Stem-cell institute still in limbo despite court victory

SAN FRANCISCO -- California's $3 billion stem-cell research institute won an important victory with a court ruling rejecting challenges to its constitutionality, but the agency's finances remain in limbo while the expected appeals block much of its funding.

A state judge ruled Friday that the California Institute for Regenerative Medicine is a legitimate state agency and that two lawsuits challenging it have no merit.

The ruling came a month after a four-day trial in which lawyers with connections to anti-abortion groups claimed the country's most ambitious stem cell research agency violated California law because it wasn't a true state agency and its managers had a host of conflicts of interest.

But Alameda County Superior Court Judge Bonnie Lewman Sabraw wrote in a 42-page ruling that the lawsuits failed to show the voter-approved law that created the agency in 2004, "is clearly, positively and unmistakably unconstitutional."

Lewman Sabraw's ruling becomes official in 10 days unless the losing attorneys come up with new and dramatically different arguments.

The litigation, however, has prevented the Institute for Regenerative Medicine from borrowing any of the $3 billion it is authorized from traditional Wall Street bond buyers. That won't change until the expected appeals of the verdict are exhausted, probably sometime next year.

"It's unfortunate that the plaintiffs, after losing at the polls, went to court to frustrate the voters' will," California Attorney General Bill Lockyer said. "The sooner this legal fight is over, the sooner California can move to where the people want it -- in the forefront of stem cell research."

David Llewellyn, a lawyer for one of the groups suing the stem cell institute, said he will probably petition the California Supreme Court to take the case directly, bypassing the appellate courts.

"There are several curiosities in the verdict," said Llewellyn, who represents the California Family Bioethics Council.

During the litigation, the agency has relied on contributions and loans from philanthropic organizations and wealthy donors to stay afloat. It managed to make its first grants earlier this month after six groups loaned it a combined $14 million, to be paid back once the Wall Street bond market was opened to the agency.

The agency also is earmarked to receive money from a scheduled May 22 fundraiser that's sponsored by several wealthy Californians and will include performances by Julie Andrews and Marvin Hamlisch. With tickets costing as much as $10,000 each, the unorthodox fund-raising for a state agency has attracted some critics.

But agency officials have said it's necessary to begin fulfilling the institute's mission to develop medicines and diagnostic tools.

The litigation also has helped build further support from people who are outraged that critics of the agency have gone to court to "defeat the will of the people," said Robert Klein, who chairs the committee that manages the stem cell agency.

"This decision will provide us the horsepower and direct support to move forward as we need the funds," Klein said.

Proposition 71 was placed on the California ballot in November 2004 to counter President Bush's stem cell research policy, which severely restricts the amount of federal funding that can be used for the work opposed by many conservative Christian groups.

Approved by 59 percent of the state's voters, it will fund about $300 million annually in stem cell research that the federal government won't.

Llewellyn said he still thinks Proposition 71 violates state laws against proposing two subjects on a single ballot measure even though the judge said she found no evidence to support that claim.

Llewellyn's client and the taxpayer group People's Advocate also argued in their combined lawsuits that the stem cell institute wasn't a proper state agency because its finances are controlled by a 29-member board called the Independent Citizens' Oversight Committee that isn't accountable to any branch of state government.

But the judge rejected those arguments and all others challenging the agency's legality.

Human embryonic stem cells are created in the first days after conception and scientists believe the cells can be used as replacement therapies to treat the sick and injured. But social conservatives who believe life begins at conception view the science as immoral because microscopic embryos are destroyed during the research.