Expert Witness Testimony In Federal Court

Here’s a case that’s a little dated (2012) but still post-worthy for its detailed discussion of punitive damages and the standards for expert testimony admissibility in Federal court.

In Baldonado v. Wyeth, 2012 WL 1520331, the Northern District partially granted a motion to bar plaintiff’s economics expert from testifying on plaintiff’s punitive damages and a defendant pharmaceutical company’s net worth in an injury suit involving one of defendant’s hormone replacement products.

In support of her case, the Plaintiff offered the  expert opinions of an economist who offered opinions on both the defendant’s net worth and the amount of punitive damages due the plaintiff.

In partially granting the defendant’s motion to bar the testimony, the court provides a nice gloss on the required showings for getting expert opinions into evidence in Federal courts.

Punitive Damages and Expert Testimony

– Under Federal Rule of Evidence 702, 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: (1) the expert’s knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (2) the testimony is based on sufficient facts or data; (3) the testimony is the product of reliable principles and methods; and (4) the expert has reliably applied the principles and methods to the facts of the case;

– Federal district courts employ a three-part test before admitting expert testimony: (1) the expert must be qualified as an expert by knowledge, skill, experience, training, or education; (2) the expert’s reasoning or methodology underlying his testimony must be scientifically reliable; and (3) the expert’s testimony must assist the trier of fact in understanding the evidence or to determine a factual issue;

 – A damages expert should not give an opinion on the amount of punitive damages the jury should award;

 – a punitive damage amount is for the jury to decide based on the facts of this case and the applicable punitive damages law.

See FRE 702.

The court found that the Plaintiff’s economist improperly testified that the jury should assess punitive damages between $6.4 billion and $7.1 billion based on defendant’s daily profit rate for the drug in question and his review of SEC guidelines for punitive damages in antitrust cases.

Since it was improper for the expert to opine on the specific punitive damages to be awarded as well as what damages calculation formula to apply, the court granted the motion to bar the expert from testifying on the proper measure for punitive damages.

Punitive Damages and ‘Net Worth’ Testimony

The court next addressed whether plaintiff’s expert could opine that the defendant pharmaceutical giant was worth about $62 billion.  In the context of punitive damages and in the accounting realm, “net worth” means the excess of a company’s total assets minus total liabilities.

In Illinois, a plaintiff can present evidence of a corporate defendant’s net worth where punitive damages are at issue.  A defendant’s profits or net worth is relevant where a plaintiff alleges a claim that may merit punitive damages.

But because of their penal nature, punitive damages are disfavored and courts cautiously avoid assessing punitives unless clearly they are clearly warranted.  While the amount of punitive damages is a question for the jury, the threshold decision of whether the facts of a particular case justify the imposition of punitive damages is for the judge to decide.

The Court ultimately ruled that a further hearing was necessary to probe the basis for the expert’s net worth finding.  Since the expert appeared to substitute a “market capitalization” (number of outstanding shares times share value) analysis instead of a straight assets-minus-liabilities one to measure the defendant’s net worth, the expert’s underlying methodology wasn’t sound enough to get his report into evidence without an additional hearing.

Afterwords:

1/ Where an expert offers damages and net worth testimony, especially for a global corporate defendant, his predicate methodology must be based on sound data for his testimony to be admissible;

2/ While a defendant’s net worth is relevant to the punitive damages question, a court must still make a threshold decision that a given case warrants punitive damages;

3/ The plaintiff who seeks a punitive damages award has the burden of showing how he or she arrived at the ultimate net worth valuation for a defendant.

 

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PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.