Are economists reliable?

["Ian Murray" <seamus2001@xxxxxxxx>]

< http://www.abanet.org/journal/nov01/focus.html >
PRACTICE STRATEGIES / FOCUS: LITIGATION
Economic Testimony Under Fire
Courts are increasingly finding economists unreliable as expert
witnesses

BY ROBERT G. BADAL and EDWARD J. SLIZEWSKI

The U.S. Supreme Court's landmark decision in Daubert v. Merrell Dow
Pharmaceuticals, Inc. has become a significant factor in the outcome
of antitrust cases.

With increasing frequency, federal district courts have relied on
Daubert, and the High Court's follow-up 1999 decision in Kumho Tire
Co., Ltd. v. Carmichael, to exclude what they perceive to be
unreliable economic testimony. It is a pattern that could have
significance for other areas of litigation, as well.

Daubert established a new standard governing the admissibility of
"scientific" expert testimony. The two-part test requires courts to
make a preliminary determination of whether the expert will offer
scientific testimony relevant to the facts of the case. It then
requires courts to assess the reliability of the testimony in terms of
four different factors.

Kumho extended the test to expert testimony based on "technical" or
"other specialized" knowledge. Moreover, it eschewed the formulaic
application of Daubert and gave the district courts wide latitude to
apply relevant Daubert factors to assess the reliability of the expert
testimony at issue.

Since Kumho, virtually every circuit court that has reviewed an order
excluding an economist's testimony in an antitrust case under Daubert
affirmed the district court's exclusion order.

It is becoming more apparent that no expert witness, regardless of the
length of his or her curriculum vitae or strength of reputation, is
safe. District courts are aggressively scrutinizing all aspects of
economic testimony-from the broadly theoretical to the narrowly
factual-to root out perceived flaws.

It is possible to glean a number of steps that can be taken to
eliminate the more obvious grounds for exclusion under Daubert. While
antitrust cases are the primary source of these lessons, they can be
applied in other contexts, as well:

. Hire an expert economist with academic and professional experience
that matches the issues raised in your case. The days of the
all-purpose economist may be coming to an end. Identify as early as
possible the specific areas in which expert testimony will be required
and seek out academically credentialed economists with relevant
professional experience.

. Recognize the difference between liability and damages experts.
Antitrust suits, as well as other cases, often involve economists or
financial experts in both the liability and damages phases, but it may
not be wise to hire one expert for both roles.

. Require the economist to perform independently the work required to
reach an opinion. Even before Daubert, it was not advisable to ask an
expert to assume important facts without conducting an independent
investigation or verification, or to rely on assumptions of market
behavior absent actual data. Neither has it been accepted practice for
the attorney to "draft" the expert's report. But in the post-Daubert
environment, such practice is simply foolish.

Relevant Data Vital

. Commit the time and resources needed to gather relevant data. Lack
of relevant market data is the most common criticism in the Daubert
exclusion cases. While gathering the data may be time-consuming and
expensive, courts are less willing to allow economists to substitute
assumptions for empirical evidence of actual market behavior.

. Cross-check the method and results with the professional literature.
An economic expert has a responsibility to provide relevant,
supportable analyses to defend his or her opinions. Following Kumho,
it is not necessarily mandated that these opinions be subject to peer
review or publication. To the extent there is relevant published
literature, however, the opinions should be consistent with it.

. Never ignore a problem. The economist must be able to address the
limitations on his or her methodology and data in an honest manner,
which includes acknowledging those limitations, explaining how they
were addressed, and justifying the results based on the peculiar facts
of the case.

It is reasonable to infer from the exclusion cases that courts are
more inclined to exclude testimony of an expert who failed to subject
his or her own opinions to a critical evaluation than one who did.



Robert G. Badal is a share-holder and Edward J. Slizewski is special
counsel in the Los Angeles office of Heller, Ehrman, White &
McAuliffe.