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In June 1998, lawyers for 21 independent boat builders were ecstatic. They had just won a $140 million jury verdict — the largest civil verdict in Arkansas history — in an antitrust case against Brunswick Corp., which manufactures and sells inboard engines for motorboats. Though they expected an appeal, the lawyers believed they were on solid ground. They had built their case around Stanford University economics professor Robert Hall, who testified that Brunswick, which at times held a market share as large as 78 percent, engaged in anti-competitive conduct in buying two boat manufacturers and then using its expanded power to restrain trade, enabling it to overcharge for its engines. Nearly two years later, the victory was wrested away. The 8th U.S. Circuit Court of Appeals reversed and remanded for judgment in favor of Brunswick — largely because the court found that Hall’s testimony never should have been admitted. Though the plaintiffs’ lawyers were surprised by this decision and the strict standard applied by the court, it turns out their experience was not unique. Where judges were once inclined to admit expert testimony in business disputes and to let juries decide the weight to give it, more recently U.S. district court judges have adopted tougher standards, according to two recent studies. The smaller study found expert economists testifying in IP cases can be “highly vulnerable to admissibility challenges.” The larger one, which focused on antitrust cases, attributed the trend to the U.S. Supreme Court’s decision in Kumho Tire Co. Ltd. v. Carmichael, 119 S. Ct. 1167 (1999), and a review of the cases the study was based on suggests that a judge’s decision on the plaintiff’s expert usually determines the outcome of the case. THE IMPACT OF ‘KUMHO’ The study of antitrust cases was conducted by Robert Badal and Edward Slizewski, lawyers in the Los Angeles office of Heller Ehrman White & McAuliffe, who examined all the cases they could find — a total of 16 — in which the plaintiff’s economics expert was challenged under Daubert v. Merrell Dow Pharmaceuticals Inc., 113 S. Ct. 2786 (1993) and a judge wrote an opinion. They published a short article outlining their conclusions in the ABA Journal [see www.nlj.com for a link to a longer version of their article]. Virtually all antitrust cases depend heavily on an expert economist who typically is called to identify the relevant market, analyze the ways in which the defendant monopolized that market, and calculate the plaintiff’s damages. “Every antitrust case I’ve been involved in has had an expert testify to damages,” said Badal, who has been defending clients in antitrust cases for nearly 30 years. “The opinion testimony of expert economists will often be the difference between success and failure in an antitrust case.” Of the first 10 cases the pair studied, judges admitted expert testimony, or found the testimony admissible, in eight cases. However, the pattern changed drastically after that. Of the next six cases, expert testimony was excluded in four, including two decided by the 8th and 5th Circuits. Furthermore, circuit courts wrote opinions on two more that came from the first group of 10. In one, the 7th Circuit affirmed a trial court’s exclusion of testimony. The second was the 8th Circuit’s reversal in Brunswick. In virtually every case in which testimony was excluded, the antitrust claim sank with the expert. At first Badal and Slizewski had trouble making sense of the pattern. After all, the Daubert case set the standard back in 1993. Then they added to their chronological list of cases one that had nothing to do with antitrust law, and it all fell into place. The case was Kumho, which was significant both in confirming Daubert‘s standards and extending them — making it more difficult for expert testimony to be admitted. Daubert had offered judges guidance in determining the admissibility of expert testimony, suggesting they consider whether a scientific theory or technique has been tested, has been published and subjected to peer review, possesses recognized error rates and is generally accepted in the scientific community. In Kumho, the Supreme Court explicitly stated that Daubert also applied to “technical” and “other specialized” knowledge. It highlighted the judge’s role as gatekeeper and strengthened the abuse-of-discretion standard for appellate review it had already spelled out in General Electric Co. v. Joiner, 118 S. Ct. 512 (1997). Kumho concluded by focusing on whether an expert’s specific knowledge fit the case at hand. “The trial court had to decide whether this particular expert had sufficient specialized knowledge to assist the jurors in deciding the particular issues in the case,” Justice Stephen Breyer wrote for the 8-1 majority. MESSAGE RECEIVED The lawyers’ study suggests that judges have gotten the message. The Kumho decision came down in March 1999, right after the 10th case they examined. In their view, it explains the pattern. And the Brunswick case, which Slizewski termed “a wake-up call,” could serve as Exhibit A. The trial of Concord Boat v. Brunswick in federal court in Little Rock, Ark., concluded in June 1998, before Kumho. In March 2000, a year after Kumho, the 8th Circuit reversed the trial court’s decision. Writing for a unanimous three-judge panel, Judge Diana Murphy noted that Hall, the Stanford economist, used an economic model “to construct a hypothetical market which was not grounded in the economic reality of the stern drive engine market, for it ignored inconvenient evidence.” Specifically citing Kumho, she added: “Even a theory that might meet certain Daubert factors should not be admitted if it does not apply to the specific facts of the case.” Stephen Shapiro, the appellate lawyer who successfully argued Brunswick’s case, said that the plaintiffs had hoped to relitigate the expert testimony, but were barred from doing so by Weisgram v. Marley Co., 120 S. Ct. 1011 (2000). In general, said Shapiro, an appellate lawyer in the Chicago office of Mayer, Brown & Platt and formerly deputy solicitor general at the Justice Department, plaintiffs’ lawyers would profit by spending more time selecting experts and thoroughly scrutinizing their testimony in advance. It may even behoove them to hire consultants to vet their experts. “Sure it’s expensive and time-consuming,” he acknowledged, “but compared to 10 years of litigation and having everything wiped out on appeal, it’s fully justified.” Another case that demonstrated that even dazzling credentials no longer guarantee that an expert’s testimony will be admitted was In re Brand Name Prescription Drugs Antitrust Litigation, 1999 U.S. Dist. Lexis 550. At the conclusion of a trial in federal court in Chicago in which a nationwide class claimed drug manufacturers and wholesalers engaged in a conspiracy to eliminate competition and artificially inflate prices to pharmacies, Judge Charles Kocoras summarily dismissed the testimony of Nobel Prize-winning economist Robert Lucas and found for the defendants. Kocoras ruled that Lucas was, among other things, “ignorant of material testimony and other evidence,” and that his opinions were “not only not based on the evidence, they were inconsistent with it” and “were offered without any scientific basis.” On appeal, the 7th Circuit affirmed the exclusion and much of the decision. The experts in two other cases included in the study failed to pass muster for a more traditional reason: inadequate credentials. In Virginia Vermiculite Ltd. v. W.R. Grace & Co., 98 F. Supp. 2d 729 (W.D. Va. 2000), the plaintiff’s economic consultant had a B.A. in geological engineering, but no advanced degree or specific training in economics. In Seatrax Inc. v. Sonbeck International Inc., 200 F.3d 358 (5th Cir. 2000), which is more of a trademark infringement than an antitrust case, the 5th Circuit affirmed a magistrate judge’s exclusion of an expert who had no formal training in accounting and had not independently examined the defendant’s gross sales figures provided by the plaintiff’s lawyers. Louis Wilde, an economist and vice president at the economics and business consulting firm Charles River Associates, reached some of the same conclusions as Badal and Slizewski in his study of intellectual property cases. Though the article he co-authored in IP Litigator included only four cases, Wilde said he is aware of additional cases decided since publication. “There’s been a very clear trend of judges playing that gatekeeper role in a much more aggressive way,” said Wilde, who regularly testifies as an expert himself. The anticipation of this closer scrutiny, he explained, is an incentive to settle. “ Daubert challenges,” he said, “are always on the table now.”

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