Doe 1 et al v. Xytex Corporation et al

Filing 81

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS by Judge William Alsup [granting in part and denying in part 74 Motion to Dismiss]. Amended Pleadings due by NOON on 4/6/2017. (whasec, COURT STAFF) (Filed on 3/24/2017)

1
2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7
FOR THE NORTHERN DISTRICT OF CALIFORNIA
8
9
JANE DOE 1 and JANE DOE 2;

11
For the Northern District of California

United States District Court

10

12
13
14

Plaintiffs,

No. C 16-02935 WHA

v.
XYTEX CORPORATION, a Georgia
Corporation;

ORDER GRANTING IN PART
AND DENYING IN PART
MOTION TO DISMISS

Defendant.

15

/

16
17
18

INTRODUCTION
In this wrongful-birth action involving the sale of human semen for artificial

19

insemination, one defendant moves to dismiss. For the foregoing reasons, the motion is

20

GRANTED IN PART and DENIED IN PART.

21

STATEMENT

22

1.

23

Plaintiffs Jane Doe One and Jane Doe Two, a same-sex couple, resided and continue

24

to reside in San Francisco. In 2004, they registered to use xytex.com, a website operated by

25

defendant Xytex Corporation. Xytex, through its website, sold human semen for use in artificial

26

insemination. At the time, Xytex’s website declared that it is “an industry leader in reproductive

27

services with a commitment to unsurpassed quality controls,” and that the donors’ personal

28

health and family history are carefully screened through a comprehensive medical process

JANE DOE ONE & JANE DOE TWO.

1

developed by the Centers for Disease Control and Prevention. Additionally, the website

2

proclaimed that Xytex’s “FDA-mandated screening and testing also ensures our donors’

3

continued good health.” It further represented that the screening process was so thorough

4

that a mere “1 percent of the men that inquire about being a donor candidate are evaluated,”

5

and, ultimately, “[f]ewer than 5 percent of the candidates become donors” (Compl. ¶¶ 2, 17).

6

Our plaintiffs heard about Xytex through friends and visited Xytex’s website.

7

Plaintiffs were impressed by the aforementioned screening procedures described on the website.

8

From looking at the website, plaintiffs got the impression that Xytex seemed to be the sperm

9

bank with the most rigorous qualification standards. Plaintiffs reached out to Xytex and spoke
with Mary Hartley, a Xytex representative. They asked her if she knew of any Xytex sperm

11
For the Northern District of California

United States District Court

10

donors that had a particularly impressive health and education history. Hartley immediately

12

singled out a specific sperm donor, Donor #9623, and stated that although Xytex has not yet

13

published his profile on their website, his sperm had already been used to successfully

14

inseminate women and it would be sold out as soon as his profile was published. Hartley also

15

claimed that Donor #9623 was “ultra intelligent” and that he looked “like a model.” “Moments

16

after” the phone conversation, Jane Doe One and Jane Doe Two purchased sperm from Donor

17

#9623 (id. ¶¶ 30–31).

18

After Xytex sent the sperm to San Francisco, licensed independent medical professionals

19

introduced sperm from Donor #9623 into plaintiff Jane Doe One in an artificial insemination

20

procedure. Approximately nine months later, Jane Doe One gave birth to P.S. At the time of

21

the complaint, P.S. was nine years old (id. ¶ 33).

22

Nine years passed.

23

In April 2015, Jane Doe One and Jane Doe Two saw an article on the website for

24

the Associated Press that discussed a lawsuit that had been filed against Xytex, specifically

25

referencing to Donor #9623. The article revealed that their sperm donor, Xytex Donor #9623,

26

was a mentally ill schizophrenic felon, who had pled guilty to residential burglary. Plaintiffs

27
28
2

1

learned that Donor #9623 had dropped out of college and held no degrees whatsoever. They also

2

discovered that Xytex had altered Donor #9623’s photos, removing a large facial mole (id. ¶ 34).

3

Subsequently to plaintiffs’ discovery of Donor #9623’s medical and criminal history,

4

Jane Doe One sent an email to Ronda Drake, an agent of Xytex and expressed her concern

5

regarding the fact that Donor #9623 was a diagnosed schizophrenic. In response, Drake said that

6

she was not aware “of any reported medical issues,” related to Donor #9623. Additionally, Jane

7

Doe One received an email from J. Todd Spradlin, the Chief Medical and Laboratory Director

8

for Xytex, in which Dr. Spradlin said that he had “received no information to confirm that Donor

9

#9623 has schizophrenia.” Spradlin also said, in the same email, that it “would be irresponsible

11
For the Northern District of California

United States District Court

10

12

of Xytex to notify clients of unsubstantiated claims” (id. ¶¶ 35–36).
2.

XYTEX AND DONOR #9623.

Donor #9623 first came to the Xytex office in late 2000. At that time, he worked as a

13

janitor/waiter, who had dropped out of school. Prior to selling his sperm to Xytex, Donor #9623

14

had been hospitalized, as an adult, for mental health reasons on at least two separate occasions.

15

During these hospitalizations, which sometimes lasted for more than two weeks, the medical

16

staff of two different hospitals diagnosed Donor #9623 with psychotic schizophrenia, narcisstic

17

personality disorder, and significant grandiose delusions (id. ¶¶ 21–22).

18

Xytex’s “rigorous qualification procedure” included filling out a questionnaire on his

19

first visit and undergoing a ten-minute physical examination, in which the examining physician

20

did not discuss Donor #9623’s physical or mental health history. Donor #9623 told Hartley that

21

he thought his IQ was about 130, but Hartley “suggested to him that he was a genius with an IQ

22

of about 160.” Hartley further told him that the more educated donors did well selling their

23

sperm, and that Xytex usually dealt with donors with higher education. Two weeks after the

24

initial visit in 2000, Donor #9623 won approval to be a Xytex sperm donor (id. ¶¶ 22–23).

25

While Xytex represented Donor #9623 as a healthy, intelligent, and highly educated

26

sperm donor, he underwent hospitalization for mental health problems and got arrested on

27

numerous occasions for burglary, trespassing, DUI, and disorderly conduct. In 2002, Donor

28

#9623 was found to be disabled for his schizophrenia and placed on full Social Security
3

1

Disability (id. ¶ 24). Xytex alleged that it had no knowledge of either Donor #9623’s medical

2

or criminal record.

3

Recently, Jane Doe One and Jane Doe Two have come to discover that “their child needs

4

counseling.” Additionally, Jane Doe One and Jane Doe Two have each attended conferences

5

regarding best practices “for parents in their situation,” suffered stress and worry, and been

6

required to, and will be required to, expend funds to evaluate and care for their child to

7

ensure that should she become schizophrenic, she will have the best care possible (id. ¶ 37).

8

*

9

*

*

In April 2016, plaintiffs filed their complaint in San Francisco County Superior Court.
Plaintiffs alleged claims for intentional misrepresentation, negligent misrepresentation, strict

11
For the Northern District of California

United States District Court

10

products liability, products liability based on negligence, breach of express warranty, breach

12

of implied warranty of merchantability, battery, negligence, false advertising, wrongful birth,

13

specific performance, punitive damages, and violations of the California Unfair Competition

14

law.

15

The action was removed to federal court here in San Francisco on June 1, 2016, based on

16

diversity jurisdiction (Dkt. No. 1). One defendant moved to enforce a forum-selection clause in

17

the usage agreement on its website (Dkt. No. 11). An order rejected defendant’s argument that

18

they had provided reasonable notice of the usage agreement but allowed discovery into whether

19

plaintiffs had actual notice of the agreement (Dkt. No. 27). The parties’ briefs following that

20

discovery revealed inappropriate conduct at the deposition of one of the plaintiffs by counsel

21

for both sides, so the Court held an evidentiary hearing to complete the testimony, then invited

22

supplemental briefing (Dkt. No. 45). After the evidentiary hearing, while the supplemental

23

briefing proceeded, defendant brought a motion to stay discovery pending review of its petition

24

to consolidate this action with several others in multi-district litigation which was granted in

25

part (Dkt. No. 60). The Judicial Panel on Multidistrict Litigation decided not to institute a

26

multidistrict litigation and the partial stay was lifted (Dkt. No. 69). Now Xytex moves to

27

dismiss. This order follows full briefing and oral argument.

28
4

1

ANALYSIS

2

To survive a motion to dismiss, a complaint must contain sufficient factual matter,

3

accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S.

4

662 (2009). A claim is facially plausible when there are sufficient factual allegations to draw a

5

reasonable inference that the defendant is liable for the conduct alleged. While a court “must

6

take all of the factual allegations in the complaint as true,” it is “not bound to accept as true a

7

legal conclusion couched as a factual allegation.” Id. at 1949–50 (quoting Bell Atl. Corp. v.

8

Twombly, 550 U.S. 544, 555 (2007)) (internal quotation marks omitted). “[C]onclusory

9

allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss
for failure to state a claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996)

11
For the Northern District of California

United States District Court

10

(citation omitted).

12

California recognizes the tort of “wrongful birth.” Turpin v. Sortini, 31 Cal. 3d 220

13

(1982). The essence of the tort is negligence by a professional service provider leading to a

14

problematic birth. Before addressing the challenge to the wrongful birth claim for relief,

15

however, this order will address the challenge to plaintiffs’ intentional and negligent

16

misrepresentation claims. Finally, the order will address the remaining challenges.*

17

1.

18

Plaintiffs claim Xytex intentionally or negligently misrepresented the specific

19

characteristics of Donor #9623, such as his level of education, and his medical and criminal

20

record. The elements of a claim for intentional misrepresentation are: (1) a misrepresentation,

21

which includes a concealment or nondisclosure; (2) knowledge of the falsity of the

22

misrepresentation, i.e., scienter; (3) intent to induce reliance on the misrepresentation;

23

(4) justifiable reliance; and (5) resulting damages. The same elements comprise a claim

24

for negligent misrepresentation, except there is no requirement of scienter or intent to induce

25

reliance. Small v. Fritz Companies, Inc., 30 Cal. 4th 167, 173 (2003). Under Rule 9(b),

INTENTIONAL/NEGLIGENT MISREPRESENTATION.

26
27
28

* Xytex agrees to apply California law in adjudicating this motion. The site-usage agreement on
Xytex’s website included a choice-of-law provision selecting Georgia as governing the relationship between
Xytex and its users. A prior order held our plaintiffs had no notice of the site-usage agreement. Accordingly,
Xytex concedes that California law applies, at least for the sake of this motion (Dkt. No. 74 at 6 n.1).

5

1

plaintiff alleging fraud must satisfy a heightened pleading standard that requires circumstances

2

constituting fraud be pled with particularity. Specifically, “[t]he pleadings must state precisely

3

the time, place, and nature of the misleading statements, misrepresentations, and specific acts of

4

fraud.” Kaplan v. Rose, 49 F.3d 1363, 1370 (9th Cir. 1994). The pleading must be “specific

5

enough to give defendants notice of the particular misconduct . . . so that they can defend against

6

the charge and not just deny that they have done something wrong.” Vess v. Ciba-Geigy Corp.

7

USA, 317 F.3d 1097, 1106 (9th Cir. 2003). The requirement for pleading scienter is less

8

rigorous than that which applies to allegations regarding the “circumstances that constitute

9

fraud” because the Rule 9(b) requirement states that “malice, intent, knowledge, and other

11
For the Northern District of California

United States District Court

10

conditions of a person’s mind may be alleged generally.”
In its briefs, Xytex argues that plaintiffs’ misrepresentation claims fail because damages,

12

causation, intent, and scienter are not specifically alleged. At oral argument, counsel for Xytex

13

repeatedly stated that our plaintiffs testified and that this Court found that they had “never

14

[seen] the website,” in an apparent argument made to sow doubt that our plaintiffs relied on

15

the allegedly misleading statements thereon. Xytex’s characterization of plaintiffs’ testimony

16

and the Court’s finding is so inaccurate that it should be addressed. At the evidentiary hearing

17

regarding the forum-selection clause, Jane Doe One testified, inter alia, that she recalled the

18

website had “a lot of information directed towards patient[s] in the Patient section that answered

19

questions like what do you screen your donors for” (Jane Doe One Dep. at 26). The order

20

denying Xytex’s motion to transfer found, “nothing in Doe One’s testimony, however, suggested

21

she ever viewed or learned of the site-usage agreement” and that “there [was] simply nothing

22

in the record from which to infer that Doe One ever browsed the About Us tab” (Dkt. No. 66 at

23

7–8) (emphasis added). Nothing in our record supports defense counsel’s groundless assertion

24

that our plaintiffs “never saw the website.” Xytex counsel went on to add that “Buyer Beware”

25

should apply, but plaintiffs had no way to conduct due diligence on Donor #9623 whose true

26

identity was hidden from plaintiffs by Xytex. Only Xytex knew his true identity and was able

27

to conduct any diligence.

28
6

1

A.

Damages.

2

Xytex contends that plaintiffs have not alleged that they suffered any actual damages

3

because of the alleged misrepresentations concerning Donor #9623 inasmuch as the birth of

4

plaintiffs’ child alone does not warrant general damages. Turpin, 31 Cal. 3d 220 at 235 (“[I]t is

5

simply impossible to determine in any rational or reasoned fashion whether [a child] has in fact

6

suffered an injury in being born impaired rather than not being born . . . .”). Nevertheless,

7

special damages are available.

8

Plaintiffs’ complaint does not claim damages due to their child’s life, but rather due to

Plaintiffs argue that as parents, they “may recover special damages for extraordinary expenses

11
For the Northern District of California

the medical expenses and emotional distress upon discovery of Donor #9623’s medical history.

10

United States District Court

9

necessary to treat [their child’s] hereditary ailment.” Turpin, 31 Cal. 3d 220 at 239 (alteration

12

in original).

13

Xytex would distinguish Turpin. In Turpin, the court allowed for recovery of medical

14

expenses associated with an hereditary ailment of a child who had been conceived only after

15

medical care providers failed to diagnose such condition in an older sibling. Xytex contends

16

that the special damages in Turpin were “both certain and readily measurable” inasmuch as the

17

plaintiffs’ child actually suffered from the hereditary deafness — unlike our plaintiffs’ child —

18

who has not yet been diagnosed with schizophrenia. (Again, Turpin is the decision recognizing

19

the tort of wrongful birth.)

20

Plaintiffs respond that it is not necessary to prove that plaintiffs’ child already is

21

schizophrenic to recover medical costs because “medical monitoring may be called for as a

22

result of a defendant’s tortious conduct, even in the absence of actual physical injury.” Potter v.

23

Firestone Tire & Rubber Co., 6 Cal 4th 965, 1007 (1993).

24

Xytex contends Potter is distinguishable because Potter held that “there can be no

25

recovery for preventative medical care and checkups to which members of the public at large

26

should prudently submit.” Potter, 6 Cal. 4th 965 at 1009. At this stage, one can reasonably

27

infer that monitoring plaintiffs’ child for mental illnesses, after discovering that the child’s

28

paternal genes carry the hereditary disease of schizophrenia, rises above preventative medical
7

1

care to which members of the public at large should submit themselves to, but rather originates

2

from the child’s genetic predisposition. Plaintiffs, therefore, have sufficiently alleged damages

3

caused by Xytex’s misrepresentations. This order recognizes that Turpin was a negligence-

4

based decision rather than a misrepresentation-based decision. Nevertheless, this order holds

5

that at a minimum the type of damages recognized in Turpin would also be recoverable under a

6

misrepresentation theory.

7

B.

Causation.

8

Xytex contends that plaintiffs have failed to allege a causal link between the alleged torts

9

and the injury as damages alleged may only be recovered when “it becomes more likely than not
that the injury was a result of its action.” Simmons, 212 Cal. App. 3d 696 at 702. In Simmons,

11
For the Northern District of California

United States District Court

10

the plaintiff brought a wrongful birth and life action based on the alleged negligence of

12

plaintiff’s physician in failing to provide a test that might have disclosed the risk of her child

13

being born with Down’s Syndrome in time to abort the pregnancy. The court found the

14

defendants physician and clinic did not proximately cause the harm, since there was only a

15

twenty percent chance the test would have detected the risk of Down’s Syndrome. Id. at 702.

16

Simmons is distinguishable because it arose on summary judgment, not at the pleading stage, as

17

here.

18

Plaintiffs, therefore, have alleged sufficient facts to demonstrate proximate cause.

19

Moreover, plaintiffs have sufficiently alleged all elements for negligent misrepresentation.

20

Xytex’s motion to dismiss plaintiffs’ negligent misrepresentation claim fails.

21
22
23
24

The final two elements, intent to induce, and scienter, relate only to plaintiffs’ intentional
misrepresentation claim, to which this order now turns.
C.

Intent to Induce Reliance.

Xytex’s contends that plaintiffs failed to make allegations that Xytex intended to deceive

25

plaintiffs. The complaint, however, alleges that when plaintiffs asked Hartley if she knew of

26

any Xytex sperm donors that had a particularly impressive health history, Hartley immediately

27

singled out Donor #9623, creating the reasonable inference that Xytex intended to induce

28

reliance on its misrepresentation that Donor #9623 was healthy.
8

1
2

Plaintiffs, therefore, have sufficiently alleged Xytex’s intent to induce reliance on the
alleged misrepresentations.

3
4

D.

Scienter.

In order to satisfy the requirement of scienter, it must be established either that defendant

5

had actual knowledge of the untruth of his statements, or that he lacked an honest belief in their

6

truth, or that the statements were carelessly and recklessly made, in a manner not warranted by

7

the information available to defendant. Watt v. Patterson, 125 Cal. App. 2d 788, 792 (1954).

8
9

Xytex argues that while plaintiffs allege that Donor #9623 made false claims about
himself, they do not allege that Xytex knew about these misrepresentations. Plaintiffs contend
that active knowledge is not necessary since Xytex made the false representations with

11
For the Northern District of California

United States District Court

10

recklessness and disregard for their truth. The information regarding Donor #9623’s medical

12

health history, as well as his criminal record could have easily been discovered “through publicly

13

accessible, indisputable, medical and professional documents,” especially in light of Xytex’s

14

proclamation of its “intense and arduous” qualification process that “generat[es] a lot of medical,

15

psychological, genetic, and social information” (Compl. ¶ 19(g), 22). If Xytex had screened

16

Donor #9623 as carefully as Xytex claimed to screen donors, then Donor #9623 would not have

17

been held out to be a model man and likely would have been rejected. Xytex surely knew that it

18

failed to screen up to the standard it advertised. This alone would show reckless disregard and

19

therefore is adequate to show that Xytex acted with scienter.

20

Plaintiffs’ allegations have sufficient particularity as to the time, the nature, and the

21

specific acts to meet the requirements of Rule 9(b). Therefore, plaintiffs’ allegation of

22

intentional misrepresentation has been sufficiently plead, and thus survives the motion to

23

dismiss.
NEGLIGENCE/STRICT PRODUCTS LIABILITY.

24

2.

25

A plaintiff may seek recovery in a products liability case either on the theory of

26

strict liability in tort or on the theory of negligence. Under either theory, to recover from a

27

manufacturer, a plaintiff must prove that a defective product caused the injury. Marrell v.

28

Navegar, Inc., 26 Cal. 4th 465, 478 (2001).
9

1

Plaintiffs’ strict products liability claim alleges that defendant either “manufactured”

2

or “distributed” the allegedly “defective and unsafe” sperm. Xytex contends that the claim for

3

strict liability is barred by a tissue bank’s statutory immunity to strict products liability under

4

Section 1635.2 of the Health and Safety Code. Section 1635.2 states (emphasis added) that

5

“the . . . distribution of tissue for the purpose of transplantation . . . shall be deemed a service

6

by those persons engaged in these activities” and that the aforementioned acts therefore “shall

7

not be subject to the requirements of Division 2 of the Commercial Code.”

8

Xytex supports its claim for statutory immunity by citing Cryolife, Inc. v. Superior Court,

9

110 Cal. App. 4th 1145 (2003), where the court held that “by expressly excluding the application
of Division 2 of the Commercial Code to the sale, storage, or distribution of tissue for the

11
For the Northern District of California

United States District Court

10

purpose of transplantation,” the legislature implicitly excluded such tissue-related activities from

12

the application of the doctrine of strict products liability. Cryolife, Inc., 110 Cal. App. 4th 1145

13

at 1154. Xytex, therefore, argues that as a service provider of tissue it is exempt from strict

14

products liability.

15

Plaintiffs do not dispute this point, but correctly contend that Cryolife did not discuss

16

or deal with a claim for products liability based on negligence, such as a failure to warn of risks

17

from the use of sperm from Donor #9623 that Xytex knew or should have known. A tissue

18

bank’s statutory immunity from strict products liability therefore does not extend to products

19

liability based on negligence. Plaintiffs’ strict products liability claim is dismissed. As to this,

20

leave to amend will not be granted inasmuch as it is foreclosed as a matter of law. Plaintiffs’

21

negligence claim survives at this stage.
BREACH OF WARRANTIES.

22

3.

23

Plaintiffs allege that Xytex created express and implied warranties regarding the

24

“quality and reliability” of the sperm sold to plaintiffs. An express warranty may be created:

25

By “affirmation of fact or promise,” “description of the goods,” or “sample or model.”

26

Cal. Com. Code § 2313. Moreover, “a warranty that the goods shall be merchantable is implied

27

in a contract for their sale.” Cal. Com. Code § 2314(1) (emphasis added).

28
10

1

Xytex rightly points out that Section 2313 of the Commercial Code is part of Division

2

Two, which is, as establish above, inapplicable to tissue-related activities. See Cal. Health &

3

Safety Code § 1635.2; Cryolife, Inc., 110 Cal. App. 4th 1145 at 1154.

4

While plaintiffs seem to implicitly concede to Xytex’s argument, plaintiffs switch gears

found in the California Commercial Code, such terminology does not limit the legal basis for a

7

claim for relief at this stage.” Plaintiffs argue that even if Xytex’s representations and warranties

8

are not enforceable as an express contract, plaintiffs have alleged sufficient facts to recover on

9

a theory of promissory estoppel. This order declines to evaluate on a claim for promissory

10

estoppel, as plaintiffs failed to allege this claim in their complaint. See Perkins v. LinkedIn

11
For the Northern District of California

in their reply and contend that “while the terminology of express and implied warranties may be

6

United States District Court

5

Corp., 53 F. Supp. 3d 1190, 1203 (N.D. Cal. 2014) (Judge Lucy Koh); Swartz v. KPMG LLP,

12

476 F. 3d 756, 763 (9th Cir. 2007). The claim for breach of warranties is dismissed. As to this

13

claim, leave to amend will not be granted inasmuch as it too is foreclosed as a matter of law.

14

4.

15

Plaintiffs allege that Xytex committed a battery by causing Jane Doe One to be

16

inseminated with the sperm of a person to whom she did not consent to (Compl. ¶ 79). In the

17

medical context, “battery is an intentional tort that occurs when a doctor performs a procedure

18

without obtaining any consent.” Conte v. Girard Orthopaedic Surgeons Medical Group, Inc.,

19

107 Cal. App. 4th 1260, 1266 (2003). There are three elements to a claim for medical battery

20

under a violation of conditional consent: (1) The patient must show his consent was conditional,

21

(2) the doctor intentionally violated the condition while providing treatment, and (3) the patient

22

suffered harm as a result of the doctor’s violation of the condition. Piedra v. Dugan, 123 Cal.

23

App. 4th 1483, 1497–98 (2004).

24

BATTERY.

As to the first element, plaintiffs claim that their consent to the artificial insemination

25

of Jane Doe One was conditioned on using the sperm of a healthy and intelligent donor.

26

Next, plaintiffs contend that Xytex violated said condition because Jane Doe One was

27

inseminated with sperm from a mentally-ill felon, and that thereby the insemination constitutes

28

battery. This argument is flawed. The only procedure alleged in the complaint was the artificial
11

1

insemination performed on Jane Doe One by “licensed medical professionals” unaffiliated with

2

Xytex. Despite Xytex’s misrepresentations regarding Donor #9623, Xytex never committed an

3

intentional or offensive touching of Jane Doe One.

4

Plaintiffs attempt to argue that “[o]ne who causes an offensive touching to occur is

5

liable for the offense, even if an innocent third party was the conduit.” People v. Austin,

6

111 Cal. App. 3d 110, 1140 (1980). California law has not extended the tort of medical battery

7

to third-party misconduct. Plaintiffs’ claim for medical battery is dismissed.

8

5.

NEGLIGENCE/PRODUCTS LIABILITY
BASED ON NEGLIGENCE/WRONGFUL BIRTH.

9
Plaintiffs contend that Xytex “acted carelessly and negligently” in providing sperm,
10
liability claim based on negligence, as well as their wrongful birth claim as wrongful birth is
For the Northern District of California

United States District Court

thereby causing plaintiffs’ injuries. Plaintiffs’ claim for negligence is repetitive of their products
11
12
one form of a professional negligence action. Turpin, 31 Cal. 3d 220 at 229. The sole element
13
at issue here is that of recoverable damages. Pursuant to the antecedent discussion of special
14
damages, plaintiffs have sufficiently claimed that Xytex’s tortious actions caused the alleged
15
damages. Xytex’s motion to dismiss the negligence, products liability based on negligence,
16
and wrongful birth claim therefore fails.
17
6.

SPECIFIC PERFORMANCE.

18
Plaintiffs seek specific performance to compel Xytex to honor the contract term
19
that obliges Xytex to disseminate information regarding Donor #9623 as discussed by Xytex.
20
To obtain specific performance after a breach of contract, a plaintiff must generally show:
21
(1) The inadequacy of his legal remedy; (2) an underlying contract that is both reasonable and
22
supported by adequate consideration; (3) the existence of a mutuality of remedies; (4)
23
contractual terms which are sufficiently definite to enable the court to know what it is to enforce;
24
and (5) a substantial similarity of the requested performance to that promised in the contract.
25
Real Estate Analytics, LLC v. Vallas, 160 Cal. App. 4th 463, 472 (2008). Only the fourth
26
element is contested.
27
28
12

1

Xytex contends that plaintiffs failed to allege sufficiently definite contract terms for the

2

court to enforce and that it is unclear what information it should disclose since plaintiffs are

3

already aware of the information they argue should be disclosed.

4

Plaintiffs, however, demand full disclosure of information Xytex might receive in the

5

future concerning Donor #9623, and for now we must leave the remedy of specific performance

6

on the table among potential relief.

7
8
9

7.

FALSE ADVERTISEMENT/UNFAIR COMPETITION.

Plaintiffs contend that by promoting misleading information about the nature,
characteristics, and qualities of Donor #9623, Xytex engaged in unfair business practices and
false advertising. Unfair competition includes “any unlawful, unfair or fraudulent business act

11
For the Northern District of California

United States District Court

10

or practice . . . and any act prohibited by the false advertising law.” Cal. Bus. & Prof. Code

12

§ 17200. Advertising that “is untrue or misleading, and which is known, or which by the

13

exercise of reasonable care should be known, to be untrue or misleading” is prohibited.

14

Cal. Bus. & Prof. Code § 17500.

15

First, Xytex contends that this claim should fail because plaintiffs fail to allege that

16

Xytex knew about the misrepresentations. As discussed above, a reasonable inference from

17

plaintiffs’ allegations is that Xytex acted recklessly regarding its misrepresentations.

18

Second, Xytex contends that the claim should be dismissed since plaintiffs are unable to

19

allege any facts showing the amount of restitution necessary to restore purchasers to the status

20

quo ante. See Cal. Bus. & Prof. Code § 17535. Xytex cites Colgan v. Leatherman Tool Group,

21

Inc., 135 Cal. App. 4th 663, 697 (2006), where the failure to support the restitution amount with

22

evidence led to the dismissal of the unfair competition claim. Colgan is not on point. Unlike the

23

case before us, which is at the pleading stage, Colgan was on appeal from a restitution order

24

after trial. Plaintiffs’ claim for false advertisement and unfair business practices has been

25

sufficiently alleged.
PUNITIVE DAMAGES .

26

8.

27

Plaintiffs seek punitive damages. Xytex contends that under Section 425.13 of the Code

28

of Civil Procedure, plaintiffs are required to file a motion to amend before they can seek punitive
13

1

damages. Plaintiffs argue that Section 425.13 is a procedural state statute and therefore does

2

not apply in federal court. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). Plaintiffs cite

3

Jackson v. E. Bay Hosp., 980 F. Supp. 1341, 1352 (N.D. Cal. 1997) (Judge Marilyn Patel), where

4

the court found that Section 425.13 was a method of managing the pleadings and was not “so

5

intimately bound up” with the substantive law of torts that it had to be applied. As Jackson is on

6

point and persuasive, unlike Xytex’s arguments, plaintiffs’ claim for punitive damages survives

7

for now.

8
9

CONCLUSION
For the foregoing reasons the motion to dismiss is GRANTED IN PART as to plaintiffs’
claims for strict products liability, breach of warranties, and battery. The motion to dismiss is

11
For the Northern District of California

United States District Court

10

DENIED IN PART as to plaintiffs’ claims for intentional and negligent misrepresentation,

12

negligence, products liability based on negligence, wrongful birth, false advertising, unfair

13

business practices, specific performance, and punitive damages. Plaintiffs may seek leave to

14

amend the dismissed claims, except as to strict products liability and breach of warranties, by

15

a formal motion noticed on the normal 35-day calendar by APRIL 6 AT NOON. Plaintiffs must

16

plead their best case. Their motion should affirmatively demonstrate how the proposed first

17

amended complaint corrects the deficiencies identified in this order, as well as any others raised

18

in Xytex’s motion but not addressed herein. The motion should be accompanied by a redlined

19

copy. Failure to timely file a motion seeking leave to amend will result in dismissal of the

20

action against plaintiffs. Xytex must raise any Rule 12 issues in response to plaintiffs’ motion.

21

This case will go to trial in November and both sides must pursue discovery in time to be ready

22

for the trial date and please do not use any excuse of co-ordinated discovery as a basis for

23

delaying depositions or other discovery.

24
25

IT IS SO ORDERED.

26
27

Dated: March 24, 2017.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

28
14