Case Title: Sargon Enters., Inc. v. Univ. of S. Cal.

Citation: 

Docket Number: S191550

State: california

Court: California Supreme Court

Date: 2012-11-26T00:00:00Z

Document:
1 
Filed 11/26/12 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
SARGON ENTERPRISES, INC., 
) 
 
 
) 
 
Plaintiff and Appellant, 
) 
 
 
) 
S191550 
 
v. 
) 
 
 
) 
Ct.App. 2/1 B202789, B205034 
UNIVERSITY OF SOUTHERN  
) 
CALIFORNIA et al., 
) 
 
) 
Los Angeles County 
 
Defendants and Appellants. 
) 
Super. Ct. No. BC209992 
 
____________________________________) 
 
A small dental implant company that had net profits of $101,000 in 1998 
has sued a university for breach of a contract for the university to clinically test a 
new implant the company had patented.  The company seeks damages for lost 
profits beginning in 1998, ranging from $200 million to over $1 billion.  It claims 
that, but for the university‘s breach of the contract, the company would have 
become a worldwide leader in the dental implant industry and made many millions 
of dollars a year in profit.  Following an evidentiary hearing, the trial court 
excluded as speculative the proffered testimony of an expert to this effect.  We 
must determine whether the court erred in doing so. 
We conclude that the trial court has the duty to act as a ―gatekeeper‖ to 
exclude speculative expert testimony.  Lost profits need not be proven with 
mathematical precision, but they must also not be unduly speculative.  Here, the 
court acted within its discretion when it excluded opinion testimony that the 
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company would have become extraordinarily successful had the university 
completed the clinical testing. 
We reverse the judgment of the Court of Appeal, which had held the trial 
court erred in excluding the testimony. 
I.  FACTUAL AND PROCEDURAL HISTORY 
Because neither party petitioned the Court of Appeal for rehearing, much of 
this summary of the factual and procedural history is taken from that court‘s 
majority opinion.  (See Richmond v. Shasta Community Services Dist. (2004) 32 
Cal.4th 409, 415; Cal. Rules of Court, rule 8.500(c)(2).) 
A.  The Lawsuit and First Appeal 
In 1991, plaintiff Sargon Enterprises, Inc. (Sargon) patented a dental 
implant that its president and chief executive officer, Dr. Sargon Lazarof, had 
developed.  The United States Food and Drug Administration approved the 
implant, which meant it could be sold and used in the United States.  As the Court 
of Appeal opinion described it, Sargon‘s implant ―could be implanted immediately 
following an extraction and contained both the implant and full restoration.  [¶]  In 
the 1980‘s, the standard implant was the Branemark implant developed at the 
University of Gothenburg in Sweden.  The Branemark implant required several 
steps.  First, surgery would place the implant in a healed extraction socket in the 
patient‘s mouth; a second surgery would inspect the implant to see if it had 
properly integrated with the bone (a process known as ‗osseointegration‘); last, a 
crown would be placed on the implant.  Sargon‘s implant was a one stage implant:  
it expanded immediately into the bone socket with an expanding screw; this 
mechanism permitted the implant to be ‗loaded‘ with a crown the same day.‖ 
In 1996, Sargon contracted with defendant University of Southern 
California (USC) for the USC School of Dentistry to conduct a five-year clinical 
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study of the implant.  In May 1999, Sargon sued USC and faculty members of its 
dental school involved in the study, alleging breach of contract and other causes of 
action.  USC cross-claimed for breach of contract.  All of Sargon‘s claims except 
the breach of contract claim against USC were eliminated by demurrer or 
summary judgment.  In 2003, the contract action was tried before a jury.  Before 
trial, at an in limine hearing, the trial court excluded evidence of Sargon‘s lost 
profits on the ground USC could not have foreseen them. 
The evidence presented at trial showed that after initial success in the 
clinical trials, USC failed to present proper reports as its contract with Sargon 
required.  The jury found that USC had breached the contract and awarded Sargon 
$433,000 in compensatory damages.  It also found in Sargon‘s favor on USC‘s 
cross-complaint for breach of contract. 
Sargon appealed.  The Court of Appeal reversed the judgment, holding that 
the trial court had erred in excluding evidence of Sargon‘s lost profits on the 
ground of foreseeability.1  It also stated, ―Given that the in limine hearings 
focused on foreseeability and not the amount of lost profit damages, it is 
premature to determine whether such damages can be calculated with reasonable 
certainty.‖  (Sargon Enterprises, Inc. v. University of Southern California (Feb. 
25, 2005, B167519) [nonpub. opn.].) 
On remand, the case proceeded to retrial on the breach of contract claim.  
USC moved to exclude as speculative the proffered opinion testimony of one of 
Sargon‘s experts, James Skorheim.  The court presided over an eight-day 
evidentiary hearing at which Skorheim was the primary witness. 
                                              
1  
We express no opinion on the correctness of this ruling, which is not before 
us on review. 
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B.  The Evidentiary Hearing 
Skorheim testified that he was a certified public accountant and an attorney.  
He had been an accountant for 25 years and ―work[ed] as a business and industry 
analyst and forensic accountant.‖  As the Court of Appeal summarized, he testified 
that Sargon‘s lost profits ―ranged from $220 million to $1.18 billion.  In preparing 
his opinion, Skorheim reviewed litigation materials (including deposition 
transcripts and reports of USC‘s damages experts), financial information from 
Sargon and its competitors (including annual reports), and market analyses of the 
global dental implant market prepared by Millennium Research Group . . .‖  
(Millennium).  Skorheim based his opinion on a ―market share‖ approach, by 
which he determined what share of the worldwide dental implant market Sargon 
would have gained had USC completed a favorable clinical study, and he 
calculated future profits based on that market share.  ―Skorheim used the market 
share approach to lost profit damages because the methodology had been used in 
complicated patent cases, antitrust cases, and unfair competition cases.‖  
The Court of Appeal summarized Skorheim‘s testimony about the dental 
implant industry:  ―Nobel Biocare‘s Branemark implant was the pioneer implant 
developed in the 1960‘s and 1970‘s and required two surgeries.  Straumann 
developed the second generation implant, which was placed in the bone without 
being submerged in the gum.  In the early 1990‘s, there was very little penetration 
into the potential dental implant market.  Out of millions of potential patients, only 
about 1 percent of this potential market was receiving product, presenting an 
opportunity for tremendous growth.  In the late 1990‘s, the market began to grow 
dramatically.  Industry reports demonstrated the global market was expected to 
grow during the period 1998 to 2009 at an annualized rate of 18.5 percent.  At the 
time, the market craved technological innovation aimed at shortening healing time, 
cost, and treatment time.  [Millennium] predicted that sales of immediate load 
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implants would grow at compound annual rates of 56.3 percent during 2002 to 
2006, and 32.8 percent from 2005 to 2009.  Further, [Millennium] reported in 
2004, immediate loading implants represented only a ‗niche‘ market because 
demand was limited by industry acceptance.  By 2009, immediate load implants 
would account for 14.9 percent of the United States market, up from 0.4 percent in 
2000. 
―Sargon‘s innovation lay in the use of an ‗immediate load implant,‘ the 
‗ ―holy grail of dental implantology,‖ ‘ which was directed at the market‘s need 
for ease of use, shortened healing times, and overall cost.  Given the state of the 
implant market at the time, in Skorheim‘s opinion an innovator such as Sargon 
would have rapidly commanded a significant market share; with the exception of 
Nobel Biocare, all of the other major implant makers are recent arrivals on the 
scene.‖ 
In Skorheim‘s opinion, three key ―market drivers‖ operate in the dental 
implant industry:  (1) innovation, (2) clinical studies, and (3) outreach to general 
practitioners.  A company must have all three to be successful.  Skorheim had 
testified, the Court of Appeal stated, that ―[t]he value of a clinical study to an 
implant maker is two-fold:  It establishes the efficacy of the device and permits 
entry into the universities where students can be taught to use the device, with the 
expectation that, upon graduation, they will use the product in their practices.‖  He 
believed that clinical success of the Sargon implant would likely lead to 
commercial success.  Skorheim also had testified that because virtually every 
dental implant company employed clinical studies and general practitioner 
outreach, innovation really determined market success and what market share a 
company would achieve.  He had explained, ―The greater the technological 
achievement in the product mix, the greater the likelihood for revenues.‖  In 
Skorheim‘s opinion, innovation was a necessary prerequisite to achieving market 
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success.  ―[F]irst and foremost, you have to have the technological innovation and 
the efficacy.‖ 
As the Court of Appeal observed, ―Skorheim‘s ‗market share‘ approach 
was based upon a comparison of Sargon to six other large, multinational dental 
implant companies that were the dominant market leaders in the industry, and 
which controlled in excess of 80 percent of global sales (Big Six):  Nobel Biocare, 
Straumann, [Biomet 3i], Zimmer, Dentsply, and Astra Tech.  Although there are 
approximately 96 companies worldwide that make dental implants, Skorheim 
believed the Big Six were the top innovators based upon his analysis of the 
[Millennium] report and market intelligence.‖  Skorheim had described the smaller 
companies as ―copycats‖ and ―price cutters‖ that competed on the basis of price 
and were not innovative; he believed that ―the top six are innovators and the rest 
are copycats.‖  The Court of Appeal stated:  ―On cross-examination, Skorheim 
acknowledged that [Millennium‘s] report did not state the Big Six were the most 
innovative; rather, it was an inference he drew from reviewing the report and the 
size and success of the companies in comparison to other, smaller companies.‖ 
Skorheim had acknowledged that many of the smaller companies claimed 
to be innovative, but he believed in fact they were not.  When the trial court noted 
that the Millennium report mentioned other companies that claimed to be 
innovative, Skorheim had responded, ―And I would say that the proof is in the 
pudding.  And the proof is their ability to track the market share and they haven‘t 
been able to do that.‖  When asked whether he agreed ―that the company with the 
largest market share is not necessarily the most innovative,‖ Skorheim had 
answered, ―I don‘t think I can agree with that.  I mean, ultimately, the markets 
determine what‘s innovative and what‘s not innovative.  These markets reward 
innovativeness. . . .  And so the market really makes a determination of which of 
these companies is more innovative than not by the extent to which they reward 
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them with purchasing their products, and so forth.‖  Skorheim had acknowledged 
that the Millennium report did not specifically indicate that some of the smaller 
companies were not innovative, but explained that this was because ―those 
companies are not big enough to be even addressed in the global market, so there‘s 
nothing specific.‖ 
Skorheim believed that Sargon was innovative, like the Big Six, and not a 
copycat or price cutter, like the other small companies.  He acknowledged that 
Sargon was a very small company whose annual profits peaked in 1998 at around 
$101,000 and, unlike the big companies, it had no meaningful marketing or 
research and development organization and no parent company to assist it.  But he 
believed these factors were merely ―incidental‖ to innovation and played little role 
in achieving market share.  Accordingly, and because innovation is the key factor 
driving market success, Skorheim had compared Sargon to the ―Big Six‖ rather 
than to the smaller companies in computing lost profits.  He considered the Big 
Six and Sargon to be ―comparable companies.‖ 
Skorheim had testified that ―assuming the jury finds [the new implant] was 
a superior innovative revolutionary product and based upon everything else I see 
in the materials here, I think that Sargon had a very good chance of becoming the 
market leader over a period of time.  I estimated maybe a 10-year period of time.‖  
Indeed, he believed to a ―reasonable certainty‖ that within 10 years or so Sargon 
would have become a market leader.  He also believed it likely that one of the Big 
Six would have dropped out of the leadership, and that Sargon would have 
replaced that company as a world leader. 
When the trial court asked whether it mattered that some of the big 
companies had many different products, Skorheim had responded that Sargon 
―would have to remain competitive by investing significant amounts of money in 
[research and development] like . . . the other major manufacturers.  Each of them 
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are investing tens of millions of dollars a year into research and development to 
remain strong and technologically sound.‖  He was confident that a company like 
Sargon would have been able to expend the necessary resources to ―develop other 
products over time, that they would be able to use their patented expandable root 
process with other types of coatings, let‘s say, or shapes or sizes.‖  He thought 
Sargon‘s ability to do so distinguished it from the other small companies. 
The Court of Appeal stated:  ―Skorheim outlined similarities and 
differences between the Big Six and Sargon:  First, they all manufactured titanium 
implants, and the implants were one-stage, two-stage, or immediate load (Sargon 
only); second, all used clinical studies; third, all used outreach to general 
practitioners; fourth, pricing was substantially the same; fifth, their qualitative and 
quantitative cost structures were the same; and the implants were manufactured 
either in-house or pursuant to a contract with a third party.  Qualitative cost 
structure consisted of cost of goods sold, research and development costs (R & D), 
sales and marketing costs, and general administrative costs.  Sargon did not have a 
meaningful R & D organization or a sales and marketing department.  In all other 
respects, Sargon‘s costs were similar to the Big Six.‖  Skorheim had 
acknowledged, however, that he could not think of any objective ―business 
metric‖ — ―whether it‘s sales, number of employees, number of distributers, 
anything‖ — by which Sargon was comparable to, for example, Astra Tech, the 
member of the Big Six with the smallest market share. 
The Court of Appeal opinion provided a chart summarizing Skorheim‘s 
testimony regarding Sargon and its competitors for the ―relevant time period, 
approximately 1998.‖  We reproduce it here:  
 
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Sargon 
(1998) 
AstraZeneca 
(1999) 
Dentsply 
(1998) 
Biomet 3i 
(2000) 
Nobel[2] 
(1998) 
Employees 
< 20 
> 55,000 
> 6,000 
> 4,000 
> 1,000 
R&D 
$      46,000 
$  2,923,000,000 
$  18,200,000 
$     40,208,000 
$    8,741,808 
Net Sales 
$1,748,612 
$18,445,000,000 
$795,122,000 
$   920,582,000 
$164,747,305 
Net Profits 
$    101,113 
$  1,143,000,000 
$  34,825,000 
$   173,771,000 
$    5,868,080 
Assets 
$    544,977 
$19,816,000,000 
$895,322,000 
$1,218,448,000 
$243,621,260 
Market Share 
(2007)[3] 
N/A 
4.8% 
7% 
17% 
22–23% 
The dental implant business was only part of AstraZeneca‘s company.  
Skorheim testified that Astra Tech, its dental implant division, had sales in 1999 of 
$111 million. 
For the reasons he gave, Skorheim believed that Sargon, unlike any of the 
other smaller companies, would, over time, have become a market leader, one of 
the Big Six.  In calculating Sargon‘s lost profits, he had not considered profits 
Sargon had ever actually realized, but instead considered the market leaders‘ 
profits.  He believed that Sargon‘s profits would have increased over time until 
they reached the level of one of the market leaders.  He testified, however, that in 
one respect he had taken into account Sargon‘s actual income.4  He had started 
with Sargon‘s gross revenues (not net income) in 1998, the year USC should have 
produced an interim report, which were around $1.7 million to $1.8 million and 
                                              
2  
The Court of Appeal explained that these figures were converted from 
Swedish kroner using the exchange rate in effect in 1998.  Nobel Biocare acquired 
another implant company in 1999, which increased its market share and added 
products to its portfolio. 
3  
The Court of Appeal explained that ―Straumann, another comparator 
company for which there was no data in the record during the relevant period, had 
attained a 22 percent global market share in 10 years.‖ 
4  
The trial court had initially sustained USC‘s objection to this testimony on 
the basis that it was inconsistent with Skorheim‘s deposition, and Sargon had 
failed to provide notice of this testimony, thus depriving USC of the opportunity to 
cross-examine Skorheim meaningfully on the point.  But it permitted Skorheim to 
present this testimony ―to make a record.‖ 
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constituted approximately one half of 1 percent of the total global market.  He then 
doubled that number based on his belief that, had the initial report from the 
clinical study been favorable and had other potentially favorable publicity 
followed, Sargon would have sold approximately 20 implants each to 
approximately 200 additional dentists.  This would have brought Sargon‘s market 
share for that year to about 1 percent.  Skorheim believed that beginning in 1998, 
Sargon‘s market share would have ―ramp[ed] up‖ over the years from this 1 
percent to a share that a comparable member of the Big Six enjoyed.  He had 
calculated the lost profits based on sales in 1998 of over $3 million and a 
subsequent increase each year until Sargon reached the level of one of the Big Six. 
Skorheim claimed no expertise regarding how innovative Sargon‘s dental 
implant was, although he had testified that ―the immediate loading of implants is 
kind of the so-called holy grail of dental implantology.‖  He said the jury would 
have to ―wrestle‖ with the question of how innovative Sargon was.  Because of 
this lack of expertise, Skorheim could not give a single sum of lost profits.  Rather, 
in Skorheim‘s opinion, the amount would depend on how innovative the jury 
found Sargon to be, compared to the market leaders. 
As the Court of Appeal explained, ―Skorheim‘s damages model created 
four alternative damage scenarios based upon the jury‘s determination of the 
innovativeness of the implant.  As a predicate, Skorheim had ranked the 
innovativeness of the comparator companies and established a hierarchy.  If the 
jury concluded Sargon‘s level of innovation was equal to the least innovative of 
the benchmark companies, Astra Tech, Sargon would have attained a 3.75 percent 
share; if the jury concluded Sargon‘s level of innovation was equal to one of the 
lesser innovators of the benchmark companies, like Dentsply, Sargon would have 
attained a 5 percent market share; if the jury concluded Sargon‘s level of 
innovation was equal to a middle-level innovator, like [Biomet 3i], Sargon would 
11 
have attained a 10 percent share; and if the jury concluded Sargon‘s level of 
innovation was that of the most innovative companies, Nobel Biocare and 
Straumann, Sargon would have attained a 20 percent market share.‖  In 
establishing this hierarchy, Skorheim had assumed that the higher the market share 
a company had obtained, the more innovative it was.  He also agreed, however, 
that it was possible, for example, that Astra Tech, with its smaller market share, 
was more innovative than Biomet 3i, which had a greater market share. 
For each of these four scenarios, Skorheim had calculated lost profits from 
1998 to 2009, then added what he calculated to be post-2009 lost profits.  
Skorheim believed that Sargon‘s net profits, which in actuality peaked at $101,000 
in 1998, would have grown to $26 million per year in 2009 under the least 
profitable of the scenarios, and to $142 million per year in 2009 under the most 
profitable of the scenarios. 
The Court of Appeal opinion provided a chart summarizing Skorheim‘s lost 
profits calculations.  We reproduce it here:  
 
Market 
Share 
3.75% 
(Astra Tech) 
5% 
(Dentsply) 
10% 
(Biomet 3i) 
20% 
(Nobel/Strau.) 
Lost Profits 
1998-2009 
$120,011,000 
$181,020,949 
$335,940,541 
 $ 640,232,628 
Value 
Post 2009 
  100,473,347 
  134,343,563 
  269,824,425 
   540,786,150 
TOTAL: 
  $220,484,347   $315,364,512   $605,764,968 $1,181,018,778 
Thus, Skorheim had projected total lost profits of $220 million if the jury 
found Sargon‘s innovation was comparable to that of the least innovative market 
leaders, making what he described as a ―meaningful contribution to innovation‖; 
of $315 million if the jury found Sargon‘s innovation was somewhat greater; of 
$600 million if the jury found Sargon‘s innovation was somewhat greater yet; and 
of $1.2 billion if the jury found Sargon‘s innovation was comparable to that of the 
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market leaders, making what he described as ―revolutionary industry changing 
technology.‖ 
The Court of Appeal summarized the testimony of the other witnesses at 
the evidentiary hearing.  ―Dr. Lazarof confirmed Skorheim‘s conclusion that 
innovation coupled with clinical studies was the driver of market share.  Sargon 
also presented the testimony of Steven Hanson, president from 1992 to 2004 of 
Calcitek, a successful implant company, who testified Sargon could have 
commanded a 15 to 20 percent share of the market if the USC study had been 
completed, although he had not done a market study or considered the probability 
of all of the other steps necessary to get Sargon a 15 to 20 percent market share.  
Robert Pendry was at Straumann from 1992 to 2001 and at Thommen Medical 
from 2002 to 2006, and testified that in his opinion the Sargon implant was 
‗absolutely revolutionary‘ and ‗world changing‘ when introduced in 1997 to 1998.  
In Pendry‘s words, the Sargon implant ‗was the most exciting thing I‘d heard in 
the implant business ever.‘ ‖ 
C.  The Trial Court’s Ruling 
Following the evidentiary hearing, the court issued a 33-page written ruling 
on USC‘s motion to exclude Skorheim‘s testimony. 
The court began by quoting an opinion by Judge Friendly of the Second 
Circuit Court of Appeals stressing the need to protect juries from ―an array of 
figures conveying a delusive impression of exactness in an area where a jury‘s 
common sense is less available than usual to protect it.‖  (Herman Schwabe, Inc. v. 
United Shoe Machinery Corp. (2d Cir. 1962) 297 F.2d 906, 912.)  The court found 
it unreasonable for Skorheim, ―or any such expert, to rely on much of the data 
which forms the basis of his opinions, because no data bears any resemblance to 
Plaintiff‘s historical profits or to those of any similar business.‖  ―Mr. Skorheim‘s 
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opinion leaves the determination of up to a billion dollars of lost profit damages to 
pure speculation.‖ 
The court assumed for purposes of its ruling ―that a ‗market share‘ analysis 
is appropriate and warranted under California law,‖ but it found that Skorheim‘s 
―market share opinion is not based on any actual historical financial results or 
comparisons to similar companies and, therefore, is not based on matter of a type 
[on which] an expert may reasonably rely.‖  ―The fatal flaw in Mr. Skorheim‘s 
reasoning is that it starts off assuming, without foundation, its conclusion.  The 
fatal flaw in his analysis is that he relies on data that in no way is analogous to 
Plaintiff.  Mr. Skorheim deems Plaintiff‘s historical data, such as past business 
volume, ‗not relevant‘ to his lost profits projections.‖  (Fn. omitted.) 
The court noted that at the evidentiary hearing, Skorheim had ―offered a 
new opinion that would have been grounded in some historical performance.‖  It 
explained that it had sustained USC‘s objection to this new opinion ―on grounds it 
was never disclosed in discovery.  This court notes that this new methodology is 
directly inconsistent with Mr. Skorheim‘s declaration, depositions testimony and 
the position Plaintiff has taken throughout this litigation. . . .  Regardless, the 
methodology of the new opinion is unreasonable.‖  Later in the evidentiary 
hearing, ―Plaintiff again attempted to show some historical grounding for the 
damage projections.  Mr. Skorheim testified that his damage projections started 
with Sargon‘s gross revenues of $1,700,000 in 1997.  Mr. Skorheim then doubled 
those revenues in 1998 . . . .  To accomplish this, Mr. Skorheim assumed a 
favorable USC study and resultant publicity would cause 200 more dentists to buy 
at least 20 more implants each.  The Court can find no factual basis for this 
assumption.  [¶] . . . [¶]  This Court specifically finds that Sargon‘s historical 
performance played no role in determining Mr. Skorheim‘s market projections, 
except to the extent that Sargon‘s data showed it had some sales.‖ 
14 
The court found that Skorheim‘s ―projections are wildly beyond, by 
degrees of magnitude, anything Sargon had ever experienced in the past.  Under 
the 20% market share scenario, for example, Plaintiff would see its profits climb 
by 534.4% the first year, and by over 157,000% by 2009.‖  Instead, the court 
found, Skorheim ―starts his analysis with a comparison to industry leaders, all 
multi-million or multi-billion international corporations, or subsidiaries of such.  
This, of course, is unavoidable if one only looks to industry ‗drivers‘ to ascertain 
who most successfully employs those ‗drivers.‘  [¶]  The only thing these 
established companies have in common with Plaintiff is that they all sell or make 
dental implants.  In all other respects, in areas the [Millennium] report deems 
relevant, such as size, history, product line, sales force, access to financing, among 
others, they are worlds apart from Sargon.‖  (Fn. omitted.) 
The court noted that Skorheim had testified ―that of all the 98 dental 
implant manufacturers, he could not identify one that did not pursue clinical 
studies or target general practitioners, rendering these two ‗drivers‘ meaningless 
for comparison purposes.  [¶]  Moreover, many implant companies who touted 
‗innovative‘ products, yet had smaller revenues, were omitted for comparison 
purposes.‖  In his testimony, ―Mr. Skorheim grouped the companies that he 
deemed had ‗innovative‘ products.  He omitted certain smaller companies who, 
according to the [Millennium] report, also claimed to have innovations.  When 
asked in court to explain this omission, he testified, ‗The proof is in the pudding.‘  
The small market share of these companies showed the market disagreed.  
Apparently, a product is ‗innovative‘ if the market embraces it and it sells.  [¶]  
The summary exclusion of other companies from his analysis, along with the fact 
that it should not be a startling revelation that biotechnology companies that have 
innovative products, all other things being equal, do better than those who do not, 
15 
render this ‗driver‘ equally meaningless for comparison purposes.‖  The court 
found this argument to be ―entirely circular.‖ 
The court continued:  ―At the hearing, Plaintiff changed its theory and 
attempted to show that it was similar to the industry leaders in ways other than 
possession of the three ‗drivers.‘  The characteristics that Mr. Skorheim contended 
made Plaintiff ‗similar‘ to the industry leaders, however, were characteristics 
common to most, if not all, implant companies.  Obviously, if most share these 
‗common traits,‘ the traits are meaningless for comparison purposes.  If, based 
upon these common characteristics, the very smallest is considered ‗similar‘ to the 
very biggest, all cases that have required objective similarity would be effectively 
overruled, and the rule requiring ‗similarity‘ would cease to exist.  This Court 
finds that Sargon is not similar to the industry leaders by any relevant, objective 
business measure.‖ 
The court found that the dissimilarity between Sargon and the industry 
leaders ―is sufficient, itself, to grant Defendant‘s motion‖ to exclude Skorheim‘s 
testimony, but ―this court has other problems with Mr. Skorheim‘s opinion that 
give further grounds, by themselves, to grant Defendant‘s motion.‖  It found that 
―[c]omparing ‗degrees of innovation‘ with other products fails to give the jury 
standards from which it can make a rational decision, is inherently speculative and 
subjective, and thus fails to assist the jury in its fact-finding function.  [¶]  The 
relevance of Mr. Skorheim‘s testimony, if any, is that it provides the jury with an 
evidentiary basis to make market share choices and thus assess damages.  The jury 
can choose from four market shares ranging from 3.75% to 20%, depending upon 
its finding of relative ‗innovativeness.‘  The highest rating gets Nobel Biocare‘s 
share, with the lesser market share percentages awarded depending upon whether 
the innovativeness of the Plaintiff‘s implant is more on a par with products from 
Zimmer, 3i, and Straumann.  The lowest percentage finding the jury can make is 
16 
that the innovativeness of the Sargon implant is comparable to Astra Tech‘s or 
Dentsply‘s products.  The fatal problem with this is that there is little rational basis 
for this choice, and no rational standards for how the jury is to choose. 
―Implicit in this choice is that there is an evidentiary basis for this ranking; 
an ‗innovativeness‘ pecking order where, in fact, Nobel Biocare is on top, others 
follow, with Astra Tech and Dentsply on the bottom.  Likewise, there must be an 
evidentiary basis for degree of difference; evidence that shows not only that Nobel 
Biocare is more innovative, but, with 20% of the market, it must be twice as 
‗innovative‘ as 3i, in the 10% group, and so on.  Otherwise, ‗innovativeness‘ 
would not track the percentage market share for the findings he proposes the jury 
make.  Yet, the only factual basis for such a pecking order comes from Dr. 
Lazarof‘s opinion of such, and there is no evidence or reason to believe one 
company is more innovative than another, in the percentage difference, other than 
the fact the companies have different market shares.  [¶]   . . .   [¶]  The only 
possible evidentiary support for the percentage difference in the pecking order 
comes from Mr. Skorheim‘s oft repeated observations of the marketplace.  Certain 
smaller companies, who claimed to have innovative products, were excluded from 
his ‗industry leader‘ market share list because ‗the market‘ disagreed with their 
claim of ‗innovativeness.‘  ‗The proof is in the pudding,‘ Mr. Skorheim explained.  
If their products were truly innovative, they would sell more and thus have larger 
market shares.  [¶]   . . .   [¶]  To the extent that this ranking of ‗innovativeness,‘ 
with Nobel Biocare on top with 20%, and Astra Tech on the bottom with 3.75%, 
rests on the fact that some have larger market shares, it rests on nothing more than 
a tautology.  As there is no evidentiary basis that equates the degree of 
innovativeness with the degree of difference in market share, the question posed to 
the jury — to rank innovativeness and assign a market share, the sine qua non of 
Mr. Skorheim‘s opinion — has no rational basis.‖ 
17 
Additionally, the court continued, ―[t]he only rational answer to the 
question Mr. Skorheim seeks to have the jury answer comparing ‗innovativeness‘ 
is ‗it depends.‘  What is ‗most innovative‘ about any implant depends upon what 
the practitioner and patient think is important.  [¶]  What is good, better or best is 
inherently subjective, and depends upon the need, the patient, the price, and the 
situation.  [¶]   . . .   [¶]  It is not that the jury, given the time confines of a trial, 
will not have enough information to decide relative ‗innovativeness,‘ it is that no 
jury, given an infinite amount of time, will ever have enough information.  Such is 
the nature of purely subjective determinations.  Which is the most innovative 
implant?  The Court expects there to be experts giving their views, but do we have 
any standards or guidelines to help us in the determination?‖ 
The court explained that in the Millennium reports ―there are many 
different types of implants.  The market leaders have product lines of implants to 
serve the diverse needs of patients and practitioners.  Some implants have different 
coating and/or screws.  Some are immediate loading, some are two-stage loading, 
others have internal or external connections.  Astra Tech markets an implant that it 
claims ‗has amassed significant documentation that confirms the increased bone 
retention right up to the top of the implant compared to competitive products.‘  
Another Astra Tech implant is touted as ‗simple and easier to use.‘  [Citation.]  
Others are more ‗affordable‘ such as INNOVA Life Sciences and IMTEC.  
[Citation.]  Each company offers a line of implant products it claims are excellent 
for various uses.‖  ―Is the Sargon implant as good or better than those offered by 
competitors?  Plaintiff will advocate for the Sargon implant.  Who will advocate 
for all the rest?‖ 
The court explained why, in its view, Skorheim‘s opinion was speculative.  
―A jury can determine if a Ford was defective, because there are objective facts, 
such as industry standards and standards for safety, as well as a body of case law 
18 
on the subject of products liability.  A jury cannot say if a Ford is a better car than 
a Chevrolet, because that is subjective and depends upon what the driver wants 
and what he can afford, among other things. 
―By way of example, assume that Miss Oklahoma entered into a contract to 
transport her to the ‗Miss America‘ contest.  Assume further that the carrier 
breached the contract and Miss Oklahoma missed the chance to compete.  A jury 
could decide if she was damaged by the breach, to the extent damages could be 
ascertained.  Could the jury go further and, based upon testimony of experts, 
decide that, had she been allowed to compete, she would have defeated Miss 
Colorado for the title of Miss America, or decide that she would have been second, 
behind Miss Colorado and ahead of Miss Montana?  [¶]  It is not a situation . . . 
that juries can and do decide complex issues.  Of course they do.  But in all cases, 
including cases where jurors are asked to ‗rank,‘ as in comparative fault, there are 
standards in the form of jury instructions and a body of case law to refer to if 
needed for special instructions.‖ 
The court believed that asking a jury to rank innovativeness ―is no different 
than deciding whether Miss Oklahoma or Miss Colorado should wear the Miss 
America crown.  [¶]  Mr. Skorheim‘s question calls for nothing but a subjective 
and speculative response.  Whether an implant is good, better or best can only be 
answered in the market place, not the jury room.  The market place has rendered 
its verdict:  ‗It depends.‘  That is why all the various implant companies, even the 
very biggest, and their implants have their own market niche with corresponding 
minority market shares.  [¶]   . . .   [¶]  Because there are no standards or guidelines 
to determine ‗degrees of innovation,‘ it relegates the question of determining 
potentially more than a billion dollars in damages to pure speculation.  
Accordingly, the court finds that there are two independent grounds to rule this 
evidence inadmissible:  No damage award can be based on speculation; and 
19 
evidence that cannot assist the trier of fact in the resolution of an issue is not 
relevant.‖ 
The court continued:  ―Mr. Skorheim has no qualifications to opine that but 
for Defendant‘s breach, Plaintiff would have a program of targeting general 
practitioners on a par with any of the companies he singled out for comparison.  
[¶]  The [Millennium] report sets forth sales and marketing strategies for the 
industry leaders.  For example, Nobel Biocare in the 2001-2003 timeframe had 80 
field representatives in the United States alone.  What makes Mr. Skorheim think 
that Plaintiff would equal or surpass these numbers, or done so with equal or 
greater success?  The only information he can offer is the uncritical acceptance of 
Dr. Lazarof‘s hoped-for marketing plans.  Whether these plans would ever have 
been implemented as anticipated, or succeeded, is pure speculation.‖ 
―Mr. Skorheim testified that, in the perfect world where there had been no 
breach, by 2007 Sargon would have made the seamless transition from a three-
person operation to sharing industry leadership with Nobel Biocare, a multi-
million dollar international corporation.  Nobel Biocare touts, according to the 
annual reports he relied upon, many different product lines, including different 
types of implants.  When asked how Sargon could be an industry leader with only 
one implant (he later testified that Sargon had developed seven) Mr. Skorheim 
testified that ‗he would expect‘ Sargon to have invested in ‗R and D‘ in the 
intervening years and also, by 2007, to have invented new products and coatings.  
Mr. Skorheim thus opined that not only would Sargon have invested in ‗R and D‘ 
by 2007, but has also opined on what the results of that ‗R and D‘ would be.  [¶]  It 
is not reasonable for any expert to make such a faith-based prediction so 
absolutely devoid of any factual basis about an industry where he has no 
expertise.‖ 
20 
Additionally, ―nowhere in [Skorheim‘s] success scenario is any mention of 
how competitors will react to having their market share taken by Plaintiff. . . .  We 
do not know if these million or billion dollar corporations, or their shareholders, 
would just go quietly, because it is not discussed or considered.  We are forced to 
assume they would do nothing.‖  ―This ‗Field of Dreams‘ ‗trust me‘ analysis 
forces us to assume, speculate and believe too much.  It is no different than our 
Miss Oklahoma asking the jury to vote her Miss America and arguing that her 
damages include the inevitable movie deals and product endorsements that 
‗common sense‘ dictates every Miss America receives and were lost because her 
transportation breached the contract to take her to the contest.‖  (Fn. omitted.) 
In its concluding portion, the court stated that ―case law demands that to 
establish such lost profits through expert testimony, the expert must base his/her 
opinion on either historical performance of the company or a comparison to the 
profits of companies similar in terms of size, locality, sales, products, number of 
employees and other relevant financial factors.  A party is not permitted to ‗make 
up‘ its own factors as a basis for comparison and invite the jury to decide whether 
the corporations are similar.  To allow this is to invite proceedings where there are 
no objective standards as there will always be some way to argue that companies 
are ‗similar,‘ no matter how superficial or irrelevant.  Here, for example, the 
factors Mr. Skorheim uses would lead to the absurd result that Sargon, one of the 
industry‘s smallest companies, was ‗similar‘ to the largest.  In assessing lost profit 
damages in this context, there is a meaningful difference between biggest and 
smallest.  [¶]  Mr. Skorheim admittedly shunned historical performance and 
comparison to companies of similar size and financial situation, choosing instead 
to compare Plaintiff to multi-national industry giants based upon his own criteria 
of ‗similar.‘  His criteria, even assuming he has the qualifications to decide them, 
which he does not, are nebulous and legally irrelevant under case law.  
21 
Accordingly, there is no issue of similarity to give to the jury to compare and 
decide.‖ 
The court concluded ―that Mr. Skorheim‘s opinions are not based upon 
matters upon which a reasonable expert would rely, and do not show the nature 
and occurrence of lost profits with evidence of reasonable reliability, because his 
opinion is not based on any historical data from Plaintiff or a comparison to 
similar businesses.  The court also finds his ‗market drivers‘ meaningless for 
comparison purposes.  Additionally, his opinion rests on speculation and 
unreasonable assumptions.‖ 
Accordingly, the court granted USC‘s motion to exclude Skorheim‘s 
testimony. 
D.  The Second Appeal 
  After the court excluded Skorheim‘s testimony, the parties stipulated to 
entry of judgment for $433,000 on Sargon‘s breach of contract claim.  Sargon 
appealed for the second time. 
By a two-to-one vote, the Court of Appeal reversed the judgment and 
remanded the matter for a new trial on lost profits.  It concluded the trial court 
erred in excluding Skorheim‘s testimony. 
After reviewing in detail the facts, the parties‘ arguments, and the relevant 
law, the court found that ―Sargon has the better argument here. . . .  In 1998, 
Sargon had about $1.8 million in revenues, roughly one-half of 1 percent of the 
global market for dental implants.  Astra Tech, one of the companies relied on by 
Skorheim, had around $18.5 million in revenues, for a 4.8 percent market share.  
The other companies had greater revenues and market shares.  At the very least, 
the jury was entitled to hear about Astra Tech because it was sufficiently similar to 
22 
Sargon, and a damages award based on a comparison to that company would have 
been supported by substantial evidence, not speculation. 
―We acknowledge the difficulty in determining lost profits when an 
established business is built upon the sale of an innovative, revolutionary, or 
world-changing product.  The factor of innovation — what the trial court 
described as a ‗beauty contest‘ — is not easily converted into dollars and cents.  
But exactitude is not required.  None of Sargon‘s competitors used its implant, 
and, to that extent, they were different.  But lost profits may be based on a 
comparison of similar companies; they need not be identical in all respects.  
Skorheim‘s expert opinion was based on ‗economic and financial data, market 
surveys and analyses, business records of similar enterprises, and the like.‘  (Kids’ 
Universe v. In2Labs[ (2002) 95 Cal.App.4th 870, 884].)  He also considered 
Sargon‘s historical financial data.  The trial court‘s ruling is tantamount to a flat 
prohibition on lost profits in any case involving a revolutionary breakthrough in an 
industry. 
―If USC had not sabotaged the clinical study of the Sargon implant, Sargon 
would have had a successful clinical trial to its credit and a prominent university 
using the implant at its dental school.  But it was denied.  Through its wrongful 
conduct, USC allegedly caused the loss of profits and has made the proof of lost 
profits all the more difficult, thereby rendering its evidentiary attack unconvincing.  
(GHK Associates v. Mayer Group, Inc.[ (1990) 224 Cal.App.3d 856, 874].)  We 
have carefully reviewed the trial court‘s criticisms of Skorheim‘s proffered 
testimony and conclude they were better left for the jury‘s assessment.‖ 
Justice Johnson dissented.  He argued that ―[w]here, as  here, the law does 
not offer precise parameters to the quantum of proof required to establish lost 
profit damages, a trial court must be permitted to draw the line in the sand, either 
letting the evidence in as meeting the certainty threshold, or excluding it as below 
23 
that threshold.  The placement of that threshold is left to the trial court so long as it 
is within the bounds of the law.‖  He found the trial court‘s decision to be 
―founded on a detailed, methodical and well-reasoned examination of the law of 
contracts and the limits on lost profits damages. . . .  [¶]   . . .  [T]he task of 
determining the threshold measure of certainty to permit Skorheim‘s opinion to go 
to the jury should be left to the gatekeeping function of the trial court, in the 
context of its evidentiary rulings after an evaluation of all of the facts, evidence, 
and arguments.  Here, the trial court drew a very reasonable line in the sand with 
its ruling excluding Sargon‘s evidence of lost profit damages.  I see no 
justification for this court to overturn that decision.‖ 
The dissent argued that ―Sargon was not similar to the Big Six under any 
relevant, objective business measure‖ and found ―nothing in this ruling that 
indicates the trial court acted in an arbitrary, capricious fashion, was guided by 
whim rather than the rule of law, or exceeded the bounds of reason.‖  Justice 
Johnson added that ―while I admittedly share with the trial court a healthy dose of 
skepticism over Skorheim‘s unyieldingly optimistic projections for Sargon‘s 
market share growth and while I struggle to see a nexus between those projections 
and business and economic reality, this dissent nonetheless does not stem from the 
havoc that Skorheim‘s methodology may wreak upon reasonable damage 
calculations but from the damage done to the trial judge‘s reasonable and 
prudently exercised judgment on an evidentiary issue over which he and he alone 
should have decisional authority, absent arbitrariness and capriciousness.  Nothing 
in the trial judge‘s reasonable, straightforward and clearly articulated evidentiary 
ruling bears even a smidgeon of arbitrariness or capriciousness.‖  Accordingly, 
Justice Johnson would have affirmed the trial court‘s ruling excluding Skorheim‘s 
testimony. 
24 
We granted USC‘s petition for review to decide whether the trial court 
erred in excluding Skorheim‘s testimony. 
II.  DISCUSSION 
This case stands at the intersection of two legal principles:  (1) Expert 
testimony must not be speculative, and (2) lost profit damages must not be 
speculative.  We will discuss both principles, then apply them to this case. 
A.  Expert Testimony 
As did the trial court, we begin our consideration of expert testimony with 
words that Judge Friendly wrote half a century ago:  ―There is no bright line that 
divides evidence worthy of consideration by a jury, although subject to heavy 
counter-attack, from evidence that is not.  Especially because of the guaranty of 
the Seventh Amendment, a federal court must be exceedingly careful not to set the 
threshold to the jury room too high.  Yet it is the jury system itself that requires the 
common law ‗judge, in his efforts to prevent the jury from being satisfied by 
matters of slight value, capable of being exaggerated by prejudice and hasty 
reasoning . . . to exclude matter which does not rise to a clearly sufficient degree 
of value‘; ‗something more than a minimum of probative value‘ is required.  1 
Wigmore, Evidence (3d ed. 1940), pp. 409-410.  These comments are especially 
pertinent to an array of figures conveying a delusive impression of exactness in an 
area where a jury‘s common sense is less available than usual to protect it.‖  
(Herman Schwabe, Inc. v. United Shoe Machinery Corp., supra, 297 F.2d at p. 
912.) 
Although Judge Friendly was discussing federal law and federal courts, his 
comments, both in their cautionary note that, due to the jury trial right, courts 
should not set the admission bar too high, and in their stressing the need to exclude 
unreliable evidence, could just as well have described California law and 
25 
California courts.  Under California law, trial courts have a substantial 
―gatekeeping‖ responsibility.5 
Evidence Code section 801 provides:  ―If a witness is testifying as an 
expert, his testimony in the form of an opinion is limited to such an opinion as is:  
[¶]  (a)  Related to a subject that is sufficiently beyond common experience that 
the opinion of an expert would assist the trier of fact; and [¶] (b)  Based on matter 
. . . that is of a type that reasonably may be relied upon by an expert in forming an 
opinion upon the subject to which his testimony relates, unless an expert is 
precluded by law from using such matter as a basis for his opinion.‖  (Italics 
added.)  Subdivision (b) clearly permits a court to determine whether the matter is 
of a type on which an expert may reasonably rely. 
In Lockheed Litigation Cases (2004) 115 Cal.App.4th 558, 563, the 
plaintiffs argued that under Evidence Code section 801, subdivision (b), ―a court 
should determine only whether the type of matter that an expert relies on in 
forming his or her opinion is the type of matter that an expert reasonably can rely 
on in forming an opinion, without regard to whether the matter relied on 
reasonably does support the particular opinion offered.‖  The Court of Appeal 
disagreed.  ―An expert opinion has no value if its basis is unsound.  [Citations.]  
Matter that provides a reasonable basis for one opinion does not necessarily 
provide a reasonable basis for another opinion.  Evidence Code section 801, 
subdivision (b), states that a court must determine whether the matter that the 
expert relies on is of a type that an expert reasonably can rely on ‗in forming an 
                                              
5  
Recent United States Supreme Court decisions have referred to the trial 
judge‘s ― ‗gatekeeper‘ role‖ (General Electric Co. v. Joiner (1997) 522 U.S. 136, 
142) or ― ‗gatekeeping‘ obligation‖ (Kumho Tire Co. v. Carmichael (1999) 526 
U.S. 137, 141).  We have used the term ―gatekeeping responsibility.‖  (People v. 
Prince (2007) 40 Cal.4th 1179, 1225, fn. 8.) 
26 
opinion upon the subject to which his testimony relates.‘  (Italics added.)  We 
construe this to mean that the matter relied on must provide a reasonable basis for 
the particular opinion offered, and that an expert opinion based on speculation or 
conjecture is inadmissible.‖  (Lockheed Litigation Cases, supra, at p. 564.) 
We agree with this analysis.  Indeed, as the Court of Appeal in that case 
also noted (Lockheed Litigation Cases, supra, 115 Cal.App.4th at p. 564), the 
California Law Revision Commission comments to Evidence Code section 801 
explained that ―under existing law, irrelevant or speculative matters are not a 
proper basis for an expert‘s opinion.  See Roscoe Moss Co. v. Jenkins [(1942) 55 
Cal.App.2d 369] (expert may not base opinion upon a comparison if the matters 
compared are not reasonably comparable) . . . .‖  (Cal. Law Revision Com. com., 
29B pt. 3A West‘s Ann. Evid. Code (2009 ed.) foll. § 801, p. 25.)  Comments of a 
commission that proposed a statute are entitled to substantial weight in construing 
the statute, especially when, as here, the Legislature adopted the statute without 
change.  (Jevne v. Superior Court (2005) 35 Cal.4th 935, 947.)  Thus, under 
Evidence Code section 801, the trial court acts as a gatekeeper to exclude 
speculative or irrelevant expert opinion.  As we recently explained, ―[T]he 
expert‘s opinion may not be based ‗on assumptions of fact without evidentiary 
support [citation], or on speculative or conjectural factors . . . .  [¶]   Exclusion of 
expert opinions that rest on guess, surmise or conjecture [citation] is an inherent 
corollary to the foundational predicate for admission of the expert testimony:  will 
the testimony assist the trier of fact to evaluate the issues it must decide?‘  
(Jennings v. Palomar Pomerado Health Systems, Inc. (2003) 114 Cal.App.4th 
1108, 1117.)‖  (People v. Richardson (2008) 43 Cal.4th 959, 1008; accord, People 
v. Moore (2011) 51 Cal.4th 386, 405.) 
Additionally, as a recent law review article explains, Evidence Code section 
801 is not the only statute that governs the trial court‘s gatekeeping role.  We must 
27 
also consider Evidence Code section 802.  (See Imwinkelried & Faigman, 
Evidence Code Section 802:  The Neglected Key to Rationalizing the California 
Law of Expert Testimony (2009) 42 Loyola L.A. L.Rev. 427 (hereafter 
Imwinkelried & Faigman).) 
Evidence Code section 802 provides:  ―A witness testifying in the form of 
an opinion may state . . . the reasons for his opinion and the matter . . . upon which 
it is based, unless he is precluded by law from using such reasons or matter as a 
basis for his opinion.  The court in its discretion may require that a witness before 
testifying in the form of an opinion be first examined concerning the matter upon 
which his opinion is based.‖  (Italics added.)  This section indicates the court may 
inquire into the expert‘s reasons for an opinion.  It expressly permits the court to 
examine experts concerning the matter on which they base their opinion before 
admitting their testimony.  The reasons for the experts‘ opinions are part of the 
matter on which they are based just as is the type of matter.  Evidence Code 
section 801 governs judicial review of the type of matter; Evidence Code section 
802 governs judicial review of the reasons for the opinion.  ―The stark contrast 
between the wording of the two statutes strongly suggests that although under 
section 801(b) the judge may consider only the acceptability of the generic type of 
information the expert relies on, the judge is not so limited under section 802.‖  
(Imwinkelried & Faigman, supra, 42 Loyola L.A. L.Rev. at p. 441.) 
Evidence Code section 802 also permits the trial court to find the expert is 
precluded ―by law‖ from using the reasons or matter as a basis for the opinion.  
― ‗Law‘ includes constitutional, statutory, and decisional law.‖  (Evid. Code, 
§ 160.)  Thus, ―construed in the context of section 160, section 802 authorizes a 
court to promulgate case law restrictions on an expert‘s ‗reasons‘ . . . .‖  
(Imwinkelried & Faigman, supra, 42 Loyola L.A. L.Rev, at p. 442.)  This means 
that a court may inquire into, not only the type of material on which an expert 
28 
relies, but also whether that material actually supports the expert‘s reasoning.  ―A 
court may conclude that there is simply too great an analytical gap between the 
data and the opinion proffered.‖  (General Electric Co. v. Joiner, supra, 522 U.S. 
at p. 146, quoted in Imwinkelried & Faigman, supra, 42 Loyola L.A. L.Rev., at p. 
448.) 
Thus, under Evidence Code sections 801, subdivision (b), and 802, the trial 
court acts as a gatekeeper to exclude expert opinion testimony that is (1) based on 
matter of a type on which an expert may not reasonably rely, (2) based on reasons 
unsupported by the material on which the expert relies, or (3) speculative.  Other 
provisions of law, including decisional law, may also provide reasons for 
excluding expert opinion testimony.6 
But courts must also be cautious in excluding expert testimony.  The trial 
court‘s gatekeeping role does not involve choosing between competing expert 
opinions.  The high court warned that the gatekeeper‘s focus ―must be solely on 
principles and methodology, not on the conclusions that they generate.‖  (Daubert 
v. Merrell Dow Pharmaceuticals, Inc., supra, 509 U.S. at p. 595.)  The advisory 
committee on the 2000 amendments to Federal Rules of Evidence, rule 702, which 
codified the rule established in Daubert, noted that the trial court‘s task is not to 
choose the most reliable of the offered opinions and exclude the others:  ―When a 
trial court, applying this amendment, rules that an expert‘s testimony is reliable, 
this does not necessarily mean that contradictory expert testimony is unreliable.  
                                              
6  
In People v. Leahy (1994) 8 Cal.4th 587, 604, this court held that the 
―general acceptance‖ test for admissibility of expert testimony based on new 
scientific techniques (see People v. Kelly (1976) 17 Cal.3d 24) still applies in 
California courts despite the United States Supreme Court‘s rejection, in Daubert 
v. Merrell Dow Pharmaceuticals, Inc. (1993) 509 U.S. 579, of a similar test in 
federal courts.  Nothing we say in this case affects our holding in Leahy regarding 
new scientific techniques. 
29 
The amendment is broad enough to permit testimony that is the product of 
competing principles or methods in the same field of expertise.‖  (Advisory Com. 
Notes to Federal Rules Evid., rule 702, 28 U.S.C.) 
The trial court‘s preliminary determination whether the expert opinion is 
founded on sound logic is not a decision on its persuasiveness.  The court must not 
weigh an opinion‘s probative value or substitute its own opinion for the expert‘s 
opinion.  Rather, the court must simply determine whether the matter relied on can 
provide a reasonable basis for the opinion or whether that opinion is based on a 
leap of logic or conjecture.  The court does not resolve scientific controversies.  
Rather, it conducts a ―circumscribed inquiry‖ to ―determine whether, as a matter 
of logic, the studies and other information cited by experts adequately support the 
conclusion that the expert‘s general theory or technique is valid.‖  (Imwinkelried 
& Faigman, supra, 42 Loyola L.A. L.Rev. at p. 449.)  The goal of trial court 
gatekeeping is simply to exclude ―clearly invalid and unreliable‖ expert opinion.  
(Black et al., Science and the Law in the Wake of Daubert:  A New Search for 
Scientific Knowledge (1994) 72 Tex. L.Rev. 715, 788.)  In short, the gatekeeper‘s 
role ―is to 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.‖  
(Kumho Tire Co. v. Carmichael, supra, 526 U.S. at p. 152.) 
Except to the extent the trial court bases its ruling on a conclusion of law 
(which we review de novo), we review its ruling excluding or admitting expert 
testimony for abuse of discretion.  (People v. McWhorter (2009) 47 Cal.4th 318, 
362; People v. Gardeley (1996) 14 Cal.4th 605, 619; People v. Mickey (1991) 54 
Cal.3d 612, 687-688; Lockheed Litigation Cases, supra, 115 Cal.App.4th at p. 
564.)  A ruling that constitutes an abuse of discretion has been described as one 
that is ―so irrational or arbitrary that no reasonable person could agree with it.‖  
30 
(People v. Carmony (2004) 33 Cal.4th 367, 377.)  But the court‘s discretion is not 
unlimited, especially when, as here, its exercise implicates a party‘s ability to 
present its case.  Rather, it must be exercised within the confines of the applicable 
legal principles. 
―The discretion of a trial judge is not a whimsical, uncontrolled power, but 
a legal discretion, which is subject to the limitations of legal principles governing 
the subject of its action, and to reversal on appeal where no reasonable basis for 
the action is shown.‖  (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 364, p. 
420; see Westside Community for Independent Living, Inc. v. Obledo (1983) 33 
Cal.3d 348, 355 [quoting this language].)  ―The scope of discretion always resides 
in the particular law being applied, i.e., in the ‗legal principles governing the 
subject of [the] action . . . .‘  Action that transgresses the confines of the applicable 
principles of law is outside the scope of discretion and we call such action an 
‗abuse‘ of discretion.  [Citation.] . . .   [¶]  The legal principles that govern the 
subject of discretionary action vary greatly with context.  [Citation.]  They are 
derived from the common law or statutes under which discretion is conferred.‖  
(City of Sacramento v. Drew (1989) 207 Cal.App.3d 1287, 1297-1298.)  To 
determine if a court abused its discretion, we must thus consider ―the legal 
principles and policies that should have guided the court‘s actions.‖  (People v. 
Carmony, supra, 33 Cal.4th at p. 377.) 
In this case, we consider whether the trial court properly exercised its 
discretion to exclude expert opinion testimony.  As we have explained, the trial 
court‘s discretion in this regard is circumscribed; it must be exercised within the 
limits the law permits.  Accordingly, we must review the record to ensure that the 
ruling comes within the scope of that discretion. 
31 
B.  Lost Profits 
Lost profits may be recoverable as damages for breach of a contract.  
―[T]he general principle [is] that damages for the loss of prospective profits are 
recoverable where the evidence makes reasonably certain their occurrence and 
extent.‖  (Grupe v. Glick (1945) 26 Cal.2d 680, 693.)  Such damages must ―be 
proven to be certain both as to their occurrence and their extent, albeit not with 
‗mathematical precision.‘ ‖  (Lewis Jorge Construction Management, Inc. v. 
Pomona Unified School Dist. (2004) 34 Cal.4th 960, 975.)  The rule that lost 
profits must be reasonably certain is a specific application of a more general 
statutory rule.  ―No damages can be recovered for a breach of contract which are 
not clearly ascertainable in both their nature and origin.‖  (Civ. Code, § 3301; see 
Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739, 760.) 
Regarding lost business profits, the cases have generally distinguished 
between established and unestablished businesses.  ―[W]here the operation of an 
established business is prevented or interrupted, as by a . . . breach of contract . . . , 
damages for the loss of prospective profits that otherwise might have been made 
from its operation are generally recoverable for the reason that their occurrence 
and extent may be ascertained with reasonable certainty from the past volume of 
business and other provable data relevant to the probable future sales.‖  (Grupe v. 
Glick, supra, 26 Cal.2d at p. 692.)  ―Lost profits to an established business may be 
recovered if their extent and occurrence can be ascertained with reasonable 
certainty; once their existence has been so established, recovery will not be denied 
because the amount cannot be shown with mathematical precision.  [Citations.]  
Historical data, such as past business volume, supply an acceptable basis for 
ascertaining lost future profits.  [Citations.]  In some instances, lost profits may be 
recovered where plaintiff introduces evidence of the profits lost by similar 
32 
businesses operating under similar conditions.  [Citations.]‖  (Berge v. 
International Harvester Co. (1983) 142 Cal.App.3d 152, 161-162.) 
―On the other hand, where the operation of an unestablished business is 
prevented or interrupted, damages for prospective profits that might otherwise 
have been made from its operation are not recoverable for the reason that their 
occurrence is uncertain, contingent and speculative. . . .  But although generally 
objectionable for the reason that their estimation is conjectural and speculative, 
anticipated profits dependent upon future events are allowed where their nature 
and occurrence can be shown by evidence of reasonable reliability.‖  (Grupe v 
Glick, supra, 26 Cal.2d at pp. 692-693.) 
―Where the fact of damages is certain, the amount of damages need not be 
calculated with absolute certainty.  [Citations.]  The law requires only that some 
reasonable basis of computation of damages be used, and the damages may be 
computed even of the result reached is an approximation.  [Citation.]  This is 
especially true where . . . it is the wrongful acts of the defendant that have created 
the difficulty in proving the amount of loss of profits [citation] or where it is the 
wrongful acts of the defendant that have caused the other party to not realize a 
profit to which that party is entitled.‖  (GHK Associates v. Mayer Group, Inc. 
(1990) 224 Cal.App.3d 856, 873-874 [permitting an award of profits calculated 
from a project‘s ―actual income‖].) 
A recent case provides an example of claimed lost profits that were found 
to be ―uncertain, hypothetical and entirely speculative.‖  (Greenwich S.F., LLC v. 
Wong, supra, 190 Cal.App.4th at p. 743.)  There the plaintiffs sought lost profits 
for breach of a real property sales agreement.  They ―presented evidence of lost 
profits through the testimony of [a] real estate appraiser,‖ who testified about what 
the property would have been worth had it been developed according to the 
intended plans and specifications.  (Id. at p. 749.)  The appellate court found the 
33 
resulting award of $600,000 in lost profits to be unsupported.  ―[T]he occurrence 
and extent of the projected lost profits were not proven with the requisite 
reasonable certainty in this case.‖  (Id. at p. 760.)  ―The evidence in this case was 
insufficient to show that [either plaintiff] was an established business or had a 
track record of successfully developing or redeveloping properties. . . .   [¶]   . . .  
The existence of plans for a development does not supply substantial evidence that 
the development is reasonably certain to be built, much less that it is reasonably 
certain to produce profits.‖  (Id. at p. 763.)  ―The lost profits claim was based on 
the assumption that [plaintiffs] would have constructed the residence according to 
the plans and specifications without changes and that the venture would have been 
profitable.  These assumptions were inherently uncertain, contingent, 
unforeseeable and speculative.  The proposed real estate development project here 
involved numerous variables that made any calculation of lost profits inherently 
uncertain.‖  (Id. at p. 766.) 
Once again, we add a cautionary note.  The lost profit inquiry is always 
speculative to some degree.  Inevitably, there will always be an element of 
uncertainty.  Courts must not be too quick to exclude expert evidence as 
speculative merely because the expert cannot say with absolute certainty what the 
profits would have been.  Courts must not eviscerate the possibility of recovering 
lost profits by too broadly defining what is too speculative.  A reasonable certainty 
only is required, not absolute certainty. 
C.  Application to This Case 
We now apply these principles to this case.  The issue before us is whether 
the court abused its discretion in excluding the expert testimony, not whether 
substantial evidence supports a lost profits award.  But the substantive law 
regarding lost profits is relevant to help define the type of matter on which an 
34 
expert may reasonably rely.  For example, as the trial court explained, ―While lost 
profits can be established with the aid of expert testimony, economic and financial 
data, market surveys and analysis, business records of similar enterprises and the 
like, the underlying requirement for each is ― ‗a substantial similarity between the 
facts forming the basis of the profit projections and the business opportunity that 
was destroyed.‖ ‘ ‖  (Quoting Kids’ Universe v. In2Labs, supra, 95 Cal.App.4th at 
p. 886.)  But, as the trial court further found, Skorheim‘s analysis relied ―on data 
that in no way is analogous to Plaintiff.‖ 
To the extent that the expert relied on data that is not relevant to the 
measure of lost profit damages, the trial court acted within its discretion to exclude 
the testimony because it was not ―[b]ased on matter . . . that is of a type that 
reasonably may be relied upon by an expert in forming an opinion upon the 
subject to which his testimony relates . . . .‖  (Evid. Code, § 801, subd. (b); see 
Westrec Marina Management, Inc. v. Jardine Ins. Brokers Orange County, Inc. 
(2000) 85 Cal.App.4th 1042, 1050-1051 [upholding the exclusion of expert 
testimony due in part to substantive law of lost profits].)  Accordingly, although 
the issue is the admissibility of expert testimony, we will also consider the law of 
lost profits to the extent it is relevant to that issue. 
The trial court did not abuse its discretion in the sense of making a ruling 
that was irrational or arbitrary.  It presided over a lengthy evidentiary hearing and 
provided a detailed ruling.  The Court of Appeal majority identified no specific 
error in that ruling.  As the dissenter in the Court of Appeal stated, ―Nothing in the 
trial judge‘s reasonable, straightforward and clearly articulated evidentiary ruling 
bears even a smidgeon of arbitrariness or capriciousness.‖  Indeed, the court could 
hardly have exercised its discretion more carefully. 
The trial court also excluded the expert testimony for proper reasons.  It 
properly found the expert‘s methodology was too speculative for the evidence to 
35 
be admissible.  The court assumed that Skorheim‘s market share approach would 
be appropriate in a proper case.  We will do so also.  An expert might be able to 
make reasonably certain lost profit estimates based on a company‘s share of the 
overall market.  But Skorheim did not base his lost profit estimates on a market 
share Sargon had ever actually achieved.  Instead, he opined that Sargon‘s market 
share would have increased spectacularly over time to levels far above anything it 
had ever reached.  He based his lost profit estimates on that hypothetical increased 
share. 
Skorheim considered Sargon to be comparable to the Big Six dental 
implant companies rather than the smaller ones that appear to have far more 
closely resembled it.  He admitted that by no objective business metric, such as 
sales or number of employees, was Sargon in fact comparable to the Big Six.  
Instead, he based his comparison solely on his belief that Sargon, like the Big Six, 
and unlike the rest, was innovative, and that innovation was the prime market 
driver.  (He also testified that clinical studies and outreach to general practitioners 
were market drivers, but he recognized that all dental implant companies used 
them, thus making them essentially irrelevant for comparison purposes.)  But, as 
the trial court noted, Skorheim‘s reasoning was circular.  He concluded that the 
Big Six were innovative because they were successful, and that the smaller 
companies (excluding Sargon) were not innovative because they were less 
successful.  In essence, he said that the smaller companies were smaller because 
they were not innovative.  The trial court properly considered this circularity in the 
reasoning as a basis to exclude the testimony under Evidence Code section 802. 
Skorheim based his estimates on the belief that the more innovative a 
company was, the larger the market share it would achieve.  Thus, he testified, if 
Sargon had a level of innovation equal to that of the smallest of the Big Six, it 
would have gained only its level of market share.  He then testified to gradations 
36 
of innovation, with each increase in innovation equaling a step up in market share 
and thus in future profits.  However, as the trial court explained, ―Implicit in this 
choice is that there is an evidentiary basis for this ranking; an ‗innovativeness‘ 
pecking order where, in fact, Nobel Biocare is on top, others follow, with Astra 
Tech and Dentsply on the bottom.  Likewise, there must be an evidentiary basis 
for degree of difference; evidence that shows not only that Nobel Biocare is more 
innovative, but, with 20% of the market, it must be twice as ‗innovative‘ as 3i, in 
the 10% group, and so on.  Otherwise, ‗innovativeness‘ would not track the 
percentage market share for the findings he proposes the jury make.‖  But 
Skorheim also agreed that a company with a smaller market share could, in fact, 
be more innovative than a company with a larger share. 
As the trial court further explained, ―The only possible evidentiary support 
for the percentage difference in the pecking order comes from Mr. Skorheim‘s oft 
repeated observations of the marketplace.  Certain smaller companies, who 
claimed to have innovative products, were excluded from his ‗industry leader‘ 
market share list because ‗the market‘ disagreed with their claim of 
‗innovativeness.‘  ‗The proof is in the pudding,‘ Mr. Skorheim explained.  If their 
products were truly innovative, they would sell more and thus have larger market 
shares.  [¶]   . . .   [¶]  To the extent that this ranking of ‗innovativeness,‘ with 
Nobel Biocare on top with 20%, and Astra Tech on the bottom with 3.75%, rests 
on the fact that some have larger market shares, it rests on nothing more than a 
tautology.  As there is no evidentiary basis that equates the degree of 
innovativeness with the degree of difference in market share, the question posed to 
the jury — to rank innovativeness and assign a market share, the sine qua non of 
Mr. Skorheim‘s opinion — has no rational basis.‖ 
Sargon argues that the cases concerning an unestablished company do not 
apply here because it was an established company with a track record of having 
37 
made a profit.  It had, for example, a net profit of $101,000 in 1998.  But Sargon 
had no track record of being a global leader, one of the Big Six.  An established 
company may base its claim to future profits on evidence of its past profits, but 
Skorheim did not do so.  He tried to compare Sargon to the Big Six, but the 
companies were not comparable.  In Parlour Enterprises, Inc. v. Kirin Group, Inc. 
(2007) 152 Cal.App.4th 281 (Parlour Enterprises), a jury gave a small restaurant 
business called Farrell‘s a multimillion-dollar lost profit award.  The Court of 
Appeal reversed the award, finding the claim of lost profits was improperly based 
on speculative expert testimony.  The expert in that case had compared the 
company to ―a publicly traded restaurant chain called Friendly‘s, which he 
claimed was ‗relatively similar to the Farrell‘s concept.‘ ‖  (Id. at p. 290.)  But the 
Court of Appeal found the two companies not comparable.  ―Although one way to 
prove prospective profits is through the experience of comparable businesses, [the 
expert‘s] cursory description of Friendly‘s business model failed to establish its 
profit-and-loss experience is sufficiently similar to Farrell‘s to be relevant to the 
question of plaintiffs‘ alleged lost profits.‖  (Ibid.)  The court explained that 
―[b]efore evidence of similar businesses may be used to prove loss of prospective 
profits, there must be ‗ ―a substantial similarity between the facts forming the basis 
of the profit projections and the business opportunity that was destroyed.‖ ‘ ‖  (Id. 
at p. 291.) 
This case is like Parlour Enterprises, supra, 152 Cal.App.4th 281.  Except 
for Skorheim‘s belief that, like the Big Six and unlike the rest of the smaller 
companies, Sargon was innovative, Sargon was dissimilar to all of the Big Six.  As 
the trial court noted, ―Sargon is not similar to the industry leaders by any relevant, 
objective business measure.‖  Skorheim did not base his lost profits estimates on 
any objective evidence of ―past volume of business‖ or any ―other provable data 
relevant to the probable future sales.‖  (Grupe v. Glick, supra, 26 Cal.2d at p. 692.)  
38 
Instead, as the trial court further noted, Skorheim‘s lost profit projections were 
―wildly beyond, by degrees of magnitude, anything Sargon had ever experienced 
in the past.‖ 
In finding that the trial court should have admitted Skorheim‘s testimony, 
the majority below observed that ―exactitude is not required.‖  The observation is 
correct.  If lost profits can be estimated with reasonable certainty, a court may not 
deny recovery merely because one cannot determine precisely what they would 
have been.  But exactitude is not the problem here.  Whether the actual profits 
could logically be estimated in the manner Skorheim claimed is the problem.  As 
the trial court noted, a lost profit award of up to $1 billion may not be based on 
pure speculation. 
The Court of Appeal majority found that the case of Palm Medical Group, 
Inc. v. State Comp. Ins. Fund (2008) 161 Cal.App.4th 206 ―is more on point‖ than 
Parlour Enterprises, supra, 152 Cal.App.4th 281.  In Palm Medical, a medical 
clinic sued, claiming it was wrongly denied admission into a preferred provider 
network.  The Court of Appeal upheld a lost profits award.  But there the 
plaintiff‘s expert based his lost profits estimate on the plaintiff‘s own profit margin 
and a comparison to the profits of other clinics that had participated in the 
preferred provider network from which the plaintiff had been excluded.  (Id. at p. 
227.)  As far as the opinion indicates, the plaintiff and the other clinics were, in 
fact, comparable.  The opinion gives no indication the defendant claimed 
otherwise.  Nothing in Palm Medical suggests the trial court here abused its 
discretion in finding Sargon not to be comparable to the Big Six. 
Sargon also relies on Sanchez-Corea v. Bank of America (1985) 38 Cal.3d 
892.  The trial court considered and aptly distinguished that case:  ―In Sanchez-
Corea, the earnings of plaintiff‘s small company were compared to the earnings of 
‗other companies, including Honeywell, which occupied the market after 
39 
[plaintiff‘s] departure . . . .‘  (Id. at p. 907.)  On appeal, the defendant complained, 
as does USC, that the comparison was unfair because plaintiff had ‗far smaller 
financial resources.‘  (Id. at p. 908.)  [¶]  Sargon‘s reliance is misplaced.  The 
Supreme Court held the evidence supported a $1,000,000 compensatory damage 
award because the damage award was based on Plaintiff‘s historical growth, as 
Plaintiff had experienced a ‗tenfold growth in contracts (sales) from $180,000 in 
1970 to $1.5 million in 1973.‘  (Id. at p. 907.)  In that case, the Plaintiff‘s expert‘s 
projections were based on pre-litigation estimates, which underestimated 
Plaintiff‘s actual growth in the year before Defendant‘s wrongful act and the 
subsequent lawsuit.  The court never discussed the comparison to Honeywell, and 
this case has never been cited as authority for comparing businesses of any size.‖ 
As the trial court also noted, Skorheim‘s testimony was speculative in other 
ways as well.  He assumed Sargon, which had virtually no marketing or research 
and development departments, would have developed such departments to permit 
it to compete with the Big Six, all of which had large ones.  He assumed one of the 
Big Six would fall out of that group, and Sargon would replace it.  He assumed the 
Big Six would have taken no steps to contend with their new competitor, Sargon.  
All of these factors also support the trial court‘s exclusion of Skorheim‘s 
testimony. 
Skorheim gave the opinion that, to a ―reasonable certainty,‖ Sargon would 
have become a market leader within 10 years.  The quoted term derives from the 
law of lost profits.  We stated in Grupe v. Glick, supra, 26 Cal.2d at page 693, that 
lost profits must be ―reasonably certain‖ to be recoverable.  But, as the trial court 
found, this testimony was inherently speculative.  It ―involved numerous variables 
that made any calculation of lost profits inherently uncertain.‖  (Greenwich S.F., 
LLC v. Wong, supra, 190 Cal.App.4th at p. 766.)  Skorheim‘s attempt to predict 
the future was in no way grounded in the past. 
40 
If a professional football team claims lost profits because a certain 
defensive lineman did not play for it the previous season, could an expert testify 
that in his opinion the key driver for success in the National Football League is 
quarterback sacks and, because the player was the best in the league in sacking the 
quarterback, the team would have won the Super Bowl had he played?  Could 
another expert counter that testimony by expressing her opinion that the key to 
success is turnovers, and, because the player was not particularly adept at forcing 
turnovers, the team would not even have made the playoffs with that player?  
Should the court ask the jury to choose between the two experts?  Or could the 
jury choose something in between and conclude the team would have reached, but 
lost, the Super Bowl?  Or lost in the conference title game? 
Similarly, if a first-time author sues a publisher for breach of a contract to 
publish a novel, could a witness who was an expert on the publishing business, 
literature, and popular culture testify that the novel, if published, would have 
become a national bestseller, won the Pulitzer Prize, and spawned a megahit 
movie with several blockbuster sequels?  Could a jury award lost profits based on 
that scenario?  Or could it compromise by finding the book would have been a 
bestseller but would not have won the Pulitzer Prize, and would have spawned a 
moderately successful movie but no sequel? 
World history is replete with fascinating ―what ifs.‖  What if Alexander the 
Great had been killed early in his career at the Battle of the Granicus River, as he 
nearly was?  What if the Saxon King Harold had prevailed at Hastings, and 
William, later called the Conqueror, had died in that battle rather than Harold?  
What if the series of Chinese overseas discovery expeditions that two Ming 
Dynasty emperors sponsored, and that reached at least the east coast of Africa by 
1432, had continued rather than stopped?  Many serious, and not-so-serious, 
historians have enjoyed speculating about these what ifs.  But few, if any, claim 
41 
they are considering what would have happened rather than what might have 
happened.  Because it is inherently difficult to accurately predict the future or to 
accurately reconstruct a counterfactual past, it is appropriate that trial courts 
vigilantly exercise their gatekeeping function when deciding whether to admit 
testimony that purports to prove such claims. 
An accountant might be able to determine with reasonable precision what 
Sargon‘s profits would have been if it had achieved a market share comparable to 
one of the Big Six.  The problem here, however, is that the expert‘s testimony 
provided no logical basis to infer that Sargon would have achieved that market 
share.  The lack of sound methodology in the expert‘s testimony for determining 
what the future would have brought supported the trial court‘s ruling. 
The Court of Appeal majority was concerned that ―[t]he trial court‘s ruling 
is tantamount to a flat prohibition on lost profits in any case involving a 
revolutionary breakthrough in an industry.‖  We disagree.  Other avenues might 
exist to show lost profits.  An expert could use a company‘s actual profits, a 
comparison to the profits of similar companies, or other objective evidence to 
project lost profits.  Sargon itself argues that the record in this case contains 
evidence of specific lost sales and canceled contracts due to USC‘s failure to 
complete the study.  Evidence of this kind might support reasonably certain lost 
profit estimates.7  The trial court‘s ruling merely meant Sargon could not obtain a 
massive verdict based on speculative projections of future spectacular success. 
                                              
7  
Sargon notes that the trial court had ruled that at least some of this evidence 
was insufficient to support a claim of intentional interference with prospective 
economic advantage.  The court found no evidence the lost sales were related to 
USC‘s actions or omissions.  It is not clear how this ruling would have affected a 
lost profit claim.  What is clear is that the ruling is not before us on appeal.  
Moreover, even if this type of evidence would not have been sufficient to support 
 
(footnote continued on next page) 
42 
The trial court properly acted as a gatekeeper to exclude speculative expert 
testimony.  Its ruling came within its discretion.  The majority in the Court of 
Appeal erred in concluding otherwise. 
III.  CONCLUSION 
We reverse the judgment of the Court of Appeal and remand the matter to 
that court for further proceedings consistent with this opinion. 
 
CHIN, J. 
WE CONCUR: 
CANTIL-SAKAUYE, C. J. 
KENNARD, J. 
BAXTER, J. 
WERDEGAR, J. 
CORRIGAN, J. 
LIU, J. 
                                                                                                                                                              
 
(footnote continued from previous page) 
 
a lost profit claim in this case, similar evidence might support such a claim in 
some other case. 
43 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Sargon Enterprises, Inc. v. University of Southern California 
__________________________________________________________________________________ 
 
Unpublished Opinion XXX NP opn. filed 2/9/11 – 2d Dist., Div. 1 
Original Appeal 
Original Proceeding 
Review Granted 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S191550 
Date Filed: November 26, 2012 
__________________________________________________________________________________ 
 
Court: Superior 
County: Los Angeles 
Judge: Terry A. Green 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Browne George Ross, Brown Woods George, Allan Browne, Eric M. George, Benjamin D. Scheibe, Ira 
Bibbero; Glaser Weil Fink Jacobs Howard Avchen & Shapiro, Patricia L. Glaser, Elizabeth G. Chilton and 
Andrew Baum for Plaintiff and Appellant. 
 
Quinn Emanuel Urquhart & Sullivan, Quinn Emanuel Urquhart Oliver & Hedges, Kathleen M. Sullivan, 
Daniel H. Bromberg, John B. Quinn, Michael E. Williams and Michael T. Lifrak for Defendants and 
Appellants. 
 
Cole Pedroza, Curtis A. Cole and Cassidy E. Cole for California Medical Association, California Hospital 
Association and California Dental Association as Amici Curiae on behalf of Defendants and Appellants. 
 
Daniel J. Popeo, Richard A. Samp; Bergeson and Mark E. Foster for Washington Legal Foundation and 
Allied Educational Foundation as Amici Curiae on behalf of Defendants and Appellants. 
 
Mayer Brown and Donald M. Falk for Actelion Pharmaceuticals U.S. as Amicus Curiae on behalf of 
Defendants and Appellants. 
 
Ada Meloy; Hogan Lovells US, Michael Shepard, Martin Michaelson, Alexander Dreier and David Ginn 
for American Council on Education and other Higher Education Associations and Institutions as Amici 
Curiae on behalf of Defendants and Appellants. 
 
Morgan, Lewis & Bockius, Thomas M. Peterson and Benjamin P. Smith for Asahi Kasei Pharma 
Corporation as Amicus Curiae on behalf of Defendants and Appellants. 
 
 
 
44 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Eric M. George 
Browne George Ross 
2121 Avenue of the Stars, Suite 2400 
Los Angeles, CA  90067 
(310) 274-7100 
 
Kathleen M. Sullivan 
Quinn Emanuel Urquhart & Sullivan 
555 Twin Dolphin Drive, 5th Floor 
Redwood Shores, CA  94065 
(650) 801-5000