At the Podium: Kathleen Sullivan's Pyrotechnics on Full Display Before High Court

The Quinn Emanuel partner found a receptive audience to her arguments on the admissibility of expert testimony that might get her client, USC, out of paying up to $1 billion for a botched clinical study.

Scott Graham

2012-10-08 05:48:41 PM

DAVIS — Kathleen Sullivan is a juggler. She can flip thoughts, ideas, and judicial questions through the air while arguing cogently at breakneck speed.

At a recent Ninth Circuit argument the Quinn Emanuel Urquhart & Sullivan partner unpacked all of this in 15 seconds: "Let me go through the textual reasons, the structural reasons and the policy reasons, boom, boom, boom. It's like a treasure map," she said. "If we start with the textual reasons and, Judge McKeown, if I could just do the textual argument in four quick steps and then I want to answer Judge Bea's question about whether this is an as-applied or a facial challenge."

Then, by the time you're finished thinking, "Ooh, treasure map," she's already wrapped all the different threads of the argument into a coherent bow.

Lately, Sullivan's been juggling cases along with ideas. Six weeks ago she traveled to Alaska to argue to the federal appeals court that Shell Oil should be allowed to explore for oil in the Arctic Ocean. Two weeks later she was before the same court in San Francisco arguing a high-stakes patent case for Motorola that could be worth billions in licensing revenue, and last week argued the Alien Tort Statute before the U.S. Supreme Court. And, of course, there was that little dustup between Apple and Samsung over the summer, which required her appellate expertise in the run up to trial.

Sullivan's record on those cases is mixed so far. At the prodding of the U.S. Court of Appeals for the Federal Circuit, U.S. District Judge Lucy Koh of San Jose enjoined her client, Samsung, from selling the Galaxy 10.1 tablet. (Koh just dissolved that injunction in the wake of the jury verdict.). In the Motorola case, the Ninth Circuit turned down Sullivan's bid to let the company enforce an injunction against Microsoft. The oil and alien tort cases remain under submission.

But it looks like a slam-dunk for Sullivan in another high-stakes case argued last week to the California Supreme Court at a special sitting in Davis. Sullivan used her mad argument skills to wow students and faculty of UC-Davis School of Law (and maybe even some Supreme Court justices), while appearing to get her client, the University of Southern California, off the hook for potentially $1.18 billion in damages, all the while likely making important new law on the admissibility of expert testimony.

"We don't suggest for a moment that juries are not free to decide whether expert opinion testimony is probative," Sullivan told the court. But when the methodology behind that expert testimony is unreliable, trial judges can exercise their gate keeping discretion by excluding it under Evidence Code 801, even if it knocks out an entire category of damages, she argued.

In Sargon Enterprises v. University of Southern California, that category is lost profits. Sargon is a small dental supply company with a handful of employees and what it believes was a revolutionary new design for dental implants. It contracted with USC's medical school to conduct a clinical study, but according to Sargon the university botched the study and failed to properly report its results.

An expert witness testified that Sargon, which had never had profits above $100,000 in a given year, could have made between $220 million and $1.18 billion on the implants if USC had performed competently. A jury ruled that USC did breach the contract, awarding $433,000, but a trial judge excluded the lost profits evidence. California's Second District remanded for retrial, and Superior Court Judge Terry Green held an eight-day evidentiary hearing on expert testimony proferred by accountant James Skorheim, who said Sargon's innovation would have generated profits comparable to some of the largest dental supply companies in the world. Green excluded it again as unreliable.

Before the Supreme Court last Wednesday, Sullivan spoke with an urgency bordering on anxious that called to mind another proficient appellate lawyer, criminal specialist Dennis Riordan. "The judge gave Sargon every benefit of the doubt in trying to put forth this novel, unprecedented market-drivers theory," she told the justices.

But Sullivan balanced that pointed oratory with a warm demeanor, smiling frequently and gesturing often with both palms up, as if welcoming the justices to their own court.

When Justice Carol Corrigan noted that Green devoted eight days to the summary judgment hearing, Sullivan responded, "Yes, Justice Corrigan, an eight day evidentiary hearing," punching "eight day" so as to more gently correct Corrigan about the type of procedure at issue.

Justice Joyce Kennard, meanwhile, seemed incredulous at the damages figure. "Was it a figure between $220 million up to $1.18 billion, with a 'b'"? she asked.

"Yes, remarkably enough, Justice Kennard, it was," Sullivan responded.

But, Chief Justice Tani Cantil-Sakauye interjected, wasn't the dental implant "revolutionary"?

"That's what the inventor said it was," Sullivan briefly acknowledged before steering back to more favorable turf. "But to go back to Justice Kennard's correct recitation of the numbers, and let's focus on them because they are truly remarkable."

Returning later to the "revolutionary" claim, Sullivan argued that innovation is far from the only key to profitability. "To get to be the leading company in the world, wouldn't it have something to do with your capitalization, your research and development, your other products, your advertising, your marketing, the efficiency of your management?

Of the seven justices, Goodwin Liu sounded the most skeptical. "What is the evidence supposed to show?" he asked, suggesting that a startup's profits will always be somewhat speculative. "As I read the arguments, your opponent is saying, 'Well … you breached the contract. So to now hear you complain that it's difficult to show damages because of your wrongful conduct" isn't fair.

Sullivan took the question head on. "Justice Liu, we could not disagree with that more emphatically," she said. "Far from preventing Sargon from proving lost profits, all that the trial judge did here was say, 'Please prove lost profits by a reliable method.'"

Liu and Justice Ming Chin addressed Sullivan as "Dean Sullivan" — a reference to her decade at the head of Stanford Law School. Others were not as deferential: Justice Kathryn Mickle Werdegar greeted her as "Ms. Sullivan" and Justice Marvin Baxter used the more traditional "counsel."

Sullivan's opponent in the case, Eric George of Browne George Ross, is well-known to the court as well. His father Ronald George was chief justice for 14 years and instrumental in selecting some of the current justices. Indeed, Eric George himself has actively consulted on judicial selection generally.

"Your honors, what I just heard was a superb argument," George said, "in large part to be directed to a jury."

In other words, he argued, if his expert's methodology was unreliable, USC's counsel or own experts could have tried to make that point to jurors.

Justice Ming Chin immediately threw cold water on George's argument. What's the standard of review on appeal of the trial judge's decision, he asked.

"The appropriate standard is indeed abuse of discretion," George acknowledged, "but what does that mean?"

What it usually means, if you're appellant, is that you lose. But George argued that "something very different than a normal abuse of discretion" should apply, because the trial judge was acting as the ultimate finder of fact on the issue of lost profits. "Here we have a situation where a trial judge took out of play an entire category of damages," George argued. "There is no discretion to be abused in doing that."

But even Liu didn't sound persuaded, and without his vote, George will almost surely have to concede this one to Sullivan. The expert's numbers "are presented on a chart, they look like they have some basis to them," Liu said. "And yet, I think, on careful inspection it's not obvious at all that there's any basis to these numbers."

Correction: This story has been updated to include Sullivan's Oct. 1 appearance before the U.S. Supreme Court.