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Theranos, the once revolutionary laboratory testing company, may be facing a new secret lawsuit from their former partner Walgreens. In a filing on Tuesday, Walgreens asked the Federal District Court in Delaware to permit the company to file a lawsuit "under seal" against Theranos that is based on the contracts that the two companies held with each other.
The motion filed by Walgreens explains that the two companies signed a non-disclosure agreement (NDA) relating to Theranos's business and technology. As a result of the NDA, Walgreens explained to the court that the allegations in the complaint, if disclosed in a public filing, would likely violate the terms of the NDA exposing them to liability.
What's This Case About?
While the case's specific details and allegations may remain unknown, it doesn't take much investigation to figure out what this case is about. Back in 2010, Theranos and Walgreens embarked on a partnership that had potential to revolutionize the blood-testing industry. Theranos had represented to Walgreens, and the world, that they had developed, and were still further actively researching and developing, methods to test blood that were fully automated and required no more than a single drop of blood.
As it turns out, Theranos was unable to actually do the testing as they claimed, and their products and services did not perform as promised. The proprietary blood testing machine and much of company's processes were not approved by the FDA. After Walgreens saw that Theranos was struggling, failing, and not recovering, they pulled out of the partnership and removed Theranos testing services from many of their retail locations. During Theranos's spiral to the bottom, countless customers had to be informed that their blood test results, which they received at Walgreens, were likely wrong.
Although it may seem like the grievance between Walgreens and Theranos is already out in the public, the filing by Walgreens indicates that the lawsuit would divulge confidential trade secret information relating to Theranos's testing process, machines, business practices, and more. As a result of the way most NDAs work, any divulging of information covered under the NDA could result in contractual penalties for Walgreens.
Courts will accept filings under seal if they would divulge confidential or private information. However, generally, before filing a document with the court under seal, the court must provide permission to do so, and usually wants a good reason as to why they should. While the lawsuit itself may not be a secret, the contents of any document filed under seal, and often the in court proceedings, will be until the court or the parties agree otherwise.