False advertising about sperm sales is legal in Georgia, court rules

Zelt v. Xytex Corp., --- Fed.Appx. ----, 2019 WL 423052 (11th Cir. Feb. 4, 2019)

Reproductive rights advocates often make the point that legal interventions to prioritize fetal life over all other considerations have collateral consequences far beyond abortion.  As the court here decides, those consequences include immunizing a sperm bank from the consequences of its fraud.

The Zelts sued Xytex, a for-profit sperm bank, for misrepresenting the characteristics of the sperm donor whose sperm they used to fertilize their eggs, resulting in two children.

On its website, Xytex promised it would carefully screen men applying to donate sperm using interviews and a physical exam to ensure their suitability to become a donor. Its website also stated that Xytex would conduct physical exams every six months to confirm donors’ “continued good health,” update online donor profiles, and convey new information learned about donors to clients who used sperm purchased from Xytex so that clients could “make the most informed decision possible when selecting a donor.”

Xytex advertised, and told the Zelts, that Donor #9623 had bachelor’s and master’s degrees and was working on a Ph.D., had an IQ of 160, had a “nearly perfect” medical and mental health history, had no criminal background, was one of Xytex’s most sought-after donors, and that his sperm were rarely available. In fact, before the Zelts’ purchases, Donor # 9263 had:

been diagnosed with psychotic schizophrenia, narcissistic personality disorder, a drug-induced psychotic disorder, and significant grandiose delusions; been hospitalized repeatedly for mental health reasons; received Social Security Disability Insurance due to a finding that he was disabled; and been arrested for burglary, trespassing, driving under the influence, and disorderly conduct. He has no master’s degree, was never enrolled in a Ph.D. program, and had dropped out of school, only earning a college degree years after the Zelts purchased his sperm and used it to inseminate Rene Zelt. He also has a felony conviction, having pled guilty to residential burglary.

He lied on his written questionnaire about his educational achievements and mental health background. He told a Xytex employee that he thought his IQ was about 130, but a Xytex employee suggested to him that he had an IQ of 160 and encouraged Aggeles to lie about his education. As alleged, Xytex could easily have disconfirmed his lies with a quick Google search. His physical exam was minimal and Xytex did nothing to verify anything it said about him. “It never requested Aggeles’s medical records or asked him to sign a release so it could obtain his medical records, never asked about his mental health history or spoke to any of his mental health providers, never asked about his criminal history, never requested any proof of his identification, and never attempted to confirm his educational history.”

The Zelts alleged that the donor’s illnesses were genetic and heriditary and that they suffered physical and emotional pain and suffering as a result of learning the truth about their sperm donor. They spent money to evaluate their children for mental illnesses and expect to do so in the future.

The district court granted Xytex’s motion to dismiss on the basis that the claims boil down to a wrongful birth claim, which Georgia law does not recognize. The court of appeals affirmed on related grounds. The essence of the fraud is that Xytex made misrepresentations about Donor #9623 that Xytex knew would induce the Zelts to purchase his sperm. “Had they known the truth about Donor #9623’s background, the Zelts would have acquired sperm from a different donor, one who had characteristics they found desirable.”  However, they suffered no legally cognizable injury, because Georgia does not allow courts to assess the difference in the value of a child’s life with one sperm donor and the value of a child’s life with a different donor.  [Which … doesn’t seem to be the damages being pled, even if you kick out the emotional damages as a consequence.]

Georgia doesn’t recognize wrongful birth claims, though it does recognize a limited claim for wrongful conception where a botched procedure fails to prevent pregnancy; the damages recoverable are for the resulting medical procedures and their consequences (lost wages, loss of consortium) but not for costs of child-rearing because parents aren’t injured by having a child.  The Georgia Supreme Court was unwilling to declare that “life, even life with severe impairments, may ever amount to a legal injury.” Where a plaintiff wanted the pregnancy, but not an impaired child, “Georgia courts will not compare the value of an impaired child’s life to the child’s nonexistence.”

Here, the comparison was not to the nonexistence of the child but to the child’s existence with another donor.  This wasn’t a wrongful birth action.  However, even though “[a]ssigning a numeric value to a person’s existence with impairments … is not the same as assigning a numeric value to the impairments only,” the task was close enough to prevent any recovery here.  Though the court was “sympathetic” to the Zelts’ “pain and fear over what they and their children stand to suffer,” they suffered no legally compensable injury because their children may be different from what they wanted. They couldn’t get damages for costs from the pregnancies, because they wanted the pregnancies and those costs wouldn’t differ with a different donor.

“Monetizing the detrimental value of these characteristics is a task ‘more properly suited to legislative action[,] as the legislature offers a forum wherein all of the issues, policy considerations and long range consequences involved ... can be thoroughly and openly debated and ultimately decided.’” [Though one could argue that the legislature already did that, by enacting a false advertising law that does not exclude for-profit reproductive health care businesses like Xytex.]  Thus, all the claims alleging objectionable inheritance from the donor had to be dismissed, including the false advertising claims and claims under the Georgia Fair Business Practices Act for injunctive relief, for want of cognizable injury. 

It seems to me that the sperm were worthless to them; at the very least they should get an award for the value of the sperm as warranted and the actual value of the sperm, which would not require putting any number on the value of the resulting children. But the court of appeals disagreed—their unjust enrichment/disgorgement claims were barred because calling Xytex’s enrichment “unjust” “necessarily implies that the Zelts’ children somehow are worth less than they would have been worth had they been conceived using a different donor’s sperm.”  But: if I fed my kids cereal that falsely promised to improve their immunities and intellects, I would value the resulting kids no less, but I still would have been defrauded of the extra amount I paid for the cereal.  You can put a value on the inputs without having to put a value on the outputs.

Xytex’s conduct was “[r]eckless, reprehensible, and repugnant,” but perfectly legal.