A recent California Supreme Court opinion expands the trial court’s “gatekeeping” function, adopting a Daubert-like standard for admission of expert testimony.
In Sargon Enterprises, Inc. v. University of Southern California (Sargon),1 the California Supreme Court unanimously affirmed the trial court’s exclusion of an expert economist; the expert opined that Plaintiff, a three-person medical device start-up, was destined to become an industry leader, had Defendant not breached a contract to conduct a five-year clinical trial study of Plaintiff’s dental implant device. Plaintiff’s expert claimed:
- Success in the dental implant industry hinges on being “innovative”;
- Plaintiff was highly innovative — in fact more innovative than the six leading dental implant manufacturers (the Big Six); and
- But for the breach of contract, Plaintiff would have overtaken the Big Six within 10 years and amassed huge profits ranging from US$220 million to US$1.8 billion.
A 2003 jury trial resulted in a liability finding and award of US$433,000 in compensatory damages on the breach of contract claim, but the trial court twice refused to send lost profits to the jury. Following a lengthy evidentiary hearing, the trial court noted multiple problems with the expert’s “principles and methodology” regarding lost profit damages; in particular, the expert made several wild assumptions that had little to no factual basis. For example, he admitted that there are several relevant predictors of a company’s future success — past financial performance, a strong research and development program, a comprehensive marketing strategy and sales force, and the support of a parent company — but completely disregarded those factors in projecting Plaintiff’s exponential growth. Plaintiff was a fledgling company; in its brief history, its peak annual profits had reached only US$101,000. It had no research and development program, no marketing strategy, no sales force, and no parent company. In addition, the expert’s “innovativeness” theory of market success lacked foundation and therefore failed to persuade the trial court.2 For all of those reasons, the California Supreme Court affirmed the exclusion of Plaintiff’s economist as a proper exercise of the trial court’s “gatekeeping” function.
The Court’s Opinion, ostensibly based on California Evidence Code sections 801 and 802, also cites Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) and the extensive commentary that followed that decision. In fact, the Opinion includes Daubert-esque references to the trial court’s “gatekeeping obligation,” “gatekeeping responsibility,” and “gatekeeper role.”3 In no uncertain terms, Sargon confirms the trial court’s need to examine the “reasons” behind an expert’s opinions, with particular focus on the expert’s “principles and methodology.” Stated another way, the trial judge must:
“make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.”4
The Court’s rationale for heightened scrutiny of experts is to “protect” a jury from expert testimony in a setting where “‘a jury’s common sense is less available than usual to protect it.’”5
In the authors' view, Sargon signals a potential sea change in California jurisprudence, for the first time making California a state where both Daubert and Kelly-Leahy are considered.6 For this reason, Sargon will likely impact a broad range of medical and scientific cases, including, but not limited to, products liability, toxic tort, and consumer class actions.7 In view of the foregoing, California practitioners should be well-versed in the Sargon framework, both in evaluating the strength of their own experts and deciding whether to mount a challenge to the admissibility of expert testimony under Rules 801 and 802.
Read the full opinion here.