SACRAMENTO A Los Angeles trial judge did not abuse his discretion when he excluded an expert witness's "speculative" findings that a plaintiff lost up to a billion dollars in potential profits, the state Supreme Court ruled on Monday.
The unanimous ruling upheld a strong "gatekeeper" role for trial court judges in determining the reliability of experts' conclusions.
"We conclude that the trial court has the duty to act as a 'gatekeeper' to exclude speculative expert testimony," Justice Ming Chin wrote for the court. "Lost profits need not be proven with mathematical precision, but they must also not be unduly speculative."
The decision is a blow to dental implant developer Sargon Lazarof, who has pursued the University of Southern California in court for 13 years over its mishandling of a clinical trial. Lazarof's Sargon Enterprises contracted with USC's dentistry school in 1996 to conduct a five-year study of a new implant that promised to significantly shorten dental crown installations.
The business relationship soured when the school failed to produce a required annual report on the study. Other problems with the study quickly surfaced and in 1999 Sargon Enterprises sued for breach of contract. A jury awarded Lazarof's company $433,000. But Los Angeles County Superior Court Judge Terry Green rejected accountant James Skorheim's testimony that the botched study cost Sargon somewhere between $220 million and $1.18 billion in lost profits.
The Second District Court of Appeal sent the case back for retrial and, after an eight-day evidentiary hearing, Green once again excluded Skorheim's findings.
In October the case went before the state Supreme Court where former Stanford Law School Dean Kathleen Sullivan, representing USC, argued that Skorheim's potential-profit figures were not based in reality. Sargon attorney Eric George, son of the former chief justice of California, insisted the soundness of Skorheim's calculations was something a jury should weigh.
In its ruling Monday, the court found that Skorheim's assumption that Sargon, which had never posted an annual profit above $101,000, would have quickly snatched significant market share from the so-called Big Six dental implant makers with its new product was unfounded.
"If lost profits can be estimated with reasonable certainty, a court may not deny recovery merely because one cannot determine precisely what they would have been," Chin wrote for the court. "But exactitude is not the problem here. Whether the actual profits could logically be estimated in the manner Skorheim claimed is the problem. As the trial court noted, a lost profit award of up to $1 billion may not be based on pure speculation."