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Partner Investments, L.P. v. Theranos, Inc.

Court of Chancery of Delaware

April 23, 2018

PARTNER INVESTMENTS, L.P., a Delaware limited partnership, PFM HEALTHCARE MASTER FUND, L.P., A Cayman Islands limited partnership, and PFM HEALTHCARE PRINCIPALS FUND, L.P., a Delaware limited partnership, Plaintiffs,
v.
THERANOS, INC., a Delaware corporation, ELIZABETH HOLMES, an individual, RAMESH BALWANI, an individual, and DOES 1-10, Defendants. PARTNER INVESTMENTS, L.P., PFM HEALTHCARE MASTER FUND, L.P., and PFM HEALTHCARE PRINCIPALS FUND, L.P., Plaintiffs,
v.
THERANOS, INC., ELIZABETH HOLMES, FABRIZIO BONANNI, WILLIAM H. FOEGE, and DANIEL J. WARMENHOVEN, Defendants.

          Date Submitted: March 22, 2018

          Alex Gibney, pro se

          Gregory P. Williams, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware. Attorneys for Elizabeth A. Holmes and Theranos, Inc.

          MEMORANDUM OPINION

          LASTER, VICE CHANCELLOR

         Theranos, Inc. is a life sciences company that claimed to revolutionize the laboratory testing industry with innovative methods for drawing and testing blood and interpreting patient data. In October 2015, the Wall Street Journal and other media outlets began publishing details about Theranos's technology and operations that cast doubt on Theranos's claims of innovation. In spring 2016, multiple government agencies began investigating claims that Theranos misled investors about the state of its technology and operations.

         In October 2016, certain investors in Theranos commenced Civil Action No. 12816-VCL by filing a complaint against Theranos and certain of its directors and officers. The complaint asserted claims for fraud, negligent misrepresentation, indemnification, and violations of both Delaware and California law. In April 2017, the same investors commenced Civil Action No. 2017-0262-JTL by filing a complaint against certain directors and officers of Theranos. The complaint asserted claims for breach of fiduciary duty, self-dealing, and waste.

         The parties proceeded with discovery. They exchanged documents and took a substantial number of depositions, many of which were recorded on video. For the most party, the parties did not file the deposition transcripts or video with the court. The only exceptions were excerpts from certain deposition transcripts that the parties filed in support of specific motions.

         In May 2017, the parties settled their claims. Both actions were dismissed by stipulation. The cases remain closed.

         Non-party Alex Gibney is a journalist and documentary film maker. By letter filed on February 22, 2018, he asked the court to grant him access to the depositions taken in the two cases. Because he is a film maker, he is particularly interested in the video. As the basis for his request, Gibney invokes the right of public access to judicial records.

         "It is clear that the courts of this country recognize a general right to inspect and copy public records and documents, including judicial records and documents."[1] "The public's right of access to judicial records has been characterized as fundamental to a democratic state."[2] The right of access enables the public to "judge the product of the courts in a given case."[3] This, in turn, "helps ensure 'quality, honesty and respect for our legal system.'"[4] Consequently, "all court proceedings are presumptively open to the public."[5]

         Court of Chancery Rule 5.1 "reflects the Court of Chancery's commitment to these principles."[6] It states that, "[e]xcept as otherwise provided" in Rule 5.1, "proceedings in a civil action are a matter of public record."[7] This language "makes clear that most information presented to the Court should be made available to the public."[8]

         The bulk of what most attorneys do in civil litigation neither takes place in court nor requires the active supervision of the court. Unless the parties bring a discovery dispute to the court's attention, the process of pre-trial discovery takes place in private.[9] These activities include exchanging documents, responding to interrogatories or requests for admission, and taking depositions.

         For purposes of the public's right of access, materials developed during the pre-trial discovery process are not part of the presumptively public record until they are filed with the court, such as by being placed on the docket or lodged in evidence.[10] "[T]here is no public right of access under the first amendment, let alone at common law, to discovery materials as such."[11] Until the discovery materials are submitted to the court, the public's right of access does not apply.

         Gibney seeks access to discovery materials that were never filed with the court. Under settled precedent, ...


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