Perhaps to punish the clinic for not fulfilling their contract to the donor? It's a pretty egregious failure on their part. I doubt 5m is going to sink the clinic.
I think the logic is that he could really use $5m.
In the US, damages in a lawsuit are not always determined by direct, measurable economic costs. Sometimes damages are punitive, to discourage future malfeasance. Sometimes they are contractual. Sometimes they reflect pain and suffering, or risks whose true value is hard to measure.
I mean, it all depends on what the contract says. If it says that they’ll only do 5 kids out of state it’s a huge breach to do 17 in-state. Contract terms offered from businesses to individuals should be enforced very strongly given the inherent power imbalance of that relationship.
Maybe he already spent $5m on wedding preparations for his offspring while it turns out that the spouse has the same biological father.
Why would Microsoft want 12 x $250K when they find out that you installed your 5-licensed Windows on 17 computers?
It's punitive or to compensate for the donor's emotional toll. For an empathetic person, finding out you have 12 extra kids is incredibly taxing. There's guilt for not having raised them (irrational though it mightbe), shame for not knowing them, fear for their futures, etc etc. I wouldn't wish the situation on anyone.