United States District Court, E.D. Pennsylvania
IN RE: PROCESSED EGG PRODUCTS ANTITRUST LITIGATION
IN RE: PROCESSED EGG PRODUCTS ANTITRUST LITIGATION.
For SANDRA A. JESKIE, Special Master: SANDRA A. JESKIE, LEAD ATTORNEY, DUANE, MORRIS LLP, PHILADELPHIA, PA.
GENE E.K. PRATTER, United States District Judge.
Several of the nation's largest egg producers allegedly conspired to control and limit the supply of eggs and egg products, resulting in artificially inflated prices during the period of 2000-2008. Direct Purchaser Plaintiffs, a putative class of entities and individuals that purchased eggs or egg products directly from Defendants, are seeking class certification and have offered the testimony of Dr. Gordon Rausser, who holds a Ph.D. degree in economics, in support of their Motion for Class Certification. Defendants have filed a motion seeking to exclude entirely Dr. Rausser's declaration, opinions, and testimony. Although there are a number of challenging issues that bear critical analysis and certainly merited the defense and the Court's attention, the Court ultimately concludes that the Motion to Exclude should be denied.
I. Preliminary Legal Background
a. The Daubert Standard and Factors
Federal Rule of Evidence 702 governs the admissibility of expert testimony and provides:
A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.
The Supreme Court, in Daubert v. Merrell Dow Pharms., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), imposed a gatekeeper role upon district courts by charging them to " ensure that any and all scientific evidence is not only relevant, but reliable." Daubert, 509 U.S. at 589. When " faced with a proffer of expert scientific testimony ... the trial judge must determine at the outset, pursuant to Rule 104(a), whether the expert is proposing to testify to (1) scientific knowledge that (2) will assist the trier of fact to understand and determine a fact in issue." Id. at 592. This gatekeeping function of the district court extends beyond scientific testimony to " testimony based on 'technical' and 'other specialized' knowledge." Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999).
Federal Rule of Evidence 702 provides " three distinct substantive restrictions on the admission of expert testimony: qualifications, reliability and fit." Elcock v. Kmart Corp., 233 F.3d 734, 741 (3d Cir. 2000). The party offering the expert testimony has the burden of establishing that the proffered testimony meets each of the three requirements by a preponderance of the evidence. See Padillas v. Stork-Gamco, Inc., 186 F.3d 412, 418 (3d Cir. 1999).
b. Daubert at the Class Certification Stage
A threshold question is whether, and to what extent, Daubert applies at the class certification stage. Although there is no definitive Third Circuit precedent on point, the general consensus appears to be that the Court should subject expert witnesses to Daubert scrutiny at the class certification stage of the litigation. See, e.g., Romero v. Allstate Ins. Co., No. 01-3894, 52 F.Supp.3d 715, 2014 WL 4966147, at *3-5 (E.D. Pa. Oct. 6, 2014) (applying Daubert to expert testimony at the class certification stage); In re Chocolate Confectionary Antitrust Litig., 289 F.R.D. 200, 207-08 (M.D. Pa. 2012) (" Despite the paucity of relevant precedent in the Third Circuit and the discordant views percolating in the circuits, the court finds that a thorough Daubert analysis is appropriate at the class certification stage ...." ); In re Flonase Antitrust Litig., 284 F.R.D. 207, 235 (E.D. Pa. 2012) (suggesting that expert testimony must satisfy Daubert at the class certification stage); McLaughlin on Class Actions § 3:14 (11th ed.) (" The way courts apply Daubert in the class certification context has evolved toward near universal acceptance that the requirements of Daubert and Rule 702 apply with full force at the class certification stage." ). The Supreme Court has suggested as much in dicta, see Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2553-54, 180 L.Ed.2d 374 (2011) (" The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so ...." (citation omitted)), and the other circuit courts appear to agree that Daubert applies to expert witnesses at class certification, see Newberg on Class Actions § 7:24 (5th ed.) (discussing the precedents in various circuits and concluding that all but the Sixth and Tenth Circuits endorse engaging in some form of Daubert inquiry at the class certification stage). The parties have not disputed this approach in their briefing.
There are two potential complications, however, relating to the scope of the Daubert inquiry. The first potential complication is that the question might arise as to whether the Daubert analysis is limited to expert testimony relating to class certification, meaning the analysis does not extend to expert testimony regarding the
merits. See id. (" The problem courts have confronted is that in many cases an expert who will testify at trial also testifies as to one of the prongs of the class certification inquiry.... Because the expert is testifying as to a prong of the class certification standard, the Court is tempted to ensure the testimony meets the Daubert test and must determine whether it is convincing as to the certification standard, yet because the same expert will be proffered at trial for a related point, a court is tempted to not prejudge the testimony before the discovery phase of the lawsuit enables a full development of the case's facts and of the expert testimony." ). This is a particularly unsettled and confounding issue which the Court does not necessarily need to address, as Dr. Rausser's entire testimony could well be relevant in some form at class certification (he is, after all, Direct Purchaser Plaintiffs' " class certification expert," see Case Management Order No. 21 at 4). But, to the extent this question arises, the Court's view is that it is wiser and more useful to err on the side of a more rigorous Daubert inquiry. That is, so long as the testimony could plausibly be relevant to the class certification analysis, the Court will conduct a full Daubert inquiry on that testimony. After all, the class certification analysis will " frequently entail 'overlap with the merits of the plaintiff's underlying claim,'" but this overlap does not relieve a court of its duty to conduct a full, rigorous certification analysis. See Comcast Corp. v. Behrend, 133 S.Ct. 1426, 1432, 185 L.Ed.2d 515 (2013) (quoting Wal-Mart, 131 S.Ct. at 2551). Similarly, an expert's testimony will often be relevant both to class certification and to the underlying merits should the case proceed to trial. This overlap does not, however, relieve a court of its duty to conduct a full, rigorous analysis of the testimony for class certification purposes. A significant step in this analysis is ensuring that the Daubert standard is met.
The second potential complication is that this Daubert inquiry might overlap significantly with the questions to be resolved at the class certification hearing, which might invite the notion that the issue is better resolved at the more intensive class certification hearing than at the Daubert hearing. The Court embraces the standard of Daubert : " Proponents of expert testimony do not 'have to prove their case twice--they do not have to demonstrate to the judge by a preponderance of the evidence that the assessments of their experts are correct, they only have to demonstrate by a preponderance of evidence that their opinions are reliable.'" In re DVI, Inc. Sec. Litig., No. 03-5336, 2014 WL 4634301, at *5 (E.D. Pa. Sept. 15, 2014) (quoting In re Paoli R.R. Yard PCB Litigation, 35 F.3d 717, 744 (3d Cir. 1994) (emphasis in original)).
To be sure, the Court recognizes that in the class certification context, the line between Daubert and the ultimate issues might prove somewhat illusory. That is because the reliability of the means of proving classwide impact frequently factors into the predominance determination in antitrust class actions. See, e.g., In re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d 244, 252-53, 406 U.S.App.D.C. 371 (D.C. Cir. 2013) (" Common questions of fact cannot predominate where there exists no reliable means of proving classwide injury in fact." (emphasis added)). Similarly, the Daubert analysis requires the Court to determine whether the expert testimony is reliable. See Daubert, 509 U.S. at 589 (" [T]he trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable." ).
How, then, should the Court rule upon this Daubert motion without deciding the issues tied in with class certification? For one, the focus of the two inquiries is subtly different. Daubert " focuses on principles and methodology, not on the conclusions generated by principles and methodology." In re TMI Litig., 193 F.3d 613, 670 (3d Cir. 1999). At class certification, on the other hand, the Court will rule upon the conclusions generated by the principles and methodology. Further, the issues of class certification require the Court to consider questions beyond the reliability of Dr. Rausser's testimony, such as whether further evidence can support the notion that common issues predominate over individual issues. That is, the Court need not find that Dr. Rausser's methods are, by themselves, sufficient to show, say, a common impact or that there is a reliable means of proving damages on a classwide basis--only that his methods are reliable and useful to the questions to be addressed at class certification. Therefore, though some extent of overlap is inevitable, deeming Dr. Rausser's expert testimony admissible under Daubert does not preclude the Court from denying class certification (an issue that the Court has not yet addressed).
This is consistent with the language of the Third Circuit Court of Appeals in In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305, 323 (3d Cir. 2008), in which the court said, " It follows that opinion testimony should not be uncritically accepted as establishing a Rule 23 requirement merely because the court holds the testimony should not be excluded, under Daubert or for any other reason." This quote implies not only that Daubert analysis is appropriate at the class certification stage, see Behrend v. Comcast Corp., 655 F.3d 182, 215 n.18 (3d Cir. 2011) (Jordan, J. concurring in the judgment and dissenting), rev 'd on other grounds 133 S.Ct. 1426, 185 L.Ed.2d 515 (2013), but also that the Court can refuse to exclude testimony under Daubert but nonetheless reject the import of that testimony at class certification.
c. A Quick Word about Credibility
The Daubert hearing involved a somewhat odd presentation of the testimony of Dr. Rausser. Dr. Rausser's credibility has been questioned in the ongoing Rail Freight litigation because of his ties to a company that is involved with investments in potential class action claims, including, it seems, claims in that case. This credibility issue led to some preliminary discussion among the parties and with the Court as to whether Dr. Rausser's credibility was a proper issue at the Daubert stage. Although Defendants hardly mentioned Dr. Rausser's recent credibility issues in their briefing, see Reply in Supp. of Mot. to Exclude 2 (Doc. No. 1101) (mentioning only that " new evidence that Dr. Rausser has been a stakeholder in, and long-time consultant to, companies that depend on recoveries by certified classes underscores the importance of the prohibition of experts exploiting their credentials as vehicles for factual narrative," (quotation marks and citation omitted)), at the hearing Plaintiffs did call Dr. Rausser " to address briefly the 'credibility' issue Defendants have raised," see December 8, 2014 Fax from Steven A. Asher, Esq.
The parties dispute the extent to which credibility is relevant during a Daubert inquiry. The Court follows the standard set out in Elcock :
We do not hold, however, that a district court can never consider an experts witness's credibility in assessing the reliability of that expert's methodology under Rule 702. Such a general prohibition would be foreclosed by the language of
Rule 104(a), which delineates the district court's fact-finding responsibilities in the context of an in limine hearing on the Daubert reliability issue. Indeed, consider a case in which an expert witness, during a Daubert hearing, claims to have looked at the key data that informed his proffered methodology, while the opponent offers testimony suggesting that the expert had not in fact conducted such an examination. Under such a scenario, a district court would necessarily have to address and resolve the credibility issue raised by the conflicting testimony in order to arrive at a conclusion regarding the reliability of the methodology at issue. We therefore recognize that, under certain circumstances, a district court, in order to discharge its fact-finding responsibility under Rule 104(a), may need to evaluate an expert's general credibility as part of the Rule 702 reliability inquiry.
[A]n expert's prior dishonesty or misconduct should not qualify as an appropriate factor in assessing methodological reliability when the acts are wholly unrelated to the expert's use of a particular methodology, but that a court should take such dishonesty or misconduct into account when the nexus between the acts and the expert's methodology is more direct--e.g., when the prior dishonest acts involve fraud committed in connection with the earlier phases of a research project that serves as the foundation for the expert's proffered opinion. Under this approach, for instance, the fact that an expert witness falsely reported his salary on an income tax return has little if any bearing on the reliability of a diagnostic test he frequently employs, but the fact that the expert lied about whether his methodology had been subjected to peer review, or intentionally understated the test's known rates of error, is a different matter entirely.
233 F.3d at 751 n.8 (citation omitted).
Hence, the Court now turns to the substance of the Motion to Exclude Dr. Rausser.
II. Issues Raised in Daubert Motion
The issues the Court must consider in a Daubert hearing are qualifications, reliability, and fit. The first of these considerations--qualifications--was not raised in the initial Motion to Exclude Dr. Rausser. To be " qualified" to render expert testimony under Daubert, Dr. Rausser must merely " possess specialized expertise," and this requirement is interpreted " liberally." Pineda v. Ford Motor Co., 520 F.3d 237, 244 (3d Cir. 2008) (citation omitted). In their Memorandum in Opposition to Defendants' Motion to Exclude (Doc. No. 1058), Direct Purchaser Plaintiffs detail Dr. Rausser's qualifications and experience as recounted in his curriculum vita. The Court concludes that Direct Purchaser Plaintiffs have demonstrated by a preponderance of the evidence that Dr. Rausser is qualified in the field of economics.
a. Whether Dr. Rausser Properly Considered and Discussed the Factual Record in Sections IV and V of his Declaration
The first challenge raised by Defendants to the reliability of Dr. Rausser's expert testimony is that Dr. Rausser's testimony relies not on his economic expertise but merely upon his cursory consideration of the evidence. That is, in his analysis of whether the " Egg Industry is Conducive to Price Manipulation through Output Restriction" (Section IV) and whether " Conspiracy Period Behavior and Pricing is Consistent with Collusion" (Section V), Dr. Rausser does not express opinions involving
the application of his " scientific, technical, or specialized knowledge. Instead, Dr. Rausser merely lends his expert credentials in an effort to bolster Plaintiffs' legal advocacy by providing a narrative based on these documents most to Plaintiffs' liking." Mem. in Supp. of Mot. to Exclude 4-5 (Doc. No. 1032). Such testimony, Defendants argue, is neither sufficiently based in specialized knowledge to qualify as " expert testimony" nor helpful to the finder of fact. Defendants also argue that Dr. Rausser's testimony is flawed because he did not analyze certain pieces of data, such as publicly available data to determine whether supply was reduced. See id. at 7.
By way of example, in their Reply, Defendants point to the following aspects of Dr. Rausser's testimony as offering improper interpretations of the record:
o Dr. Rausser's conclusion that the UEP animal welfare guidelines were not developed with animal welfare as their objective and that " the prospect of higher egg prices through supply reductions" was " an incentive for producers to participate" in the program. See Rausser Decl. 67-68 (Doc. No. 978-2).
o Dr. Rausser's statements in his Declaration that UEP's influence was " pervasive" and UEP certification standards " became de facto requirements for doing business in the egg industry," among other similar conclusions about UEP's influence. See id. at 25, 32,40,43,47,58.
o Dr. Rausser's statements in his Declaration that " the overwhelming evidence from the record is that UEP explicitly told producers not to build more cages," and that the Defendants " understood that the increased cage space requirements would lead to reduced supply absent any new capital investment in the construction of cages." Rausser Reply Decl. 10, 46 (Doc. No. 1059).
Plaintiffs counter that Dr. Rausser's use of the factual record is wholly appropriate and necessary for him to offer his expert opinion. They claim that this testimony about the facts is necessary for the development and testing of a hypothesis. They further argue that Dr. Rausser's opinions are based on his economic expertise, particularly because " whether certain conduct is consistent or inconsistent with one's economic self-interest, and whether it is consistent or inconsistent with collusion, are proper subjects on which a professional economist may opine." Mem. in Opp. of Mot. to Exclude 5 (Doc. No. 1058). Finally, Plaintiffs argue that ...