False advertising of sperm donor leads to wrongful birth claim

Doe 1 v. Xytex Corp., No. C 16-02935, 2017 WL 1112996 (N.D.
Cal. Mar. 24, 2017)|
A false advertising case arising out of a wrongful birth
claim: Does One and Two used xytex.com, which sold human semen for use in
artificial insemination. Xytex’s website stated that it is “an industry leader
in reproductive services with a commitment to unsurpassed quality controls,”
that the donors’ personal health and family history were carefully screened
through a comprehensive medical process developed by the CDC, that Xytex’s
“FDA-mandated screening and testing also ensures our donors’ continued good
health,” and that the screening process was so thorough that a mere “1 percent
of the men that inquire about being a donor candidate are evaluated,” and,
ultimately, “[f]ewer than 5 percent of the candidates become donors”  The Does alleged that they believed, based on
the website, that Xytex was the sperm bank with the most rigorous qualification
standards. They allegedly asked a Xytex representative if she knew of any Xytex
sperm donors that had “a particularly impressive health and education history.”
The representative identified Donor #9623, and stated that “his sperm had
already been used to successfully inseminate women and it would be sold out as
soon as his profile was published.” She also stated that Donor #9623 was “ultra
intelligent” and that he looked “like a model.” The Does bought sperm from
Donor #9623, and Doe One ultimately gave birth to P.S.
Nine years passed, and then the Does saw an article about a
lawsuit specifically relating to Xytex Donor #9623, who was a mentally ill
schizophrenic felon who had pled guilty to residential burglary. He had dropped
out of college and held no degrees whatsoever; Xytex also altered his photos, removing
a large facial mole.  Doe One expressed
her concern to an agent of Xytex, who said that she was not aware “of any
reported medical issues” related to Donor #9623; Doe One also received an email
from the Chief Medical and Laboratory Director for Xytex, who said that he had “received
no information to confirm that Donor #9623 has schizophrenia” and that it
“would be irresponsible of Xytex to notify clients of unsubstantiated claims.”
Plaintiffs further alleged: When Donor #9623 first came to Xytex, he worked as a
janitor/waiter and had dropped out of school. He’d already been hospitalized,
as an adult, for mental health reasons, at least twice. During these
hospitalizations, “the medical staff of two different hospitals diagnosed Donor
#9623 with psychotic schizophrenia, narcisstic personality disorder, and significant
grandiose delusions.”  He also had an
extensive criminal history.  Xytex’s
“rigorous qualification procedure” “included filling out a questionnaire on his
first visit and undergoing a ten-minute physical examination, in which the
examining physician did not discuss Donor #9623’s physical or mental health
history.” Donor #9623 told Xytex that he thought his IQ was about 130, but Xytex’s
representative “suggested to him that he was a genius with an IQ of about 160.”
She further told him that the more educated donors did well selling their
sperm, and that Xytex usually dealt with donors with higher education.  “Xytex alleged that it had no knowledge of
either Donor #9623’s medical or criminal record.”
The Does alleged that their child needed counseling and that
they’d suffered other expenses and mental stress, as well as needing funds “to
evaluate and care for their child to ensure that should she become
schizophrenic, she will have the best care possible.” They sued for intentional
misrepresentation, negligent misrepresentation, strict products liability,
products liability based on negligence, breach of express warranty, breach of
implied warranty of merchantability, battery, negligence, false advertising,
wrongful birth, specific performance, punitive damages, and violations of the
California Unfair Competition law.
For the misrepresentation claims, Xytex argued that “Buyer
Beware” should apply, “but plaintiffs had no way to conduct due diligence on
Donor #9623 whose true identity was hidden from plaintiffs by Xytex. Only Xytex
knew his true identity and was able to conduct any diligence.”  The Does also sufficiently alleged damages
caused by the misrepresentation in the form of expenses for monitoring the
child over and above ordinary preventative medical care.
On scienter, Xytex argued that plaintiffs failed to allege
that Xytex knew about Donor #9623’s misrepresentations about himself. But they
did allege that the information regarding Donor #9623’s medical health history,
as well as his criminal record could have easily been discovered “through
publicly accessible, indisputable, medical and professional documents,”
especially in light of Xytex’s proclamation of its “intense and arduous”
qualification process that “generat[es] a lot of medical, psychological,
genetic, and social information.” The court concluded that, on the allegations
of the complaint, “Xytex surely knew that it failed to screen up to the
standard it advertised. This alone would show reckless disregard and therefore
is adequate to show that Xytex acted with scienter.”
Negligence/wrongful birth claims also survived, but not
breach of warranty because California law made the relevant statutory provision
inapplicable to tissue-related activities such as sperm sales. A medical
battery claim was also dismissed, because the insemination was carried out by
separate third parties and Xytex never committed an intentional or offensive
touching of Jane Doe One.

Now, false advertising: Xytex allegedly violated the UCL/FAL
by promoting misleading information about the nature, characteristics, and
qualities of Donor #9623.  The alleged
facts supported the reasonable inference that Xytex acted recklessly as to its
misrepresentations.  A claim for punitive
damages also survived.

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