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This is the second of two articles devoted to the question of the admissibility of testimony by expert economists about hedonic damages. As the first part [NLJ, April 30] noted, in many traditional Frye jurisdictions, “soft” scientific expertise such as economics was exempt from the general acceptance test. Under Frye, the trial judge inquired as to whether the witness qualified as an expert and whether the subject matter exceeded the common experience or “ken” of lay triers of fact. However, the trial judge was neither obliged nor authorized to scrutinize the theory or technique employed by the expert. Daubert and Kumho ended that exemption. Kumho made it clear that the trial judge must ensure the reliability of all types of expert testimony � hard or soft science, scientific or nonscientific in character. Daubert mentioned several factors that the trial judge must consider in deciding whether the expert’s theory qualifies as reliable “scientific . . . knowledge” under Federal Rule 702. However, those factors are largely deduced from a scientific model, and even a judge cannot fit square pegs into round holes. Kumho’s challenge: gauging some experts’ reliability The real challenge posed by Kumho is determining how to evaluate the reliability of experts such as economists. This series of articles uses economists’ testimony about hedonic damages as a case study. The first article pointed out that in the Daubert-Joiner-Kumho trilogy, the court made it reasonably clear that the focus is on the specific theory or technique the expert proposes relying on. The question is not the “global” validity of the discipline of economics. Rather, the issue is the validity of the expert’s technique for estimating hedonic damages. The first article then emphasized that in determining whether the proponent has laid a sufficient foundation to validate the particular theory or technique, the judge must demand more than the expert’s bare assertion. In the case of hedonic damages, experts often point to two types of studies. The first article described willingness-to-pay studies. How much is a consumer willing to pay for a product that will reduce his or her risk of death? The second type of study is willingness-to-accept research. Suppose, for example, that an employee is willing to accept a more hazardous job with an higher annual fatality risk of 1 in 10,000 in return for an extra $300 pay. That conduct suggests that the worker considers the value of a life (VOL) to be $3 million. Viscusi, “Misuses and Proper Uses of Hedonic Values of Life in Legal Context,” 13 J. Forensic Econ. 111 (Spr./Sum. 2000). To be sure, these studies have some probative value. Regulatory agencies such as the Occupational Safety and Health Administration (OSHA) commonly rely on these studies in drafting regulations. Viscusi, supra. Assume, for instance, that a state government wants to raise the speed limit from 55 mph to 60. The government agency might evaluate the wisdom of the regulatory change by assessing both the increased risk of death and the value of the lives that will be lost if the speed limit is increased. If the highway safety investments will cost $3 million but would save two lives worth $5 million, on balance the regulatory change is desirable. Although regulatory agencies have been receptive to reliance on VOL studies, the courts have adopted a very different attitude. A few jurisdictions such as New Mexico have admitted hedonic damages testimony. Couch v. Astec Industries Inc., 53 P.3d 398 (N.M. Ct. App. 2002). However, for the most part, the courts have refused to accept hedonic damages testimony based on these studies. Ireland, Johnson & Taylor, “Economic Science and Hedonic Damage analysis In Light of Daubert v. Merrell Dow,” 10 J. Forensic Econ. 139 (1997). Their refusal rests on an analysis quite similar to the analysis that the Joiner court undertook. The courts have questioned the aptness of the analogy between the issue in these studies and the issue in tort actions as well as the adequacy of the findings in these studies to support the opinions proffered by hedonic damages experts. The courts rejecting hedonic damages testimony often emphasize that willingness-to-pay and willingness-to-accept studies focus on a negative question: risk avoidance. Livington v. U.S., 817 F. Supp. 601 (E.D.N.C. 1993). VOL figures relate to units of public safety, not measures of enjoyment. The focus in the VOL studies is not on the affirmative value of the enjoyment of life. Some people are extremely risk-adverse. Such a person might be willing to pay a good deal for a proven technique for reducing the risk of death but balk at expending a similar sum for a comparable increase in life pleasure. Some courts assert that willingness-to-pay studies “have no apparent relevance to the . . . loss of enjoyment of life.” Sullivan v. United States Gypsum Co., 862 F. Supp. 317 (D. Kan. 1994). Given the liberal standard of logical relevance codified in Federal Rule of Evidence 401, that assertion is a bit of an overstatement. However, the assertion is a forceful expression of the courts’ doubt as to whether the issue in the VOL studies and the hedonic damages question are highly analogous. A further objection to reliance on these studies is that hedonic damages experts overstate the permissible inferences from the studies. Consider, for instance, the willingness-to-pay studies. Suppose that the average consumer is willing to pay $10,000 for a particular automotive safety feature that in fact reduces the risk of dying in a traffic accident by 1%. Before making the expenditure, does the typical consumer pause to acquire information about the percentage decrease in his or her probability of death? In addition, even if they possessed that information before they made the $10,000 expenditure, is their willingness to make the expenditure convincing proof that as a general proposition, they would be willing to pay $10,000 for every percentage decrease in their probability of death? Does the typical consumer or worker think in terms of the monetary value of a unit (a percentage probability) of risk reduction? That may be an unrealistic reconstruction of the average consumer’s state of mind. Yet in order to extrapolate and compute the overall VOL based on a willingness-to-pay or willingness-to-accept study, the hedonic damages expert implicitly makes that assumption. Several courts have questioned whether the assumptions underlying these computations are realistic. E.g., Wilt v. Burracker, 443 S.E.2d 196 (W.Va. 1994); Ayers v. Robinson, 887 F. Supp. 1049 (N.D. Ill. 1995). However, unless we indulge that assumption, the VOL literature does not furnish a trustworthy answer even to the question of how much a person, confronted with a 100% certainty of death, would pay to avoid death. Finally, as numerous courts have stressed, at most the computation yields a figure representing the value of “a statistically average person.” Sullivan, supra. The hedonic damages expert infers “the value of a statistical life � a nameless, faceless member of society.” Ayers, supra. As Judge Milton Shadur elaborated in Ayers, the willingness-to-pay methodology may be an appropriate guide for regulators but not courts and juries traversing the difficult terrain of valuing [a particular] life. These two activities have very different foci: Regulators deal in averages, while courts deal with specific cases. Thus a statistical mean may have validity in the former context, while at the same time it simply creates [a] . . . deceptive appearance of precision in the latter. Based on that reasoning, Shadur excluded hedonic damages testimony under Federal Rule 403; he concluded that the potential for prejudice was substantial while the testimony possessed “relatively low probative value.” In that passage in his opinion, Shadur echoed Justice Harry A. Blackmun’s observation in Daubert that some expert testimony “can be both powerful and quite misleading.” 509 U.S. at 595. Wide discretion for judge on foundation passing muster The Joiner court underscored that the trial judge has considerable discretion in deciding whether the proponent’s foundation is sufficient to pass muster under Daubert and Rule 702. As we have seen, there are several cogent criticisms of the use of expert testimony on hedonic damages: The underlying VOL studies relate to negative risk avoidance rather than the affirmative value of the enjoyment of life, the expert’s computation rests on an unrealistic assumption about the state of mind of the consumers and workers participating in the studies, and at most the studies yield an inference as the value of an average, statistical life, not that of the plaintiff before the court. Given those criticisms, it is difficult to argue that as a matter of law, a trial judge excluding the testimony would be guilty of a clear abuse of discretion. The courts’ critique of hedonic damages testimony is similar to the Joiner court’s critique of the animal and epidemiological studies relief on the plaintiffs’ experts in that case. When the jury is asked to evaluate other intangible damages such as pain and suffering, in closing argument the plaintiff must often be content to give the jury a rough analogy: How much would a typical patient be willing to pay for a pain-killer during a dental procedure? It may be that the courts should draw a similar line with respect to hedonic damages. In summation, the plaintiff ought to be permitted to discuss how much a rational consumer may be willing to pay for a safer car or how much additional pay a rational worker would demand for performing a hazardous job. However, in the Joiner court’s words, there “is simply too great” an “extrapolat[ion]” to infer the overall affirmative value of the plaintiff’s enjoyment of life from the VOL studies. Admittedly, other species of expert economic testimony such as lost wages may be able to run the Daubert gauntlet; but in the current state of the research, expert economic testimony on hedonic damages appears vulnerable to a Joiner objection. and Kumho. Edward J. Imwinkelried is the Edward L. Barrett Jr. Professor of Law at the University of California, Davis. He can be reached at [email protected].

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