Evidentiary Issues

• Pages: 29-60

29

CHAPTER II

EVIDENTIARY ISSUES

A. Introduction

This chapter explores some of the evidentiary issues raised by the

use of econometric studies in litigation. First, the chapter examines the

admissibility of econometric expert testimony, focusing on the tests for

qualification, reliability, and relevance set forth in Daubert v. Merrell

Dow Pharmaceuticals, Inc.1 and its progeny. 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 touches on

the use of econometric evidence at the class certification stage of an

antitrust class-action case.

B. Admissibility under Daubert

1. Introduction

Federal Rule of Evidence 702 provides that “[i]f scientific, technical,

or other specialized knowledge will assist the trier of fact to understand

the evidence or to determine a fact in issue, a witness qualified as an

expert by knowledge, skill, experience, training, or education, may

testify thereto in the form of an opinion or otherwise . . . .”2 Because an

expert is permitted to offer opinions as opposed to facts, and 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.”3

1. 509 U.S. 579 (1993).

2. FED. R. EVID. 702.

3. Daubert, 509 U.S. at 592.

30 Econometrics in Antitrust

As interpreted by the Supreme Court in Daubert and its progeny,4

Rule 702 requires a “flexible” inquiry whose “overarching subject 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.”5 Accordingly, econometric evidence is admissible

under Federal Rule of Evidence 702 only if three conditions are met.

First, the expert must be qualified to testify competently about the

subject matter of the testimony.6 Second, the expert’s methodology must

be sound.7 Third, the expert’s testimony must be relevant to the issue

before the court.8 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.”9

The following sections will discuss courts’ treatment of these three

conditions in cases involving econometric evidence.

2. Qualifications

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.”10 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 note that

an expert is qualified with a cursory reference to their academic and

professional credentials.11

4. The cases in the Daubert family are Kumho Tire Co. v. Carmichael, 526

U.S. 137 (1999), General Elec. Co. v. Joiner, 522 U.S. 136 (1997), and

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

5. Daubert, 509 U.S. at 594.

6. FED. R. EVID. 702.

7. Id.; Daubert, 509 U.S. at 589-90; Kumho Tire, 526 U.S. at 147-49.

8. FED. R. EVID. 702; Daubert, 509 U.S. at 591-92; Kumho Tire, 526 U.S. at

153-54.

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

10. FED. R. EVID. 702.

11. E.g., In re Polypropylene Carpet Antitrust Litig., 93 F. Supp. 2d 1348,

1358 (N.D. Ga. 2000) (qualifying expert who performed econometric

Evidentiary Issues 31

While it may be desirable to obtain a witness with past expertise in

the industry, it is not usually necessary.12 A witness need not be an expert

in “all the fields of study on which he relied in preparing his testimony,”

if he is sufficiently trained in the methods underlying his analysis.13 On

the other hand, it is often better not to utilize an expert whom the court

may perceive as a hired gun, even when an expert is sufficiently

qualified to avoid exclusion.14

When courts exclude expert testimony and evidence based on

experts’ qualifications, it is because the experts lack training or practice

in the particular field about which they are called to testify. An extreme

example, although not involving econometric evidence, is Virginia

Vermiculite Ltd. v. W.R. Grace & Co. Connecticut,15 in which the court

concluded “because of [the expert’s] apparent failure to understand basic

antitrust economic principles, the court cannot find that [the expert]

technical consulting, held a Ph.D. in statistics, published five textbooks

and had previously testified as an econometrics expert); In re Industrial

Silicon Antitrust Litig., 1998-2 Trade Cas. (CCH) ¶ 72,348, at 83,354

(W.D. Pa. 1998) (qualifying expert with Ph.D. in economics who taught

university economics for twenty years, published sixty-six articles and

had some, but not the majority of his, experience in litigation); Law v.

NCAA, No. 94-2053, 1998 U.S. Dist. LEXIS 6640, at *4 (D. Kan. Apr.

23, 1998) (noting that qualifications of chaired professor with Ph.D. in

economics were “both undisputed and beyond dispute”).

12. Cf. Estate of Bud Hill v. Conagra Poultry Co., No. 4:94-CV-0198, 1997

U.S. Dist. LEXIS 13083, at *15 n.5 (N.D. Ga. Aug. 25, 1997) (rejecting

argument that expert’s report was inadmissible “because his only

familiarity with the [relevant] industry arose in light of this litigation”).

13. See Spray-Rite Service Corp. v. Monsanto Co., 684 F.2d 1226, 1241 (7th

Cir. 1982), aff’d, 465 U.S. 752 (1984).

14. See, e.g., In re Aluminum Phosphide Antitrust Litig., 893 F. Supp. 1497,

1500 n.5 (D. Kan. 1995) (characterizing the plaintiffs’ witness as an

“expert for hire” and negatively contrasting his extensive experience as a

paid witness with that of the defendants’ expert, who had superior

academic credentials and relatively little experience as a witness); see

also Lantec, Inc. v. Novell, Inc., No. 2:95-CV-97-ST, 2001 U.S. Dist.

LEXIS 24816, at *27-28 (D. Utah Feb. 13, 2001) (where expert’s

testimony demonstrated a lack of understanding about the relevant

industry and expert’s methodology was seriously flawed, expert was

“clearly a hired gun and any semblance of objectivity is lacking”).

15. 98 F. Supp. 2d 729, 735 (W.D. Va. 2000), aff’d sub nom. Va. Vermiculite

Ltd. v. Historic Green Springs, Inc., 307 F.3d 277 (4th Cir. 2002).