We’d like to call your attention to a recent development in expert issues. In September, SQM North America Corporation (SQMNA) petitioned SCOTUS to reverse the Ninth Circuit’s decision in SQM N. Am. Corp. v. City of Pomona, 750 F.3d 1036 (9th Cir. 2014), in which the appeals court held that “only a faulty methodology or theory, as opposed to imperfect execution of laboratory techniques, is a valid basis to exclude expert testimony.” SQMNA’s petition, which has been bolstered by four amicus briefs, raises issues significant to corporate defendants in expert-heavy disputes. Regardless of whether SCOTUS decides to hear the case, the petition highlights the circuit split over the interpretation of FRE 702 and Daubert, and the gatekeeping role of trial courts in screening unreliable expert testimony.
Let’s start with a brief discussion of the underlying facts and case history. The City of Pomona, California sued SQMNA in 2011 seeking to hold it liable for costs associated with investigating and remediating groundwater contamination allegedly caused by perchlorate. The suit hinged on a “stable isotope analysis” performed by Pomona’s causation expert purporting to show that the perchlorate in its groundwater had the same distinctive isotopic “fingerprint” as the perchlorate imported into southern California by SQMNA between 1927 and the 1950s. After a pre-trial Daubert hearing, the district court conducted an FRE 702 analysis and excluded the expert’s opinions as unreliable because, inter alia, they were subject to future methodological revisions and were not yet certified by EPA, the procedures used by the expert had not been tested and were not subject to retesting, and the reference database relied on by the expert was too small. The Ninth Circuit, however, reversed the trial court, and in particular rejected SQMNA’s argument that the causation expert’s opinions were unreliable because the expert did not adhere to testing protocols set forth in a guidance manual that the expert claimed to rely on. See SQM N. Am. Corp. v. City of Pomona, 750 F.3d 1036 (9th Cir. 2014).
The Ninth Circuit dismissed SQMNA’s argument as “relat[ing] to adherence to protocol, which typically is an issue for the jury,” and declined SQMNA’s entreaty to follow the Third Circuit’s holding in In re Paoli R.R. Yard PCB Litigation, 35 F.3d 717 (3d. Cir. 1994), that “any step that renders the analysis unreliable under the Daubert factors renders the expert’s testimony inadmissible, *** whether the step completely changes a reliable methodology or merely misstates that methodology.” Id. at 745 (emphasis added). In rejecting the Third Circuit approach, the Ninth Circuit stated that “only a faulty methodology or theory, as opposed to imperfect execution of laboratory techniques, is a valid basis to exclude expert testimony.” The Ninth Circuit further distinguished its rule by describing it as a “more measured approach to an expert’s adherence with the spirit of Daubert and the Federal Rules of Evidence.” The Ninth Circuit’s position is all the more remarkable given that the Second, Sixth and Tenth Circuits have embraced the approach enunciated in Paoli R.R. Yard PCB Litigation.
So what does it all mean? The Ninth Circuit’s ruling in SQMNA creates an undeniable circuit split over FRE 702, Daubert, and the gatekeeping role of a trial court. While the Ninth Circuit asserts that its “faulty methodology” rule takes a more measured approach to expert issues, in reality the rule creates a rigid distinction between the “methodology” an expert uses and the “conclusions” that the expert draws, urging courts to consider the two factors separately. This distinction conflicts with the plain language of FRE 702, which on its face requires a trial court to consider the methodology and conclusions when evaluating proffered expert testimony. The net effect of the Ninth Circuit’s “more measured” rule is that the critical gatekeeping role of the trial court — namely, ruling on challenges to an expert’s application of his or her methods, and challenges to the factual underpinnings of the expert’s testimony — is delegated to the jury. In practical terms, this means that experts face a lower level of scrutiny in the Ninth Circuit under FRE 702 and Daubert when compared to the more exacting “any step” rule followed by the Second, Third, Sixth and Tenth Circuits.
Finally, to be fair, the Ninth Circuit is not alone in construing FRE 702 and Daubert as calling for the “liberal admission” of expert testimony. In Johnson v. Mead Johnson & Co., 754 F.3d 557 (8th Cir. 2014) and Manpower, Inc. v. Ins. Co. of Penn., 732 F.3d 796 (7th Cir. 2013), the Eighth and Seventh Circuits reversed trial court decisions excluding expert testimony, reasoning that challenges to the experts’ assumptions and extrapolations were matters for cross-examination, not issues that reached questions of reliability under FRE 702 and Daubert. These disparate rulings demonstrate that there is not a uniform rule when it comes to analyzing expert issues in the federal courts of the United States. While SCOTUS may step in and resolve this conflict, if it does not, corporate defendants need to know that the interpretation and application of FRE 702 and Daubert can, and does, vary significantly from circuit to circuit.