Evidentiary Issues

• Pages: 147-186

147

CHAPTER 8

EVIDENTIARY ISSUES

This chapter explores the principal evidentiary issues frequently

raised by the use of econometric studies in litigation. First, the chapter

examines the admissibility of econometric evidence under Federal Rule

of Evidence 702.

1

Rule 702 incorporates the standards for scientific and

technical evidence announced in Daubert v. Merrell Dow

Phar maceuticals, Inc.

2

and its progeny. In ruling on the admissibility of

an econometric study, a court will focus on the qualifications of the

expert, the sufficiency of the underlying facts or data, the relevance of

the study to issues in litigation, the reliability of the method applied in

the econometric analysis, and whether the method was properly applied.

Second, the chapter discusses the burden of production on parties

relating to the use of econometric evidence. Third, the chapter looks at

the standard of appellate review on evidentiary rulings and issues

regarding the timing and waiver of Daubert objections. Finally, the

chapter briefly discusses the use of econometric evidence at the class

certification stage of an antitrust class action.

A. Admissibility Under

Daubert

1. Introduction

Federal Rule of Evidence 702 provides:

A witness who is qualified as an expert by k nowledge, skill,

experience, training, or education may testify in the form o f an opinion

or otherwise if:

1

. The language of Rule 702 was amended in 2011 as part of the r estyling of

the Federal Rules of Evidence to make them more easily understood and

to make style and terminology consistent throughout the rules. These

changes were intended to be stylistic only. There was no intent to change

any result in a ny ruling on evidence admissibilit y. FED. R. EVID. 702

advisory committee’s note (2011 amendment).

2

. Daubert v. Merrell Dow Pharm., 509 U.S. 579 (1993).

148 Econometrics

(a) the expert’s scientific, technical, or other specialized knowledge

will help the trier of fact to understand the evidence or to determine a

fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably a pplied the principles and methods to the

facts of the case.

3

Because an expert is permitted to offer opinions in addition to

testimony about facts, and in federal court litigation is permitted to rely

upon hearsay as opposed to firsthand knowledge, it is extremely

important that the expert’s opinion have “a reliable basis in the

knowledge and experience of his discipline.”

4

As interpreted by the Supreme Court in Daubert and its progeny,

5

Rule 702 requires a “flexible” inquiry whose “overarching subj ect is the

scientific validity—and thus the evidentiary relevance and reliability—of

the principles that underlie a proposed submission. The focus, of course,

must be solely on principles and methodology, not on the conclusions

that they generate.”

6

As the 2011 amendment to Rule 702 now makes explicit,

econometric evidence is admissible only if five conditions are met. First,

the expert must be qualified to testify competently about the subject

matter of the testimony.

7

Second, the expert’s testimony must be relevant

to an issue before the court.

8

Third, the expert’s testimony must be based

on sufficient data or facts.

9

Fourth, the expert’s method must be sound.

10

3

. FED. R. EVID. 702.

4

. Dauber t, 509 U.S. at 592.

5

. The Dauber t line of Supreme Court decisions includes Kumho Tire Co. v.

Carmichael , 526 U.S. 137 (1999), Genera l Elec. Co. v. Joiner, 522 U.S.

136 (1997), and Weisgram v. Marley Co., 528 U.S. 440 (2000).

6

. Dauber t, 509 U.S. at 594-95.

7

. FED. R. EVID. 702.

8

. FED. R. EVID. 702(a); Dauber t, 509 U.S. at 591-92; Kumho Tire, 526 U.S.

at 147-48.

9

. FED. R. EVID. 702(b); Daubert, 509 U.S. at 594-95; Kumho Tire, 526

U.S. at 149.

Evidentiary Issues 149

Finally, the expert must reliably apply that method to the facts of the

case.

11

The purpose of these conditions “is to make certain that an expert,

whether basing testimony upon professional studies or personal

experience, employs in the courtroom the same level of intellectual rigor

that characterizes the practice of an expert in the relevant field.”

12

Most attacks on the reliability of an econometric analysis will likely

impact the study’s weight rather than its admissibility. However,

challenges that disclose fundamental methodological flaws, the absence

of key variables, or critical gaps in data may be sufficient to exclude

econometric testimony altogether.

2. Qualifications of the Expert

The first requirement for admission of any expert testimony is that

the expert possess adequate qualifications in the field about which he or

she will testify. A witness must qualify as an expert through particular

“knowledge, skill, experience, training, or education.”

13

For an expert

presenting econometric evidence, qualifications typically include degrees

in economics or statistics and experience in applying regression analyses.

In most cases in which econometric evidence is admitted, courts

conclude that an expert is qualified after a brief review of the expert’s

academic and professional credentials.

14

10

. FED. R. EVID. 702(c); Daubert, 509 U.S. at 592-93; Kumho Tire, 526 U.S.

at 147-49.

11

. FED. R. EVID. 702(d).; Kumho Tire, 526 U.S. at 157; Joiner, 522 U.S. at

146.

12

. Kumho Tire, 526 U.S. at 152.

13

. FED. R. EVID. 702.

14

. See, e.g., In re Ready-Mixed Concrete Antitrust Litig., 261 F.R.D. 154,

163-64 & n.11 (S.D. Ind. 2009) (qualifying economist with “strong

econometric background” who was “experienced in o ffering opinions

related to class impact based on benchmarking and regression analysis” in

previous cases, notwithstanding expert’s statement that he would not put

himself forward as an expert in econometrics); In re Apollo Group, Inc.

Sec. Litig., 527 F. Supp. 2d 957, 964 (D. Ariz. 2007) (expert’s published

work and general expertise in econometrics sufficient); In re

Polypropylene Carpet Antitrust Litig., 93 F. Supp. 2d 1348, 1358-59

(N.D. Ga. 2000) (qualifying expert who p erformed econometric technical

consulting, held a Ph.D. in statistics, published five textboo ks and had

previously testified as an econometrics expert); In re Industrial Silicon