Theranos and David Boies Cut Legal Ties
Famed litigator disagrees with Theranos over strategy for handling investigations of company
By John Carreyrou
Updated Nov. 20, 2016 9:06 a.m. ET
Litigator David Boies and the law firm he founded, Boies, Schiller & Flexner LLP, have stopped doing legal work for Theranos Inc. after disagreeing about the strategy for handling ongoing government investigations of the blood-testing company, according to people familiar with the matter.
Mr. Boies, 75 years old, has been one of the country’s best-known litigators since the late 1990s. He became Theranos’s outside counsel after being approached in 2011 by two investors in the Palo Alto, Calif., startup. He fiercely defended Theranos against questions about its technology and operations.
Those efforts included threatening to take legal action against The Wall Street Journal during the months before it published in October 2015 its first article detailing problems at Theranos.
In addition, former Theranos employee Tyler Shultz said in a Journal article Wednesday that two partners at Boies Schiller unsuccessfully pressured him to say he had talked to a Journal reporter and to reveal who the Journal’s other sources might be. Mr. Boies is the law firm’s chairman. One of the partners said he has a different recollection of the events described by Mr. Shultz.
Mr. Boies is a member of Theranos’s board of directors, which he joined in October 2015. The company is in the process of hiring new executives for its management team, which could affect the composition of the board, according to people familiar with the matter.
Theranos’s new outside law firm, WilmerHale, declined to comment, said spokeswoman Molly Nunes. Theranos’s general counsel, David Taylor, declined to comment.
Theranos is the subject of criminal and civil investigations by the U.S. attorney’s office in San Francisco and the Securities and Exchange Commission, which are trying to determine if the company misled investors and regulators about its technology and operations. Theranos has said it is cooperating.
The exact nature of the disagreement over how to handle the investigations isn’t clear, but Mr. Boies’s relationship with Theranos founder Elizabeth Holmes also deteriorated as the company suffered regulatory setbacks, according to a person familiar with the matter.
Those tensions came to a head when Theranos’s general counsel, Heather King, left the company in early September and returned to Boies Schiller, where she had previously been a partner. People familiar with the matter said Ms. King left Theranos after she and Mr. Boies disagreed with Ms. Holmes about Theranos’s legal strategy.
Mr. Boies’s first assignment for Theranos was a patent lawsuit against a childhood neighbor of Ms. Holmes, who also is the company’s chief executive. The case was settled in early 2014, and Mr. Boies moved into an advisory role at Theranos.
The law firm was paid in Theranos stock for its work on the patent case, according to a person familiar with the matter. Boies Schiller was granted more than 300,000 shares valued at $4.5 million, based on a valuation of $15 a share at the time, this person said.
In an email to employees Thursday, Ms. Holmes said she was “preparing to defend our company.” She said Theranos has “chosen to put all our energy into our technology and seeing our product through studies and regulatory submissions, so we can show who we are through our inventions.”
Theranos is appealing sanctions proposed by regulators. Last month, it shut down all its blood-testing facilities and said it would focus on developing products that could be sold to outside laboratories, hospitals and doctors’ offices.