Opinion ID: 149112
Heading Depth: 3
Heading Rank: 2

Heading: Expert Testimony on Cartels

Text: Preston McAfee, a professor of economics and business strategy at California Institute of Technology, testified for the Government as an expert witness on how bid-rigging cartels work. McAfee had no direct knowledge of the facts in this case, and testified that he had not examined the evidence to conclude whether there actually was any bid rigging in this case. Instead, he testified about how auction and bidding work, how collusion in auctions work[s], and the incentives that are created for seeking cost-reducing technologies. For example, he explained that an economically rational member of a cartel must factor into its calculation of costs the risks associated with bid rigging ( i.e., being found out and prosecuted). The cartel member's bid must be higher than that of a competitive bidder in order to cover those costs. McAfee also explained what could be inferred from the assumption that a cartel existed. For example, he testified that if a cartel existed, one could infer that members of the cartel must be able to successfully influence the bidding process if they are to succeed in the object of the conspiracythat is, rigging the bids. But the individual who prepares the bid need not know about the cartel, as long as that person is influenced by somebody who knows about the cartel. In sum, the professor explained that [c]artels are formed... to subvert competition and increase prices and testified how a cartel member achieves that purpose. Rule 702 of the Federal Rules of Evidence provides that [i]f scientific, technical, or other 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. However, not all scientific testimony is created equal; some expert opinions are more helpful or more valid than others. Recognizing this fact, in 1993, the Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), held that trial judges must act as gatekeepers to exclude unreliable expert testimony. Under Daubert and the Court's further clarification in Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), testimony admitted under Rule 702 must be both reliable and relevant. Id. at 152, 119 S.Ct. 1167. In 2000, the Supreme Court amended Rule 702 to reflect the Daubert line of cases, outlining general standards that the trial court must use to assess the reliability and relevance of testimony. An expert witness may therefore testify only if (1) the testimony is based upon sufficient 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 of the case. Fed.R.Evid. 702. The defendants moved in limine to exclude McAfee's testimony, arguing the testimony did not meet the standards of Rule 702 because it was too broad, too generic, and based too heavily on assumptions rather than analysis of the actual evidence. They argued that McAfee's testimony was not related to the facts of the case. Instead, McAfee simply assumed that a cartel actually existed between the defendants and other companies in order to make his testimony relevant. The defendants also stressed that McAfee had not tried to determine whether a cartel existed in this case, even though there are economics-based strategies to identify whether bids are in fact collusive. Because of these weaknesses, McAfee's testimony would not assist the jury in understanding the evidence as required by Rule 702. The district court denied the motions, and reaffirmed and explained its decision when it denied motions for a new trial. In its opinion denying a new trial, the court explicitly held that McAfee's testimony satisfied the requirements of Daubert and Rule 702. Miller v. Holzmann, 563 F.Supp.2d 54, 96 (D.D.C.2008). Quoting the advisory committee's note to Rule 702, the court stated that in some cases an expert may give valuable testimony to the factfinder by explaining general principles without ever attempting to apply these principles to the specific facts of the case. Id. at 90 (quoting Fed.R.Evid. 702 advisory committee's note) (emphasis omitted). According to the advisory committee's note, [f]or this kind of generalized testimony, Rule 702 simply requires that: (1) the expert be qualified; (2) the testimony address a subject matter on which the factfinder can be assisted by an expert; (3) the testimony be reliable; and (4) the testimony `fit' the facts of the case. Fed. R.Evid. 702 advisory committee's note. The district court initially held that McAfee was a qualified expert. 563 F.Supp.2d at 92 & n. 40; see also id. at 96 (listing McAfee's credentials as evidence that he was well-qualified to testify on generally-accepted economics principles). The court then proceeded to analyze McAfee's testimony under the rest of the advisory committee's note's rubric, first assessing relevance (addressed by the second and fourth criteria), then reliability (addressed by the third). First, the district court held McAfee's testimony to be relevant. The testimony addressed a subject matter appropriate for expert testimonythe second criterion under the Rule 702 advisory committee's notebecause McAfee explained complex processes and economic theory such as the federal government's procurement process, auction incentives, and the effect of collusion on auctions. Id. at 92. These topics are precisely the sort of specialized, technical matter concerning which a lay jury may benefit from a qualified expert's tutelage. Id. The testimony also `fit' the facts of the case as required by the fourth criterion. The defendants argued that the assumptions on which McAfee based his testimony were not based in the facts of the case, and therefore did not fit. But the district court disagreed. The court pointed out that, contrary to the defendants' assertions, McAfee never assumed that a cartel existed in this case.  Id. at 94. Instead, McAfee made it clear he was describing generic circumstances, leaving the jury to determine which scenario best `fit' the facts in this case. Id.; see also id. at 94 n. 45 (holding that McAfee's testimony also did not create unfair prejudice under Rule 403 because he repeatedly explained he was not familiar with the facts, and that he did not know whether collusion occurred here). His testimony, while not derived from the facts in the case, was sufficiently connected to the facts to be relevant and helpful to the jury. Id. at 95. Last, the district court turned to the third criterionreliabilitynoting that the law grants a district court the same broad latitude when it decides how to determine reliability as it enjoys in respect to its ultimate reliability determination. Id. at 95 (quoting Kumho, 526 U.S. at 141-42, 119 S.Ct. 1167). Citing Daubert 's observations about how to determine whether expert testimony is reliablefrom whether a theory has been subjected to peer review, to its potential rate of error, to whether a theory is generally accepted in the relevant fieldthe court determined that McAfee's testimony was reliable. Id. at 96. McAfee has published over twenty peer-reviewed articles on his theories about the nature of auctions and bidding. His testimony on economics embodied basic principles that are taught in undergraduate economics courses and generally accepted in the field of economics. Id. Therefore, concluded the district court, McAfee's testimony satisfied the reliability criterion. As the preceding summary of the court's reasoning demonstrates, the district court thoroughly and thoughtfully analyzed the application of Rule 702 to McAfee's testimony. We also note that district courts have broad discretion in determining whether to admit or exclude expert testimony. United States v. Gatling, 96 F.3d 1511, 1523 (D.C.Cir.1996). The court clearly did not abuse that discretion. The defendants also argue that McAfee's testimony should have been excluded under Rule 403 because the professor used highly charged terms such as cartel member and colluders, and even once made an analogy to bank robbers. As Daubert explained, Rule 403 exclusion based on unfair prejudice is particularly important in the case of expert evidence, which can be both powerful and quite misleading because of the difficulty in evaluating it. 509 U.S. at 595, 113 S.Ct. 2786 (quoting Jack B. Weinstein, Rule 702 of the Federal Rules of Evidence Is Sound; It Should Not Be Amended, 138 F.R.D. 631, 632 (1991)). But, as explained above, see supra at 38, the district court is best able to apply the balancing test of Rule 403 and determine whether evidence's potential for undue prejudice substantially outweighs its probative value. This is true for expert testimony as well as for other types of evidence. Mindful, therefore, of our responsibility not to second-guess the district court's application of the Rule 403 balancing test, we conclude the district court did not improperly apply the rule here. McAfee used terms descriptive of the theories he explained, but he also repeatedly emphasized that he was not applying the terms to the facts in this case or these defendants. The district court did not abuse its discretion when it determined that McAfee's use of terms like cartel members and colluders did not make his testimony's potential for undue prejudice substantially outweigh its probative value. Indeed, it is difficult to conceive of expert testimony relevant to the issues of this case in which the witness would not employ terms like cartel members and colluders. We note that Rule 403 provides the exclusion of evidence if its probative value is substantially outweighed by the danger of unfair prejudice, not simply prejudice. In some sense, any evidence that is probative might be arguably prejudicial. That is, the purpose of offering evidence is to influence the decision of the jury. We can hardly say that the district court abused its discretion by admitting expert testimony that used terms entirely relevant to the issues at trial.