How and Why Did it Go So Wrong?: Theranos as a Legal Ethics Case Study

• Citation: Vol. 37 No. 2
• Publication year: 2021

How and Why Did it Go So Wrong?: Theranos as a Legal Ethics Case Study

G.S. Hans
Vanderbilt University, gautam.hans@vanderbilt.edu

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HOW AND WHY DID IT GO SO WRONG?: THERANOS AS A LEGAL ETHICS CASE STUDY

G.S. Hans^*

Abstract

The Theranos saga encompasses many discrete areas of law. Reporting on Theranos, most notably John Carreyrou's Bad Blood, highlights the questionable ethical decisions that many of the attorneys involved made. The lessons attorneys and law students can learn from Bad Blood are highly complex. The Theranos story touches on multiple areas of professional responsibility, including competence, diligence, candor, conflicts, and liability. Thus, Theranos serves as a helpful tool to explore the limits of ethical lawyering for Professional Responsibility students.

This Article discusses the author's experience with using Bad Blood as an extended case study in a new course on Legal Ethics in Contemporary Practice. It begins by discussing the pedagogical justifications for including Theranos in the course and the unanticipated ways in which Bad Blood highlighted particular topics and questions. The Article then describes student reactions to using Bad Blood as a primary text to communicate ethical principles in legal practice and the strengths and weaknesses of doing so. It concludes by contextualizing the use of Theranos as a case study in the larger history of other uses of popular texts in legal education and what lessons other instructors might take from using such case studies.

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CONTENTS

Introduction................................................................................429

I. Choosing Theranos...............................................................434

A. Never Waste a Good Ethical Crisis....................................434
B. Incorporating Bad Blood....................................................438
C. Happy Accidents in Assigning Theranos............................439

II. Student Reactions to Bad Blood........................................446

A. General Student Reactions..................................................447
B. In-Depth Discussion of Ethical Lawyering.........................449
C. Drawbacks to Assigning Bad Blood...................................457

III. The Uses of Case Studies in Legal Education...................458

A. Textual Case Studies in Legal Education ........................... 459
B. Multimedia Case Studies in Legal Education.....................461
C. Lessons from Bad Blood for Ethical Lawyering.................463

1. Lawyers in a Larger Social Context.............................464
2. Norms in Practice Settings...........................................464
3. Self-Guidance and Superiors........................................465
4. Client Pressures............................................................466
5. Law As a Tool...............................................................467

Conclusion...................................................................................468

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Introduction

The charismatic leader of a technology company that claims it will change the world charms investors, the press, and the public. Despite obvious warning signs, the company flies high—until it doesn't. Flaws that anyone would have noticed—had they been paying attention to the company's actual practices, rather than its narrative—seem obvious to everyone in retrospect, yet we are all left to wonder: How did something so problematic manage to charm us for so long? And were we naive to not notice?

The preceding paragraph could apply to a number of companies and founders, from uber and Travis Kalanick to WeWork and Adam Neumann.¹ one of the most notorious examples in recent history that could fit this narrative is Elizabeth Holmes's Theranos.² A technology company that Holmes claimed would transform health care by revolutionizing the testing of blood samples, Theranos burned brightly before flaming out in about fifteen years.³

Though Holmes claimed that her blood testing technology could accomplish impossible feats—using a very small amount of blood to run multiple tests in a very small device—the devices never functioned as the company asserted, and the tests were never sufficiently accurate to be of any real use.⁴ some of the test results were so inaccurate that, if they had been followed, patients might have been given dangerous, unnecessary treatments.⁵ Yet along the

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way, Theranos successfully partnered with major players like safeway, Walgreens, the cleveland clinic, and the U.S. military.⁶

In retrospect, it was far too good to be true that Holmes, who dropped out of stanford as an undergraduate and lacked meaningful experience in biology, chemistry, or medicine, could have solved problems that have bedeviled scientists for years.⁷ Yet, Holmes's hubris attracted a great deal of after-the-fact attention—perhaps due to her extravagant healthcare claims, her age, her gender, or her presentation—far beyond that of other silicon Valley failures.⁸ The Theranos story has been told in print, on television, and as a podcast; of these, the definitive chronicle of Holmes and Theranos seems to be Bad Blood, the nonfiction bestseller penned by the Wall Street Journal's John carreyrou.⁹ carreyrou spent many years investigating Theranos as a reporter, and his book provides extensive insights and sourcing into how the company unraveled.¹⁰

Behind nearly every company, a team of lawyers toils, and Theranos was no exception. Lawyers, alongside other employees, helped spin the story of Theranos and avoid regulatory and legal pitfalls.¹¹ By concealing the truth of what was happening from regulators and intimidating employees and former employees with legal threats, Theranos and its employees crafted a public strategy

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reliant on private malfeasance.¹² As described by Carreyrou, some of the company's strategy relied on the work of high-powered law firms that engaged in questionable conduct.¹³

David Boies, one of the most well-known and infamous attorneys currently practicing in the United States, was intimately involved in the rise and fall of Theranos, both as an attorney representing the company and as a board member.¹⁴ Boies's role in Theranos raises many obvious ethical questions, as did his conduct in other contemporaneous, high-profile cases (such as the Harvey Weinstein allegations).¹⁵ And beyond Boies's conduct, several other examples of ethical issues for lawyers arose in the Theranos saga.¹⁶ Bad Blood describes many moments that are likely to turn the stomachs of lawyers and law professors who keep legal ethics in mind.¹⁷

While designing a course on "Legal Ethics in Contemporary Practice," which focuses on how current issues in the legal profession highlight different aspects of the ethical rules that regulate attorneys, I chose to include Bad Blood as an extended case study. Given Theranos's public notoriety—including a well-regarded podcast and an HBO documentary series, in addition to Bad Blood—the story of this failed company provides an illustrative, well-known tool to explore many issues covered in the standard Professional Responsibility course.¹⁸ I believed that the Theranos saga, with its riveting, dramatic details and complicated ethical questions, would help students engage with the sometimes dry ethical rules with

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greater zeal than any hypotheticals that I could design or that a casebook could provide.

This Article describes my experience with using Bad Blood and Theranos as ongoing pedagogical tools while teaching students a standard course on the Model Rules of Professional Conduct (MRPC) that included extensive discussion of current issues in the legal profession.¹⁹ Bad Blood indirectly highlights ethical issues on a range of topics, from conflicts of interest to reporting requirements. Thus, I chose to periodically engage students throughout the term with questions targeted to different ethical rules implicated by the book.

Because my course is designed to help students develop their own ethical framework before entering practice, it was my hope that Bad Blood would provide more than a cautionary tale. In an ideal world, the Theranos case study would help my students realize that "professional responsibility" is more than just a graduation or bar requirement. The thesis of my course is that professional responsibility is a core element of legal practice that all lawyers must be constantly cognizant of to best represent their clients and promote the public good—which lawyers have a special responsibility to do.²⁰

For that reason, near the end of the semester, I devoted a full class session to explore how attorneys—including, but not limited to, Boies—behaved in the book's narrative and whether the conduct described in Bad Blood helped the students understand how ethical rules play out in the real world. I designed that discussion to encourage students to reflect on how the book highlighted ethical rules. It also allowed them to describe their own intuitions regarding what they might do as attorneys if they faced similar questions while practicing law.

This Article proceeds in three parts. Part I discusses the reasons I chose to include Bad Blood as a component of my course, the

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pedagogical goals for doing so, and the ways in which teaching Theranos provided unexpected opportunities for learning. As a gripping, timely exploration of corporate malfeasance and high-stakes lawyering, Bad Blood was a highly engaging element of the class—which was quite welcome, given the undeserved reputation for dryness that Professional Responsibility courses often have. But because Professional Responsibility courses are both surveys and also contain sequentially structured material, incorporating Bad Blood presented challenges in highlighting the ethical problems posed by the book—for example, discussing conflicts of interest that the book mentioned when students had not...