In a recent decision in Manpower, Inc. v. Ins. Co. of Pennsylvania, __F.3d__ (7th Cir. Oct. 16, 2013) (No. 12-2688), the district court’s exclusion of plaintiff’s expert was held to be in error, and subsequently reversed by the Seventh Circuit. The case involved an insurance contract dispute in which Manpower sought damages for loss associated with business interruptions caused by a building collapse. The incident prevented the plaintiff’s use of the building for more than a year. In support of their damage assessment, Manpower sought to admit testimony from an accounting expert. The use of the expert witness was rejected by the district court, and the court granted the Defendant’s motion for summary judgment.
On appeal, the Seventh Circuit reversed and remanded the district court’s ruling. The Seventh Circuit noted the delineating factors between gatekeeping authority, under FRE 702 and Daubert standards, in assessing the reliability in methodology versus the reliability in conclusions reached by utilizing a particular methodology. Blurring of lines may occur between methodology and data conclusions, which the court noted “[a]dmittedly…is not always an easy line to draw,” Manpower cited to the Supreme Court decision in General Electric Co. v. Joiner, 522 U.S. 136, 146 (1997):;
“Conclusions and methodology are not entirely distinct from one another. Trained experts commonly extrapolate from existing data. The critical inquiry is whether there is a connection between the data employed and the opinion offered; it is the opinion connect to existing data “only by the ipse dixit of the expert that is properly excluded under Rule 702. Manpower at *19. (Internal quotation marks omitted).
While the principles of FRE 702 and Daubert had been properly applied, the circuit court agreed with the Plaintiff’s argument that the district court overstepped its boundaries of judicial authority in assessing reliability. As the court stated, “[w]e agree that [Plaintiff’s expert] opinion—although not bulletproof—is sufficiently reliable to present to a jury and that in excluding [Plaintiff’s expert] opinion, the district court exercised its gatekeeping role under Daubert with too much vigor.” Manpowerat *17.
The expert testimony sought to be admitted by Plaintiff’s accounting expert utilized a growth-rate extrapolation methodology to calculate plaintiff’s projected revenue had the collapse not occurred. The district court recognized it as consistent with the insurance policy’s mandate, as well as supported by scholarly treatise. As the circuit court noted:
“Having drawn those conclusions, the district court’s assessment of reliability of the methodology ought to have ceased (or proceeded to the second variable in the business-loss equation. Instead, the district court drilled down to a third level in order to assess the quality of the data inputs [Plaintiff’s expert] selected in employing the growth rate extrapolation methodology. What the district court took issue with was not [Plaintiff’s expert’s] growth extrapolation methodology, but rather his selection of certain data from which to extrapolate.” Id. at *19.
The basis for exclusion was grounded upon the district court’s belief that Plaintiff’s expert “should have selected different data, covering a longer period, as the base for his projection.” Id. at *20. However, as the circuit court noted, because “the selection of data inputs to employ in a model is a question separate from the reliability methodology reflected in the model itself,” the exclusion was an inappropriate overstepping in authority. Id. In examining the distinction between the decision-making powers are appropriate for judicial assessment, and those more appropriately left to juror assessment, the circuit court explained, “[t]he district court usurps the role of the jury, and therefore abuses its discretion, if I unduly scrutinize the quality of the expert’s data and conclusions rather than the reliability of the methodology the expert employed.” Id. at 18.
On the other hand, as the circuit court noted, “[t]his is not to say that an expert may rely on data that have no quantitative or qualitative connection to the methodology employed.” Id. at *22. However, as the district court expressly acknowledged, no lack in connection existed. Essentially, the district court accepted the methodology employed by Plaintiff’s expert as reliable under relevant standards, the subsequent analysis was not only unnecessary, but, more importantly, inappropriate grounds to support exclusion of testimony that ought to have been left to juror assessment.
By: Alicia McKnight, J.D.