Allapattah Services, Inc. v. Exxon Corp.

• Decision Date: 28 July 1999
• Docket Number: No. 91-0986-Civ.,91-0986-Civ.
• Citation: 61 F.Supp.2d 1335
• Parties: ALLAPATTAH SERVICES, INC., et. al., Plaintiffs, v. EXXON CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Florida

Page 1335

61 F.Supp.2d 1335

ALLAPATTAH SERVICES, INC., et. al., Plaintiffs, v. EXXON CORPORATION, Defendant.

No. 91-0986-Civ.

United States District Court, S.D. Florida.

July 28, 1999.

Eugene Stearns, Miami, FL, Sidney Pertnoy, Gerald Bowen, McLean, VA, for plaintiffs.

Larry Stewart, Miami, FL, Robert Abrams, Robert Brookheiser, Stuart Harris, Darren B. Bernhard, Robert Wallis, Exxon Company, U.S.A., Houston, TX, for defendant.

OMNIBUS ORDER ON DAUBERT AND RELATED MATTERS

GOLD, District Judge.

I. INTRODUCTION.

Exxon dealers [i.e. direct served branded dealers] have filed this class action against Exxon Corporation based on a claimed breach of Exxon's contractual obligation to its dealers, and the dealer class as a whole, to charge open wholesale gasoline prices in good faith after it implemented its Discount for Cash ("DFC") Program in 1982. By prior orders, the court has addressed various aspects of the controversy.¹ The current matter arises from numerous motions which essentially seek to exclude expert testimony on damages and related matters. To address these motions, the court has conducted an extensive Daubert² hearing over six days.³ At the Daubert hearing; the court heard the direct testimony and cross-examination of the parties' expert witnesses. The Daubert hearing was the last step in a lengthy process established by prior court orders. The process sought to assure that each party would have a complete opportunity to establish, or not, the reliability of its expert witness' opinions on damages and related matters, as well as the lack of reliability of the opposing expert's opinions.

II. PENDING MOTIONS AND GENERAL BACKGROUND.

By order dated March 25, 1999, the parties were permitted until April 15, 1999 to file their expert reports. On that date, the Plaintiffs filed the expert report of Dr. Raymond P.J. Fishe. Exxon filed the expert report of Dr. Joseph P. Kalt. The parties then were permitted until May 3, 1999 to complete their final depositions of the opposing party's expert. Thereafter, each party was permitted to challenge the opposing party's expert by Daubert motions explaining: (i) why the expert is not qualified to testify competently regarding the matters he or she intends to address; (ii) which aspects of the expert's methodology is claimed to be unreliable as determined by the sort of inquiry mandated in Daubert, (iii) and why the testimony will not assist the trier of fact to understand the evidence or to determine a fact in issue. See Order on Status Conference, dated March 9, 1999 [D.E. # 972]. The responding party was then permitted to reply with its own memorandum and affidavits.

Upon the completion of the depositions, Exxon moved to exclude the testimony of Dr. Raymond Fishe [D.E. # 1020]. In support, it filed an accompanying affidavit of Dr. Joseph Kalt, dated June 6, 1999. Exxon also filed a motion to preclude expert testimony on the amount and basis for damages [D.E. # 1028], and to strike Paragraph 5 of the May 17, 1999 affidavit of Dr. Raymond Fishe [D.E. # 1042].

In response, the Plaintiffs filed their own affidavits. The first affidavit was of Dr. Raymond Fishe, dated May 17, 1999. The second affidavit was of Dr. William D. Nordhaus, dated May 17, 1999. Exxon moved to dismiss the Nordhaus affidavit, but the court previously denied its motion by order dated July 1, 1999. [D.E. # 1125].

Plaintiffs then responded to Exxon's motion to exclude Dr. Fishe's expert testimony with a memorandum of law and a new 50 page affidavit of Dr. Fishe. This affidavit contained a number of new charts and exhibits to further explain or justify Dr. Fishe's April 15th report. It also responded to various attacks made by Exxon during Dr. Fishe's deposition, and by Dr. Kalt in his affidavit of June 6, 1999. Exxon then moved to preclude the testimony by Plaintiffs' expert on analysis not contained in his final report [D.E. # 1091]. Finally, Plaintiffs filed their motion to exclude or limit the testimony of Dr. Kalt [D.E. # 1018].⁴ For reasons stated below, the parties' motions are denied.

III. FEDERAL RULE OF EVIDENCE 702.

Federal Rule of Evidence 702,⁵ as explained by the United States Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589, 113 S.Ct. 2786, 2794-95, 125 L.Ed.2d 469 (1993), and in Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), controls determinations regarding the admissibility of expert testimony. Expert testimony may be admitted into evidence if: (1) the expert is qualified to testify competently regarding the matters he intends to address; (2) the methodology by which the expert reaches his conclusions is sufficiently reliable as determined by the sort of inquiry mandated in Daubert; and (3) the testimony assists the trier of fact, through the application of scientific, technical, or specialized expertise, to understand the evidence or to determine a fact in issue. See Fed. R.Evid. 702; Daubert, 113 S.Ct. at 2794 (holding that "under the [Federal] Rules the trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable"). Here, the court concludes that: (1) both experts are qualified to testify, and (2) that their testimony, through their specialized knowledge, would assist the trier of fact to determine whether the Plaintiffs are entitled to damages.⁶ The sole remaining issue for determination is the second inquiry; that is, whether the methodologies by which Dr. Fishe and Dr. Kalt reached their respective conclusions are sufficiently reliable for consideration by the jury. Each party bears the burden of proof to demonstrate reliability by the preponderance of the evidence. Daubert, 113 S.Ct. at 2796 n. 10. As discussed more fully below, the reliability assessment entails preliminary consideration as to whether each expert's reasoning and methodology are sufficiently valid so as to be properly applied to the facts in issue. Id. at 113 S.Ct. at 2797.

IV. RELIABILITY DETERMINATION.

The Daubert Court noted that "[t]he inquiry envisioned by Rule 702 is, we emphasize, a flexible one." Daubert, 113 S.Ct. at 2797. Many factors will "bear on the inquiry [into whether an expert's reasoning or methodology is reliable], and we do not presume to set out a definitive checklist or test." Daubert, 113 S.Ct. at 2796. Nevertheless, the Court did identify certain factors that may be pertinent to such an inquiry. These factors include: "whether [the theory or technique at issue] can be (and has been) tested"; whether it "has been subjected to peer review and publication"; the "known or potential rate of error" of the technique, as well as the "existence and maintenance of standards controlling [its] operation"; and the degree to which the relevant scientific community accepts the theory or technique as reliable. Daubert, 113 S.Ct. at 2796-97. The district judge is assigned the task "... of ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Daubert, 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469.

In Kumho, the Supreme Court held that Daubert's "gate-keeping" obligation, requiring the trial judge's inquiry into both the expert's relevance and reliability, applies not only to "scientific" testimony, but to all expert testimony. Kumho, 526 U.S. 137, ___, 119 S.Ct. 1167, 1174, 143 L.Ed.2d 238; see also United States v. Paul, 175 F.3d 906, 910 (11th Cir.1999). The Supreme Court further noted that Federal Rules of Evidence 702 and 703 give all expert witnesses testimonial leeway unavailable to other witnesses on the presumption that the expert's opinion "will have a reliable basis in the knowledge and experience of his discipline." Kumho, 526 U.S. at ___, 119 S.Ct. at 1174 (citing Daubert, 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469). Moreover, the Court held that a trial judge may consider one or more of the specific Daubert factors when doing so will help determine that expert's reliability. Kumho, 526 U.S. at ___, 119 S.Ct. at 1175. But, as the Court stated in Daubert, the test of reliability is a "flexible" one, and Daubert's list of specific factors neither necessarily nor solely applies to all experts or in every case. Kumho, 526 U.S. at ___, 119 S.Ct. at 1175 (citing Daubert, 113 S.Ct. at 2786).⁷ Alternatively Kumho provides that "the law grants a district court the same broad latitude when it decides how to determine reliability as it enjoys in respect to its ultimate reliability determination." Kumho, 526 U.S. at ___, 119 S.Ct. at 1171 (citing General Electric Co. v. Joiner, 522 U.S. 136, 143, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997)).

Thus, the district court is required to exercise a special "gate-keeping" function to ensure that an opinion offered by an expert is reliable. Kumho, 526 U.S. at ___, 119 S.Ct. at 1176. Indeed, "where [expert] testimony's factual basis, data principles, methods, or their application are called sufficiently into question ... the trial judge must determine whether the testimony has a `reliable basis' in the knowledge and experience of [the relevant] discipline." Id. at 1175<sup>8</sup> (emphasis added). The "`gate-keeping' inquiry must be tied to the facts of a particular case." Id. Moreover, the testimony must be helpful or "fit" with the issues to be resolved in the case; that is, the district judge must also determine whether the expert's reasoning and methodology can be properly applied to the facts in issue. Daubert, 113 S.Ct. at 2796.

The focus is not on the conclusions generated by the expert's methodology, but on the reasonableness of the expert's use of such an approach, together with his or her particular method of analyzing the data obtained, to draw a conclusion regarding the specific matter to which the expert testimony is directly relevant. Kumho, 526 U.S. at ___, 119 S.Ct. at 1177. The "overarching" goal of Daubert's gate-keeping requirement "... is to make certain that...