1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-22-1999

In Re: Unisys

Precedential or Non-Precedential:

Docket 98-1007

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1999

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 1999 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Recommended Citation

"In Re: Unisys" (1999). 1999 Decisions. Paper 71.

http://digitalcommons.law.villanova.edu/thirdcircuit_1999/71
Filed March 22, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 98-1007 

IN RE: UNISYS SAVINGS PLAN LITIGATION 

JOHN P. MEINHARDT, on behalf of himself and all others 

similarly situated 

v. 

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-03067)

BERNARD MCDEVITT, on behalf of himself and all others 

similarly situated 

v. 

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-03126)

PARKER C. KEAN, on behalf of himself and all others

similarly situated 

v. 

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-03164)

MICHAEL HECK; JOSEPH MCCARTHY; ANGELO 

DEPIETRO, on behalf of themselves and all others 

similarly situated 

v. 

UNISYS CORPORATION; THE ADMINISTRATIVE 

COMMITTEE OF THE UNISYS SAVINGS PLAN; THE 

INVESTMENT COMMITTEE OF THE UNISYS SAVINGS 

PLAN; JACK A. BLAINE; JOHN J. LOUGHLIN; KENNETH 

MILLER; DAVID A. WHITE; STEFAN RIESENFELD 

(E.D. PA. Civil No. 91-cv-03276) 

GARY VALA, individually and on behalf of all others

similarly situated 

v. 
JACK A. BLAINE; MICHAEL R. LOSEY; JOHN J. 

LOUGHLIN; KENNETH L. MILLER; STEFAN C. 

RIESENFELD; CURTIS A. HESSLER; DAVID A WHITE; 

UNISYS CORPORATION; THE NORTHERN 

TRUST COMPANY 

(E.D. PA. Civil No. 91-cv-03278) 

CAROLYN A. GOHLIKE, on behalf of herself and all others 

similarly situated 

v. 

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-03321)

NADIA F. SOS; FAROUK M. SOS, individually and on 

behalf of all others similarly situated 

v. 

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-03582)

KENNETH GOERS; JOHN J. CIESLICKI, on behalf of 

themselves and all others similarly situated 

v. 

UNISYS CORPORATION; THE NORTHERN 

TRUST COMPANY 

(E.D. PA. Civil No. 91-cv-04678) 

DENNIS C. STANGA; JAMES M. COLLINS, on behalf of 

themselves and all others similarly situated 

v. 

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-04689)

JOHN H. BURGESS, JR., on behalf of himself and all 

others similarly situated 

v. 

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-04696)

WILLIAM TORKILDSON 

v. 

 2 
UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-04754)

 John M. Meinhardt, Michael Heck, Joseph 

 McCarthy, Angelo DiPietro, Gary Vala, Carolyn 

 Gohlike, Dennis C. Stanga, James M. Collins,

 John H. Burgess, Jr., Bernard McDevitt, Parker 

 Kean, Nadia F. Sos, Farouk M. Sos, Kenneth 

 Goers, John J. Cieslicki, and William 

 Torkildson, plaintiffs in the above-listed 

 actions, individually and on behalf of the class 

 certified by Order of the district court entered 

 on January 28, 1992 in Master File Civil 

 Action No. 91-3067, 

 Appellants 

No. 98-1037 

IN RE: UNISYS SAVINGS PLAN LITIGATION 

JOHN P. MEINHARDT, on behalf of himself and all others 

similarly situated 

v. 

UNISYS CORPORATION 

(E.D. PA. Civil No. 91-cv-03067) 

HENRY ZYLLA; RICHARD SILVER; RONALD GRIPPO; 

EDWARD LAWLER; RICHARD ANDUJAR; CLARENCE 

MULLER; CHARLES WAHLER; JAMES MCLAUGHLIN; 

DONALD RADER; JOSEPH LAU; JAMES GANGALE; 

ALFRED CONTARINO; JOHN MARCUCCI; JOSEPH A. 

FIORE; RICHARD MASTRODOMENICO; NICK KLEMENZ; 

PETER SZCZYBEK, on behalf of themselves and all others 

similarly situated; ENGINEERS UNION LOCAL 444 OF 

THE INTERNATIONAL UNION OF ELECTRONIC, 

ELECTRICAL, SALARIED, MACHINE AND FURNITURE 

WORKERS, A.F.L.-C.I.O.; LOCALS 445 OF THE 

INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, 

SALARIED, MACHINE AND FURNITURE WORKERS, 

A.F.L.-C.I.O.; LOCALS 450 OF THE INTERNATIONAL 

 3 
UNION OF ELECTRONIC, ELECTRICAL, SALARIED, 

MACHINE AND FURNITURE WORKERS, A.F.L.-C.I.O.; 

LOCALS 470 OF THE INTERNATIONAL UNION OF 

ELECTRONIC, ELECTRICAL, SALARIED, MACHINE AND 

FURNITURE WORKERS, A.F.L.-C.I.O.; LOCALS 165 OF 

THE INTERNATIONAL UNION OF ELECTRONIC, 

ELECTRICAL, SALARIED, MACHINE AND FURNITURE 

WORKERS, A.F.L.-C.I.O.; LOCAL 3, INTERNATIONAL 

BROTHERHOOD OF ELECTRICAL WORKERS, A.F.L.-C.I.O. 

v. 

UNISYS CORPORATION; EDWIN P. GILBERT; JOHN J. 

LOUGHLIN; THOMAS PENHALE, individually and in their

capacities as members of the Unisys Employee Benefits 

Executive Committee and administrators of the Unisys 

Retirement Investment Plan; RICHARD H. BIERLY, EDWIN 

P. GILBERT; CURTIS A. HESSLER; LEON J. LEVEL; 

KENNETH L. MILLER; DAVID A. WHITE; JACK A. 

BLAINE; STEFAN C. RIESENFELD; GEORGE T. ROBSON, 

individually and in their capacities as members of the 

Investment Committee of the Unisys Retirement 

Investment Plan 

(E.D. PA. Civil No. 91-cv-03772) 

 Henry Zylla, Richard Silver, Ronald Grippo, 

 Edward Lawler, Richard Andujar, Clarence 

 Muller, Charles Wahler, James McLaughlin, 

 Donald Rader, Joseph Lau, James Gangale, 

 Alfred Contarino, Richard Colby, John 

 Marcucci, Joseph Fiore, Richard 

 Mastrodomenico, Nick Klemenz and Peter 

 Szczybek, plaintiffs in the above-listed actions, 

 individually and on behalf of the class certified 

 by Order of the district court entered on 

 January 28, 1992 in Master File Civil Action

 No. 91-3067, 

 Appellants 

 4 
On Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. No. 91-cv-03067) 

District Judge: Honorable Herbert J. Hutton 

Argued Friday, September 25, 1998 

BEFORE: BECKER, Chief Judge, 

WEIS and GARTH, Circuit Judges 

(Opinion filed March 22, 1999) 

 James R. Malone, Jr. (Argued) 

 Michael E. Gottsch 

 Pamela Nicolaysen 

 Chimicles, Jacobsen & Tikellis 

 361 West Lancaster Avenue 

 One Haverford Centre 

 Haverford, PA 19041 

 Joel C. Meredith 

 Daniel B. Allanoff 

 Meredith Cohen Greenfogel & 

 Skirnick, P.C. 

 117 S. 17th Street 

 22nd Floor 

 Philadelphia, PA 19103 

 Attorneys for Appellants 

 Laurence Z. Shiekman (Argued) 

 Brian T. Ortelere 

 Pepper Hamilton LLP 

 3000 Two Logan Square 

 18th & Arch Streets 

 Philadelphia, PA 19103 

 5 
 John Teklits 

 Unisys Corporation 

 Township Line & Union Meeting 

 P.O. Box 500 C2NW14 

 Blue Bell, PA 19424-0001 

 Attorneys for Appellees 

 Marvin Krislov 

 Deputy Solicitor for 

 National Operations 

 Marc I. Machiz 

 Associate Solicitor 

 Karen L. Handorf 

 Counsel for Special Litigation 

 Paul C. Adair 

 Trial Attorney 

 U.S. Department of Labor 

 Office of the Solicitor 

 Plan Benefits Security Division 

 P.O. Box 1914 

 Washington, D.C. 20013 

 Attorneys for Secretary of Labor as 

 Amicus Curiae in Support of 

 Plaintiffs-Appellants 

OPINION OF THE COURT 

GARTH, Circuit Judge: 

This action, brought by employees who had participated 

in individual account pension plans maintained by their 

employer Unisys Corporation ("Unisys"), charged essentially 

that Unisys and the individual defendants1 had breached 

their fiduciary duties prescribed by ERISA2 by investing in 

_________________________________________________________________ 

1. Unisys is one of eleven defendants. Other defendants are the 

Administrative Committee and the Investment Committee of the Plan and 

those individuals involved in making decisions for the Plan. The 

defendants will be referred to collectively as "Unisys." 

2. Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 

S 1001 et seq. 

 6 
Executive Life Insurance Guaranteed Investment Contracts 

("GICs"). After a bench trial, the District Court granted 

judgment for all defendants, ruling in their favor on all 

issues related to the breach of fiduciary duty claims, thus 

denying all relief and damages to the plaintiff class of 

Unisys employees.3 

We have reviewed the trial record independently and

conclude that in all material respects, the District Court's 

findings of fact were not clearly erroneous, the District 

Court did not abuse its discretion in excluding Dr.

Gottheimer's testimony, and the District Court did not err 

in making its conclusions of law. We also conclude that 

while we do not agree with some of the holdings of the 

District Court, those disagreements have no effect on the 

District Court's overall holding of prudence, and that 

therefore, the orders entered by the District Court on 

November 24, 1997 and January 9, 1998 will be affirmed. 

I. 

This is the second appeal from the District Court's

rulings in this case. Initially, summary judgment was 

entered in favor of Unisys, but on review, we remanded for 

trial. In re Unisys Savings Plan Litig., 74 F.3d 420 (3d Cir.), 

cert. denied, 117 S. Ct. 56 (1996) ("Unisys I"). Almost all of 

_________________________________________________________________ 

3. Plaintiffs are a class of Unisys employees who will be referred to 

throughout this Opinion as "Meinhardt." John P. Meinhardt had 

originally brought this action as a class action on behalf of himself and 

all others similarly situated. See In re Unisys Savings Plan Litig., 74 

F.3d 

420 (3d Cir.), cert. denied, 117 S. Ct. 56 (1996) ("Unisys I"). 

This is an appeal of two consolidated cases. In thefirst action, final 

judgment was entered on November 24, 1997 in eleven related actions 

after a bench trial. A timely notice of appeal wasfiled on December 18, 

1997. We exercise appellate jurisdiction under 28 U.S.C. S 1291, as an 

appeal from a final judgment. 

The second appeal before this court involves the ERISA claims in a 

twelfth related action, upon which final judgment has not been entered. 

The District Court certified the ERISA claims in that action under Fed. 

R. Civ. P. 54(b) on January 9, 1998; a notice of appeal was filed on 

January 16, 1998. We exercise appellate jurisdiction for the second 

appeal under Fed. R. Civ. P. 54(b) in tandem with 28 U.S.C. S 1291. 

 7 
the background facts and details are found in our earlier 

opinion and we refer here only to those matters particularly 

relevant to the arguments made by the parties on appeal. 

Now that the District Court has rendered its findings of 

fact and conclusions of law in favor of the Unisys, 4 

Meinhardt complains that the standard used by the District 

Court was improper, that Meinhardt's expert's testimony 

was improperly excluded, and that Meinhardt suffered 

damages that were not recognized by the District Court. As 

indicated above, we hold that the District Court's essential 

factual findings were not clearly erroneous and that 

measured by the appropriate prudence standard of ERISA, 

the District Court properly concluded that Unisys did not 

breach any fiduciary duty. This threshold holding makes it 

unnecessary for us to discuss in detail the subsidiary 

issues raised on appeal by Meinhardt. 

At the outset we call attention to the fact that the 

contours of the factual record have changed significantly 

since we last addressed the GIC issue presented in this 

case. At the earlier summary judgment stage, the prior 

panel of this court was obliged to assume that various facts 

presented by Meinhardt were true and that all inferences 

had to be drawn in Meinhardt's favor. Moreover, we 

assumed the report of Dr. Gottheimer, Meinhardt's 

proposed expert witness, would be admitted into evidence. 

As we discuss infra, the District Court properly excluded 

Dr. Gottheimer from testifying under Fed. R. Evid. 702. 

As we have mentioned, at the conclusion of a ten-day 

bench trial, the District Court entered judgment for Unisys 

and issued extensive findings of fact and conclusions of 

law. We review the District Court's findings of facts for clear 

error. Application of legal precepts to historical facts 

receives plenary review. Feder v. Evans-Feder, 63 F.3d 217, 

222 n.9 (3d Cir. 1995). The District Court's decision to 

qualify an expert is reviewed for abuse of discretion. 

_________________________________________________________________ 

4. The District Court's findings of fact and conclusions of law can be 

found at In re Unisys Savings Plan Litig., No. 91-3067, 1997 WL 732473 

(E.D. Pa. Nov. 24, 1997). For the sake of convenience, we will refer to 

the 

District Court's findings of fact as "FF P __," and to its conclusions of 

law 

as "CL P __." 

 8 
General Elec. Co. v. Joiner, 118 S. Ct. 512 (1997); In re Paoli 

R.R. Yard Litig., 35 F.3d 717, 741-46 (3d Cir. 1994) ("Paoli 

II"). 

II. 

Meinhardt participated in a 401(k) savings plan ("Plan")5 

administered by Unisys. Two companies, Sperry and 

Burroughs, had merged in 1986 to create Unisys, and thus 

their retirement plans also merged. See Unisys I, 74 F.3d at 

425-26. Meinhardt and the class he represents elected to 

invest their money in two of the funds offered by the Plan, 

the Fixed Income Fund ("FIF ") and the Insurance Contract 

Fund ("ICF "). Investments in the FIF/ICF were exclusively 

restricted to Guaranteed Investment Contracts ("GICs").6 

For ease of reference throughout this Opinion we will refer 

to the FIF/ICF as the "Fund." 

Unisys described the Fund as one of the more 

conservative funds that was intended to return principal 

with interest.7 Plan participants could invest as much or as 

little of their money as they desired. In order to prevent 

interest rate arbitrage by the participants and in order to 

receive a higher yield from the GICs, Fund assets could not 

be transferred to the money market fund directly; Fund 

assets had to be held for at least a year in one of the four 

equity stock funds. In 1990, Unisys shortened this "equity 

wash" to a period of six months after receiving approval 

from Executive Life. App. 1702. 

In 1987 and 1988, Unisys purchased three Executive Life 

GICs as investments for the Fund. The Executive Life GICs 

_________________________________________________________________ 

5. The Plan is actually three separate plans that make joint investments. 

See Unisys I, 74 F.3d at 426-27 & 427 n.5. 

6. A GIC is a contract under which the issuer is obligated to repay the 

principal deposit at a designated future date and to pay interest at a 

specified rate over the duration of the contract. Unisys I, 74 F.3d at 

426. 

7. The Plan offered five other investment funds: the Diversified Fund, the 

Indexed Equity Fund, the Active Equity Fund, the Unisys Common Stock 

Fund, and the Short Term Investment Fund ("money market fund"). The 

money market fund invested in United States Treasury Bills, bank 

obligations, and other short term investments. 

 9 
themselves were comprised of assets that potentially had 

high rates of return, some of which were high yield bonds, 

or "junk bonds." The junk bonds did not fare well in the 

late 1980's markets. In 1991, California regulators seized 

Executive Life and temporarily froze all payments from the 

Executive Life GICs. By 1996, however, the Fund 

reimbursed the principal to Meinhardt and had paid some 

interest, but at a lower rate than had been guaranteed. 

FF P 80. 

Meinhardt accuses Unisys of breaching its fiduciary

duties of prudence, diversification, and disclosure with 

respect to the Executive Life contracts that had been 

purchased for the Fund. ERISA prescribes that fiduciaries 

must adhere to a standard of prudence. ERISA requires 

that a fiduciary's duty shall be discharged: 

 with the care, skill, prudence, and diligence under the 

 circumstances then prevailing that a prudent man 

 acting in a like capacity and familiar with such matters 

 would use in the conduct of an enterprise with like 

 character and with like aims; . . . . 

29 U.S.C. S 1104(a)(1)(B). 

III. 

To determine whether Unisys had satisfied the ERISA

standard of prudence, the district court found the following 

facts from the evidence. 

Unisys delegated the responsibility of investing for the 

Fund to David White and Leon Level. White and Level have 

educational and practical backgrounds in financial matters. 

FF PP 17-18; App. 643-45, 1136-37. At the direction of 

White and Level, Unisys purchased three Executive Life 

GICs as investments for the Fund through bidding 

processes in June 1987, December 1987 (both for the FIF), 

and January 1988 (for the ICF). Of the many GICs 

purchased for the Fund, only three were Executive Life 

GICs, constituting between 15 and 20 percent of the Fund's 

assets. FF PP 14-15; App. 4450. Unisys, through White and 

Level, considered many firms through a process of 

competitive bidding, and Unisys heard in-person 

 10 
presentations from the insurance companies. FF P 20; App. 

523, 1154. 

Unisys presented evidence that for the first bid (June 

1987), White and Level hired an experienced investment 

consultant, Murray Becker, who evaluated many different 

insurance firms.8 FF P 20. In evaluating potential insurance 

companies from which to purchase GICs, Becker obtained 

information and ratings from Standard and Poor's and A.M. 

Best, ratings services that evaluate the stability and 

potential profitability of various types of companies 

including insurance companies. Both ratings services gave 

Executive Life their highest rating.9 Becker and others 

testified that the ratings services were quite thorough 

because they analyzed raw data and interviewed investment 

managers. App. 535. Becker testified that he and other 

professionals had a high confidence in the thoroughness of 

the ratings services, which led to their respective ratings. 

FF P 21; App. 658-62, 702-03, 708-12, 1160-61. As detailed 

in the District Court's findings of fact, Becker was very 

familiar with how the ratings services evaluated the GICs. 

Id. 

Prior to the first bid, Unisys reviewed Becker's bid 

specifications. FF P 20 n.2; App. 1267-68, 3659. White 

testified that he carefully considered the use of high yield 

bonds and knew the risks involved. The prevailing view in 

the investment world at that time was that high yield 

guaranteed insurance contracts were good risks. FF P 27; 

App. 1038-39. 

_________________________________________________________________ 

8. Becker had given Sperry advice about GICs through his firm, Johnson 

& Higgins, before the Unisys merger. See Unisys I, 74 F.3d at 427. 

Becker handled more than 500 such bids in his career. FF P 20; App. 

522. 

9. Standard and Poor's gave Executive Life an AAA rating, which was 

reaffirmed on several occasions to meet questions concerning, inter alia, 

the inclusion of high yield bonds in Executive Life's portfolio. FF P 23. 

An 

"AAA" rating means that an insurer offers"superior financial security on 

both an absolute and relative basis." The insurer possesses "the highest 

safety and [has] an overwhelming capacity to meet policyholder 

obligations." FF P 24; App. 4279. A.M. Best also gave Executive Life its 

highest rating, A+. FF P 24. 

 11 
In addition to understanding the risks associated with 

Executive Life GICs, White chose Executive Life GICs for 

their other unique features. He selected the three Executive 

Life GICs to balance other Fund investments -- the 

Executive Life GICs had longer maturity dates, App. 656- 

57, 692, and their portfolios lacked real estate mortgages or 

derivatives and had a low proportion of commercial real 

estate investments. App. 1010, 1156-58. Furthermore, 

Executive Life used the "barbell" approach in making 

investments for the GICs; that is, the higher risk associated 

with the high yield bonds was balanced with low risk, lower 

yield government bills. FF P 25; App. 1156-58. 

For the second two bids and upon completion of the 

merger between Burroughs and Sperry into Unisys, Unisys 

decided not to utilize Becker's services. White, Level, and 

three other employees under their direction had sufficient 

professional experience to select GIC issuers. Moreover, 

Becker had charged the Plan $25,000 per bid. FF P 31; App. 

1162-65. White and Level expanded the list of potential 

bidders for the second and third bids and maximized the 

market information available to them. FF P 32; App. 1054- 

55. 

In the months between the bids, White and Level 

"engaged in an ongoing process of reviewing and updating 

the information on the potential bidders." FF P 33; App. 

615-22. They testified that they also kept abreast of 

developments in the GIC industry by reading trade 

publications and journals. FF P 33 n.6; App. 617, 632. They 

analyzed the portfolio and risk of the insurance carriers, 

using the Standard and Poor's and A.M. Best ratings as a 

source of information about both the insurance companies' 

asset composition and their creditworthiness. FF P 35; App. 

1056. They testified that they would not have been able to 

replicate the analyses done by the ratings services inhouse. App. 711. They had available to them SEC forms 

10K and 10Q to review prior to making their selection. 

FF P 35; App. 1065-66, 631. They had also consulted with 

a firm that Unisys had engaged to advise it on its defined 

benefit pension plan. That firm advised Unisys on its 

selection of issuers for the GIC funds. App. 608, 626-27. 

 12 
In Unisys I, 74 F.3d at 436, we directed the District 

Court to determine whether the ratings could be used 

reliably by Unisys. As mentioned earlier, Level and White 

both testified that the ratings services were respected for 

their competence and thoroughness throughout the 

investment and finance community. App. 1160-61, 658- 

623, 702, 708-11. The District Court found that the ratings 

services provided reliable information. FF P 21. We are 

satisfied that this finding is not clearly erroneous. See also 

Bussian v. RJR Nabisco, ___ F. Supp. 2d ___, No. Civ. A. H91-1533, 1998 WL 639320, at *7 (S.D. Tx. Sept. 2, 1998) 

("Nabisco's use of the consultant and rating agencies [in 

selecting an Executive Life annuity] does not demonstrate 

imprudence."). 

The District Court also resolved at trial four other issues 

of fact that we identified in Unisys I. First, evidence in the 

summary judgment record may have indicated that Becker 

had recommended the purchase of a three-year GIC, rather 

than a five-year GIC. Unisys I, 74 F.3d at 427. At trial, 

however, Becker testified that he had not recommended the 

shorter maturity (three-year) Executive Life GIC. Rather, his 

discussion with Unisys officers about maturity dates was 

very general, leading to the conclusion that the investment 

in five-year GICs was appropriate. FF P 30; App. 555-558. 

Second, at the summary judgment stage, the evidence

suggested that Becker told White that Executive Life would 

lose its AAA rating from Standard & Poor if its investments 

of junk bonds exceeded 35%, and White believed that 40- 

50% of Executive Life's investments were junk bonds. 

Unisys I, 74 F.3d at 427. At trial, Becker stated that it was 

not his view that Executive Life would lose their Standard 

and Poor's AAA rating if high yield bonds comprised more 

than 35% of Executive Life's portfolio. Rather, he testified 

that Executive Life thought its AAA rating might be in 

jeopardy if their high yield bond holdings exceeded 35%. 

However, Standard and Poor's had access to the actual 

percentage of high yield bonds in Executive Life's portfolio, 

and it still issued a AAA rating to Executive Life. Thus, 

White's reliance on the AAA rating was neither 

unreasonable nor imprudent. As discussed infra, even if 

White had an erroneous view of the percentage of high yield 

 13 
bonds in Executive Life's portfolio, a hypothetical prudent 

fiduciary would have known that Executive Life's high yield 

bond percentage was within an acceptable range in 

Executive Life's and Standard and Poor's analyses. FF P 28; 

App 501.10 

Third, in Unisys I, we stated: 

 [A] reasonable factfinder could infer from this evidence 

 that Unisys failed to analyze the bases underlying 

 [Becker's] opinion of Executive Life's financial condition 

 and to determine for itself whether credible data 

 supported [Becker's] recommendation that Unisys 

 consider investing plan assets with the insurer. A 

 reasonable factfinder could also conclude that Unisys 

 passively accepted its consultant's positive appraisal of 

 Executive Life without conducting the independent 

 investigation that ERISA requires. 

Unisys I, 74 F.3d at 435-36 (emphasis added). However, 

after taking evidence at trial, the District Court did not find 

that Unisys had failed to make its own evaluation of 

Executive Life's financial condition, nor did itfind that 

Unisys "passively" had accepted Becker's appraisal. On the 

contrary, the District Court made numerous findings that 

White and Level were aware of the composition of assets of 

Executive Life GICs and that they understood the risks 

associated with each of those assets. FF PP 25-27. 

Fourth, in Unisys I, we advised the District Court that it 

should determine the significance, if any, of Executive Life's 

substantially higher interest rates. We suggested that 

dramatically higher interest rates might have prompted 

Unisys to conduct extra investigation into Executive Life's 

creditworthiness. As stated earlier, at trial, White testified 

that he carefully had considered the use of high yield bonds 

and knew the risks involved. Unisys recognized that higher 

rates could, over time, yield dramatic differences in income, 

but that the trustees were "constrained by their standards 

_________________________________________________________________ 

10. As counsel for Unisys pointed out at oral argument, if Executive Life 

had 40% of its holdings in high yield bonds, and Executive Life GICs 

constituted 15-20% of the Fund, White invested only 8% of the Fund 

assets in high yield bonds. 

 14 
of risk tolerance." FF P 25; App. 1250. The District Court 

credited the testimony of the Unisys fiduciaries and was 

satisfied and concluded that Unisys had made a reasonable 

and thorough investigation of Executive Life GICs. CL P 3. 

We will not disturb that holding here.11 

IV. 

The District Court's factual findings support its legal 

conclusions that Unisys was prudent under the standard 

articulated in ERISA and that a hypothetical prudent 

investor would have purchased each of the three GICs. As 

we stated in Unisys I, ERISA requires that afiduciary shall 

discharge his duties 

 with the care, skill, prudence, and diligence under the 

 circumstances then prevailing that a prudent man 

 acting in a like capacity and familiar with such matters 

 would use in the conduct of an enterprise with like 

 character and with like aims; . . . . 

_________________________________________________________________ 

11. Meinhardt contests three other alleged failures of the District Court 

to follow this Court's mandate or to consider evidence in the record. 

Each of these objections however, is without merit because Meinhardt 

did not tender an expert to show how these facts supported the 

conclusion that Unisys was imprudent. 

First, the evidence revealed that Unisys did not have written 

investment or diversification standards for the Fund, but that it had 

guidelines for the money market fund. However, Meinhardt did not 

present evidence that prudence required written fund guidelines and 

Unisys testified that the unwritten guideline for investment diversity was 

that no one investment should constitute more than 20% of a fund's 

portfolio. 

Second, some evidence suggested that Unisys spent less than twenty 

minutes evaluating each bidder on bid day. Meinhardt presented no 

evidence that more time should have been spent at bid day, and 

considering this fact in isolation ignores evidence of Unisys's 

investigation and consideration of each bidder prior to bid day. 

Third, Unisys admitted at trial that the FIF bids had late maturity 

dates, and thus Executive Life GICs would become larger percentages of 

the FIF as time wore on. App. 1081. Again, Meinhardt did not 

demonstrate that the percentages were ever beyond the norm. Moreover, 

the FIF was phasing out in favor of the ICF. 

 15 
Unisys I, 74 F.3d at 434 (quoting 29 U.S.C. S 1104(a)(1)(B)). 

We also stated that the prudence requirement focuses on "a 

fiduciary's conduct in arriving at an investment decision, 

not on its results, and asking whether a fiduciary employed 

the appropriate methods to investigate and determine the 

merits of a particular investment." Id. 

After taking evidence on the issue of Unisys's prudence, 

the District Court held that the actions taken by the Fund's 

trustees satisfied the prudence standard: "Based on the 

evidence at trial I find that the Unisys fiduciaries undertook 

adequate and reasonable steps before purchasing the three 

Executive Life contracts." CL P 3. The District Court 

concluded, "Measured by any standard, the Unisys 

fiduciaries' actions are consistent with the prudence 

requirements of ERISA." CL P 13. We hold that the District 

Court's findings of fact support its conclusions of law that 

Unisys was prudent in investing in Executive Life GICs, and 

thus Meinhardt failed to prove an essential element of his 

ERISA claim. 

As an alternate theory for holding that Unisys was not 

imprudent, the District Court considered the objective 

prudence of Unisys investments in Executive Life GICs by 

applying the "hypothetical prudent investor" test. Unisys I, 

74 F.3d at 436 (citing Fink v. National Savings & Trust Co., 

772 F.2d 951, 962 (D.C. Cir. 1985) (Scalia, J., concurring 

in part and dissenting in part) and Roth v. Sawyer-Cleator 

Lumber Co., 16 F.3d 915, 919 (8th Cir. 1994)). 

The District Court held that a hypothetical prudent

fiduciary would have invested in Executive Life GICs 

because (1) Executive Life was qualified under federal 

regulations as an insurance company authorized to provide 

annuities to facilitate the termination of benefit pension 

plans because it was state licensed, 46 Fed. Reg. 9532, 

9534 (1981); (2) other judicial decisions endorsed the 

purchase of Executive Life annuities, e.g., Riley v. Murdock, 

890 F. Supp. 444, 458-60 (E.D.N.C. 1995);12 (3) Becker, the 

adviser Unisys retained for the first bid, included Executive 

_________________________________________________________________ 

12. See also Bussian v. RJR Nabisco, ___ F. Supp. 2d ___, No. Civ. A. H91-1533, 1998 WL 639320 (S.D. Tx. Sept. 2, 1998) (decided after the 

District Court issued its findings of fact and conclusions of law). 

 16 
Life on his approved list of GIC bidders until six months 

after Unisys made its third and final purchase of Executive 

Life, App. 559; and (4) other well-known pension plans 

purchased Executive Life GICs. App. 559, 1742. The 

District Court did not err in concluding that a hypothetical 

prudent fiduciary would have made the same investments 

in Executive Life GICs as the investments made by Unisys. 

FF P 24 n.3; CL PP 8-10. 

In sum, we are satisfied that the District Court's holdings 

that Unisys was prudent, and in the alternative, that a 

hypothetical prudent fiduciary would have made the same 

investments, are supported by the evidence. 

V. 

In addition to holding that the trustees' actions satisfied 

the standard of prudence required by ERISA, the District 

Court went on to discuss why the trustees' actions were not 

arbitrary and capricious. The District Court need not have 

discussed application of an arbitrary and capricious 

standard in this case. In light of the District Court's holding 

of prudence and our affirmance of that holding, the District 

Court's discussion of an arbitrary and capricious standard 

cannot affect the judgment in favor of Unisys. 

In Unisys I, we stated that fiduciaries of investment plans 

had to satisfy the "prudent" legal standard specified in 

ERISA, cited supra. We stated that one of ERISA's 

underlying purposes was "to enforce strict fiduciary 

standards." Unisys I, 74 F.3d at 434 (citing 29 U.S.C. 

S 1001 and H.R. Rep. No. 93-533 (1974), reprinted in 1974 

U.S.C.C.A.N. 4639, 4639-43). 

In Struble v. New Jersey Brewery Employees' Welfare

Trust Fund, 732 F.2d 325 (3d Cir. 1984), we held 

specifically that the duties of loyalty and prudence 

demanded by ERISA should not be reviewed through an

"arbitrary and capricious" lens. We held that the "standards 

set forth explicitly in ERISA" should be used to evaluate the 

trustees' conduct. Id. at 333-34 (finding support in cases 

from the Second, Fifth, and Eleventh Circuits). Struble 

governs the question of Unisys's duty of prudence under 

ERISA. 

 17 
The District Court should have applied only the standard 

of "prudence under the circumstances" as required by the 

statute. Only the standard found in ERISA, 29 U.S.C. 

S 1104(a)(1)(B); Unisys I, 74 F.3d at 434, should have been 

applied to determine whether Unisys's investment methods 

were prudent. 

As authority for an arbitrary and capricious standard, 

the District Court cited Varity Corp. v. Howe, 516 U.S. 489 

(1996), Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 

(1989), and Moench v. Robertson, 62 F.3d 553 (3d Cir. 

1995), cert. denied, 516 U.S. 1115 (1996). These cases, 

however, involved situations not relevant to the present 

claims asserted against Unisys. 

In the context of a case challenging a denial of benefits 

under 29 U.S.C. S 1332(a)(1)(B) -- and not challenging the 

prudence of investment decisions -- the Supreme Court 

held that the "inherently discretionary" nature of fiduciary 

functions does not necessarily require a deferential 

standard of review. Firestone Tire & Rubber Co. v. Bruch, 

489 U.S. 101, 112 (1989). Under ERISA, the standard of 

review over a trustee's decision to deny benefits or the 

interpretation of the plan is de novo as a general rule; only 

when the plan gives the trustee discretion to deny benefits 

or construe the terms of the plan should a court employ the 

arbitrary and capricious standard. As the instant case does 

not concern a denial of benefits under 29 U.S.C. 

S 1332(a)(1)(B) or an interpretation of Unisys's Plan, 

Firestone's standard is inapplicable. Nor did Varity Corp. v. 

Howe, 516 U.S. 489 (1996), involve a claim that a trustee's 

investments were imprudent -- the claim that Meinhardt 

makes here. 

In Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995), cert. 

denied, 516 U.S. 1115 (1996), we did apply a deferent 

arbitrary and capricious standard of review to a claim by a 

plan's participants that the fiduciary was imprudent. We 

were careful to point out in Moench, however, that our 

holding was limited to the specific type of plan involved in 

that case, an Employee Stock Ownership Plan ("ESOP"). 

Here, of course, the Unisys Plan was not an Employee 

Stock Ownership Plan. Furthermore, Moench specifically 

held its analysis was in "complete harmony with the

 18 
prudent man standard of care obligations imposed by 29 

U.S.C. S 1104 on fiduciaries, as our holding implicates only 

the standard of review of the conduct of a fiduciary and not 

the standards governing that conduct," Moench, 62 F.3d at 

566 n.3 (emphasis added), as is the case here. 

In sum, Unisys's methods of making that decision must 

be evaluated using the ERISA standard mandated by 

Unisys I and in accordance with Struble. The District Court 

did not err in concluding that Unisys did not breach its 

duty of prudence. 

For these reasons, the District Court's discussion of an 

arbitrary and capricious standard was superfluous and 

constitutes no more than harmless error. Fed. R. Civ. P. 61. 

The District Court's statements that Unisys's actions were 

not arbitrary and capricious do not negate its otherwise 

correct holding that Unisys satisfied the ERISA prudence 

standard. 

VI. 

Meinhardt also argues that the District Court abused its 

discretion when it decided to exclude the testimony of Dr. 

George M. Gottheimer, one of Meinhardt's two proposed 

expert witnesses.13 Meinhardt offered Dr. Gottheimer to 

testify on the subject of "the customary methods of

investigating the financial condition and creditworthiness of 

insurance companies." 

To qualify as an expert under Fed. R. Evid. 702, a 

witness must have sufficient qualifications in the form of 

knowledge, skills, and training. Additionally, the court must 

find that the testimony of the expert will be reliable and 

that the testimony will "fit," that is, assist the trier of fact. 

In re Paoli R.R. Yard Litig., 35 F.3d 717, 741-43 (3d Cir. 

1994). While it may be arguable that the "fit" prescribed in 

_________________________________________________________________ 

13. Meinhardt's expert Tsetsekos was qualified to testify and did testify 

on the issue of damages caused by Unisys's alleged breaches of its 

duties of diversification and disclosure. However, the District Court held 

that his testimony was insufficient to prove that any alleged failure to 

diversify or disclose information caused Meinhardt and the other class 

plaintiffs to suffer losses. We agree. See infra Parts VII and VIII. 

 19 
In re Paoli is a "fit" reflecting on the substance of the 

witness' testimony, we think it just as relevant to the "fit" 

reflecting on the witness' credibility. Indeed, in the recent 

Supreme Court decision discussing the standard of review 

applicable to the admission and exclusion of expert

evidence, the Supreme Court refers to the District Court's 

"gatekeeper" role of screening such evidence to ensure that 

it is not only relevant but reliable. The Court goes on to 

write, "A court of appeals applying `abuse of discretion' 

review to [expert testimony] rulings may not categorically 

distinguish between rulings allowing expert testimony and 

rulings which disallow it." General Elec. Co. v. Joiner, 118 

S. Ct. 512, 517 (1997). Thus in our view, the Court's 

emphasis on reliability as well as on relevancy embraces 

within its standard the credibility of the witness proffering 

expert opinion. This is particularly true where, as here, it is 

the district court judge sitting as a finder of fact who must 

rule on issues of evidence. See Goodman v. Highlands Ins. 

Co., 607 F.2d 665, 668 (5th Cir. 1979) ("[A] trial judge 

sitting without a jury is entitled to even greater latitude 

concerning the admission or exclusion of evidence."). 

While we could understand issue being taken with the 

Goodman precept, it appears to us after Joiner that the 

Goodman standard has been given increased viability. 

Although Joiner was a summary judgment decision, it

nevertheless emphasized that Daubert did not alter the 

general rule announced in Spring Co. v. Edgar, 99 U.S. 645 

(1978). In Edgar, the Court stated, " `cases arise where it is 

very much a matter of discretion with the court whether to 

receive or exclude the evidence; but the appellate court will 

not reverse in such a case, unless the ruling is manifestly 

erroneous.' " Joiner, 118 S. Ct. at 517 (quoting Edgar, 99 

U.S. at 658). After so stating, the Court rejected any 

alteration of this rule and in the context of expert testimony 

said, "But Daubert [v. Merrell Dow Pharmaceuticals, Inc., 

509 U.S. 579 (1993)] did not address the standard of 

appellate review for evidentiary rulings at all. . .." Id. The 

Court then repeated that under Daubert " `the trial judge 

must ensure that any and all scientific testimony or 

evidence admitted is not only relevant, but reliable.' " Id. 

(quoting Daubert, 509 U.S. at 589). 

 20 
The Court went on to hold in Joiner that the Eleventh 

Circuit had erred in reviewing the exclusion of Joiner's 

experts' testimony because it failed to give the trial court 

the deference that is the hallmark of abuse of discretion 

review. Id. (citing Koon v. United States, 518 U.S. 81, 97-99 

(1996)). The Court further held that the studies upon which 

Joiner's experts relied were not sufficient whether

individually or in combination, to support their conclusions 

that Joiner's exposure to PCBs contributed to Joiner's 

cancer, and that the District Court therefore did not abuse 

its discretion in excluding their testimony.14 

In the instant case, the District Court ruled that Dr. 

Gottheimer's testimony would not be admissible for three 

reasons. First, the court found that Dr. Gottheimer's 

educational credentials were not of the highest caliber.15 

Second, during Dr. Gottheimer's voir dire, the District Court 

found Dr. Gottheimer not to be credible because he had 

made statements about his credentials that were 

inconsistent with his deposition testimony. Finally, the 

District Court found that Dr. Gottheimer's expertise was in 

property casualty insurance, not life insurance, and that 

Gottheimer had admitted in his deposition that there are 

"fundamental" differences in evaluating the two types of 

insurance. FF PP 101-05; CL PP 17-19. 

These three reasons coincide with the three requirements 

articulated in Paoli II: qualifications, reliability, and fit. The 

record discloses that Dr. Gottheimer's qualifications were 

less than stellar. Because he had testified untruthfully at 

voir dire, his testimony could well have been held 

unreliable. Finally, Dr. Gottheimer's alleged expertise, 

limited in any event to methods of investing with respect to 

property casualty insurance, did not fit with or meet the 

need of the District Court for expert testimony in life 

insurance investing. See Surace v. Caterpillar, Inc., 111 

F.3d 1039, 1055-56 (3d Cir. 1997). The District Court 

determined that Dr. Gottheimer could not be a credible 

_________________________________________________________________ 

14. Ultimately, the Court, on another issue, reversed the judgment and 

remanded the proceedings as to whether a material dispute of fact 

existed as to Joiner's alleged exposure to other elements. 

15. Dr. Gottheimer received his Ph. D. from a correspondence school. 

 21 
witness based on admissions secured through the use of 

his prior sworn testimony. See FF PP 102-104. Because the 

District Court, as fact-finder, listened to the testimony and 

assessed the credibility of the witness, these findings are 

entitled to great deference by this Court. See Anderson v. 

City of Bessemer City, N.C., 470 U.S. 564 (1985). 

Judge Becker, in his thoughtful and comprehensive 

dissent, while focusing almost exclusively on the standards 

for admissibility of scientific expert testimony, nevertheless 

acknowledges that "the factfinder is ordinarily the arbiter of 

general credibility," Dissent at 40, and that "the power to 

evaluate the credibility of witnesses and give testimony its 

proper weight primarily resides with the trier of fact." 

Dissent at 41. He also properly acknowledges that the 

decision to admit or to exclude expert testimony is reviewed 

for abuse of discretion. 

Judge Becker, however, fails to recognize or credit in his 

dissent two significant and controlling issues. First, Dr. 

Gottheimer's testimony does not fall within the scope of 

scientific testimony, and accordingly, it should not be tested 

by the particular standards required for testimony based on 

a particular scientific ethic.16 See Carmichael v. Samyang 

Tire, Inc., 131 F.3d 1433 (11th Cir. 1997), cert. granted sub 

nom. Kumho Tire Co. v. Carmichael, 118 S. Ct. 2339 (1998). 

It is true of course that we have referred to the Paoli 

requirements of qualifications, reliability and fit -- but we 

have done so only to emphasize that, measured by any 

standard, scientific or non-scientific, the District Court did 

not abuse its discretion in excluding Dr. Gottheimer's 

testimony. 

Second, and more important, the dissent, while 

acknowledging that it is the fact finder that determines 

weight and credibility of an expert's testimony, apparently 

overlooks the distinguishing circumstance here: the fact 

finder was the District Court judge himself, and not a jury. 

Judge Hutton made the critical credibility determination 

that he could not believe the testimony of Dr. Gottheimer, 

and that being so, no reason has been put forward as to 

_________________________________________________________________ 

16. See Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993); In re 

Paoli R.R. Yard Litig., 35 F.3d 717, 741-43 (3d Cir. 1994). 

 22 
why we should not credit and defer to the District Court's 

finding. Even if we might have made a different 

determination regarding Dr. Gottheimer's credibility, we are 

not at liberty to impose our opinion on the District Court.17 

We would be hard pressed to require a District Court 

judge sitting in a non-jury case who credibly and with 

reason found that he could not believe a witness to

nevertheless hear the witness's direct examination, crossexamination, and rebuttal examination in an extended trial 

when he knew that he would only reject it as unbelievable. 

All the instances and cases cited by the dissent, see, e.g., 

Dissent at 32 n.1, 46 n.13, are those in which it was for the 

jury as fact finder to determine credibility and weight of the 

expert testimony. Thus, those cases are wholly inapplicable 

to the facts of this case. When the role of the gatekeeper to 

admit or exclude evidence (the judge) and the role of the 

factfinder to assess and weigh the evidence that was 

admitted (the jury) are one and the same, the judge who 

becomes the factfinder as well as the gatekeeper must be 

given great deference by this Court, and, as we note below, 

should not be required to waste judicial time. See Fed. R. 

Evid. 403. Therefore, we cannot say on this record that it 

was an abuse of the District Court's discretion to exclude 

Dr. Gottheimer's testimony. 

Even if the District Court had abused its discretion, and 

we hold that it did not, the error must be deemed harmless 

in light of the District Court's finding that Dr. Gottheimer 

was not credible. The District Court concluded, "If given the 

chance to testify, I could not find [Dr. Gottheimer] to be a 

_________________________________________________________________ 

17. As the Supreme Court of Maine stated: 

 We have previously stated that the determination of the 

 qualifications of expert witnesses is reserved to the sound 

discretion 

 of the trial judge. It follows, therefore, that appellate decisions 

 affirming the trial court do not necessarily stand for the 

proposition 

 that the opposite ruling would constitute error. 

Hanson v. Baker, 534 A.2d 665, 667 (Me. 1987) (citation omitted); see 

also Seese v. Volkswagenwerk A.G., 648 F.2d 833, 844 (3d Cir. 1981) 

("[W]e recognize that the admission of expert testimony rests within the 

sound discretion of the district court and that the district court will be 

reversed only for an abuse of that discretion."). 

 23 
credible witness given his evasiveness, if not his propensity 

to state falsehoods." CL P 18. Obviously, hearing testimony 

from a witness who was given no credence at all by the 

District Court judge presiding at a bench trial would have 

resulted in the "waste of time" proscribed by Federal Rule 

of Evidence 403, particularly where the false statements 

identified by the judge were material to the purported 

expert's qualifications. 

VII. 

ERISA requires a fiduciary to "diversify[ ] the investments 

of the plan so as to minimize the risk of large losses, unless 

under the circumstances it is clearly not prudent to do so." 

29 U.S.C. S 1104(a)(1)(C). Meinhardt complains that Unisys 

invested an excessive amount of Fund investments in

Executive Life GICs. As discussed in Unisys I, Congress did 

not try to quantify diversity with percentages, leaving that 

determination to the facts and circumstances as found by 

the courts. Unisys I, 74 F.3d at 438-40. 

The District Court determined that Meinhardt had not 

introduced evidence by way of expert testimony as to what 

would have constituted a properly diversified fund. At the 

time Executive Life went into receivership, the Fund had 

20% of its assets in Executive Life investments, and the 

court held this level of diversification to be proper.18 

CL PP 32-33. 

Nor did Meinhardt prove his case with respect to the duty 

to diversity because he did not show that the Fund suffered 

"large losses" as a result of any failure to diversify. This was 

an issue that the Court of Appeals specifically held was not 

known at the summary judgment stage. See Unisys I, 74 

F.3d at 440. Meinhardt presented no evidence of 

investments that would have constituted proper 

diversification in order to prove that Unisys did not properly 

_________________________________________________________________ 

18. The District Court combined the FIF and the ICF for purposes of 

diversification because the funds "worked together;" that is, the FIF was 

being phased out in favor of the ICF. Proceeds from matured FIF 

contracts were invested in the ICF, and no new investments were made 

in the FIF. FF P 79; App. 1510-12, 4450. 

 24 
diversify the investments in the Fund or to enable the 

District Court to assess losses, if any, to Meinhardt for the 

difference. FF P 90. 

The duty to diversify and resulting damages from a 

breach of that duty could not be determined from the 

summary judgment record in Unisys I. Now that the trial 

has concluded, it is evident to us, as it was to the District 

Court, that Meinhardt's failure of proof did not lead to any 

determination that Unisys breached its duty to diversify or 

that damages resulted. 

VIII. 

Meinhardt claims that Unisys did not fulfill its obligation 

of making necessary disclosures under ERISA. 

In Unisys I, we stated that "a fiduciary may not materially 

mislead those to which section 1104(a)'s duties of loyalty 

and prudence are owed." Unisys I, 74 F.3d at 440-41. A 

fiduciary must make disclosures if silence would be

harmful. Bixler v. Central Pa. Teamsters Health & Welfare 

Fund, 12 F.3d 1292, 1300 (3d Cir. 1993). ERISA also

requires plaintiffs to prove losses for any breach of fiduciary 

duty claim: 

 Any person who is a fiduciary with respect to a plan 

 who breaches any of the responsibilities, obligations, or 

 duties imposed upon fiduciaries by this subchapter 

 shall be personally liable to make good to such plan 

 any losses to the plan resulting from each such 

 breach. 

29 U.S.C. S 1109(a) (emphasis added). As Meinhardt and 

the other class plaintiffs were seeking individual relief 

under 29 U.S.C. S 1132(a)(3) (in contrast to S 1132(a)(2), 

which only allows relief on behalf of the Plan), Meinhardt 

was required to prove individual losses. Varity Corp. v. 

Howe, 516 U.S. 489, 507-15 (1996). 

Although the District Court's discussion of Meinhardt's 

claims that Unisys breached its duty to disclose 

information about Executive Life spans 18 pages, we can 

dispose of this issue on appeal briefly. Essentially, 

Meinhardt complains that Unisys received reports about 

 25 
Executive Life's financial troubles in early 1990. Meinhardt 

claims that Unisys (1) did not warn the Fund participants, 

(2) drafted misleading letters in order to dispel participants' 

concern, (3) did not disclose the fact that a high-level 

Unisys executive had purged his own portfolio of Executive 

Life securities, and (4) entered into an agreement with 

Executive Life not to disclose information to participants 

that would cause participants to change their investments.19 

The District Court held that Meinhardt did not prove that 

the alleged failures to disclose were material. CL PP 22-23. 

We need not address the question of whether the alleged 

nondisclosures were material, however, because it is clear 

that Meinhardt did not prove that any alleged failures to 

disclose caused the participants to suffer damages.

CL PP 29-30. The District Court found that Meinhardt and 

the other class plaintiffs (1) already had actual knowledge 

of much of the information it is claimed that Unisys failed 

to disclose, (2) did not read the Plan documents, and (3) 

testified that they would not have withdrawn or transferred 

their money from the Fund even if they had known about 

Executive Life's problems. FF PP 70-71; CL P 28; App. 1681- 

82, 1688-89. 

Moreover, Meinhardt's expert, Tsetsekos, offered 

testimony on losses suffered as a result of the alleged 

failures to disclose, but referred only to those losses 

incurred by the Fund and not to any losses incurred by 

individual participants named as plaintiffs. FF PP 76-77; 

CL PP 29-31. Meinhardt also failed to prove individual 

damages suffered by each participant as ERISA requires. 29 

U.S.C. S 1132(a)(3). 

We hold that these factual findings of the District Court 

are not clearly erroneous and that they support the

conclusion reached by the District Court that Meinhardt 

failed to prove his claim that Unisys breached its duty of 

disclosure. 

_________________________________________________________________ 

19. The agreement did not prevent Unisys from disclosing information 

required by law. App. 1702. 

 26 
IX. 

A final word should be said about Meinhardt's claim for 

damages. First and foremost, in the absence of proof of a 

breach of fiduciary duty, no relief in the way of damages or 

losses could accrue to Meinhardt. We have held that Unisys 

satisfied ERISA's prudence standard and that accordingly, 

no breach of fiduciary duty occurred. This being so, no 

claim for increased interest, i.e., the promised interest 

minus the actual amount of interest received, or any other 

damages, can be sustained. As we have noted earlier, 

Meinhardt had received the return of the entire principal 

invested as well as some interest.20 

It is therefore irrelevant as to whether any losses

sustained by the Fund from GIC investments could have 

been offset by any gains derived from other Fund 

investments. While we acknowledge that a trustee, when he 

is imprudent and breaches his trust, is liable for all gains 

and may not offset losses against them,21 in the instant 

case, the Unisys fiduciaries were neither imprudent nor did 

they breach their fiduciary duties.22 

Additionally, Meinhardt and the Department of Labor as 

amicus also argued that the burden of proving causation of 

damages shifts to the defendant after the plaintiff has 

proved that the defendant breached a fiduciary duty. Here, 

the District Court assigned the burden of proof to the 

plaintiff Meinhardt. Because we have held that Unisys did 

not breach its fiduciary duties, we have no need to address 

the issue of which party bears the burden of proving 

causation of damages resulting from a breach offiduciary 

duty. While we recognize that our sister circuits have 

_________________________________________________________________ 

20. Even without offsetting the losses with the gains, the three contracts 

each returned principal with minimal (3-5%) interest. FF P 80. 

21. See Donovan v. Bierwirth, 754 F.2d 1049, 1056 (2d Cir. 1985); 

Restatement (Second) of Trusts S 213. 

22. In light of our decision in favor of Unisys, we have no need to 

address Unisys's affirmative defense under 29 U.S.C. S 1104(c), which 

relieves a trustee of liability if the loss results from the participant's 

exercise of control. 

 27 
divided in deciding this question,23 we have yet to express 

ourselves on this issue.24 

X. 

In sum, we have held that: 

(1) The District Court's findings of fact issued after 

 hearing evidence on Meinhardt's ERISA claims will be 

 affirmed as not clearly erroneous. 

(2) The District Court's conclusions of law that the Unisys 

 fiduciaries were prudent, and in the alternative, that a 

 hypothetical prudent fiduciary would have made the 

 same investments in Executive Life GICs, also will be 

 affirmed. 

(3) Although we do not agree with the District Court's 

 additional discussion of an arbitrary and capricious 

 standard in reviewing the investments made by the 

 ERISA fiduciaries, this discussion was superfluous, 

 constitutes no more than harmless error, and does not 

 affect our judgment. 

(4) The District Court did not abuse its discretion in 

 excluding the testimony of Meinhardt's proposed expert 

 witness on the issue of Unisys's prudence, and in any 

 event, that action was harmless in light of the District 

 Court's finding that the expert was not credible. 

_________________________________________________________________ 

23. Compare Silverman v. Mutual Benefit Life Ins. Co., 138 F.3d 98, 105- 

06 (2d Cir. 1998), cert. denied, ___ S. Ct. ___, 1998 WL 440027 (Oct. 5, 

1998) and Kuper v. Iovenko, 66 F.3d 1447, 1459-60 (6th Cir. 1995) 

(burden of proof on plaintiff) with McDonald v. Provident Indemnity Life 

Ins. Co., 60 F.3d 234, 237 (5th Cir. 1995); Roth v. Sawyer-Cleator 

Lumber Co., 16 F.3d 915, 917 (8th Cir. 1994) (burden of proof on 

fiduciary defendant). 

24. Cf. Kemmerer v. ICI Americas, Inc., 70 F.3d 281, 290 (3d Cir. 1995) 

(citing Roth for the proposition that burden of disproving damages shifts 

to the trustee, but finding no need to shift the burden because the case 

before the court did not involve a situation where plaintiff had proved a 

breach of duty and a definite loss); Nedd v. United Mine Workers of Am., 

556 F.2d 190, 211 (3d Cir. 1977) (holding that shifting the burden of 

causation to the fiduciary is an appropriate rule in an LMRA case). 

 28 
(5) The District Court did not err in denying relief to 

 Meinhardt inasmuch as no losses or damages could be 

 sustained. As a consequence, we have found it 

 unnecessary to address the disputed issue of which 

 party bears the burden of proving causation of 

 damages that result from a breach of fiduciary duty. 

(6) The District Court did not err in holding that 

 Meinhardt's other ERISA claims, failure to diversify 

 and failure to disclose information, were not proved. 

Thus, we will affirm the District Court's orders of November 

24, 1997, and January 9, 1998, in favor of Unisys and 

against Meinhardt. 

Each party shall bear its own costs. 

 29 
BECKER, Chief Judge, dissenting 

Although I join in Parts I through V and VII through IX 

of the majority's opinion, I believe that the majority has 

made a significant error regarding expert testimony, and I 

dissent on this point. Because I believe that this error is 

not harmless, I believe we should vacate the judgment and 

remand this case for a new trial. 

In concluding that the District Court properly excluded 

the testimony of Dr. Gottheimer, the majority seriously 

misconceives the proper approach to the admission of 

expert opinion testimony under Federal Rule of Evidence 

702. As an initial point, the majority overstates the degree 

to which we owe deference to the District Court's decision 

in a case, such as this, tried to the court. The District 

Court's decision deserves no additional deference simply 

because the court sat as both evidentiary gate-keeper and 

fact-finder. If anything, the practicalities of the matter 

suggest that the trial court in such a situation should be 

more reluctant than usual to exclude evidence, although I 

do not suggest that we should apply a correspondingly 

more stringent standard of review. 

The District Court and the majority also make three

important errors in analyzing the substantive requirements 

of Rule 702. First, the majority confuses the reliability of an 

expert witness -- a matter for the jury -- with the reliability 

of his or her methodology -- a matter initially for the trial 

judge -- and therefore erroneously concludes that 

questions about an expert witness's general credibility are 

a proper basis for excluding his or her testimony. The 

question for the judge under Rule 702 is not whether the 

witness is reliable but whether the methodology the expert 

uses in reaching his conclusions is reliable. As to this latter 

point, the witness's general credibility is simply irrelevant; 

the relevant issues in determining the reliability of an 

expert's principles and methods are of the sort set forth 

with respect to scientific testimony in Daubert v. Merrell 

Dow Pharms., Inc., 509 U.S. 579, 593-95 (1993). 

Second, the majority misconstrues the nature of the

requirement of "fit" between the expert's testimony and the 

facts at issue. The majority concludes that the District 

 30 
Court correctly found that no fit exists in this case because 

Dr. Gottheimer's experience, in the area of propertycasualty insurance, on which his testimony is based, is not 

in the specific area -- life insurance -- with which the facts 

in this case deal. But the majority's focus on the connection 

between Dr. Gottheimer's claimed basis for being an expert 

and the facts at issue, as opposed to the connection 

between the substance of his testimony and the facts, is 

irrelevant to the question of fit. Their concern about his 

background should more appropriately be directed at Dr. 

Gottheimer's qualifications, not the fit between his 

testimony and the facts. 

Third, the majority permits the District Court to set the 

qualifications bar for expert testimony too high. It approves 

the District Court's rejection of the expert's testimony 

simply because his qualifications are not of the"highest 

caliber." This conclusion is inconsistent with our 

longstanding liberal approach to the matter of expert 

witness qualifications. Also, the connection between Dr. 

Gottheimer's expertise and the issues in this case-- which 

the majority discusses in the context of fit -- are not too 

remote for him to qualify as an expert under Rule 702. 

Finally, I think that the majority wrongly concludes that 

any error in the exclusion of Dr. Gottheimer's testimony 

was harmless. While improper admission of evidence is 

usually harmless error in a bench trial, the improper 

exclusion of an expert witness who would have offered a 

party's sole expert testimony on an element of its case 

ordinarily is not harmless. The fact that the District Court 

found some inconsistencies in Dr. Gottheimer's voir dire 

testimony was not a sufficient basis for changing the 

ordinary rule. Such inconsistencies are not enough to 

convince me that it is highly probable that Dr. Gottheimer's 

testimony, if admitted, would not have changed the 

outcome. This is especially true in light of the fact that the 

inconsistencies the District Court discusses were at worst 

minor. 

I. Overview of Rule 702 

Under Rule 702, "[i]f scientific, technical, or other 

 31 
specialized knowledge will assist the trier of fact to 

understand the evidence or to determine a fact in issue, a 

witness qualified as an expert by knowledge, skill,

experience, training, or education, may testify thereto in the 

form of an opinion or otherwise." Fed. R. Evid. 702. The 

Supreme Court has recognized that Rule 702 , although it 

limits the scope of permissible evidence, is part of "the 

`liberal thrust' of the Federal Rules and their `general 

approach of relaxing the traditional barriers to "opinion" 

testimony.' " Daubert, 509 U.S. at 588 (quoting Beech 

Aircraft Corp. v. Rainey, 488 U.S. 153, 169 (1988)). We have 

recognized that this "principle of liberal admission of expert 

testimony is found in Rule 702 itself, in the advisory 

committee note to the rule, and in our case law."1 

To these ends, Rule 702 embodies three distinct 

substantive restrictions on the admission of expert

testimony: qualifications, reliability and fit. See In re Paoli 

R.R. Yard PCB Litig. ("Paoli II"), 35 F.3d 717, 741-43 (3d 

Cir. 1994). First, an expert witness must be qualified by 

virtue of specialized expertise. See Fed. R. Evid. 702 

(permitting expert testimony of a witness "qualified as an 

expert by knowledge, skill, experience, training, or 

education"); Paoli II, 35 F.3d at 741. Second, "an expert's 

testimony is admissible so long as the process or technique 

the expert used in formulating the opinion is reliable." Paoli 

II, 35 F.3d at 742 (citing Daubert, 509 U.S. at 589-90). 

Third, "[e]xpert testimony which does not relate to any 

issue in the case is not relevant and, ergo, non-helpful." 

Daubert, 509 U.S. at 591 (citations omitted).2 

_________________________________________________________________ 

1. Habecker v. Copperloy Corp., 893 F.2d 49, 51 (3d Cir. 1990); accord 

Waldorf v. Shuta, 142 F.3d 601, 625 (3d Cir. 1998) (citing the "policy of 

liberal admissibility of expert testimony"); Holbrook v. Lykes Bros. S.S. 

Co., 80 F.3d 777, 782 (3d Cir. 1996) (citing"our liberal approach to 

admitting expert testimony"); United States v. Downing, 753 F.2d 1224, 

1230 (3d Cir. 1985) (citing "the liberal standard of admissibility 

mandated by Rule 702"); Knight v. Otis Elevator Co., 596 F.2d 84, 88 (3d 

Cir. 1979). 

2. It is not a settled question in this Circuit whether the Daubert 

requirements apply to nonscientific testimony such as may be at issue 

here. See Lauria v. National R.R. Passenger Corp., 145 F.3d 593, 599 n.7 

(3d Cir. 1998) (questioning, but not resolving, whether Daubert analysis 

 32 
II. Standard of Review 

As an initial matter, I think the majority errs in its 

analysis of the applicable standard of review and the extent 

to which we owe deference to the District Court's decision. 

Of course, the decision whether to admit or exclude expert 

testimony is largely within the hands of the trial judge. We 

review such a decision for abuse of discretion. See General 

Elec. Co. v. Joiner, 118 S. Ct. 512, 517 (1997) ("We have 

held that abuse of discretion is the proper standard of 

review of a district court's evidentiary rulings." (citations 

omitted)); In re Paoli R.R. Yard PCB Litig. ("Paoli I"), 916 

F.2d 829, 856 & n.33 (3d Cir. 1990). The standard does not 

change when we are reviewing a court's decision to exclude, 

as opposed to admit, expert testimony, in spite of the liberal 

_________________________________________________________________ 

should apply to testimony of expert in train track maintenance); United 

States v. Velasquez, 64 F.3d 844, 850 (3d Cir. 1995) (questioning the 

propriety of applying Daubert to handwriting analysis, but applying it in 

an exercise of caution). This question is currently before the Supreme 

Court. See Carmichael v. Samyang Tire, Inc., 131 F.3d 1433 (11th Cir. 

1997), cert. granted sub nom. Kumho Tire Co. v. Carmichael, 118 S. Ct. 

2339 (1998). The current proposed amendment to Rule 702 would apply 

a distillation of the Daubert analysis to all expert testimony. See Fed. 

R. 

Evid. 702 (proposed amendment 1998) (further limiting admissibility of 

expert testimony to where "(1) the testimony is sufficiently based upon 

reliable facts or data, (2) the testimony is the product of reliable 

principles and methods, and (3) the witness has applied the principles 

and methods reliably to the facts"). 

The majority contends that I have erred by focusing on Daubert 

analysis in a case in which it might not apply. See Slip Op. at 23. But 

even to the extent the majority turns out to be correct that a strict 

Daubert analysis does not apply, my conclusions would not change. 

First, I do not believe that the result would be any different if we were 

to apply the principles of Rule 702 sans Daubert. In fact, since Daubert 

imposes additional requirements for scientific testimony beyond the 

usual requirements for expert testimony, not applying Daubert would 

provide even greater reason to believe that Dr. Gottheimer's testimony 

should have been admitted. Thus, the majority's criticism supports my 

contention. Second, even if the Supreme Court in Kumho decides that 

strict Daubert analysis should not apply to non-scientific testimony, I 

still think that the basic principles of reliability and fit would be 

relevant 

in determining the admissibility of expert testimony under Rule 702. 

 33 
standard for the admission of such testimony. See Joiner, 

118 S. Ct. at 517. 

Even though we apply an abuse of discretion standard of 

review, however, "to the extent the district court's ruling 

turns on an interpretation of a Federal Rule of Evidence our 

review is plenary."3 Furthermore, although our review is 

highly deferential, it is not a complete bar to reversing a 

district court's decision even where the court does not 

commit purely legal error. See, e.g., Paoli I, 916 F.2d at 

855-56 (rejecting as an abuse of discretion the trial court's 

insistence on certain credentials as expert qualifications); 4 

Weinstein's Federal Evidence S 702.02(2) n.9 (2d ed. Nov. 

1998) (collecting cases). 

The majority concludes that the fact that this case

involved a bench trial requires additional deference to the 

District Court's evidentiary exclusion decision. In reaching 

this conclusion, the majority relies on Goodman v. 

Highlands Insurance Co., 607 F.2d 665 (5th Cir. 1979), 

which states that "a trial judge sitting without a jury is 

entitled to even greater latitude concerning the admission 

or exclusion of evidence." Goodman, 607 F.2d at 668. The 

majority asserts that, after Joiner -- in which the Supreme 

Court held that the same abuse of discretion standard of 

review applies to an evidentiary ruling on expert testimony 

regardless of whether the trial court admits or excludes the 

evidence -- the "Goodman" rule "has been given increased 

viability." Slip Op. at 20. For a variety of reasons, I cannot 

agree with the majority's conclusion that our review is 

affected by the fact that this case was tried to the court. 

As an initial matter, Goodman does not support the 

meaning the majority draws from it. The statement in 

Goodman upon which the majority relies refers not to the 

trial court's decision on admissibility but to whether the 

trial court's decision, if erroneous, was a harmless error. 

_________________________________________________________________ 

3. DeLuca v. Merrell Dow Pharms., Inc., 911 F.2d 941, 944 (3d Cir. 1990) 

(citing In re Japanese Elec. Prods. Antitrust Litig., 723 F.2d 238, 277 & 

n.43 (3d Cir. 1983), revd. on other grounds sub. nom. Matsushita Elec. 

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986)); accord Barker v. 

Deere & Co., 60 F.3d 158, 161 (3d Cir. 1995). 

 34 
This reading is made manifest by an examination of the 

sentence following that quoted above: 

 In a non-jury case, the admission of incompetent 

 evidence will not warrant reversal unless all of the 

 competent evidence is insufficient to support the 

 judgment, or unless it affirmatively appears that the 

 incompetent evidence induced the court to make an 

 essential finding which would otherwise not have been 

 made. 

Goodman, 607 F.2d at 668 (citations omitted). This is 

simply a restatement of the familiar harmless error test for 

review of decisions admitting evidence in bench trials.4 It is, 

however, irrelevant to our determination of whether the 

district court's decision to exclude expert testimony from 

evidence is reversible error.5 

Furthermore, even assuming the majority correctly states 

the Fifth Circuit's Goodman rule, I think that rule is not a 

proper one and would not follow it. The Federal Rules of 

Evidence apply with full force to bench trials. See Fed. R. 

Evid. 1101(b); 9 Charles Alan Wright & Arthur R. Miller, 

_________________________________________________________________ 

4. As we have stated: 

 [I]t is well settled that in a nonjury case, an appellate court 

will not 

 reverse on the basis of an erroneous admission of evidence unless 

 (1) there is insufficient evidence other than the challenged 

evidence 

 to support the district court's conclusion, or (2) the district 

court is 

 induced by the challenged evidence to make an essential finding 

 that it would not have made otherwise. 

United States v. Local 560, Intl. Bhd. of Teamsters, 780 F.2d 267, 278 

(3d Cir. 1985) (alteration in original) (quoting De Laval Turbine, Inc. v. 

West India Indus., Inc., 502 F.2d 259, 263-64 (3d Cir. 1974)); accord 12 

Rya W. Zobel, Moore's Federal Practice S 61.06(2) (3d ed. 1998). This is 

a sensible rule based on the assumption that judges are more capable 

of ignoring prejudicial or irrelevant evidence than juries. See 1 

Weinstein's, supra, S 103.41(4)(a) ("At one end of the scale is the nonjury trial in which the judge is often assumed, even in a criminal case, 

to have disregarded inadmissible evidence in arriving at a decision."). 

5. Recent cases from the same court reveal that the quoted portion of 

Goodman in fact refers to harmless error analysis. See, e.g., Southern 

Pac. Transp. Co. v. Chabert, 973 F.2d 441, 448 (5th Cir. 1992) (quoting 

Goodman and citing it in support of the harmless error standard). 
 35 
Federal Practice & Procedure S 2411, at 587 (2d ed. 1995) 

("In theory, the Federal Rules of Evidence apply equally in 

court trials and jury trials."). After all, a trial is a trial. To 

me, the proposition that we owe more deference to trial 

court decisions excluding evidence in bench trials is 

inconsistent with the Federal Rules and encourages sloppy 

district court decisionmaking.6 

If anything, trial courts should be more chary of 

excluding evidence in bench trials than in jury trials. See 

Builders Steel Co. v. Commissioner, 179 F.2d 377, 379 (8th 

Cir. 1950) ("[A] trial judge who, in the trial of a nonjury 

case, attempts to make strict rulings on the admissibility of 

evidence, can easily get his decision reversed by excluding 

evidence which is objected to, but which, on review, the 

appellate court believes should have been admitted."), 

quoted in 9 Wright & Miller, supra, S 2411, at 587. The 

better course is to admit the evidence and then take factors 

that otherwise might affect its admissibility into 

consideration in determining its weight, rather than waste 

time debating the propriety of admitting the evidence.7 I 

_________________________________________________________________ 

6. The majority suggests that I have failed to recognize the critical fact 

in 

this case: that the judge was the fact-finder as well as the Rule 702 

gatekeeper. The majority is incorrect. Of course I recognize this fact, 

but 

think that it should make no difference in our analysis. The majority 

essentially contends that, once the trial judge in a bench trial makes up 

his or her mind during an in limine hearing that a witness is not 

credible, that decision is cast in concrete and the judge will close his 

or 

her ears to any further (trial) testimony from the witness. Concomitantly, 

the majority suggests that, with any witness, the court proceeding to a 

bench trial may exclude a prospective witness's testimony based not on 

its admissibility but on the witness's credibility. See Slip Op. at 23 

("We 

would be hard pressed to require a District Court judge sitting in a nonjury case who credibly and with reason found that he could not believe 

a witness to nevertheless hear the witness's direct examination, crossexamination, and rebuttal examination in an extended trial when he 

knew that he would only reject it as unbelievable."). I, to the contrary, 

think it would be preferable for the trial judge to listen to the witness 

and keep his or her mind open to the possibility that the entirety of the 

witness's trial testimony could change his or her view of the witness's 

credibility. Listening, after all, is a major part of the judge's job. 

7. See Builders Steel, 179 F.2d at 379 (quoting Donnelly Garment Co. v. 

NLRB, 123 F.2d 215, 224 (8th Cir. 1941)). In Donnelly Garment, the 

court noted that it is usually more efficient in a bench trial for the 

court 
to simply admit questionable evidence, and then take such questions 

into consideration in determining the weight it should be given. See 123 

F.2d at 224. 

 36 
believe the majority's approach grants undue deference to 

trial court's decisions excluding evidence in bench trials. 

III. Rule 702 Requirements 

I now turn to the substantive requirements of Rule 702. 

Under Rule 702, expert testimony is admissible only if it 

meets the requirements of Rule 702: qualifications,

reliability and fit. The majority concludes that the District 

Court properly found that Dr. Gottheimer's testimony met 

none of these requirements. I disagree, and discuss each of 

these factors, although not in the usual order. 

A. Reliability 

The majority begins with the indisputable premise that 

reliability is a key factor in determining the admissibility of 

expert testimony. "[U]nder the Rules the trial judge must 

ensure that any and all scientific testimony or evidence 

admitted is not only relevant, but reliable." Joiner, 118 S. 

Ct. at 517 (quoting Daubert, 509 U.S. at 589). From this, 

the majority concludes that, as part of the reliability 

analysis, a trial court may consider the general credibility 

of a witness in determining whether his or her testimony is 

appropriately admitted as expert witness testimony. See 

Slip Op. at 20 ("Thus in our view, the Court's emphasis on 

reliability as well as on relevancy embraces within its 

standard the credibility of the witness proffering expert 

opinion."). Accordingly, the majority holds that, since the 

District Court found that Dr. Gottheimer was not a credible 

witness it could properly exclude his expert testimony 

under Rule 702. The majority misconceives the 

fundamental nature of the reliability inquiry under Daubert. 

The reliability inquiry focuses not on the witness's 

reliability in an evidentiary sense, but on the reliability of 

the methodology that the expert applies in arriving at an 

opinion. 

 [I]n order to qualify as "scientific knowledge," an 

 inference or assertion must be derived by the scientific 

 method. Proposed testimony must be supported by 

 appropriate validation -- i.e., "good grounds," based on 

 what is known. In short, the requirement that an 

 37 
 expert's testimony pertain to "scientific knowledge" 

 establishes a standard of evidentiary reliability. 

Daubert, 509 U.S. at 590 (footnote omitted). This inquiry 

focuses on the expert's principles and methodology, not his 

results. 

 The inquiry envisioned by Rule 702 is, we emphasize, 

 a flexible one. Its overarching subject is the scientific 

 validity -- and thus the evidentiary relevance and 

 reliability -- of the principles that underlie the 

 proposed submission. The focus, of course, must be 

 solely on principles and methodology, not on the 

 conclusions that they generate. 

Daubert, 509 U.S. at 594-95. Under Rule 702, the trial 

court's preliminary reliability analysis in making an 

admissibility determination must focus on the witness's 

methods, not his or her testimony as a whole.8 A current 

proposed amendment to Rule 702 reemphasizes this focus 

on the reliability of the methodology, as opposed to the 

witness.9 

_________________________________________________________________ 

8. Even the broadest understandings of the Daubert reliability inquiry 

recognize that such reliability determinations are limited to the 

witness's 

methods and related matters. "The broadest reading of Daubert is that it 

applies to all reliability issues presented by all expert testimony. Under 

this interpretation, all reliability issues raised by an expert's 

application, 

methodology, reasoning, or underlying theories are admissibility 

questions to be resolved by the gatekeeper-judge." 29 Charles Alan 

Wright & Victor James Gold, Federal Practice & Procedure S 6266, at 290 

(1997). 

9. The Judicial Conference of the United States's Standing Committee on 

Rules of Practice and Procedure is currently considering an amendment 

to Rule 702 proposed by its Advisory Committee on Rules of Evidence 

that would permit the admission of expert testimony if "(1) the testimony 

is sufficiently based upon reliable facts or data, (2) the testimony is 

the 

product of reliable principles and methods, and (3) the witness has 

applied the principles and methods reliably to the facts." Fed. R. Evid. 

702 (proposed amendment 1998). Under the proposed rule, the trial 

judge must determine whether the proposed testimony"is properly 

grounded, well-reasoned and not speculative before it can be admitted." 

Fed. R. Evid. 702 advisory committee's note (proposed amendment 

1998). "If there is a well-accepted body of learning and experience in the 

expert's field, then the expert's testimony must be grounded in that 

learning and experience to be reliable, and the expert must explain how 

the conclusion is so grounded." Id. 
 38 
Credibility plays no appropriate part in the analysis of 

the reliability of a proposed expert's methodology. The 

Court in Daubert recognized a number of factors pertinent 

to the reliability inquiry, including testability, peer review or 

publication, potential rate of error, existence of standards 

and controls, and general acceptance. See 509 U.S. at 593- 

94. We, as well as others, have suggested numerous 

additional factors relevant to reliability as set forth in the 

margin.10 The key point is that none of these factors 

requires consideration of the proffered expert's credibility in 

general. "[E]valuating the reliability of scientific 

methodologies and data does not generally involve 

assessing the truthfulness of the expert witnesses . . . ." 

Paoli II, 35 F.3d at 749.11 Of course, a particular witness 

_________________________________________________________________ 

10. See, e.g., Downing, 753 F.2d at 1238-39 (listing additional factors: 

novelty, specialized literature, and non-judicial uses of techniques); 

Joiner, 118 S. Ct. at 519 (whether the expert has unjustifiably 

extrapolated from an accepted premise to an unfounded conclusion); 

Sheehan v. Daily Racing Form, Inc., 104 F.3d 940, 942 (7th Cir.) 

(whether "the expert is being as careful as he would be in his regular 

professional work outside his paid litigation consulting"), cert. denied, 

117 S. Ct. 2480 (1997); Daubert v. Merrell Dow Pharms., Inc., 43 F.3d 

1311, 1317 (9th Cir. 1995) ("whether the experts are proposing to testify 

about matters growing naturally and directly out of research they have 

conducted independent of the litigation, or whether they have developed 

their opinions expressly for purposes of testifying"); Claar v. Burlington 

N.R.R. Co., 29 F.3d 499, 502 (9th Cir. 1994) (whether the expert has 

adequately accounted for obvious alternative explanations). 

11. Courts have held in numerous other cases that credibility is 

irrelevant to determining whether a proposed expert witness's testimony 

is admissible under Rule 702, and particularly whether it is based on 

reliable methodology. See, e.g., Breidor v. Sears, Roebuck & Co., 722 

F.2d 1134, 1138-39 (3d Cir. 1983) ("Where there is a logical basis for an 

expert's opinion testimony, the credibility and weight of that testimony 

is 

to be determined by the jury, not the trial judge."); see also Kannankeril 

v. Terminix Intl., Inc., 128 F.3d 802, 809 (3d Cir. 1997) ("If the expert 

meets liberal minimum qualifications [under Rule 702], then the level of 

the expert's expertise goes to credibility and weight, not 

admissibility."). 

For example, expert witnesses cannot be excluded on the basis of bias. 

See, e.g., Marshall v. Perez Arzuaga, 828 F.2d 845, 851-52 (1st Cir. 

1987); Gideon v. Johns-Manville Sales Corp., 761 F.2d 1129, 1135-36 

(5th Cir. 1985). Similarly, factual errors in a witness's testimony are 

not 

grounds for excluding the witness from testifying as an expert. See Paoli 

II, 35 F.3d at 753-54. Finally, general attacks on credibility based on a 

lack of personal knowledge are not a proper basis for excluding expert 

testimony. See Dixon v. International Harvester Co., 754 F.2d 573, 580 
(5th Cir. 1985). 

 39 
can lie about whether one of the factors mentioned above is 

present. But the witness's general credibility -- i.e., 

credibility based on matters not directly related to these 

factors, such as bias or unrelated prior inconsistent 

statements -- is not relevant to a trial court's preliminary 

determination that these factors are present. These factors 

are relatively objective matters that the court can generally 

analyze independent of the witness's testimony about them. 

For example, a court is fully capable of determining 

whether a theory or method is testable. 

Furthermore, permitting the trial court to consider the 

general credibility of an expert witness in its analysis of the 

reliability of proposed expert opinion testimony improperly 

trenches on the province of the fact-finder. The fact-finder 

is ordinarily the arbiter of general credibility. Rule 702 is 

intended not to impinge on the authority of the fact-finder 

in making credibility determinations, but rather to ensure 

that the fact-finders' ability to find facts independently is 

not overwhelmed by complex and authoritative-seeming 

expert testimony. See 29 Wright & Gold , supra, S 6262, at 

179 ("If the trier of fact is unable or disinclined to question 

the expert's opinion, it surrenders its central function to an 

expert whose testimony may be unreliable."). In order to 

avoid this eventuality, Rule 702 provides for a preliminary 

inquiry into whether proposed expert testimony is the kind 

that is appropriately admitted into evidence, i.e., that the 

method is reliable and based on expertise. See id. at 183- 

84. But this inquiry cannot extend into matters that are the 

proper province of the fact-finder, such as general

credibility. See id. at 184 ("Importantly, however, Rule 702 

on its face creates no general power in the trial judge to 

exclude expert testimony on the grounds that it is 

unreliable."). 

This limitation on the power of the trial court to admit 

and exclude expert testimony rests on sound policy 

considerations. First, it is emblematic of the Rules' 

generally liberal approach to the admissibility of evidence, 

discussed above. See supra Part I. Second, it reflects the 

fact that the power to evaluate witness's credibility lies 

traditionally with the fact-finder, not the trial court making 

evidentiary rulings. See 29 Wright & Gold, supra, S 6262, at 

 40 
185 ("[T]he power to evaluate the credibility of witnesses 

and give testimony its proper weight primarily resides with 

the trier of fact."). 

Finally, it rests on the general assumption underlying the 

Federal Rules of Evidence as a whole: the fact-finder is best 

situated to determine the credibility of witnesses. See id. at 

185 ("[J]uries generally have the ability to accurately weight 

and evaluate witness credibility."). "Accordingly, the most 

common judicial response to attacks on the reliability of 

expert testimony is that such matters go to weight, not 

admissibility." Id. at 185-86. The Court in Daubert

recognized the importance of leaving such matters to the 

fact-finder, and not determining them on evidentiary 

grounds: 

 Respondent expresses apprehension that abandonment 

 of "general acceptance" as the exclusive requirement 

 for admission will result in a "free-for-all" in which 

 befuddled juries are confounded by absurd and 

 irrational pseudoscientific assertions. In this regard 

 respondent seems to us to be overly pessimistic about 

 the capabilities of the jury and of the adversary system 

 generally. Vigorous cross-examination, presentation of 

 contrary evidence, and careful instruction on the burden 

 of proof are the traditional and appropriate means of 

 attacking shaky but admissible evidence. 

Daubert, 509 U.S. at 595-96 (citation omitted; emphasis 

added). 

Accordingly, I conclude that the District Court erred to 

the extent that it considered Dr. Gottheimer's general 

credibility as a factor in determining whether the principles 

and methodology underlying his proposed expert testimony 

were reliable under Rule 702. This result is unaffected by 

the fact that the District Court -- post hoc -- went ahead 

and made credibility findings that arguably would have 

resulted in his rejection of Dr. Gottheimer's testimony in its 

role as fact-finder. I deal with this aspect of the matter in 

my discussion of harmless error. See infra Part IV.

Questions about Dr. Gottheimer's credibility should have 

been left for substantive fact-finding, not evidentiary 

rulings. Since the District Court and Unisys suggest no 

 41 
other concerns about the reliability requirement, I would 

conclude that Dr. Gottheimer's proposed testimony satisfies 

it. 

B. Fit 

The majority also concludes that the District Court

properly found that Dr. Gottheimer's testimony did not fit 

with the question in issue at the trial. In particular, the 

majority concludes that Dr. Gottheimer's experience and 

knowledge lay in a field not sufficiently connected with the 

question at issue to meet the requirement of fit."Dr. 

Gottheimer's alleged expertise, limited in any event to 

methods of investing with respect to property casualty 

insurance, did not fit with or meet the need of the District 

Court for expert testimony in life insurance investing." Slip 

Op. at 21. The majority misconceives the requirement of fit 

under Rule 702. 

The requirement of fit is essentially a relevance 

requirement. Under Rule 702, expert testimony is 

admissible if it "will assist the trier of fact." Fed. R. Evid. 

702. "This condition goes primarily to relevance." Daubert, 

509 U.S. at 591. "[A]dmission depends upon the `fit,' i.e., 

upon a specific proffer showing that scientific research has 

established" some point relevant to the facts of the case. 

United States v. Downing, 753 F.2d 1224, 1226 (3d Cir. 

1985). We have further clarified this point: 

 An additional consideration under Rule 702 -- and 

 another aspect of relevancy -- is whether expert 

 testimony proffered in the case is sufficiently tied to the 

 facts of the case that it will aid the jury in resolving a 

 factual dispute. In this regard, we hold that a 

 defendant who seeks the admission of expert testimony 

 must make an on-the-record detailed proffer to the 

 court, including an explanation of precisely how the 

 expert's testimony is relevant to the [factual issue] 

 under consideration. The offer of proof should establish 

 the presence of factors . . . which have been found by 

 researchers to [provide a basis for the proffered 

 opinion]. Failure to make such a detailed proffer is 

 sufficient grounds to exclude the expert's testimony. 

 42 
753 F.2d at 1242 (citations omitted); see also Lauria v. 

National R.R. Passenger Corp., 145 F.3d 593, 600 (3d Cir. 

1998); United States v. Velasquez, 64 F.3d 844, 850 (3d Cir. 

1995). 

The majority errs in concluding that Dr. Gottheimer's 

field of expertise has any relevance to the fit inquiry. As the 

foregoing discussion of the fit requirement shows, it is 

satisfied if the proffered expert opinion is relevant to a 

factual issue before the fact-finder. The expert'sfield of 

expertise is irrelevant to an inquiry into the connection 

between the opinion itself and the issues in the case. A 

simple example shows this. In Lauria, a railroad worker 

slipped and was injured when he stepped on a loose 

railroad tie that was sitting between some tracks. "The 

primary issue [was] whether Amtrak was negligent in failing 

to remove a [railroad] tie from Lauria's workplace." Lauria, 

145 F.3d at 600. An expert opinion "that the tie was a 

dangerous obstruction that should have been discovered 

and removed and, . . . that Amtrak's negligence made the 

workplace unsafe" clearly satisfies the requirement of fit. 

145 F.3d at 600. 

But the expertise of the proponent of the opinion is 

irrelevant to this inquiry. This is true even if the witness 

proposing to testify to the above opinion is a medical doctor 

who has no experience with train tracks. Under the 

majority's reasoning, however, the doctor's testimony would 

not meet the fit requirement. Clearly, a medical doctor with 

no experience working with train tracks has no expertise 

with regard to the placement of loose railroad ties. If Dr. 

Gottheimer's testimony would not meet the fit requirement 

because his expertise lay in a different field of insurance 

than that in issue in the case, clearly the hypothetical 

doctor cannot provide testimony that meets the fit 

requirement. But the doctor's testimony should be excluded 

because of his lack of qualifications, not because of a 

supposed lack of fit. The proposed expert's expertise is 

simply irrelevant to determining whether the proffered 

expert opinion is relevant to issues in the case. 

As this example shows, the majority's and the District 

Court's concerns about the connection between Dr. 

Gottheimer's expertise and the issues in the case are 

 43 
actually relevant to the step of the Rule 702 inquiry which 

I consider infra: qualifications. Under Rule 702, a witness 

can offer an expert opinion if he or she is "qualified as an 

expert by knowledge, skill, experience, training, or 

education." Fed. R. Evid. 702. The nature of a witness's 

specific field of expertise is part of the expert's background 

that is considered in determining whether a witness is 

qualified. See Paoli II, 35 F.3d at 741. 12 

I think a proper fit inquiry would show that Dr. 

Gottheimer's testimony meets the fit requirement. Plaintiffs' 

counsel said that Dr. Gottheimer would have testified that 

certain standard tests exist in the insurance industry to 

analyze the financial condition of insurance companies, and 

that he was familiar with those tests. He would have 

further testified that he performed these tests on Executive 

Life data, and concluded "that the tests set up certain red 

flags that should have caused a person familiar with the 

tests and performing the tests, to ask further questions 

about the solvency and the credit worthiness of Executive 

Life." I think this is the kind of "on-the-record detailed 

proffer" that we required in Downing, "including an

explanation of precisely how the expert's testimony is 

relevant to" determining whether Unisys acted prudently. 

Downing, 753 F.2d at 1242. Accordingly, I would conclude 

that Dr. Gottheimer's proposed testimony meets thefit 

requirement. The nature of Dr. Gottheimer's expertise, and 

its connection with the factual issues in this case, are 

relevant only to the Rule 702 inquiry into qualifications, to 

which I now turn. 

_________________________________________________________________ 

12. In fact, the case the majority cites in support of its conclusion that 

Dr. Gottheimer's testimony does not meet the fit requirement involved an 

inquiry into the witness's qualifications, not thefit between his proposed 

testimony and the issues in that case. See Surace v. Caterpillar, Inc., 

111 

F.3d 1039 (3d Cir. 1997). In Surace, the plaintiff offered the testimony 

of 

an electromechanical engineer concerning workers' habituation to 

auditory warning devices. The district court excluded Brink's testimony 

and we affirmed, noting that the expert's experience was limited to 

mechanical, as opposed to human, factors in design, and he therefore 

was not qualified to testify about the latter. See 111 F.3d at 1055-56. 

 44 
C. Qualifications 

The majority also concludes that the District Court

properly excluded Dr. Gottheimer's testimony because he 

was not qualified as an expert with respect to the issues in 

this case. Specifically, the majority adopts the District 

Court's conclusion that Dr. Gottheimer was not qualified 

because his "qualifications were less than stellar." Slip Op. 

at 21. The District Court noted that "Dr. Gottheimer claims 

a doctoral degree from a correspondence school, an 

additional ground for my refusal to qualify him as an 

expert." In re Unisys Sav. Plan Litig., No. 91-3067, 1997 WL 

732473, at *26 (E.D. Pa. Nov. 24, 1997). In addition, as 

discussed above, see supra section III.B, the majority 

concludes that the District Court properly rejected Dr. 

Gottheimer's testimony because his field of expertise was 

not sufficiently connected to the issues in the case. "Dr. 

Gottheimer's experience in the insurance area was limited 

to property casualty insurance and not life insurance." 

Unisys, 1997 WL 732473, at *22. Neither of these are 

appropriate grounds for excluding an expert witness for 

lack of qualifications. 

The requirement that an expert witness be qualified is 

well established. A witness may only provide expert

testimony to the extent that he or she is "qualified as an 

expert by knowledge, skill, experience, training, or 

education." Fed. R. Evid. 702. The bases for concluding 

that a witness is qualified are flexible. "[I]nsistence on a 

certain kind of degree or background is inconsistent with 

our jurisprudence in this area." Paoli I, 916 F.2d at 855; 

accord Waldorf v. Shuta, 142 F.3d 601, 626 (3d Cir. 1998) 

("[I]n considering the qualification of witnesses as experts, 

we stress that ordinarily an otherwise qualified witness is 

not disqualified merely because of a lack of academic 

training."); Paoli II, 35 F.3d at 741 ("We have eschewed 

imposing overly rigorous requirements of expertise and 

have been satisfied with more generalized qualifications."). 

A particular educational background is unnecessary;

practical experience is sufficient to conclude that a witness 

is qualified as an expert. See Lauria, 145 F.3d at 599 (citing 

American Tech. Resources v. United States, 893 F.2d 651, 

656 (3d Cir. 1990)). "Following this logic, it is an abuse of 

 45 
discretion to exclude testimony simply because the trial 

court does not deem the proposed expert to be the best 

qualified or because the proposed expert does not have the 

specialization that the court considers most appropriate."13 

Although, as always with evidentiary questions, we apply 

a deferential standard of review to a trial court's

determination of whether a proposed expert is qualified, we 

have on numerous occasions found that a district court 

abused its discretion in excluding a proffered expert 

because of his or her qualifications. Some of these cases 

are summarized in the margin.14 

_________________________________________________________________ 

13. Holbrook, 80 F.3d at 782 (citing Paoli I, 916 F.2d at 856); accord 

Kannankeril, 128 F.3d at 809 ("Whether the appellants' expert might 

have done a better job is not the test."); Paoli II, 35 F.3d at 741 

("[E]xclusion was not the proper remedy `simply because the experts did 

not have the degree or training which the district court apparently 

thought would be most appropriate.' " (quoting Paoli I, 916 F.2d at 856)). 

14. See Lauria, 145 F.3d at 599 ("Slavin's twenty years of experience 

with track equipment, maintenance, and safety procedures qualified him 

as an expert who could testify as to Amtrak's responsibility to inspect 

and maintain the track in a safe condition," even though he did not have 

particularized training other than that which anyone who had done such 

work for twenty years would have); Holbrook, 80 F.3d at 781-82 

(reversing exclusion of treating physician's testimony as to whether 

plaintiff 's cancer was mesothelioma; district court had reasoned that 

doctor was not qualified because he was not an oncologist; stating that 

trial court erroneously "restricted Dr. Carpenter's testimony based on a 

requirement that the witness practice a particular specialty to testify 

concerning certain matters"); Paoli I, 916 F.2d at 856 (district court 

excluded witnesses who would have testified about gas chromatography 

tests and differential diagnoses, because they lacked degrees in 

chemistry and medicine respectively: "In light of the liberal Rule 702 

expert qualification standard, we hold that the district court abused its 

discretion in excluding portions of [the experts'] testimony simply 

because the experts did not have the degree or training which the 

district court apparently thought would be most appropriate." (footnote 

omitted)); Habecker, 893 F.2d at 52-53 (concluding that district court 

abused its discretion when it excluded expert testimony concerning 

connection between lack of operator restraints and plaintiff's injury, 

where plaintiff was injured when he was thrown from the cab of a forklift; district court's sole reason for finding expert was not qualified 

was 

because he lacked an engineering degree); Knight, 596 F.2d at 88 

 46 
Supported by these cases, I believe that Dr. Gottheimer 

was in fact qualified to offer the expert testimony proffered, 

and that the District Court's conclusion to the contrary was 

an abuse of discretion. The District Court found that Dr. 

Gottheimer was not qualified on two grounds: the nature of 

his educational credentials and the distinction between his 

experience in property-casualty insurance companies and 

the issues in the case involving life insurance companies. In 

light of the case law discussed in the margin above, both of 

these findings are inconsistent with the exercise of sound 

discretion. 

The District Court concluded that Dr. Gottheimer could 

not be qualified because his doctorate was awarded by a 

correspondence school. If this were plaintiffs' sole basis for 

claiming that Dr. Gottheimer was qualified, I would

probably agree with the District Court. It was not, however. 

Rather, the record discloses numerous grounds on which to 

conclude that Dr. Gottheimer was qualified as an expert. 

Dr. Gottheimer's resume demonstrates his expertise 

through three distinct areas: experience, education and 

teaching. First, he has worked for a dozen years as a 

consultant in the insurance industry, following thirty years 

of employment by various insurance companies. His 

consulting work has included analyses of both propertycasualty and life insurance companies.15 Second, he has 

_________________________________________________________________ 

(finding error in district court's exclusion of expert testimony 

concerning 

whether unguarded elevator control buttons were a design defect 

"because it believed that such expertise would require some background 

in the design and manufacture of elevators," which proposed expert 

lacked; noting our "reluctance to require highly particularized, subspecialization on the part of experts"). 

15. The District Court held that Dr. Gottheimer was not qualified 

because his experience lay largely in the area of property-casualty 

insurance, not life insurance, noting that Dr. Gottheimer testified that 

there were "fundamental differences" between the two. See 1997 WL 

732473, at *22. This conclusion contradicts our holdings in Knight and 

Holbrook, in which we reversed district courts' exclusions of experts 

whose expertise the trial courts concluded was not sufficiently 

specialized. As we emphasized in those cases, we are reluctant "to 

require highly particularized, sub-specialization on the part of experts." 

Knight, 596 F.2d at 88; accord Holbrook, 80 F.3d at 782. Any differences 

between the two areas "should go to the weight, and not the 

admissibility, of [the expert's] opinion." Knight, 596 F.2d at 88. 

 47 
bachelor's and master's degrees in insurance-relatedfields, 

as well as the a doctorate from a correspondence school.16 

He also possesses several professional affiliations in 

insurance professionals' organizations. Finally, Dr. 

Gottheimer has taught for over twenty-five years at the 

College of Insurance. The College of Insurance is an 

accredited, industry-sponsored school that offers classes in 

all aspects of insurance business. He is now on the fulltime faculty there, and has taught courses in a variety of 

fields, including insurance company management. 

In light of these extensive qualifications, I have no doubt 

that Dr. Gottheimer was qualified and should have been 

permitted to testify as an expert under Rule 702. The 

District Court's decision to the contrary was an abuse of 

discretion. As the majority points out, the District Court 

refused to qualify Dr. Gottheimer because his qualifications 

"were not of the highest caliber." Slip Op. at 21. But in light 

of our longstanding jurisprudence, this is not an 

appropriate basis for excluding a proffered expert witness. 

See Kannankeril v. Terminix Intl., Inc., 128 F.3d 802, 809 

(3d Cir. 1997); Holbrook, 80 F.3d at 782; Paoli II, 35 F.3d 

at 741. Accordingly, I must conclude that the District Court 

abused its discretion in excluding his testimony on this 

basis. 

_________________________________________________________________ 

16. The District Court's focus on the nature of Dr. Gottheimer's doctorate 

and its consequent implicit dismissal of his other qualifications is also 

inconsistent with the exercise of sound discretion. If the district courts 

abused their discretion in Habecker, Paoli I and Lauria by insisting that 

the expert have a particular type of degree, the District Court in this 

case erred in insisting that the expert have not just a particular degree, 

but a degree from a particular kind of school. Cf. Lauria, 145 F.3d at 

599; Paoli I, 916 F.2d at 856. 

Furthermore, the District Court's reliance on Van Blargan v. Williams 

Hospitality Corp., 754 F. Supp. 246 (D.P.R. 1991), in discounting Dr. 

Gottheimer's degree is misplaced. In that case, the district court 

excluded an expert because, in addition to discounting his doctorate 

from a correspondence school, the court found that he had no other 

satisfactory qualifications. See Van Blargan, 754 F. Supp. at 248-49. 

Here, by contrast, Dr. Gottheimer has numerous other qualifications in 

addition to his doctorate. 

 48 
For all these reasons, I think that Dr. Gottheimer should 

have been permitted to testify as an expert witness under 

Rule 702. As discussed above, Dr. Gottheimer fully met all 

three of the Rule 702 requirements: qualifications,

reliability and fit. The only remaining question is whether 

that error was reversible or harmless error. 

IV. Harmless Error 

In the closing paragraph of its discussion of the Rule 702 

evidentiary issue, the majority concludes that, even if the 

District Court did commit an error in excluding Dr.

Gottheimer's testimony, the error was harmless. In 

reaching this conclusion, it relies on the District Court's 

statement that it "could not find [Dr. Gottheimer] to be a 

credible witness given his evasiveness if not his propensity 

to state falsehoods." 1997 WL 732473, at * 26. The District 

Court pointed to a few alleged inconsistencies in Dr. 

Gottheimer's deposition and trial testimony in support of 

this conclusion. The majority concludes that, since the 

District Court would not have believed Dr. Gottheimer's 

testimony, his testimony could not have been given any 

weight if admitted. Thus its exclusion did not have a 

substantial effect on the outcome and any error in 

excluding it was harmless. Once again, I must disagree. 

Under the Federal Rules of Evidence, an evidentiary error 

to which a party has raised a proper objection is not a 

grounds for reversal "unless a substantial right of the party 

is affected." Fed. R. Evid. 103(a); see also 28 U.S.C. S 2111; 

Fed. R. Civ. P. 61. An error is harmless, i.e., it does not 

affect a substantial right, only if "it is highly probable that 

the error did not contribute to the judgment." Murray v. 

United of Omaha Life Ins. Co., 145 F.3d 143, 156 (3d Cir. 

1998) (citing McQueeney v. Wilmington Trust Co., 779 F.2d 

916, 923-27 (3d Cir. 1985)). Although, as discussed above, 

the improper admission of evidence is usually harmless 

error in a bench trial, see supra Part II, the erroneous 

exclusion of evidence in a bench trial can be reversible error 

just as in a jury trial. See 11 Charles Alan Wright et al., 

Federal Practice & Procedure S 2885, at 454 (2d ed. 1995) 

("In nonjury cases the district court can commit reversible 

error by excluding evidence but it is almost impossible for 

 49 
it to do so by admitting evidence." (footnote omitted)). Error 

is especially likely not to be harmless where the excluded 

expert was the only one a party offered to prove an

essential element of its case.17 

In this case, Dr. Gottheimer was the only expert witness 

plaintiffs offered to prove that Unisys acted imprudently. 

His proffered testimony, set forth in the margin, was strong.18 

By excluding Dr. Gottheimer's testimony, the District Court 

deprived plaintiffs of their best evidence that Unisys 

breached its duty of prudence, a key element of his case. In 

light of our conclusion in Lauria and Holbrook, I cannot say 

that it is highly probable that the exclusion of Dr. 

Gottheimer did not affect the outcome of the trial. This is 

especially true in light of the other evidence admitted at 

_________________________________________________________________ 

17. See Lauria, 145 F.3d at 600 ("Finally, we note that because Slavin 

was the only witness originally offered to prove Amtrak's negligence with 

respect to the base tie, his exclusion from the trial did not constitute 

harmless error."); Holbrook, 80 F.3d at 787 (finding that the error in 

excluding plaintiff 's two doctors who were his only evidence regarding 

the type of cancer from which he suffered was not harmless); see also 

Habecker, 893 F.2d at 53 (finding that the error in excluding one of 

plaintiff 's two expert witnesses was not harmless where defendant 

proffered three experts on the same point). 

18. In particular, plaintiffs' attorney stated that, if he had been 

permitted 

to testify, Dr. Gottheimer's testimony would have been as follows: 

 We have offered [Dr. Gottheimer's] testimony to establish . . . 

that 

 in the insurance industry, there are some standard tools of tests 

 that are performed in conducting an analysis of thefinancial 

 condition of insurance companies, both life and health, and 

property 

 and casualty, in terms of ratios that are generated from the annual 

 statement, tests prescribed by the National Association of 

Insurance 

 Commissioners, and the Best leverage and liquidity and 

profitability 

 ratios. 

 The witness has performed these tests in his own capacity in the 

 past. He has performed them with respect to Executive Life, based 

 upon information that was available prior to the time of the three 

 bids in question. He is able to interpret the tests. He is familiar 

with 

 the tests. And his testimony would establish that the tests set up 

 certain red flags that should have caused a person familiar with 

the 
 tests and performing the tests to ask further questions about the 

 solvency and the credit worthiness of Executive Life. 

 50 
trial, set forth in the margin.19 The District Court essentially 

decided all questions the evidence raised in favor of Unisys 

and concluded that Unisys acted prudently. Although I 

agree with the majority that, based on the admitted

evidence, this conclusion was not clearly erroneous, this is 

to me an exceedingly close question. Accordingly, Dr. 

Gottheimer's testimony, if admitted, stood a good chance of 

changing this balance and consequently changing the

decision of the District Court. 

That the District Court had questions about Dr. 

Gottheimer's credibility should not affect our harmless 

error analysis. The District Court's conclusion that it would 

not have found Dr. Gottheimer's testimony credible, based 

only on his voir dire testimony, is not sufficient grounds for 

concluding that exclusion of his testimony was harmless. I 

believe that there is a reasonable chance that, if the District 

Court had given Dr. Gottheimer the opportunity to present 

his testimony in full, it would have found him to be a 

credible witness. 

Our decisions in Lauria and Holbrook at least implicitly 

support this conclusion. In each of those cases, we reversed 

a district court decision excluding expert testimony on the 

grounds that the expert witness lacked the necessary 

qualifications. Such evidence goes to the weight, not the 

admissibility, of the expert testimony. See Kannankeril, 128 

_________________________________________________________________ 

19. The evidence on Unisys's prudence admitted at trial included 

primarily the testimony of White and Level, two Unisys executives 

charged with responsibility for the Funds, and Becker, an advisor whose 

services White and Level engaged. The evidence before the District Court 

concerned several questions which, although the court decided them in 

Unisys's favor, raised serious questions about Unisys's prudence. (1) 

Whether Unisys conducted an adequate independent investigation into 

Becker's recommendation? (2) Whether Unisys conducted an adequate 

investigation of its own after it ceased use of Becker's services? (3) 

Whether credit ratings were sufficient to prove that Unisys acted 

prudently? (4) Whether the Unisys trustees adequately considered and 

debated the advantages and disadvantages of the Executive Life GICs? 

(5) Whether the fact that the Executive Life GICs bore a higher interest 

rate was sufficient to suggest that they were not prudent investments? 

(6) Whether it was imprudent for Unisys not to maintain written 

investment guidelines? 

 51 
F.3d at 809. In neither Lauria nor Holbrook did the effect of 

the expert's particular qualifications on the weight properly 

accorded to his testimony play any part in our harmless 

error analysis. See Lauria, 145 F.3d at 600 (discussing 

harmless error without mentioning the quality of the 

improperly excluded expert's qualifications); Holbrook, 80 

F.3d at 787 (same). Similarly, the impact of questions about 

Dr. Gottheimer's credibility on the weight due his testimony 

should not play a part in our harmless error analysis in 

this case. 

I find further support for this conclusion in an 

examination of what the District Court identified as 

"impeachment" of Dr. Gottheimer. The District Court stated 

that "Dr. Gottheimer was impeached no fewer than four 

times on the relatively straight forward questions on his 

qualifications." 1997 WL 732473, at *26; see also 1997 WL 

732473, at *21-*22. But this so-called "impeachment" 

involved at most minor inconsistencies. First, Dr. 

Gottheimer testified at trial that he could not recall having 

testified in court in a case involving a life insurance 

company, although he stated at his deposition three years 

earlier that twenty-four out of the twenty-five times he had 

testified in court involved property-casualty insurance 

companies. See 1997 WL 732473, at *21. Second, although 

at his deposition he could not recall having done consulting 

work involving life insurance company solvency, he testified 

that he had been retained once before his deposition and 

several times after his deposition to do such consulting. See 

1997 WL 732473, at *21-*22. Third, while he testified at 

trial that there were "some differences and there are also 

some similarities in the way" one analyzes life insurance as 

opposed to property-casualty insurance company solvency, 

in his deposition he agreed with Unisys's attorney that 

there were "fundamental differences." See 1997 WL 732473, 

at *22. 

I cannot see how these answers, under any reasonable 

reading, suggest that Dr. Gottheimer is a completely 

incredible witness. At most, they suggest that he could 

remember some things at his deposition that he could not 

at trial, and vice versa. Certainly, Dr. Gottheimer's 

statements at trial were not directly inconsistent with those 

 52 
in his deposition. A comparison of the statements does not 

raise an inference that Dr. Gottheimer was being evasive, 

let alone lying. Thus, I cannot agree with the majority that 

the at worst minor inconsistencies in Dr. Gottheimer's 

testimony make it highly probable that his testimony would 

not have affected the District Court's judgment. 

Accordingly, I do not think that the District Court's 

erroneous exclusion of Dr. Gottheimer's expert witness 

testimony was harmless. Therefore, I would remand this 

case for a new trial in which Dr. Gottheimer's testimony 

could be presented; hence, I dissent. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 53