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.