactics it had become notorious for. Brille [the Boies firm attorney] let it be known that if Tyler didn’t sign the affidavit and name the Journal’s sources, the firm would make sure to bankrupt his entire family when it took him to court. Tyler also received a tip that he was being surveilled by private investigators.”
Boies Schiller also put pressure on other sources for Carreyrou’s reporting about Theranos: “Boies Schiller’s Mike Brille sent a letter to Rochelle Gibbons threatening to sue her if she didn’t cease making what he termed ‘false and defamatory’ statements” about Theranos.
The Wall Street Journal itself was the target of legal hardball. The Journal received a formal letter from David Boies: “Citing several California statutes, the letter sternly demanded that the Journal 'destroy or return all Theranos trade secrets and confidential information in its possession.’” That was followed a few days later by a 23 page letter from Boies to the Journal threatening a lawsuit.
The day came when David Boies met with Wall Street Journal people in an effort to squelch publication of Carreyrou’s investigative article about Theranos. The Boies effort was unsuccessful. The Carreyrou article on Theranos’ bad behavior ran on October 15, 2015.
For Tyler Shultz, the price for being a whistle blower included $400,000 in legal bills, estrangement from his famous grandfather, and much personal anguish.
What lessons can be drawn from Carreyrou’s description of the Boies firm’s practices? Not that Boies or his firm’s lawyers necessarily did anything illegal or unethical. The Carreyrou book does not provide enough information to justify that conclusion. It may be, for example, that David Boies and his firm had great faith in Theranos technology.
But even in the absence of clear evidence of illegality or unethical lawyer behavior there is significance in Carreyrou’s sense of outrage. Careyrou feels that “bare-knuckles” lawyering was used on behalf of Theranos in an effort to suppress information from Tyler Shultz and Carreyrou’s other sources of information. Also, that aggressive lawyering was used in an effort to squelch publication of his reporting. A main element of the bare-knuckles lawyering described by Carreyrou is the threat of legal liability and litigation expense.
Even where it is legal and ethical, such aggressive lawyer behavior should be examined further by those interested in legal policy. The behavior suggests a problem: that the complexity of laws and legal proceedings may have the unintended side effect of facilitating bullying by parties with deep legal resources. The targets of such bullying may be individuals like Tyler Shultz, or small companies. Bullying based on unmatched deep resources can occur, for example, in the context of landlord-tenant disputes involving small commercial tenants, and franchisor-franchisee disputes where the franchisees have limited resources.
Bare-knuckles bullying by lawyers that is within the bounds of legality and permissible ethics is nevertheless concerning. Among other bad effects, bullying may result in information about wrongdoing being suppressed, inappropriate financial burdens being imposed on targets of bullying, and failure to fairly resolve disputes among parties.
This posting is by Don Allen Resnikoff, who takes full responsibility for its contents
