Posted on Tue, Aug. 02, 2005

Lawsuits will delay stem-cell research
STATE LOANS AND GRANT HOPED TO TIDE NEW INSTITUTE OVER
By Steve Johnson
Mercury News

http://www.ledger-enquirer.com/mld/ledgerenquirer/business/technology/122
83644.htm

California's $3 billion stem-cell research institute, heralded as a
world-class effort to fight tragic diseases, could be in for a legal
fight that cripples its core mission for a year or more.

Two lawsuits set for a hearing Thursday in Alameda County court have
already delayed the financing approved by voters last fall to pay for the
program. As a result, the state plans to ask charities for major
financial help. But that option also is being challenged and could
trigger even more legal wrangling.

These two suits plus a third, all brought by anti-abortion groups, may be
just the beginning. Experts predict litigation could dog the program for
years.

``Frankly I think that's the plaintiffs' goal,'' said James Harrison, the
stem-cell program's lawyer. ``Drag this out, delay it in any way they
can, impede the funding of stem-cell research.''

That prospect worries supporters of the stem-cell effort created by
Proposition 71, which more than 7 million Californians passed in November
in hopes it would lead to cures for Alzheimer's, Parkinson's disease and
other ailments.

``I think this is the worst kind of obstructionism,'' said Stanford
University law Professor Hank Greely. ``It is frustrating, but it may
work -- for a while.''

Those behind the suits deny they are merely stalling, however.

``I've never brought a lawsuit for delaying tactics in my life,'' said
David Llewellyn Jr., who filed one of the claims. ``I'm absolutely
convinced there were several very substantial constitutional violations
in Prop. 71.''

A legal magazine once dubbed Llewellyn ``God's lawyer'' because of the
dozens of anti-abortion and other religion-related cases he has handled.
But instead of attacking the stem-cell effort on religious grounds, which
would be tough in a state court, Llewellyn's suit takes another tack.

It seeks to invalidate the institute's financing, planned to come from a
sale of bonds, alleging among other things that the stem-cell board is
riddled with conflicts of interest that could impede its ability to
fairly allocate the money.

Novel claims

The second suit in Alameda County was filed by the Life Legal Defense
Foundation, which opposes abortion and recently participated in the
failed bid to keep brain-damaged Terri Schiavo alive. It claims the
stem-cell program lacks proper state oversight and should be barred from
spending the bond money.

``Our state is in a financial crisis, and this is $3 billion in taxpayer
funding that we really can't afford,'' said the foundation's Executive
Director, Dana Cody.

Both suits initially were filed in February with California Supreme
Court, which declined to hear them. The Life Legal Defense case, brought
on behalf of People's Advocate and the National Tax Limitation
Foundation, was refiled in April. Llewellyn, representing a group
affiliated with the conservative California Family Council, refiled his
on July 8.

Although California officials claim the suits lack legal merit, they said
it's hard to predict how the courts will react to them because the cases
raise novel claims. That's especially true of Llewellyn's bid to halt the
bond sale, said Robert Feyer, a partner with the state's bond counsel,
Orrick, Herrington & Sutcliffe.

``This is really the first one I'm aware of that's been brought against
the state's general obligation bonds,'' Feyer said.

The good news for the state is that the legal deadline for filing more
bond-sale challenges has expired. Even so, the two suits have scared away
potential bond investors, delaying the bond sale until the courts decide
the cases. And that could take a while.

Getting the suits resolved legally by the end of this year is ``extremely
unlikely,'' said Deputy Attorney General Tamar Pachter. Although some
experts say resolution of the suits could take up to 18 months, she
added, ``your guess is as good as mine.''

Litigation magnet

With the bonds held up, the stem-cell program has gotten a $3 million
loan from the state and a $5 million grant from the founder of San
Francisco-based Dolby Laboratories to hire staff and ramp up operations.
But that's far short of the $300 million the program had planned to spend
annually on research over the next decade.

To help cover those costs, state officials have proposed selling up to
$200 million in so-called bond anticipation notes. Those notes could
prove worthless to investors if the courts invalidate the bonds needed to
repay them. So the idea is to sell them to charities, which could write
off any loss as a donation.

To derail that plan, Llewellyn's suit specifically bars such donations.
And the moment state officials announce they're issuing the notes, he
said, he plans to file another legal action asking a judge to immediately
halt the process.

A third suit filed in federal court to challenge the stem-cell institute
takes a different tack. It would ban California's initiative from
financing human embryonic stem-cell studies, claiming that would violate
the rights of embryos.

The Maryland attorney who filed it, R. Martin Palmer, challenged the
Clinton administration's stem-cell plans on similar grounds, although his
suit in that case was declared moot after the Bush administration limited
federal money for such research.

Pursuing a suit can be expensive, and Palmer said he's financing it out
of his own pocket. But he said he's willing to do that because the issue
is crucial.

A lot of other people have similarly intense feelings about stem-cell
studies. And because of that, some experts warn, it's a good bet
California's program will become a magnet for litigation over everything
it does.

``There is going to be a series of legal challenges both at the state and
federal levels,'' predicted Nancy Geenen, a managing partner with the law
firm Foley & Lardner, who has been closely following the suits. ``It's
going to happen.''


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