Opinion
Civil File No. 00-MDL-1328 (PAM)
January 29, 2003
MEMORANDUM AND ORDER
This matter is before the Court on Defendants' Motion to Exclude Plaintiffs' Expert Witness. For the reasons that follow, the Court denies the Motion. Defendants ask the Court to exclude the testimony of Dr. John Beyer under the principles espoused in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999), and codified in Fed.R.Evid. 702. According to Defendants, Dr. Beyer's economic analysis is "junk science" and should not be admitted.
Defendants bolster their arguments regarding the alleged failings of Dr. Beyer's analysis with the testimony of yet another expert witness, Professor Franklin Fisher of MIT. Plaintiffs respond with their own new expert. The Court notes that Chief Justice Rehnquist surely did not intend the proceeding he created in Daubert to devolve into yet another battle of the experts.
In any case, the Court is not persuaded that Dr. Beyer's testimony should be excluded. Defendants' criticisms of Dr. Beyer's analysis go to the weight that should be given his testimony, and not to whether that testimony is admissible under Daubert and its progeny. The weight of Dr. Beyer's testimony is a matter for the jury.
DISCUSSION
Proponents of expert witnesses must prove admissibility by a preponderance of the evidence, Lauzon v. Senco Prods., Inc., 270 F.3d 681, 686 (8th Cir. 2001) (citing Daubert, 509 U.S. at 592), but the trial court has discretion on whether to admit or exclude expert testimony, Miles v. Gen. Motors Corp., 262 F.3d 720, 724 (8th Cir. 2001). Under Federal Rule of Evidence 702, a witness is qualified to testify as an expert on the basis of the witness's knowledge, skill, experience, training or education. See id. Once a witness qualifies as an expert, the district court has the obligation to act as a "gatekeeper," screening the expert's testimony to ensure that it "is not only relevant but reliable." Id. (citing Daubert, 509 U.S. at 589). Further, the testimony should assist the trier of fact, and courts should resolve doubts regarding the usefulness of an expert's testimony in favor of admissibility. Clark v. Hendrick, 150 F.3d 912, 915 (8th Cir. 1998); see also Arcoren v. United States, 929 F.2d 1235, 1239 (8th Cir. 1991) (noting that Rule 702 clearly "is one of admissibility rather than exclusion") (quoted in Lauzon, 270 F.3d at 686).
To determine whether proffered expert evidence satisfies the standard of reliability, the Court must ascertain whether such evidence is "ground[ed] in the methods and procedures of science." Daubert, 509 U.S. at 590. Daubert provides a number of nonexclusive factors for courts to apply in making admissibility determinations: (1) whether the theory or technique can be (and has been) tested; (2) whether the theory or technique has been subjected to peer review and publication; (3) the known or potential rate of error; and (4) whether the theory has been generally accepted. Lauzon, 270 F.3d at 687 (quoting Peitzmeier v. Hennessy Indus., Inc., 97 F.3d 293, 297 (8th Cir. 1996) (paraphrasing Daubert, 509 U.S. at 593-94)).
Defendants contend that Dr. Beyer's multiple regression analysis is flawed for several reasons: (1) the demand variable used results in the conclusion that, as demand goes up, price comes down, which allegedly is contrary to basic economic theory; (2) the analysis allegedly fails to account for differences in currencies and exchange rates; and (3) Dr. Beyer allegedly failed to consider other factors such as capacity increases that might account for otherwise unexplained price differences in the conspiracy and post-conspiracy period.
A. Negative Demand Variable
The meat of Defendants' argument is that Dr. Beyer used a negative number as the demand variable in his multiple regression analyses, and that this flies in the face of all economic theory. According to Defendant, a demand variable must be a positive number because economic theory holds that as demand goes up, price also goes up, and vice versa. Although the demand/price correlation described by Defendants is indeed a fundamental precept of economics, it is not without exceptions. There are common exceptions to the rule that illustrate how price dos not always vary inversely with demand. One example is in luxury items. A Mercedes Benz at $10,000 may not sell as well as the same car at $50,000 because of the perception that a $10,000 car may have quality problems or is not "really" a Mercedes. Another example is when the price of the item is such a small component of the finished good. This could certainly be the scenario with MSG and nucleotides. A manufacturer who uses MSG might only spend 1/2 cent out of the total cost of the food item it manufactures on a flavor enhancer. Thus, if the cost of MSG rises to 1 cent, the manufacturer will not stop purchasing MSG because even at 1 cent, the cost of the MSG is so small in relation to the total cost as to be de minimus. Of course, whether this is indeed the case in the relevant market has yet to be proved, but certainly Dr. Beyer should be allowed to explain why he used a negative demand variable, and his use of such does not, as Defendants maintain, invalidate his opinion.
B. Differences in Currencies and Exchange Rates
Defendants contend that Dr. Beyer has failed to account for differences in currencies and exchange rates. However, in multiple regression analysis any differences in currencies and exchange rates are usually accounted for in different ways than in formulating a variable to take them into account. Plaintiffs contend that Dr. Beyer does equalize the price/cost figures he uses to account for exchange rates. He should be allowed to explain to the jury how he did this. Again, Defendants' challenge goes to the weight to be given to Dr. Beyer's conclusions, and not to the admissibility of the his testimony.
C. Capacity Increases
Finally, Defendants play a little bit of a word game with their challenge regarding the alleged failure to account for capacity increases. They substitute production for capacity, ignoring the obvious argument that larger capacity doesn't necessarily mean larger production, especially if, as Plaintiffs contend, there was a conspiracy in place that closely regulated production. Indeed, increased capacity can be a way of keeping competitors (or non-conspirators in this case) out of the market. This objection does not invalidate Dr. Beyer's analysis.
CONCLUSION
Defendants have failed to show that Dr. Beyer's analysis fails the standards put forth in Daubert. Dr. Beyer's methods are tested and accepted. The Court finds that his analysis is relevant and, under the Daubert requirements, is also reliable.
Accordingly, IT IS HEREBY ORDERED that Defendants' Motion to Exclude Plaintiffs' Expert Witness (Clerk Doc. No. 344) is DENIED.