PHOENIX (CN) - A private blood banking company accused of misrepresenting the storage and potential use of infants' umbilical cord stem cells to vulnerable parents says its practices can't be challenged under the Arizona Consumer Fraud Act because the purported misrepresentations weren't made from within or directly to consumers in the state.

Monday morning, an attorney for Cord Blood Registry Inc., known as CBR, poked legal holes in a lawsuit filed in March by Arizona Attorney General Kris Mayes, who says CBR engages in unfair business practices and deceptive advertising regarding the cord blood banking services it provides.

Specifically, defense attorney Lee Brand said in state court that the complaint makes no claim directly connecting the business's online advertisements and representations to the Grand Canyon State. 

"The issue is where the statement is made," the Pillsbury Law associate told Maricopa County Judge Scott Minder. "Not what the statement is about." 

CBR operates its only stem cell laboratory and storage facility in Tucson, Arizona. The private blood banking company targets new parents nationwide, selling them on the potential to use an infant's umbilical cord stem cells to fight against more than 80 potential diseases and disorders.

In her complaint, Mayes says the company misleads vulnerable new parents by omitting the sheer rarity of most of said diseases and playing up the likelihood that the stem cells would ever be needed. In fact, Mayes cites experts who estimate the likelihood of ever using the stored cord blood is "at best from a 1:400 to a 1:200,000 chance over the child's lifetime."

Mayes also claims that CBR blurs the lines between diseases approved for stem cell treatment and those still in experimental phases, and pays doctors to endorse the practice despite widespread disavowal of private blood banking from the American Academy of Pediatrics, the American College of Obstetricians and Gynecologists and the American Medical Association. 

The state argued Monday that CBR's physical presence in Tucson establishes "a clear Arizona nexus" to litigate under the Arizona Consumer Fraud Act. If that's not enough, state attorney Allison Chase told Minder, the company directly advertises to Arizona citizens via social media, and misrepresents the transportation and handling of samples taken to the Tucson storage facility.

"They lean into Arizona," Chase said. "It is a selling point of their product."

But Brand characterized the complaint as a simple fraud case, arguing that even if actions are taken in Arizona, the state can't prove that the decisions behind the representations were made there.

"The claim is not about the mishandling of samples," he said. "It's about misrepresentations about how the samples are handled. That's the slight of hand. This is a false advertising case." 

Brand argues that the plaintiffs are in violation of Civil Rule of Procedure 9b, which requires that fraud claims be made with particularity to time, place and manner of the fraud rather than refer generally to continuous conduct. 

But Chase says the case is more than just a fraud claim, but instead is two-pronged, being about deceptive advertising and unfair practices.

For example, she said, the company not alerting parents when their blood sample spoils in transit to Tucson - one element of the state's claim -  is not fraud because CBR didn't intend to trick the parents on the outset, but is still an unfair business practice because the company continues to collect annual storage fees for that spoiled sample. 

Because there isn't an initial intention to defraud, rule 9b doesn't apply, she said. 

Many of the things the state says are omitted from advertisements to parents are corrected and accounted for in the client services agreement signed by all customers, Brand said.

But that agreement has changed numerous times over the last 10 years of the purported misconduct, Chase added. Deceptions via omissions made years ago that were only corrected recently can't be erased, she said. 

Brand asked that the judge consider the client service agreement as evidence to a lack of omissions. Chase said allowing the document in without its older versions would be premature before the discovery period.

Source: Courthouse News Service