[00:00:00] Speaker 03:
Good morning everyone.

[00:00:04] Speaker 03:
Just give me one moment to set up here.

[00:00:25] Speaker 03:
Well, we have three matters set for argument today, but they're all related.

[00:00:30] Speaker 03:
Judge Roeder, Judge Nelson, and I welcome you to the Ninth Circuit, and we look forward to hearing your arguments.

[00:00:37] Speaker 03:
The first case up is US versus Holmes.

[00:00:40] Speaker 03:
When you're ready, counsel.

[00:00:52] Speaker 04:
Good morning, and may it please the court, Amy Saharia for Appellant Elizabeth Holmes.

[00:00:57] Speaker 04:
I'd like to reserve five minutes for rebuttal.

[00:00:59] Speaker 03:
All right.

[00:01:00] Speaker 03:
I'll try to help you out, but as you know, keep your eye on the clock as well.

[00:01:03] Speaker 04:
I will, Your Honor.

[00:01:05] Speaker 04:
The central issue in this case was whether Ms.

[00:01:07] Speaker 04:
Holmes knowingly misrepresented the capabilities of Theranos' technology.

[00:01:12] Speaker 04:
The government told the jury this was the underlying false statement in the case and a thread through the investor scheme.

[00:01:19] Speaker 04:
The government's case on this central issue rested in substantial part on two categories of evidence.

[00:01:24] Speaker 04:
Dr. Das' untested undisclosed scientific analysis and the testimony of Dr. Rosendorff, whose bias and incompetence we could not expose on cross-examination.

[00:01:36] Speaker 04:
Both categories of evidence were infected with error.

[00:01:40] Speaker 04:
On this record, with a general verdict, the government cannot show the errors were harmless.

[00:01:45] Speaker 04:
The case was close.

[00:01:47] Speaker 04:
This was the most powerful evidence on the central issue in the case.

[00:01:51] Speaker 04:
And Ms.

[00:01:51] Speaker 04:
Holmes provided the jury with a plausible alternative narrative of her intent, including through her own testimony.

[00:01:58] Speaker 04:
although I'd like to focus today on the points I just summarized.

[00:02:02] Speaker 04:
Of course, I would be happy to answer questions on any additional arguments the court wishes to discuss.

[00:02:08] Speaker 00:
Can I just ask you to clarify a little bit more?

[00:02:10] Speaker 00:
You said the case was close.

[00:02:13] Speaker 04:
Yes, Your Honor.

[00:02:14] Speaker 00:
I didn't come away reading

[00:02:17] Speaker 00:
all of this with the same impression.

[00:02:19] Speaker 00:
There was, it seemed to me, pretty overwhelming evidence.

[00:02:24] Speaker 00:
Separate and apart from any complaints about Das' testimony or Rosenbaum's testimony, why, I don't want to start from the back end, but maybe you can explain why this wouldn't have been harmless there.

[00:02:39] Speaker 00:
You sort of suggested in your opening that that's because there wasn't a,

[00:02:43] Speaker 00:
a verdict form, but that can't just, the government can still show harmless air even when there's not a specific verdict form.

[00:02:55] Speaker 04:
Of course, Your Honor.

[00:02:56] Speaker 04:
So let me talk about harmlessness.

[00:02:59] Speaker 04:
First of all, with respect to the case being close, the government prevailed on only

[00:03:03] Speaker 04:
four of 12 counts.

[00:03:05] Speaker 04:
The jury acquitted Ms.

[00:03:06] Speaker 04:
Holmes on four counts, and it hung on three additional counts.

[00:03:10] Speaker 04:
It deliberated for seven days.

[00:03:12] Speaker 04:
Those are all classic indicators this court has identified of a case being close.

[00:03:19] Speaker 04:
The court also looks to whether the defense provided the jury with an alternative, plausible narrative.

[00:03:26] Speaker 04:
Court doesn't ask whether the defense case was overwhelming, but was there a plausible defense case?

[00:03:32] Speaker 04:
And here there absolutely was a plausible defense case.

[00:03:35] Speaker 04:
Ms.

[00:03:35] Speaker 04:
Holmes testified.

[00:03:37] Speaker 04:
Because she testified, we were able to put into the record contemporaneous documents showing company scientists telling her in real time that the technology worked.

[00:03:47] Speaker 04:
telling her in real time that the company's partnerships with pharmaceutical companies had been successes and showing that the company was so confident in its technology that it submitted it to the FDA.

[00:03:58] Speaker 02:
Counsel, may I ask you, you characterized the case as being about whether there was a knowing misrepresentation.

[00:04:08] Speaker 02:
When you say, following up on Judge Nelson's question, when you say that this is close, are you saying it's close as to her knowledge, or are you arguing that it was close as to whether there was a misrepresentation?

[00:04:22] Speaker 04:
It is close as to her knowledge.

[00:04:24] Speaker 04:
There was substantial evidence that we put forward, both cross-examining the government's witnesses, but then especially in the defense case, showing that in real time, she in good faith believed in the accuracy of this technology.

[00:04:38] Speaker 02:
So you're not disputing the evidence and findings with respect to the fact that this was not accurate and that the information was not good?

[00:04:49] Speaker 04:
We're not, Your Honor.

[00:04:50] Speaker 04:
Now, we separately have an argument that the reliability of Dr. Das' expert opinion has never been proven, but putting that aside, no, Your Honor.

[00:05:00] Speaker 04:
Now, with respect to the other alleged misrepresentations and the fact that this was a general verdict, the government relies heavily on the notion that it proved other alleged misrepresentations that it claims stand separate and apart from the accuracy of the technology.

[00:05:17] Speaker 04:
And I want to make two points about that particular argument.

[00:05:20] Speaker 04:
First of all, we don't know which misrepresentation the jury relied on because we have a general verdict.

[00:05:27] Speaker 04:
I would point the court to the Fifth Circuit's decision in United States versus Alexius, which we cite.

[00:05:33] Speaker 04:
In that case, which is quite similar to this one, there were four alleged false statements that were part of a perjury conviction.

[00:05:39] Speaker 04:
There was an evidentiary error, a confrontation clause violation that went to one of those four alleged misstatements.

[00:05:46] Speaker 04:
And the Fifth Circuit held that because it didn't know which of the misstatements the jury relied on, it was required to reverse.

[00:05:55] Speaker 00:
So, for example, you would say that the misrepresentation is about their continuing growth in Walgreens and Safeway.

[00:06:07] Speaker 00:
Walgreens, Your Honor.

[00:06:08] Speaker 00:
Walgreens.

[00:06:09] Speaker 00:
That was not, the government can't rely on that because it wasn't specified in the indictment.

[00:06:17] Speaker 00:
Is that your argument here?

[00:06:18] Speaker 04:
It wasn't specified on the verdict form, which misrepresentation the jury was relying on.

[00:06:24] Speaker 04:
But what's more than that, the government itself tied that misrepresentation and all the misrepresentations back to the accuracy of the technology.

[00:06:33] Speaker 04:
in the closing argument.

[00:06:35] Speaker 04:
Let me give the court a few examples.

[00:06:36] Speaker 03:
So let me have you address knowledge, because as you said, if the government hasn't shown knowledge, then that gives you a case to make for reversal in this case.

[00:06:47] Speaker 03:
I want you to focus in on the evidence of knowledge that the government did present.

[00:06:51] Speaker 03:
You've raised quite a number of evidentiary challenges, which as you know, much of which we review with substantial deference to the district courts, the extent that the district court made findings.

[00:07:02] Speaker 03:
With regard to the DAS testimony, I don't see from the briefing that you're really contesting nor I think could you contest that a good portion of his testimony is admissible as percipient.

[00:07:14] Speaker 03:
Now the question is, at what point did it potentially veer into the expert realm?

[00:07:22] Speaker 03:
What is your view of that?

[00:07:24] Speaker 04:
So his opinion, which is reflected in the patient impact assessment, that the technology was not accurate, that there was a potential

[00:07:35] Speaker 04:
impact on patient test results from the technology, that is an opinion that is based on scientific knowledge and it falls squarely within rule 701C.

[00:07:45] Speaker 04:
There is no on-the-job exception to rule 702, that is why rule 701C was added to rule 701.

[00:07:53] Speaker 04:
So his opinion, which is reflected in that patient impact assessment, is clearly an expert opinion.

[00:08:00] Speaker 03:
Okay, we can debate that, but there's an independent relevance involved.

[00:08:04] Speaker 03:
He was her employee hired to do a job.

[00:08:07] Speaker 03:
He did that job.

[00:08:09] Speaker 03:
And in conducting the assessment, the patient impact statements in response to CMS, he told her certain things that tend to show that she was aware of problems in technology and ultimately decided that he really had no choice in his professional capacity to void the test results.

[00:08:29] Speaker 03:
All that really goes to knowledge, independent of whether he's testified as an expert or not.

[00:08:34] Speaker 03:
Why can't the government bring that in for that purpose?

[00:08:38] Speaker 04:
For two reasons.

[00:08:39] Speaker 04:
First of all, that's not the purpose that it admitted that evidence for.

[00:08:42] Speaker 04:
It urged the jury in closing to use his opinion for its truth.

[00:08:46] Speaker 04:
That's at ER 12578, where it told the jury to use his opinion to prove that technology did not work.

[00:08:54] Speaker 04:
Second of all, her state of mind in 2016 was not

[00:08:57] Speaker 04:
relevant to any issue before the jury.

[00:09:01] Speaker 04:
The investor counts ended in 2015.

[00:09:04] Speaker 04:
The patient counts, technically they charge a patient conspiracy going through 2016, but the government made zero attempt to prove any representations to patients in 2016 after Dr. Das committed.

[00:09:19] Speaker 03:
But there's an inference there, so now does it become a four or three evaluation by the district court?

[00:09:26] Speaker 04:
I know, Your Honor, there still is the fundamental 702 question with respect to Dr. Das's opinion, given that the government admitted it for its truth and asked the jury to use it for its truth.

[00:09:40] Speaker 04:
The court needed to conduct a reliability analysis of that opinion before admitting it.

[00:09:46] Speaker 00:
Can I just ask, you said in their closing arguments, they made that argument.

[00:09:51] Speaker 00:
At what point would the district court need to be put on notice that this was what they were putting in them for?

[00:09:56] Speaker 00:
Because if, I mean, to Judge Winn's point, the government was making a point that this was Holmes's knowledge.

[00:10:06] Speaker 00:
If they sort of switched, if they had to say anything in closing statements, would you have had the same objection here?

[00:10:14] Speaker 04:
Yes, because at the same time that the government admitted the patient impact assessment and Dr. Das' opinions, it also admitted the CMS report through Dr. Das, and it made quite clear at the time that it was admitting the CMS report, that it was not admitting it for its truth and was admitting it only for the limited purpose of knowledge or notice.

[00:10:38] Speaker 04:
And at the same time, it did not admit

[00:10:40] Speaker 04:
the patient impact assessment for that limited purpose.

[00:10:43] Speaker 04:
Now, we still have the point that her state of mind in 2016 was just not relevant to any issue in the case, given the time period of the investor conspiracy and given that there were no representations

[00:10:57] Speaker 04:
to patients made after the time of his expert analysis.

[00:11:04] Speaker 03:
Am I correct in understanding from your briefing that you're really not challenging his expertise?

[00:11:10] Speaker 03:
It's more the Dalbert gatekeeping function.

[00:11:13] Speaker 04:
Exactly, Your Honor.

[00:11:15] Speaker 04:
And I think on that point, it's quite noteworthy that when the government informed us five weeks before trial in an email,

[00:11:21] Speaker 04:
that it might elicit expert opinions from Dr. Doss.

[00:11:26] Speaker 04:
It cited us as the bases and reasons for his opinions to the supplemental expert report of its retained expert, Dr. Master.

[00:11:35] Speaker 04:
As to Dr. Master, the district court had granted us a Daubert hearing because it could not determine whether his opinions were reliable based on the papers.

[00:11:44] Speaker 04:
And even though it granted us that Daubert hearing as to Dr. Master,

[00:11:47] Speaker 04:
We never got a downward hearing with respect to Dr. Doss.

[00:11:51] Speaker 04:
There was no assessment of his reliability, of his opinions, no disclosure.

[00:11:56] Speaker 04:
We've never received disclosure to this date of his expert opinions.

[00:12:00] Speaker 02:
Well, wouldn't much of his testimony have been admissible in any event as a recipient witness as to what he actually did on the job?

[00:12:09] Speaker 04:
Some of it would have been, but not his opinion about whether the technology worked.

[00:12:15] Speaker 04:
That was classic expert opinion.

[00:12:17] Speaker 02:
That little piece.

[00:12:20] Speaker 04:
It's little in terms of the amount of time in his examination that it took.

[00:12:25] Speaker 04:
And that's because the government didn't have to actually do the normal work it would do with an expert.

[00:12:30] Speaker 04:
It didn't go through his methodology.

[00:12:32] Speaker 04:
It just asked him for his ultimate opinion.

[00:12:35] Speaker 04:
But it is quite powerful evidence in this case.

[00:12:38] Speaker 04:
It is the most powerful evidence about whether that technology

[00:12:41] Speaker 02:
worked because it wasn't his opinion expressed in terms of what he concluded in the course of his job.

[00:12:49] Speaker 04:
Yeah, yes, it was.

[00:12:50] Speaker 04:
But again, there's no on the job exception to rule 702.

[00:12:53] Speaker 04:
This court held that in Figueroa Lopez, and the Rules Committee then added Rule 701C to Rule 701.

[00:13:01] Speaker 04:
Now, I do want to discuss Dr. Rosendorf's cross-examination as well.

[00:13:07] Speaker 04:
He was the most critical witness with respect to the issue of knowledge, because he was at the company

[00:13:13] Speaker 04:
when Ms.

[00:13:14] Speaker 04:
Holmes was making representations to investors, unlike Dr. Das, who came after the fact.

[00:13:21] Speaker 04:
This was the most important cross-examination of the case for the defense.

[00:13:25] Speaker 04:
It was the most important direct examination.

[00:13:27] Speaker 04:
By our count, his direct examination was 50% longer than any other government witness.

[00:13:33] Speaker 04:
The government invoked him more than any other witness in opening and closing.

[00:13:36] Speaker 04:
He was the only government witness who supposedly relayed concerns to Ms.

[00:13:41] Speaker 04:
Holmes at the time

[00:13:43] Speaker 04:
that she was making the representations to investors and the government.

[00:13:47] Speaker 00:
Can I ask you a question about this because I mean you raised some good points here on both DOS and Rosenbaum but when I was looking at Rosenbaum what I saw was the district court making some pretty careful distinctions on when cross-examination would be allowed and when it wouldn't.

[00:14:04] Speaker 00:
I might have come to different conclusions, but of course, as Judge Winn sort of alluded to, we're not reviewing that, DeNovo.

[00:14:11] Speaker 00:
We're reviewing that for abuse of discretion.

[00:14:14] Speaker 00:
How do we look at this?

[00:14:16] Speaker 00:
Because you agree this wasn't a case where you weren't allowed cross-examination.

[00:14:21] Speaker 00:
Your contention is the scope of the cross-examination, correct?

[00:14:25] Speaker 04:
That's correct.

[00:14:26] Speaker 04:
Of course we were allowed to cross-examine him.

[00:14:28] Speaker 04:
But as to his post-Theranos employment, two of the places of employment were completely barred from any cross-examination.

[00:14:36] Speaker 04:
And as to the third, which was the Perkin-Elmer, his Perkin-Elmer employment, the key issue there is he was working there at the time of his testimony at trial.

[00:14:48] Speaker 04:
His laboratory was under federal investigation by CMS.

[00:14:54] Speaker 04:
CMS had found his

[00:14:55] Speaker 04:
his laboratory was posing immediate jeopardy to patient health and had tied that binding directly to him.

[00:15:03] Speaker 00:
Well, I'm still struggling with what does that have to do?

[00:15:08] Speaker 00:
Maybe he wasn't competent.

[00:15:11] Speaker 00:
But he that doesn't change the fact that he was telling Miss Holmes certain facts, and that seems to be the evidence here.

[00:15:18] Speaker 00:
I mean, is your is your statement that she discounted what he told her?

[00:15:23] Speaker 00:
Your position would be she discounted what he told her because she didn't have confidence in him.

[00:15:28] Speaker 04:
No, first of all, much of his testimony was about oral conversations that are not contemporaneously proven by documents.

[00:15:37] Speaker 04:
In fact, his testimony about his departure from the company was hotly contested by Ms.

[00:15:43] Speaker 04:
Holmes in her own testimony.

[00:15:45] Speaker 04:
But no, our defense as to Dr. Rosendorff was that he was the person responsible for validating

[00:15:52] Speaker 04:
these tests in the laboratory.

[00:15:54] Speaker 04:
And to the extent the laboratory was using tests that were not reliable or accurate, he was the one who was supposed to figure that out.

[00:16:02] Speaker 04:
And his incompetence, his failure to find that out, shielded Ms.

[00:16:07] Speaker 04:
Holmes from knowledge that the laboratory tests were not accurate.

[00:16:12] Speaker 04:
We argued that in closing, and the government clearly understood that his competence was squarely at issue because it devoted a substantial part of its rebuttal argument.

[00:16:21] Speaker 04:
to defending Dr. Rosendorff's competence.

[00:16:24] Speaker 04:
This is at ER 12850 to 56.

[00:16:28] Speaker 00:
But doesn't that suggest you had the opportunity?

[00:16:30] Speaker 00:
I mean, you did have the opportunity to challenge his competence.

[00:16:33] Speaker 04:
But not on cross-examination.

[00:16:35] Speaker 04:
And the relevant question for the confrontation clause is whether we had that opportunity on cross-examination and the evidence that at the time of trial, his laboratory was under federal investigation.

[00:16:46] Speaker 04:
And CMS had found him specifically, personally, to have failed on his job.

[00:16:52] Speaker 04:
It was highly relevant both to his competence, to his bias, and it was critical to allow us to impeach by contradiction the government asking him on direct examination to compare his experience at Theranos to other laboratories.

[00:17:07] Speaker 03:
Council, before we eat too much further into your rebuttal time, can I have you briefly address the 407 issue?

[00:17:14] Speaker 03:
Because the decision to avoid the test results is a pretty compelling piece of evidence for the government.

[00:17:20] Speaker 04:
Yes, Your Honor.

[00:17:21] Speaker 04:
So as to that issue, there are two pieces of evidence that show that the voiding was not legally required or required by CMS.

[00:17:31] Speaker 04:
First of all, the CMS inspector told the government that Theranus made the decision to void— It wasn't mandated, but they expected a satisfactory response.

[00:17:40] Speaker 03:
And in his professional opinion, the only appropriate response was to void the result.

[00:17:46] Speaker 03:
How do we look at that?

[00:17:47] Speaker 03:
And I think embedded in our review of this issue is the factual finding by the district court.

[00:17:55] Speaker 03:
And so if you can also address the standard review, is it for clear error?

[00:17:59] Speaker 04:
Sure.

[00:17:59] Speaker 04:
Well, there is no factual finding by the district court as to this issue.

[00:18:05] Speaker 04:
The court just said... Well, implicit factual finding in any event.

[00:18:09] Speaker 04:
There is an implicit.

[00:18:09] Speaker 04:
The court allowed it to come in without making an express finding, and by the way, without making any rule 403 balancing.

[00:18:18] Speaker 04:
That is not on the record anywhere.

[00:18:20] Speaker 04:
But as to that issue, I don't think it can be enough that a company is under federal investigation and that it takes certain actions to try to please the regulator.

[00:18:33] Speaker 04:
If that were the case,

[00:18:35] Speaker 04:
then any time a company took aggressive actions, even if they weren't legally required, rule 407 would not come into play.

[00:18:42] Speaker 04:
But rule 407 exists precisely to incentivize companies to take aggressive actions, to take remedial actions without fear that they will be held against the company.

[00:18:52] Speaker 04:
There is no evidence in this case that

[00:18:55] Speaker 04:
that CMS required this, that this was a response to the immediate jeopardy finding.

[00:19:00] Speaker 04:
I think as you'll hear in Mr. Bolwani's appeal, the immediate jeopardy finding didn't relate to the Edison.

[00:19:06] Speaker 04:
And therefore, this was not a response to the immediate jeopardy finding.

[00:19:10] Speaker 04:
Unless the court has further questions now.

[00:19:12] Speaker 02:
Well, I just have one question.

[00:19:14] Speaker 02:
Yes.

[00:19:14] Speaker 02:
You said that you had a plausible narrative.

[00:19:17] Speaker 02:
Yes.

[00:19:18] Speaker 02:
Who is the bad guy here then?

[00:19:21] Speaker 04:
Well, there doesn't need to be a bad guy.

[00:19:25] Speaker 04:
There were in fact many good people working at Theranos, working day in and day out, trying to, and believing that they had created novel technology.

[00:19:37] Speaker 04:
Ms.

[00:19:37] Speaker 04:
Holmes believed that.

[00:19:38] Speaker 04:
She said that in her testimony.

[00:19:40] Speaker 04:
There are documents contemporaneously proving that.

[00:19:43] Speaker 04:
And that is what she was telling investors.

[00:19:47] Speaker 02:
Okay.

[00:19:49] Speaker 04:
Thank you.

[00:19:49] Speaker 04:
Thank you.

[00:19:52] Speaker 03:
I'll give you some of your time back as our questions ate up nearly all your time.

[00:19:57] Speaker 03:
Let's hear from the government.

[00:20:18] Speaker 01:
Good morning.

[00:20:19] Speaker 01:
May it please the court, Kelly Volcar, on behalf of the United States.

[00:20:23] Speaker 01:
This court should affirm Holmes's conviction and sentence because the district court did not err, let alone plainly err, in permitting Dr. Doss to testify to his percipient contemporaneous recollections of events in 2016 under Rule 701 rather than 702, and did not abuse its discretion in admitting the two trial exhibits, including the patient impact assessment.

[00:20:47] Speaker 01:
The district court did not abuse its discretion in limiting, after four days, Holmes's cross-examination of Rosendorf regarding his purported bias and incompetence post-theranos, particularly given the topics were irrelevant and cumulative.

[00:21:01] Speaker 01:
As Judge Nelson indicated earlier, if there were any trial errors, they were harmless, given the overwhelming and multifaceted evidence against Holmes.

[00:21:09] Speaker 00:
So whatever we conclude on the last issue, we still got to walk through some of these other issues.

[00:21:18] Speaker 00:
And I got to say, I have some problems with how this happened.

[00:21:22] Speaker 00:
And Dr. Doss, in particular,

[00:21:26] Speaker 00:
Where is the line?

[00:21:28] Speaker 00:
They do have a pretty good basis for some unfairness here, where you put in an expert, then you didn't use the expert, and then you used a lay witness to get in some of that same testimony.

[00:21:41] Speaker 00:
There's a pretty good story here for Ms.

[00:21:45] Speaker 00:
Holmes.

[00:21:46] Speaker 01:
Your Honor, I respectfully disagree.

[00:21:48] Speaker 01:
And I think when the court digs into the record, I think it will quickly find that that portrayal that Holmes has set up falls away.

[00:21:56] Speaker 01:
The reason I say that is because the government did notice Dr. Stephen Masters as its expert.

[00:22:03] Speaker 01:
Dr. Masters was set to testify on a number of topics.

[00:22:06] Speaker 01:
In the Daubert order, the judge allowed some of those topics without a Daubert hearing.

[00:22:12] Speaker 01:
And it said that there needed to be a further hearing on certain topics.

[00:22:16] Speaker 01:
And I want to talk about what those are for a moment.

[00:22:18] Speaker 01:
Dr. Masters was going to be allowed to testify under the district court's order about whether or not Theranos was up to industry standards when it came to accuracy and reliability.

[00:22:29] Speaker 01:
Dr. Master was going to be able to testify about the assay vitamin D.

[00:22:32] Speaker 01:
However, Dr. Master identified in his report that he would like additional information on some of the other blood tests.

[00:22:39] Speaker 01:
And that is what the district court said.

[00:22:41] Speaker 01:
He needed a downward hearing in order to hear more about what the expert was going to base that opinion on.

[00:22:50] Speaker 01:
The government provided that additional information and issued a supplemental report in advance of the Daubert hearing as the district judge permitted and was going to have a Daubert hearing on June 30th.

[00:23:05] Speaker 01:
It was the defense that asked to move that hearing.

[00:23:09] Speaker 01:
The government was prepared to proceed.

[00:23:11] Speaker 00:
Okay, I'm not sure.

[00:23:12] Speaker 00:
I want to track this, but at the end of the day, did Dr. Master, did you call Dr. Master or not?

[00:23:17] Speaker 01:
No, Your Honor.

[00:23:18] Speaker 00:
That's sort of my question.

[00:23:21] Speaker 00:
You had an expert who'd gone through this process, and then you chose not to call that expert.

[00:23:27] Speaker 00:
I don't know all the details why.

[00:23:29] Speaker 00:
And then you use a late witness that hasn't gone through this.

[00:23:32] Speaker 01:
Yes, Your Honor.

[00:23:32] Speaker 01:
Thank you.

[00:23:33] Speaker 01:
And I think that brings me to the next major point, which is that Dr. Doss did not testify on any of the topics that Dr. Master was noticed for.

[00:23:41] Speaker 01:
And that, I think, is an important distinction between the two as well.

[00:23:44] Speaker 01:
Dr. Doss, when we did call him to testify, we noticed him by the June 3rd, 2021 deadline to disclose witnesses as a percipient witness.

[00:23:54] Speaker 01:
We learned through briefing, actually related to Dr. Master, that the defense might have thought of Dr. Doss as an expert out of an abundance of caution.

[00:24:03] Speaker 01:
We disclosed him, but the government never intended to call Dr. Doss.

[00:24:06] Speaker 01:
as an expert and the government never intended to have Dr. Doss fill the shoes of Dr. Master.

[00:24:12] Speaker 01:
The government called Dr. Doss to testify about what he observed in real time in 2016 and most importantly what he told Holmes.

[00:24:21] Speaker 01:
And by the panel's questions with my colleague across the aisle a moment ago, I think it's clear that knowledge was the central issue in this case and Dr. Doss

[00:24:31] Speaker 01:
told Holmes directly.

[00:24:33] Speaker 01:
He reported directly to Holmes.

[00:24:35] Speaker 00:
She hired him, and in fact, at trial, she held him up, essentially, as her... So that would... I would be willing to buy into that argument wholeheartedly, but for some of the positions that the government took, which was that DOSS was also important for the reliability of the tests.

[00:24:55] Speaker 00:
So why doesn't that get into some... It can't just be that

[00:25:00] Speaker 00:
anyone can testify to anything they did on the job, if it's scientific related, and they don't have to, at some point, be admitted as an expert in that area.

[00:25:13] Speaker 01:
That's correct, Your Honor.

[00:25:14] Speaker 01:
And the district court here exercised its discretion to carefully parse through what was and was not going to be expert testimony, sustained several 702 objections by the defense during trial, during Dr. Doss's testimony,

[00:25:29] Speaker 01:
However, the focus at the time at trial was really about the CMS report.

[00:25:33] Speaker 01:
Dr. Doss was hired to analyze the CMS report, determine whether or not how the company was going to respond to it.

[00:25:40] Speaker 01:
And the entire time he was sharing his findings with Holmes in that room.

[00:25:45] Speaker 03:
Right.

[00:25:45] Speaker 03:
And I think that that's part of the issue that I tried to go through with counsel.

[00:25:49] Speaker 03:
There's potentially a dual purpose here.

[00:25:52] Speaker 03:
You do have this relevancy of what he told her.

[00:25:55] Speaker 03:
And obviously the district court let that in for purposes of allowing the jury to infer knowledge.

[00:26:03] Speaker 03:
But you also let in testimony or elicited testimony that's based on his expertise.

[00:26:09] Speaker 03:
Right?

[00:26:09] Speaker 03:
Because it's outside the knowledge of a common lay person, how his conclusions about the patient impact statements required highly specialized knowledge.

[00:26:22] Speaker 03:
And I think under the government's view, it's almost like if you can get them in as a recipient witness, then you can get in all the conclusions that's based on expert testimony as well.

[00:26:32] Speaker 03:
And I don't think that's how 702 works.

[00:26:35] Speaker 01:
Your honor, I respectfully disagree.

[00:26:37] Speaker 01:
And the reason being that the patient impact assessment here, it's important to know what that document was.

[00:26:42] Speaker 01:
That document was Theranos's response to CMS to detail whether or not it agreed with the findings of CMS and how it was going to correct those deficiencies.

[00:26:53] Speaker 01:
And so the reason I completely agree with your honor that there has to be a demarcation between rule 701 and 702, it's just the government's position that the district court adequately employed that distinction here.

[00:27:05] Speaker 01:
Every time that the government started to question Doss about whether or not he did his own independent analysis and he came to certain conclusions, that was when the district court sustained rule 702 objections and did not allow Doss to.

[00:27:21] Speaker 03:
Your argument implicitly acknowledges that the government attempted to intrude into areas that would require expert testimony.

[00:27:28] Speaker 03:
The burden was really very much on the defense.

[00:27:30] Speaker 03:
It's like, well, the government can lay the foundation.

[00:27:33] Speaker 03:
The defense has to specifically object to each Q&A, and the court sometimes sustained the objections and sometimes overruled the objection.

[00:27:41] Speaker 03:
I mean, the whole Daubert gatekeeping hearing is supposed to prevent all of that.

[00:27:47] Speaker 01:
Your Honor,

[00:27:49] Speaker 01:
I think taking a step back, the government does believe that Doss was a Percipient witness, and to the extent it sounds in this— Well, there's no question that he was.

[00:27:58] Speaker 00:
Even Holmes acknowledges that he was.

[00:28:03] Speaker 00:
But he was both.

[00:28:05] Speaker 00:
And that's what we're grappling with here, is what do we do with one person's testimony when it sways between Percipient testimony and expert testimony?

[00:28:18] Speaker 01:
And your honor, that's where I would say it is the district court's job in the first instance to be that gatekeeper to impose that rule.

[00:28:25] Speaker 01:
And this was a district court that took that very seriously, that carefully parsed the testimony, listened to both sides.

[00:28:32] Speaker 01:
The government did adopt its direct examination in response to the district court's pretrial orders, saying what would cross the line into expert testimony.

[00:28:40] Speaker 01:
And again, going back to the patient impact assessment, because my understanding is that's what my colleague most takes issue with.

[00:28:46] Speaker 01:
The patient impact assessment was a document that while DOS led the charge, it was a company document prepared and sent back to CMS that Holmes ultimately reviewed and approved and even argued with DOS in real time about how to characterize it.

[00:29:02] Speaker 01:
And now I get to the statement, my colleague mentioned it a moment ago, that I believe they most take the issue with.

[00:29:06] Speaker 01:
which is that the device was unsuitable for patient use.

[00:29:10] Speaker 01:
First of all, they did not object in the moment, so that should be reviewed for plain error.

[00:29:14] Speaker 00:
And second of all... But can I push back on that slightly?

[00:29:17] Speaker 00:
Because, I mean, is that really accurate?

[00:29:21] Speaker 00:
It is accurate that they didn't object in the moment, but can it really be said that they hadn't objected to this and that this issue wasn't front and center and that the district court hadn't already ruled on this issue?

[00:29:33] Speaker 01:
Your Honor, I would argue that it was not front and center because the district court was ruling, was essentially calling balls and strikes as the testimony was coming in before it.

[00:29:45] Speaker 01:
This was a heavily litigated trial.

[00:29:48] Speaker 01:
There were also motions to strike that were filed after testimony occurred, but never on this topic.

[00:29:53] Speaker 01:
There were post trial briefings that were filed, but never on this topic.

[00:29:57] Speaker 01:
This was a case where every issue was often litigated to death, and the district court took great care in making rulings and sometimes addressing that in the moment.

[00:30:09] Speaker 01:
And so I think with that view, knowing the context of this trial, this court should look with particular skepticism when the defense never chose.

[00:30:16] Speaker 00:
A lot of in without objection in the moment.

[00:30:19] Speaker 01:
not only in the moment, Your Honor, but never challenged it afterwards until before this Court.

[00:30:23] Speaker 02:
Was the District Court asked to have a Daubert hearing as to any aspect of Dawson's testimony?

[00:30:31] Speaker 01:
No, Your Honor.

[00:30:32] Speaker 01:
The parties before

[00:30:35] Speaker 01:
hand agreed that if DOS was going to come in as an expert, then there would be a Daubert hearing at the same time as Dr. Master.

[00:30:42] Speaker 01:
The government chose not to present him as an expert and tried to stay within the lines that the district court had drawn for the government of what would be.

[00:30:52] Speaker 01:
I see.

[00:30:52] Speaker 02:
So the district court's rulings were in light of that background.

[00:30:55] Speaker 01:
That's correct, Your Honor.

[00:30:56] Speaker 03:
And one thing that I wish you, Council, I'm sorry for interrupting you.

[00:31:00] Speaker 03:
Knowledge was heavily contested.

[00:31:02] Speaker 03:
Perhaps it'll be helpful if you can just take a brief moment to kind of sum up the government's evidence of knowledge.

[00:31:09] Speaker 01:
Thank you, Your Honor.

[00:31:10] Speaker 01:
I was about to pivot to one

[00:31:13] Speaker 01:
aspect of this case that I think is incredibly important because even today, defense counsel claims that it was hotly contested whether or not the device worked.

[00:31:23] Speaker 01:
And today she said whether or not Holmes knew it worked.

[00:31:27] Speaker 01:
It was not really contested that the device did not work.

[00:31:30] Speaker 01:
It was undisputed at trial that the Minilab or 4.0, the device that you all saw on page six of the opening brief, was never used for patient testing.

[00:31:39] Speaker 01:
a witness that the defense called.

[00:31:41] Speaker 03:
Well, we're on appeal now.

[00:31:43] Speaker 03:
So every inference goes in the government's favor.

[00:31:47] Speaker 03:
So it's more helpful, at least for me, if you talk about knowledge rather than whether the device worked or not.

[00:31:52] Speaker 03:
Because those inferences now, you're going to get the benefit of that in terms of the efficacy of the devices.

[00:31:58] Speaker 01:
Thank you, Your Honor.

[00:31:59] Speaker 01:
And my apologies.

[00:32:01] Speaker 01:
The device, the mini lab or the 4.0 was never used.

[00:32:05] Speaker 01:
And Holmes admitted that on cross that she knew that.

[00:32:09] Speaker 01:
It was undisputed that the Edison or the 3.0 or 3.5 was the only device ever used to test Theranos patients, that it was only ever used to test 12 types of blood tests, and Holmes admitted that she knew that on cross-examination.

[00:32:22] Speaker 01:
In fact, Holmes admitted on cross-examination that the CMS report

[00:32:26] Speaker 01:
validated and vindicated issues that Erica Chung and Tyler Schultz raised in the real time in 2014.

[00:32:34] Speaker 01:
It is undisputed that Theranos voided every test ever run on the Edison and even at that moment in time in 2016 when all of the scientists in the company were telling Holmes that it was a device issue or DOS was telling Holmes that it was a device issue, Holmes pushed back and said that it was actually just lab mismanagement.

[00:32:52] Speaker 01:
It was undisputed that the investors did not know that Theranos was using third-party devices to test patients at all, but Holmes knew that.

[00:33:01] Speaker 01:
In contemporaneous emails and documents, Holmes suggested to the scientists that they should switch to traditional methods when the Edison was failing.

[00:33:10] Speaker 01:
And so, your honor, if I may, I think on on the harmless point but also to knowledge homes admitted a lot of facts that are known now during her cross examination during her testimony and really what remains in dispute is that.

[00:33:27] Speaker 01:
She argued, as she did to the jury, that she didn't know at the moment what was going on in the lab.

[00:33:33] Speaker 01:
Balwani ran the lab, and she had no idea, and so she hired Doss to turn over rocks.

[00:33:40] Speaker 01:
And that's part of the government's harmlessness argument there as well, is the defense calls Doss, in their closing argument, essentially a defense witness, because Holmes hired him to come in and fix everything.

[00:33:56] Speaker 01:
Turning briefly to Rule 407, if I may, Your Honor.

[00:34:00] Speaker 01:
First of all, while the District Court did not, in the moment at trial, walk through all of his factual findings, the District Court

[00:34:12] Speaker 01:
implicitly found, as Judge Nguyen noted, that the voiding was legally required and the district court had the opportunity to spell that out a few months later in responding to Balwani's motions in Lemonay before his trial.

[00:34:28] Speaker 01:
In the Balwani record, 1SER 160, Judge Davila walks through exactly what this court has heard, which is that CMS required something to be done

[00:34:39] Speaker 01:
Theranos had to respond to that in DOS's professional opinion.

[00:34:44] Speaker 01:
DOS believed that it had to be- Can I ask about that?

[00:34:48] Speaker 00:
Where is the limit on that?

[00:34:49] Speaker 00:
Because they did say something had to be done.

[00:34:53] Speaker 00:
As I understand it, that conversation happened a couple of times, right?

[00:34:57] Speaker 00:
Theranos tried to take some corrective action.

[00:35:03] Speaker 00:
they were told that's not enough, so they had to kind of keep re-upping the ante.

[00:35:07] Speaker 00:
Do I have that correct, or am I misremembering that?

[00:35:11] Speaker 01:
I do know that there was back and forth between the company and CMS, and a lot of that was precluded from coming in at trial in the motion and limine stage, but ultimately Theranos did void all of the tests.

[00:35:27] Speaker 00:
Well, and that's what I'm wondering, is at what point, because the question here is whether it was voluntary or involuntary,

[00:35:34] Speaker 00:
And I think the district court recognized that there were good arguments on both sides.

[00:35:41] Speaker 00:
So how do we judge that?

[00:35:42] Speaker 00:
Because it seems like it's a position that was taken in response to the regulatory action.

[00:35:53] Speaker 00:
But it might not have been the only mandatory

[00:35:57] Speaker 00:
So in that sense, it might have been voluntary.

[00:36:00] Speaker 00:
How do we look at that?

[00:36:02] Speaker 00:
I guess we're still looking under abuse of discretion.

[00:36:04] Speaker 01:
That's correct, Your Honor.

[00:36:05] Speaker 01:
It's under abuse of discretion.

[00:36:07] Speaker 01:
So it's a question of whether the district court was illogical or acted in illogical and plausible manner or manner unsupported by the record.

[00:36:16] Speaker 01:
However, even further than that, I do think this court can look to the purpose of Rule 407.

[00:36:20] Speaker 01:
which is to encourage companies before there is government or regulatory intervention to attempt to take remedial measures.

[00:36:33] Speaker 00:
Well, but why wouldn't that help homes here?

[00:36:36] Speaker 00:
Because, I mean, say they were taking more action than they needed to,

[00:36:41] Speaker 00:
Why wouldn't we want to incentivize that?

[00:36:43] Speaker 00:
If we affirm the district court, aren't we sort of disincentivizing that action?

[00:36:47] Speaker 00:
That a company is going to take the most restrictive response that they can, and here they may have taken a broader response.

[00:36:57] Speaker 01:
Your honor, I do not think that they took a broader response and DOS really provided the background for that.

[00:37:03] Speaker 01:
DOS said that they were unable to identify the extent, the nature and magnitude of patients that were harmed.

[00:37:10] Speaker 01:
They were unable to comply with the regulatory language that they had to send a corrected report to every patient who received an inaccurate test.

[00:37:18] Speaker 03:
because they were not able to identify every patient who fell into that category, that is why Theranos voided all of the tests on the run on the Edison and run on... Right, but the potential implication of the government's position, companies are under investigation all the time and they're gonna do everything they can in order to head off a potential indictment.

[00:37:38] Speaker 03:
So lesser measures, okay, the government isn't satisfied, then they escalate the response, escalate the response.

[00:37:43] Speaker 03:
Does the natural limit of the government's position mean that every time a company escalates the response in order to satisfy the regulatory agency, then there's a risk that that may be used as an admission against the company, should they be indicted, or an individual that's running the company?

[00:38:05] Speaker 01:
Your honor, I think that simply in a situation such as this, and of course, there are no circuit case law that apply rule 407 in the criminal context.

[00:38:16] Speaker 01:
So we are a little bit in a void here and can only look to the air crash, Bali case.

[00:38:21] Speaker 01:
When there is this regulatory field within which the company is responding, I think that it undercuts the purposes of Rule 407, and I do think that that should be... Well, I think the purpose, as Judge Nelson points out, may cut both ways.

[00:38:37] Speaker 03:
There's a surprising lack of...

[00:38:39] Speaker 03:
case law specific to this particular rule but I mean I don't know the answer in this particular case may come down to the deference but there are some troubling implications based on the government's position so I wanted to give you a chance to draw some limiting principles or help us think about some limiting principles if you can and maybe it comes down to a case by case analysis and is each district court's factual findings?

[00:39:05] Speaker 03:
I don't know.

[00:39:06] Speaker 01:
Absolutely, Your Honor, and I would say again that it is abuse of discretion here and the district court acted within it in carefully waiting to hear Doss's proffer that in his view, but also in the company's view.

[00:39:20] Speaker 01:
At the time, voiding the test was not debated.

[00:39:24] Speaker 01:
Only the characterization of how, sorry, the only how to characterize the voiding, whether it was a device issue or a quality control issue, that was the only internal debate.

[00:39:35] Speaker 01:
on cross-examination, Holmes elicited that lawyers, herself, clinical consultants, other doctors at the company, and Dr. Doss all agreed that voiding was required.

[00:39:47] Speaker 01:
And that's 34.

[00:39:48] Speaker 00:
Can I ask one question, and we may take you over?

[00:39:52] Speaker 00:
But the statement was made in opposing counsel's argument that this was a close case.

[00:40:01] Speaker 00:
And they make a decent point.

[00:40:04] Speaker 00:
There were acquittals on three charges, hung juries on other charges.

[00:40:09] Speaker 00:
She was convicted on, it was at three or four charges.

[00:40:14] Speaker 00:
What do we do with that as far as throwing this in?

[00:40:18] Speaker 00:
Do we look at, well, the evidence was,

[00:40:23] Speaker 00:
there was a lot of evidence to support the three charges of conviction, or do we discount that because, is there a way to distinguish between those convictions, or excuse me, those counts where she was convicted and acquitted?

[00:40:36] Speaker 01:
Yes, Your Honor.

[00:40:37] Speaker 01:
Of course, we cannot speculate as to why the jury reached the verdict that it did, but it is a big part of the government's harmlessness arguments.

[00:40:45] Speaker 01:
Ultimately, DOS, the CMS report, the voiding of the test results, that went to the accuracy and reliability of the device.

[00:40:51] Speaker 01:
which was the paramount misrepresentation when it came to the patient counts of which Holmes was acquitted.

[00:40:58] Speaker 01:
And so whether or not the jury believed her argument that she didn't know in real time and hiring DOS to come in to fix it, whether or not they bought those arguments, we don't know.

[00:41:15] Speaker 01:
But we do know that the jury acquitted and that the evidence that she's challenging on appeal largely went to the patient counts.

[00:41:21] Speaker 01:
We also know that there was a plethora of other evidence on the accuracy and reliability of the device.

[00:41:27] Speaker 01:
There was Dr. Rosendorf, Erica Chung, Sharika Gangak-Hedkar.

[00:41:30] Speaker 01:
There were multiple other witnesses who testified on that topic.

[00:41:34] Speaker 01:
But even more importantly, the counts she was convicted on

[00:41:36] Speaker 01:
which was four counts, the conspiracy to defraud investors and three investors who invested in 2014.

[00:41:44] Speaker 01:
There were multiple misrepresentations that were made to those investors, including about the financial health of the company, work with the military,

[00:41:52] Speaker 01:
the expanding relationship with Walgreens, the doctored pharmaceutical reports, which Holmes admitted in her cross-examination she altered before sending to Walgreens, and the fact that Theranos was using third-party devices to test patients.

[00:42:07] Speaker 01:
Holmes told PFM, one of the council of conviction, that the mini-lab, the device on page six of the opening brief, was being used to test patients when she knew that it wasn't.

[00:42:18] Speaker 01:
And so with that, I will just,

[00:42:21] Speaker 01:
I see I'm over time.

[00:42:22] Speaker 01:
So unless the court has questions about Rosendorf, the government is ready to submit.

[00:42:29] Speaker 03:
Thank you, counsel.

[00:42:29] Speaker 03:
Thank you, your honor.

[00:42:31] Speaker 03:
Can you put four minutes on the clock?

[00:42:44] Speaker 04:
I want to respond briefly on harmlessness to the points the council just made and then touch on a few points on DOS.

[00:42:53] Speaker 04:
As to harmlessness and as to the government's argument about the patient counts also turning on accuracy and reliability, we don't know why the jury acquitted on those counts, but I submit one reason is because the government failed to actually put into evidence any content of any advertisements to patients, any brochures to patients.

[00:43:12] Speaker 04:
There was virtually no evidence

[00:43:14] Speaker 04:
about the content of representations to patients.

[00:43:19] Speaker 04:
Given that, I think it would be completely improper to speculate as to why the jury acquitted on those counts.

[00:43:26] Speaker 04:
As to Ms.

[00:43:26] Speaker 04:
Holmes' knowledge, the government primarily relied on evidence from 2016.

[00:43:30] Speaker 04:
She cited the voiding.

[00:43:32] Speaker 04:
She cited what Ms.

[00:43:33] Speaker 04:
Holmes did in 2016.

[00:43:35] Speaker 04:
But the relevant question is what did she know at the time of the representations to investors

[00:43:40] Speaker 04:
in 2013 and 2014.

[00:43:43] Speaker 04:
And on that, the key issue was Dr. Rosendorf.

[00:43:46] Speaker 04:
Council mentioned Ms.

[00:43:47] Speaker 04:
Chung, but Ms.

[00:43:48] Speaker 04:
Chung admitted she never spoke to Ms.

[00:43:50] Speaker 04:
Holmes about any concerns about the technology.

[00:43:53] Speaker 04:
For the reasons we explain in our reply brief at pages 30 and 31, the government itself repeatedly tied all of the alleged misrepresentations back to the accuracy of the technology, to Ms.

[00:44:05] Speaker 04:
Holmes' knowledge of the accuracy of the technology,

[00:44:09] Speaker 04:
Just to give one example, at ER12544, the government told the jury in closing that the financial projections were misleading because they rested on a false assumption about the number of Walgreens stores that would open.

[00:44:24] Speaker 04:
And the reason Ms.

[00:44:25] Speaker 04:
Holmes knew that assumption was false and misleading was because she knew the technology did not work.

[00:44:30] Speaker 04:
The government itself tied everything back to the accuracy of the technology.

[00:44:35] Speaker 04:
As to Dr. Das, let me just respond to a few points the government made.

[00:44:40] Speaker 04:
First, Dr. Das absolutely testified to the same opinion that Dr. Master had in his expert report.

[00:44:48] Speaker 04:
Dr. Master purported to opine that theranosis technology was not capable of producing accurate and reliable test results for certain tests.

[00:44:58] Speaker 04:
That is the same opinion that Dr. Das gave at trial.

[00:45:03] Speaker 04:
As to Your Honor's question about whether there was a request for a Daubert hearing, absolutely.

[00:45:09] Speaker 04:
We move to strike Dr. Das's opinions before trial.

[00:45:13] Speaker 04:
And when we moved to strike the opinions, we said that if he were allowed to provide expert opinions, there had to be a Daubert hearing.

[00:45:20] Speaker 04:
And the court said, yes, if I allow him to provide expert opinions, there is going to be a Daubert hearing.

[00:45:27] Speaker 04:
And then we objected at trial on Rule 702 grounds, but the court overruled that Rule 702 objection.

[00:45:35] Speaker 02:
Council suggests.

[00:45:36] Speaker 02:
Is it correct that there were rulings during the course of his testimony, objections based on 702 that were sustained?

[00:45:43] Speaker 04:
There were a few objections that were sustained that went to the issue of his agreement with the CMS findings on that particular question where the government said, did you agree with the CMS finding?

[00:45:56] Speaker 04:
The court did overrule, excuse me, did sustain an objection.

[00:46:00] Speaker 04:
But the key issue on the waiver point is that when the government sought to admit the patient impact assessment,

[00:46:07] Speaker 04:
The court overruled our Rule 702 objection, and then the government proceeded to ask him about the conclusions that he drew from that assessment, including the one at the end of that segment of his examination that the government points to.

[00:46:22] Speaker 04:
Now the government made the argument that the patient impact assessment is a company document and therefore somehow it's not subject to rule 702.

[00:46:32] Speaker 04:
But the government never laid a foundation to admit that report as a business record.

[00:46:37] Speaker 04:
It did not lay that foundation with Dr. Das.

[00:46:39] Speaker 04:
It's unclear how that could be a business record because it was not the regular practice of the company to produce that kind of document.

[00:46:48] Speaker 04:
Unless the court has further questions.

[00:46:51] Speaker 04:
we urge the court to reverse and remand for a new trial.

[00:46:55] Speaker 03:
Thank you very much, counsel, to both sides for your very helpful arguments today.

[00:46:59] Speaker 03:
The matter is submitted.