Sargon Enterprises v. Usc-a Different Perspective

• Jurisdiction: United States,Federal
• Author: By Edward J. Imwinkelried and David L. Faigman
• Citation: Vol. 27 No. 2
• Publication year: 2014

Sargon Enterprises v. USC-A Different Perspective

By Edward J. Imwinkelried and David L. Faigman

Last year this journal published an article by Robert Knaier discussing the California Supreme Court case of Sargon Enterprises, Inc. v. USC, titled A Gatekeeper Embraced: Expert Opinion Testimony and the Long Road from Daubert to Sargon, 26:3 Cal. Litigation 37. This article analyzes Sargon from a slightly different perspective — that of the authors of the law review article that Sargon relied on.

In 1923, the District of Columbia Court of Appeals decided Frye v. United States (D.C. Cir. 1923) 293 Fed. 1013. In Frye, the court announced that to serve as a basis for expert testimony, a scientific theory must be generally accepted in the relevant expert circles. By the early 1970s, Frye had become the overwhelming majority view in the United States. In 1976, the California Supreme Court adopted that test in People v. Kelly (1976) 17 Cal.3d 24. Although the United States Supreme Court abandoned the Frye test in 1993 ( Daubert v. Merrell Dow Pharmaceuticals, Inc. (1993) 509 U.S. 579), the California Supreme Court quickly made it clear that it did not intend to shift to Daubert's empirical validation/reliability standard. (People v. Leahy (1994) 8 Cal.4th 587.)

[Page 14]

On the one hand, California courts tended to limit the scope of their version of Frye to novel, instrumental, purportedly scientific techniques. (People v. McDonald (1984) 37 Cal.3d 351.) On the other hand, while most states gradually embraced Daubert, California steadfastly adhered to the general acceptance test. As support for Frye waned, some hoped the California Supreme Court would seize the opportunity presented by In re Lockheed Litigation Cases (2005) 126 Cal.App.4th 271, review granted Apr. 13, 2005, 27 Cal.Rptr.3d 360, to embrace a variation of Daubert. In Lockheed, the Court of Appeal's decision read as if it had been written by a federal court applying Daubert. However, when the Supreme Court eventually dismissed review, that hope was dashed. (Id., review dismissed Nov. 1, 2007, 83 Cal.Rptr.3d 478.)

The issue surfaced again in Sargon Enterprises, Inc. v. USC (2012) 55 Cal.4th 747. Sargon Enterprises was a dental implant manufacturer that patented a new procedure allowing an implant to be completed in a single day. Sargon contracted with USC to conduct a clinical study that Sargon intended to use in its publicity campaign for the procedure. Sargon claimed that USC "sabotaged" the study by failing to produce periodic reports that the contract required. At trial, Sargon prevailed on liability. However, before trial, the judge granted USC's motion to exclude testimony about Sargon's lost profits as unforeseeable. The Court of Appeal ruled that the judge erred by misapplying the foreseeability principle, and remanded for a new damages hearing. (Id. at p. 754.)

At the remand hearing, Sargon called a certified public accountant, James Skorheim. In 1998, the year before filing suit, Sargon's net profits were $101,000. Nevertheless, comparing the novelty of Sargon's new implant procedure to the innovativeness of "the Big Six" in the global implant market, Skorheim opined that during the following decade Sargon would have garnered a substantial market share. Depending on how the innovativeness of Sargon's procedure struck the public, the expert asserted that Sargon would have gained a 3.75%, 5%, 10%, or 20% market share — yielding either a quarter of a billion dollars, a third of a billion dollars, $600,000, or $1.2 billion in profits. (Sargon Enterprises v. USC, supra, 55 Cal.4th at pp. 759-760.) Assaying a Daubert...