Daubert and Economics

/ / CFES Publications, Expert Testimony Cases

By Jerome M. Staller, Ph.D.

A recent opinion, Elcock v. Kmart Corp., 3rd Cir. no. 98-7472 (Oct. 10, 2000), stands as a good example of the difficulties courts now face in applying Daubert standards of admissibility to non-scientific testimony.

Under Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167 (1999), courts are now responsible for winnowing out unreliable non-scientific expert testimony, along with their task, imposed by Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 579, 113 S.Ct. 2786 (1993), of deciding which scientific expert testimony is acceptable.

Kumho holds that the “Daubert factors” of admissibility apply to all expert testimony, including testimony by such experts as vocational specialists and economists. Under Kumho, no longer will expert testimony be acceptable on the “ipse dixit” (the say-so) of the expert. Courts must now don lab coats and scrutinize, under the Daubert-factors microscope, all testimony based on “scientific, technical, or other specialized knowledge.”

Mercifully, Kumho gives the courts lots of leeway in deciding how the Daubert factors are to be applied to quasi-scientific or technical testimony, since much “technical” or “other” knowledge is not governed by or derived from the classic scientific method (the development of hypotheses, which are then rigorously tested for “falsifiability”).

The four Daubert guidelines for scientific validity are: 1) is the subject of testimony falsifiable or testable?; 2) is the testimony derived from techniques with known error rates?; 3) has the testimony been subjected to peer review?; and 4) is the testimony generally accepted in the scientific community?

The validity of testimony on economic damages, due to the nature of economic inquiry, cannot be determined under factors (1) and (2). Empirical testing does not usually work with economic hypotheses: economic “proof” is most-often based on statistical inferences, and is not, in most cases, “falsifiable.”

Predictably, courts are not in total agreement as to how the Daubert factors apply to testimony by economists, vocational specialists and similar experts. This was pointed out in an interesting survey article on how courts are dealing with the admissibility of financial-expert testimony in light on Kumho. The authors in “Kicking the Tires After Kumho: The Bottom Line on Admitting Financial Expert Testimony” (Houston L.R. 37:431, Summer 2000), examine opinions determining the admissibility of testimony by economists, accountants and appraisers. They report that most courts apply a combination of Daubert factors (3) and (4) and traditional considerations under Federal Rules of Evidence 403, 702 and 703. The authors found that in many cases where Daubert is cited as the basis for exclusion of testimony, the actual basis is because the proffered testimony was “mere speculation,” prejudicial or otherwise unhelpful. In Elcock v. Kmart, which is not discussed in the survey article, the court struggled mightily to apply the Daubert standards to non-scientific expert testimony. The main admissibility question faced by the Third Circuit in Elcock concerns testimony proffered by a vocational expert in this personal-injury action, concerning a slip-and-fall in a Kmart on the island of St. Croix in the U.S. Virgin Islands. The jury awarded $650,000, based in part on the vocational and economic testimony on economic loss ($300,000 for pain and suffering and $350,000 for economic loss). Defendants appealed, charging, inter alia, that a “Daubert hearing” should have been conducted on the proffered testimony of the vocational specialist and the economist.

Defendant Kmart charged that the vocational testimony was idiosyncratic and subjective. The vocational expert claimed that he had performed intelligence, achievement and aptitude tests on the plaintiff and, after reviewing available jobs in the relevant labor markets, concluded that the plaintiff had suffered a 50 to 60 percent disability. On cross examination, however, the expert could not explain how he arrived at this figure, other than stating that his review of the above factors produced this disability assessment.

The appellate court held that the expert’s stated methodology failed the Daubert requirements of testability and the existence of standards controlling the analytic technique employed. “We can only roughly analogize to these two Daubert factors when reviewing the non-scientific evidence….” the court wrote. “Vocational rehabilitation is a social science that does not exactly mirror the fundamental precepts of the so-called harder sciences. However, the gist of the above Daubert factors are nonetheless implicated in this case. Just as a scientist would want to duplicate the outcome when evaluating a colleague’s claim that he had developed a technique for cold fusion, a vocational rehabilitationist assessing [the plaintiff’s expert’s] disability determination would want to test the underlying hypotheses and review the standards controlling the technique’s operation in an attempt to reproduce the results originally generated. If such testing did not generate consistent results, [the expert’s] method would be exposed as unreliable because it is subjective and unreproducible.”

Thus, the court relies on the “gist” of the Daubert factors, a fairly imprecise standard. And, in any event, it is hard to imagine that any vocational expert’s opinion could, given the “soft” nature of the “science” of vocational analysis, yield an objective, reproducible test of an injured person’s future employment capabilities — there are simply to many unpredictable variables involved. Such analysis would stray into the realm of chaos theory, pretty much outside the boundaries of the classic scientific method.

So, such quasi-scientific testimony is to be analyzed for admissibility by the court using a quasi-rigorous standard — the “gist” of the Daubert factors. It would seem that what the court is doing here is calling for a sensible standard of admissibility that predates Daubert: expert testimony is inadmissible if it is the product of unsubstantiated conjecture (See Dreyton v. Jiffee Chemical Corp., 591 F.2d 352, 362 (6th Cir. 1978)). Maybe the best test of admissibility would be to ascertain how heavily the testimony is based on unsupported conjecture, rather than trying to judge non-scientific analysis by the standards of scientific analysis.

In any event, in judging the early results of Kumho, the data so far yield the following tentative insights: 

  1. It is a good time to challenge questionable expert testimony (prime candidates, in this author’s opinion, are a) worklife testimony based on tables purporting to isolate average time missed from work by disabled workers, b) expert testimony on hedonic damages and c) any testimony incorporating outside studies that are imperfectly understood by the testifying expert, and are merely “plugged in” without any real relevance to the individual circumstances of the case.
  2. The standards for admissibility of technical or other non-scientific expert testimony are in a state of flux and promise to remain so for awhile.
  3. The only Daubert factors that reasonably relate to economic or vocational testimony are peer review and general acceptability — “soft” sciences such as economics are not amenable to falsifiability of hypotheses or determination of “error rate.”
  4. The courts that are straining to apply Daubert factors to non-scientific testimony ultimately tend to apply simple common-sense tests to the testimony in question.

This article is reprinted with permission from the January 2001 edition of Medical Malpractice Law & Strategy, Copyright © 2001 NLP IP Company. All rights reserved. Further duplication without permission is prohibited.

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