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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.'' ------------------------------------------------------------------------- ------- Contact Steve Johnson at [log in to unmask] or (408) 920-5043. ---------------------------------------------------------------------- To sign-off Parkinsn send a message to: mailto:[log in to unmask] In the body of the message put: signoff parkinsn