More than 10 years ago I wrote two columns documenting that, although the Daubert validation test had supplanted the Frye general-acceptance test in most states as well as federal court, the state of the law had achieved an equilibrium. [NLJ, May 13 and July 22, 2002.] In the columns I predicted that "there will likely be further movement toward Daubert, [but] the shift will be a gradual one." I noted that California was the largest jurisdiction still steadfastly adhering to Frye v. U.S. (D.C. Cir. 1923).
That equilibrium largely persisted during the past decade. It is true that Daubert v. Merrell Dow Pharmaceuticals ( U.S. 1993) now has a slightly larger number of adherents than it enjoyed in 2002, but until late last year the state supreme courts in all the leading jurisdictions following Frye — states such as California, Illinois and New York — had consistently declined invitations to shift to Daubert. 1 Giannelli, Imwinkelried, Roth & Moriarty, Scientific Evidence § 1.14 (5th ed. 2012).
In late 2012, though, the California Supreme Court took a major step toward embracing the Daubert approach to determining the admissibility of expert testimony. The court took that step in Sargon Enterprises Inc. v. University of Southern California, 288 P.3d 1237 (2012). The plaintiff, Sargon Enterprises, is a dental-implant manufacturer. Most implants on the market must be made in several stages, spanning weeks. Sargon patented a dental-implant procedure that allowed the procedure to be completed in a single day. To prepare a publicity campaign for its new procedure, in 1996 Sargon entered into a contract with the University of Southern California School of Dentistry. USC agreed to conduct a clinical study of Sargon’s implant procedure. Sargon hoped that the results of the study would be favorable. If the results were positive, Sargon could use the study in its publicity campaign.
Sargon’s hopes were not realized. Sargon claimed that USC "sabotaged" the study by, inter alia, failing to prepare the periodic reports of the study’s progress as USC had promised. Sargon sued USC for breach of contract in 1999. The litigation became a tale of two hearings and two appeals.
Before the initial hearing, USC filed an in limine motion to exclude Sargon’s expert testimony about lost profits on the ground that USC could not have foreseen them. After the trial judge granted the motion, the case proceeded to trial. At a 2003 trial, the jury found that USC had breached the contract and awarded Sargon more than $400,000 in compensatory damages. However, the trial judge forbade any recovery for lost profits. On appeal, a California Court of Appeal reversed the trial judge. The court ruled that the judge had misapplied the foreseeability principle in contract law. The court therefore remanded for a new hearing on damages.
On remand after the initial appeal, the judge conducted an eight-day evidentiary hearing on the question of whether Sargon’s lost-profits damages were sufficiently certain to be recoverable. The primary witness at the hearing was the plaintiff’s expert, James Skorheim, who was both a certified public accountant and an attorney. Skorheim testified that he had researched the dental-implant industry. In his research, he compared Sargon with the "Big Six" companies that dominated the world market. Based on his research, he formulated a "market drivers" hypothesis holding that several factors determine a company’s share of the global dental-implant market, the most important being the innovativeness of the company’s implant procedure.
Skorheim conceded that he could not specify the criteria that a jury should use to determine the degree of innovativeness of a company’s products. He admitted that the jury would have to "wrestle with" that question. Given his inability to identify the criteria, he proposed providing the jury with four scenarios: If the jury found that Sargon’s innovation was meaningful, within a decade Sargon would have gained a 3.75 percent market share and realized approximately a quarter of a billion dollars in profits; if the innovation was good, 5 percent and a third of a billion dollars; if substantial, 10 percent and profits exceeding $600 million; and if "revolutionary," 20 percent and approximately $1.2 billion in profits. The trial judge excluded Skorheim’s testimony as unduly speculative. The Court of Appeal once again reversed the judge. By a 2-1 vote, the court held that the questions about the reliability of Skorheim’s testimony "were better left for the jury’s assessment." That holding set the stage for the California Supreme Court’s unanimous November 2012 decision. The state Supreme Court reversed the intermediate court and upheld the trial judge’s ruling.
In several respects, Sargon signals that the California Supreme Court has taken a major step in the direction of adopting the Daubert approach to determining the admissibility of expert testimony. To begin with, in its opinion the California court approvingly cited all three cases in the Daubert trilogy — the original Daubert decision, 509 U.S. 579 (1993), as well as its progeny, General Electric Co. v. Joiner, 522 U.S. 136 (1997), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999).
More importantly, in its opinion the California Supreme Court endorsed many of the essential teachings of those decisions. In Daubert, Justice Harry Blackmun assigned the trial judge "gatekeeping responsibilities" under Federal Rule of Evidence 702 to ensure that any expert testimony submitted to the jury is both relevant and reliable. To satisfy the trial judge, the proponent must demonstrate that the expert’s theory or technique rests on adequate, methodologically sound empirical validation. The Sargon court expressly stated that, like his or her federal counterpart, the California trial judge now has similar "gatekeeping" duties.
In the interim between Daubert and Kumho, some counsel had argued that Daubert‘s validation test applies only to purportedly scientific testimony. In Kumho, Justice Stephen Breyer rebuffed that argument. To be sure, he acknowledged that the proponent may not be able to validate nonscientific theories and techniques in the same fashion as classically scientific techniques. However, he insisted that whenever the witness claims expertise, the witness’s proponent must establish that the claim rests on more than the witness’ subjective ipse dixit. Likewise, in his opinion in Sargon, Justice Ming Chin appeared to announce a reliability standard applicable across the board to all types of expert testimony. In footnote 6 of the opinion, the justice suggested that in California, the traditional general-acceptance test may still apply to instrumental scientific techniques such as polygraphy. That species of expert testimony may have to surmount two hurdles to admissibility; but on its face the Sargon opinion tasks California trial judges to subject all expert testimony to a reliability analysis.
Finally and most importantly, in Sargon the justice conducted a reliability analysis strikingly parallel to Chief Justice William Rehnquist’s analysis in Joiner. In Joiner, the plaintiffs’ experts analogized to several animal studies to support their causation opinion. The federal trial judge concluded that the analogy between the conditions in the cited studies and the facts in Robert Joiner’s case history was inapt. In sustaining the trial judge’s conclusion, the chief justice listed the differences between adult humans and infant mice, injection and dermal exposure, and adenoma and small-cell carcinoma. In a similar fashion, Justice Chin enumerated several "objective business" metrics, such as the number of employees and sales representatives, that the California trial judge relied on in distinguishing Sargon from the Big Six.
The justice announced that under the California Evidence Code, the trial judge may and should conduct a "circumscribed inquiry" to "determine whether, as a matter of logic, the studies or other information cited by experts adequately support the expert’s opinion." He found that the trial judge had properly exercised discretion in concluding that Sargon’s situation was too dissimilar to that of the Big Six to permit Skorheim to rest his lost-profits opinion on an analogy to the Big Six.
Some commentators have already declared that Sargon has aligned Califor­nia with the ranks of Daubert jurisdictions. Robert Barnes, "High Court Changes Evidentiary Standards," The Recorder, December 10, 2012, at 11. That declaration may be premature. In Daubert, Blackmun explicitly stated that under Rule 104(a), the trial judge acts as a fact-finder; the judge considers foundational testimony pro and con and can pass on the credibility of the foundational testimony. The Sargon court stopped short of expressly empowering California trial judges to conduct that probing an inquiry.
Nevertheless, it is clear that in important respects, Sargon represents a step toward the Daubert approach. Two questions remain. One is whether the California courts will take the next step and authorize their trial judges to conduct the full-blown inquiry contemplated by Federal rules 104(a) and 702. The other, perhaps more important, question is whether Sargon will upset the national equilibrium and prompt other jurisdictions to move in the direction of Daubert‘s validation approach. In my July 22, 2002, column, I predicted that any shift toward Daubert would be "a gradual one." At the very least, Sargon provides another impetus for a shift toward Daubert, but both in California and nationwide the 2002 prediction is likely to hold true.
Edward J. Imwinkelried is the Edward L. Barrett Jr. Professor of Law at the University of California, Davis School of Law and co-author, with Paul C. Giannelli, Andrea Roth and Jane Campbell Moriarty, of Scientific Evidence (Lexis Law Publishing 5th ed. 2012). He can be reached at firstname.lastname@example.org.