Daubert Case Summaries

Transcription

1 Daubert Case Summaries APPLICATION OF DAUBERT IN THE ANTITRUST CONTEXT Federal judges often determine the admissibility of expert testimony by applying the Daubert standard, named after Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993). The cases below are a selection of decisions from 2003 to the present by United States Courts of Appeals that have applied the Daubert standard in the antitrust context to exclude expert testimony. The Daubert standard identifies a number of factors for trial judges to consider when evaluating the admissibility of expert testimony. As the gatekeeper of scientific evidence, the judge may choose to exclude such testimony on the ground that it (1) is unreliable, (2) is legally irrelevant, or (3) does not fit the facts of the case. Although the courts are not consistent in their use of terminology, we use these terms as follows: Reliability - whether or not the expert derived his conclusions from the scientific method (e.g., empirical testing, peer review and publication, known error rates, general acceptance by relevant scientific community) Relevance - whether or not the expert s methodology was guided by the controlling legal principle Fit - whether or not the expert applied his methodology to the facts of the case The following cases illustrate how these factors have been applied in recent years at the appellate level in the antitrust context. ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3rd Cir. 2012): Competitors brought suit against Eaton Corporation, a heavy-duty transmissions manufacturer, alleging Eaton used its dominant position in the market to induce truck manufacturers to enter into de facto exclusive dealing contracts with Eaton. Competitors expert submitted a report on both liability and damages. The district court allowed the expert to testify as to liability but excluded the expert s testimony regarding damages. The Third Circuit affirmed the district court s decision to allow the expert to testify as to liability because the methodologies applied were reliable, as the expert looked to such relevant factors as market definition, market power, Eaton s conduct and its effect on prices and consumer choice, alternative factors which would account for the market foreclosure, and the relevant market conditions. However, regarding the expert s damages testimony, the court held that although the expert applied the appropriate methodologies to his damages calculation, the damages opinion was properly excluded by the district court because the underlying data was not sufficiently reliable. The damages estimate was based on one of the competitors strategic business plans and the expert did not know the author of the document, the circumstances under which the projections were created, or the assumption on which the projections were based.

2 American Banana Co., Inc. v. J. Bonafede Co., Inc., 407 Fed.Appx. 520 (2nd Cir. 2010): Plaintiffs alleged defendants improperly monopolized the market for fresh, whole, extra-sweet pineapples by sending letters to competitors creating the false impression that a certain pineapple strain was patented and by engaging in sham patent litigation in order to deter competition in the market. Plaintiffs expert proposed that the letters were anticompetitive because they delayed entry into the market. The court affirmed the exclusion of the expert testimony as unreliable because the expert recited selective facts, drew legal conclusions, and failed to sufficiently explain the economic analysis underlying his conclusions. Plush Lounge Las Vegas LLC v. Hotspur Resorts Nevada Inc., 371 Fed.Appx. 719 (9th Cir. 2010): Plush Lounge, a nightclub operator, alleged Hotspur Resorts violated Section 2 of the Sherman Act. Plush Lounge s experts submitted declarations in support of a proposed market definition of cocktails and hors d oeuvres in an entertainment atmosphere within the [Hotspur] Resort. The district court struck portions of the declarations as unreliable. The Ninth Circuit held that the district court did not err because the purported experts provided inadequate foundational information about their qualifications in defining a market for antitrust purposes (i.e., reference to business experience without more was insufficient), presented legal conclusions without factual support, and failed to explain the methodology used to arrive at the proposed market definition. Mercedes-Benz USA, Inc. v. Coast Automotive Group, Ltd., 362 Fed.Appx. 332 (3rd Cir. 2010): Mercedes, an automobile manufacturer, sued its former dealership and the dealership countersued. The dealership alleged Mercedes implemented a price-fixing scheme and reduced the number of vehicles allocated to the dealership in retaliation for refusing to adhere to the scheme. The dealership s proffered experts on damages were excluded by the district court as unreliable. The court affirmed the exclusion because the expert failed to independently verify [the dealership co-owner s] claims of unfair allocation or analyze Mercedes allocation procedures, particularly where the facts belied the expert s conclusions. The court also affirmed the exclusion of a second expert who purported to calculate the value of the dealership s franchise absent the unfair vehicle allocation because his opinions were based on the projected profits set forth in [the first excluded expert s] report and, as such, were equally unreliable. Kentucky Speedway, LLC v. National Association of Stock Car Auto Racing, Inc., 588 F.3d 908 (6th Cir. 2009): Kentucky Speedway alleged NASCAR conspired with an affiliated racetrack owner to monopolize the markets for sanctioning and hosting premium stock-car races. Kentucky Speedway s market expert narrowly defined the relevant markets, including only Busch series and open-wheeled races as possible substitutes. The court affirmed the exclusion of the testimony because the market expert failed to include a broader range of substitutes in defining the relevant markets and the expert used his own, unreliable version of the SSNIP test that had not been tested, had not been subjected to peer review, had no controlling standards, had no 2

3 demonstrable showing of support within the scientific community, and was produced solely for purposes of the instant litigation. The court also affirmed the exclusion of another expert on the grounds that he performed no independent analysis other than reliance on the excluded market expert s testimony. Major League Baseball Properties, Inc. v. Salvino, Inc., 542 F.3d 290 (2d Cir. 2008): In a consolidated action Salvino, Inc., a sports-collectible producer alleged that that the centralization in Major League Baseball Property, Inc. (MLBP) of licensing for Major League Baseball teams violated both the Sherman and the Clayton Acts. At summary judgment, both parties offered expert opinions regarding procompetitive efficiencies of MLBP s actions. MLBP s expert described at length the procompetitive efficiencies of the agreement and submitted a report well-annotated with citations to documents and interviews of personnel who had first-hand knowledge. Salvino s expert, on the other hand, offered only a conclusory statement that MLBP s actions were not procompetitive. The district court concluded that the Salvino expert s testimony was unreliable and thus provided no basis for denying summary judgment. The Second Circuit held that the district court did not err in this assessment. In re Scrap Metal Antitrust Litigation, 527 F.3d 517 (6th Cir. 2008): Plaintiff Class (industrial scrap generators) alleged that Defendants (scrap brokers and dealers) violated the Sherman Act by conspiring to restrain and eliminate competition in the purchase of unprocessed industrial scrap metal. Before trial, Defendants sought to preclude, on the basis of unreliability, expert testimony regarding damages from Plaintiffs economist Defendants argued that the expert employed erroneous data. The district court ruled that, despite the many well-supported attacks on the underlying data employed and assumptions,... those attacks are best reserved for cross-examination and do not... rise to the level warranting exclusion under Daubert. On appeal Defendant contended that the erroneous data produced an erroneous calculation, which rendered the testimony unreliable and thus excludable under Federal Rule of Evidence 702. Defendant did not, however, challenge the expert s qualifications or the method employed to determine damages. The Sixth Circuit stated that [t]he task for the district court in deciding whether an expert s opinion is reliable is not to determine whether it is correct, but rather to determine whether it rests upon a reliable foundation.... It therefore affirmed the district court, concluding that whether an expert opinion is accurate in light of the data employed goes to the weight of the evidence, not to its admissibility, and the district court appropriately passed the torch to the jury to make this determination. Nilavar v. Mercy Health System-Western Ohio, No , 2007 WL , at *5-8 (6 th Cir. Aug. 7, 2007): Plaintiff radiologist alleged that defendant health care system and affiliated entities and individuals violated state and federal antitrust laws by entering into an exclusive contract for radiology services with one of plaintiff s competitors. Plaintiff s expert opined as to the relevant product and geographic markets, and concluded that defendants exercised power in the relevant market. The court upheld the exclusion of the expert s testimony as to the geographic market on the ground that it was flawed to the point of unreliability. The expert had improperly applied both the Elzinga-Hogarty test and the critical-loss test by inappropriately manipulating those 3

4 tests to arrive at a conclusion that was favorable to the plaintiff. In that regard, the court further found that the expert s exclusion of a set of patients from consideration was erroneous as a matter of law, thus also rendering the testimony irrelevant under the rubric outlined above. Craftsmen Limousine, Inc. v. Ford Motor Co., 491 F.3d 380, (8th Cir. 2007): Craftsmen, a limousine manufacturer, alleged that Ford conspired with others to prevent Craftsmen from advertising in industry trade publications and attending trade shows in violation of the Sherman Act. In 2004, the Eighth Circuit found that the testimony of Craftsmen s expert was inadmissible on the ground that it lacked reliability (see below). The district court upon remand held that Craftsmen had failed to remedy the defect in its expert testimony, and the Eighth Circuit subsequently affirmed the exclusion of the testimony on the ground that it lacked relevance and reliability. The expert analyzed the effect of the restraints at issue upon Craftsmen rather than upon the limousine industry as a whole and offered no empirical support for his definition of the relevant product market. Champagne Metals v. Ken-Mac Metals, Inc., 458 F.3d 1073, (10th Cir. 2006): Champagne, an aluminum distributor, brought suit against its competitors, alleging that they threatened to engage in concerted boycotts of any mills that sold to Champagne. Champagne s expert opined that the competitors had substantial power in the upstream market based on their sales and market share in the downstream market. The court affirmed the exclusion of the testimony on the ground that it lacked reliability. The expert offered no methodological justification for equating market power in upstream and downstream markets and seemed to have based many of his opinions solely on self-serving statements offered by Champagne. El Aguila Food Products, Inc. v. Gruma Corp., 131 Fed. App x 450, (5th Cir. 2005): Competitors claimed that El Aguila, a tortilla manufacturer, violated antitrust laws by agreeing to pay retailers in return for preferential shelf placement of its products. El Aguila s experts offered testimony on damages, causation, and antitrust injury. The court affirmed the exclusion of the testimony on the grounds that it lacked reliability and fit. One expert assumed without support that El Aguila would have earned an average industry profit margin, without causally relating lost profits to the defendants conduct, and the other expert offered abstract conclusions that were not adequately grounded in the facts of the case. Craftsmen Limousine, Inc. v. Ford Motor Co., 363 F.3d 761, (8th Cir. 2004): Craftsmen, a limousine manufacturer, alleged that Ford conspired with others to prevent Craftsmen from advertising in industry trade publications and attending trade shows in violation of the Sherman Act. Craftsmen s expert relied on tax returns and financial statements to calculate its profits before and after the conspiracy. The court reversed the district court s admission of the testimony on the ground that it lacked reliability. The expert simply assumed that Craftmen s lost growth was attributable to the conspiracy without addressing other possible factors, such as the emergence of direct competitors during that period. 4

5 Williamson Oil Co., Inc. v. Philip Morris USA, 346 F.3d 1287, (11th Cir. 2003): Cigarette wholesalers brought an antitrust class action, alleging that tobacco companies were engaged in a price fixing conspiracy. The wholesalers expert offered the opinion that the tobacco companies conduct supported an inference of collusive price fixing. The court affirmed the exclusion of the testimony on the ground that it lacked relevance. It characterized the evidence as unhelpful and irrelevant because the expert did not differentiate between lawful conscious parallelism and collusive price fixing. Group Health Plan, Inc. v. Philip Morris USA, Inc., 344 F.3d 753, (8th Cir. 2003): HMOs brought an action against tobacco companies seeking to recoup the increased health-care costs that they claimed to have incurred as a result of their members tobacco-related illnesses. The HMOs expert computed damages by comparing the actual incidence of health problems with the incidence to be expected in a counterfactual world, in which smoking would have been safer and less frequent because of the absence of a conspiracy by tobacco companies. The court affirmed the exclusion of the testimony on the grounds that it lacked reliability and fit. The court held that the expert s conclusions were inspired guesses at best and did not fit the facts of the HMOs case. 5