A defendant cabaret owner moved to strike the expert expert methodologieswitness reports and testimony of a labor economist expert witness for a class of exotic dancers who sought to recoup pay which they claimed was denied to them in violation of the Fair Labor Standards Act and state labor laws.

The plaintiffs’ labor economist created a model designed to calculate damages across the entire class of exotic dancers employed at the cabaret during the time period in question. His model incorporated data from the defendants’ point-of-sale database, which the expert used to determine the hours each dancer worked and the amounts that these dancers paid in fines and fees. In discovery, the defendants produced all three reports for each class member for the entire class period. The labor economist expert’s model consisted of 137,880 “records.” Each record reflected the data associated with one dancer for one day.

District Judge Paul Engelmayer of the U.S. District Court for the Southern District of New York wrote in his opinion that an expert opinion needs some explanation as to how the expert came to his or her conclusion and its supporting methodologies. He noted that Rule 403 says that the court may also exclude evidence if its probative value is “substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.”

In the dancers’ case, the judge noted the importance of the fact that “[a] minor flaw in an expert’s reasoning or a slight modification of an otherwise reliable method will not render an expert’s opinion per se inadmissible,” citing Second Circuit precedent. That case went on to state that “[t]he judge should only exclude the evidence if the flaw is large enough that the expert lacks good grounds for his or her conclusions.”

Defendants claimed that the labor economist’s report and his testimony were both based on unreliable methodology due to a number of “arbitrary assumptions” he made that were not justified by the evidence. The expert acknowledged that the data given to him—which was collected and maintained by the cabaret—was imperfect. However, Judge Engelmayer wrote that it is well-settled that, in wage-and-hour cases, employees are allowed to prove their hours worked as a matter of “just and reasonable inference” in the absence of employer-maintained time records. Otherwise, it would be grossly unfair to have employers avoid or reduce their liability because of their shoddy records.

Judge Engelmayer held that the expert methodologies were sufficiently sound to satisfy the accepted “just and reasonable inference” standard. The expert’s report, he held, was “evenhanded, reasonable, and intellectually rigorous”—in essence, a fundamentally mechanistic task of tabulating the hours worked. The judge noted that had the cabaret’s time records been complete, the task would’ve been totally mechanistic. But the gaps in the records required the labor economist to use his professional judgment as to what reliable proxies would be for the missing data (e.g., log-out times).

The opinion also made note of the fact that the defendants failed to offer any alternative method for calculating damages, and their expert instead devoted his report to criticizing the labor economist’s methodology and his client’s own database and data. And he did not make any of his own calculations. Further, the judge reasoned that the fact that the defendants failed to offer an alternative—let alone a better—methodology was also relevant, as they failed to offer any good reason to discredit the labor economist’s estimate of damages as other than “just and reasonable.” As a result, the judge held that the absence of an alternative methodology was a telling indication that the defendants—in attacking the labor economist expert’s report—could not do anything but spot imperfections. These, the judge said, would exist in any damages methodology, in light of the imperfect data.

Judge Engelmayer explained that the labor economist’s analysis did not have to be perfect to be received in evidence—it only was required to “rest on a reliable foundation that is relevant to the task at hand.” And, here, the judge held that the plaintiffs easily met that standard. They showed, by a preponderance of the evidence, that the expert has based his report on sufficiently reliable facts and data, and that he applied reliable principles and methods to that data. In addition, the probative value of the expert’s testimony at trial would be quite high, and that testimony would be the only available evidence from which a reasonable factfinder could calculate damages. There was no concern that this probative value would be substantially outweighed by the risk of unfair prejudice or confusion of the issues. The judge viewed the risk of unfair prejudice as “virtually zero” and the risk of jury confusion as “slight” with the easily understood nature of the data.

There was nothing unreliable or misleading about the labor economist’s methodology, and the court wrote that, at trial, the defense could cross-examine the expert about alternative means of calculating damages and argue to the jury that his methodology overstated or unpersuasively calculated the dancers’ damages.

The court denied defendants’ motion to strike the labor economist expert’s report and testimony.