"Economic Experts: Law in the New

Economy" By

ROBERT V.P. WATERMAN, JR.

LANE & WATERMAN LLP

220 North Main Street, Suite 600

Davenport, Iowa 52801-1987

Tel: 563.333.6618

Email: bwaterman@L-WLaw.com

STANDARDS FOR ADMISSIBILITY

I. State Standards for the Admissibility of Economic Expert Testimony

Iowa remains committed to its liberal view on the admissibility of expert testimony. Ranes

v. Adams Laboratories, Inc., 788 N.W.2d 677, 685 (Iowa 2010). Iowa considers two factors when

determining whether expert testimony is admissible: (1) “If the testimony will assist the trier of

fact in understanding the evidence or to determine a fact issue;” and (2) “If the witness is qualified

to testify as an expert by knowledge, skill, experience, training or education.” Id. (citing Iowa R.

of Evid. 5.702). The district court must consider whether there is reliable scientific, technical or

other specialized knowledge that is relevant to assist the trier of fact to determine whether the

proposed testimony fulfills the first requirement. Id.

Although not required under Iowa law, the Iowa Supreme Court supports the use of the

Daubert factors in determining whether scientific expert testimony is admissible. Ranes, 788

N.W.2d at 686, (citing Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct.

2786, 125 L.Ed.2d 469 (1999)). Iowa has identified the Daubert factors as: “(1) whether the

theory or technique is scientific knowledge that can and has been tested; (2) whether the theory or

technique has been subjected to peer review or publication; (3) the known or potential rate of error;

or (4) whether it is generally accepted within the relevant scientific community.” Ranes, 788

N.W.2d at 686 (citing Leaf v. Goodyear Tire & Rubber Co., 590 N.W.2d 525, 533 (Iowa 1999)).

When applying the Daubert factors, district courts should focus on the principles and

methodologies the expert used, not the expert’s conclusion or the underlying factual information.

Id. (quoting Daubert, 509 U.S. at 595). The trial court's role as gatekeeper is expanded in cases

with difficult scientific cases, but it remains the province of the jury to evaluate the expert’s

credibility. Ranes, 788 N.W.2d at 686. A district court’s decision on whether to admit expert

Presented at the Iowa Academy of Trial LawyersFebruary 27-28, 2014, Des Moines, Iowa

testimony is reviewed under an abuse of discretion standard. Mercer v. Pittway Corp., 616 N.W.2d

602, 628 (Iowa 2000).

II. Federal Standards for the Admissibility of Economic Expert Testimony

The Eighth Circuit applies the Daubert standard to all expert testimony, including expert

testimony relating to specialized and technical knowledge and economic expert testimony. See

Synergetics Inc. v. Hurst, 477 F.3d 949, 955 (8th Cir. 2007), (citing Kumho Tire Co. v. Carmichael,

526 U.S. 137, 141, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999)) ("We conclude that Daubert's general

holding — setting forth the trial judge's general `gatekeeping' obligation — applies not only to

[expert] testimony based on `scientific' knowledge, but also to [expert] testimony based on

`technical' and `other specialized' knowledge."). See also, Blue Dane Simmental v. American

Simmental Assn, 178 F.3d 1035, 1039-40 (8th Cir. 1999). Expert testimony should only be

excluded if the “opinion is so fundamentally unsupported that it can offer no assistance to the

jury.” Id. at 956 (citing Bonner v. ISP Tech., Inc., 259 F.3d 924, 929 (8th Cir. 2001)).

In Engineer Products Co. v. Donaldson Co. Inc., 313 F.Supp.2d 951, 1009-10 (N.D. Iowa

2004), Judge Bennett included the following quotation from Pioneer Hi-bred Int’l Inc. v. Ottawa

Plant Food Inc., 219 F.R.D. 135 (N.D. Iowa 2003) [internal citations omitted]:

In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct.

2786, 125 L.Ed.2d 469 (1993), the Supreme Court interpreted the requirements of

Rule 702 of the Federal Rules of Evidence concerning testimony by experts. As

the Eighth Circuit Court of Appeals subsequently explained, as interpreted by

Daubert, Rule 702 requires the trial judge to act as a "gatekeeper," admitting expert

testimony only if it is both relevant and reliable. The trial court is granted broad

discretion in its determination of reliability. The gatekeeper role should not,

however, invade the province of the jury, whose job it is to decide issues of

credibility and to determine the weight that should be accorded evidence. Expert

testimony should be admitted if [1] it is based on sufficient facts, [2] it 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.

In Daubert, the Supreme Court established how the trial court is to perform

its "gatekeeper" function under Rule 702: First, the trial court must make a

preliminary assessment of whether the reasoning or methodology underlying the

testimony is scientifically valid and of whether that reasoning or methodology

properly can be applied to the facts in issue. The Court cautioned that the trial court

must focus on the principles and methodology, not on the conclusions that they

generate. Second, the court must ensure that the proposed expert testimony is

relevant and will serve to aid the trier of fact. Expert testimony assists the trier of

fact when it provides information beyond the common knowledge of the trier of

fact. The Court, in Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167,

143 L.Ed.2d 238 (1999), clarified that the district court's gatekeeper function

applies to all expert testimony, not just testimony based in science. However, as the

Supreme Court emphasized in Daubert, 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 rulings are reviewed for abuse of discretion.

In Engineer Products, plaintiff’s expert was allowed to testify about plaintiff’s lost profits

over defendant's objection that the expert’s reasoning and methodology lacked any sound

economic basis. The court found the reasoning and methodology utilized by the expert were

sufficiently supported and that the expert's testimony would assist the trier of fact. Id. Evidence

that the expert’s opinions had evolved through a series of expert reports that involved changes in

both the facts and methodology, went to the weight to be given the opinions, not their admissibility.

Id.

The expert testimony of an agricultural economist was not allowed in Blue Dane Simmental

v. American Simmental Ass'n, 178 F. 3d 1035, 1040 (8th Cir. 1999). The agricultural economist

used a simple before and after analysis to determine the introduction of 19 arguably non-fullblood

Simmentals (cattle) caused the American Simmental markets to drop by 53%. Id. The trial court

found that the expert’s failure to analyze other factors, including the falling market prices prior to

the introduction on the Simmentals at issue, made his analysis unreliable. Id. On appeal, the

Eighth Circuit affirmed, holding that the district court appropriately used its gatekeeping role to

exclude the proffered expert testimony. Id. at 1041.

The testimony of economic experts has generally been found admissible in the face of

Daubert challenges. See Synergetics, Inc. v. Hurst, 477 F. 3d 949, 956 (8th Cir. 2007) (district

court did not abuse its discretion in allowing Synergetic’s expert to testify about potential damages

even though Hurst challenged the expert’s technique by arguing the expert used an improper

assumption about the number of suppliers in the relevant market); Hartley v. Dillards, 310 F.3d

1054 (8th Cir. 2002) (plaintiff’s expert’s testimony in a wrongful termination case was challenged

because the expert did not take into account the economic realities of the particular mall and the

materials that he relied upon did not squarely support his testimony that the Dillard’s store in

question did suffer loss of income as a result of the plaintiff’s action, but these alleged deficiencies

went to the weight, not the admissibility of the testimony); EFCO Corp. v. Symons Corp., 219

F.3d 734, 739 (8th Cir. 2000) (use of differing methodologies by opposing experts went to weight,

not admissibility of their respective opinions)

CHALLENGES TO THE WEIGHT, NOT THE ADMISSIBILITY,

OF THE EXPERT TESTIMONY

Generally, weaknesses in the factual basis supporting an expert opinion go to the weight to

be given the opinion, not its admissibility. In Sallis v. Lamansky, 420 N.W.2d 795, 796 (Iowa

1988), the plaintiff claimed he suffered severe permanent and disabling injuries as the result of a

rear-end collision. At trial, plaintiff proffered the testimony of an economic expert who testified

to plaintiff’s future earnings potential. Id. at 798. Defendant objected to the expert’s testimony

arguing that there was “no proper factual foundation for the economist’s opinion.” Id. at 797. The

economist based his estimate of plaintiff’s future earning capacity on the conclusion that plaintiff

would spend his remaining working years as a truck driver with no time off for illness or vacation.

Id. at 798. The economist did not consider the possibility that plaintiff would be suspended from

his position because of a poor driving record. Id. On appeal, the Iowa Supreme Court affirmed,

holding that evidence of plaintiff’s poor driving record and limited history as a truck driver went

to the weight to be given the expert’s opinion, not its admissibility. Id.

Similar conclusions were reached in Preferred Marketing Associates Co. v. Hawkeye Nat’l

Life Ins. Co., 425 N.W.2d 389, 393 (Iowa 1990) and Mermigis v. Servicemaster Industries, Inc.,

437 N.W.2d 242 (Iowa 1989). In Preferred Marketing, the trial court allowed an expert’s

testimony, over defendant's objection that the expert’s opinion was based on a faulty assumption.

Preferred Marketing, 425 N.W.2d at 393. The trial court was affirmed on appeal with the Iowa

Supreme Court hold that any deficiency in the factual basis of the expert opinion went to the weight

not the admissibility of the evidence. Id. In Mermigis, the trial court allowed the expert’s

testimony over defendant's objection that the opinion was not supported by the facts. Mermigis,

437 N.W.2d at 248. The trial court was affirmed on appeal, with the court holding that the expert’s

opinions were sufficiently established and the trial court did not err in allowing the expert to testify.

Id.

An expert’s lack of prior knowledge about the trucking industry went to the weight to be

given his opinions on plaintiff's economic losses, not their admissibility. Olson v. Nieman’s Ltd.,

579 N.W.2d 299 (Iowa 1998). In Olson, defendants challenged plaintiff's expert’s testimony,

arguing that the expert was not qualified to testify to plaintiff’s economic damages because he was

unfamiliar with the trucking industry and that the damage calculations were speculative. Id. at

308. The trial court rejected the challenge to the expert’s qualifications, finding the expert was a

qualified economist and he had researched the trucking industry. Id. at 308-09. The trial court

was affirmed on appeal, with the court finding that defendants' objections went to the weight, not

the admissibility, of the evidence. Id. at 309.

SUBSTITUTIONS FOR ECONOMIC EXPERT TESTIMONY

Iowa has a history of allowing lay testimony on economic damages. An early case, Anthes

v. Anthes, 139 N.W.2d 201, 209 (Iowa 1965), relied on plaintiff’s own testimony about his inability

to do manual labor at his farm as evidence of his loss of earning capacity. Plaintiff and his doctors

testified that plaintiff’s injuries were serious and plaintiff testified that when he returned to work

after his accident, his abilities to work on the farm were limited. Id. After the accident, plaintiff

could not operate a tractor, shovel, do heavy lifting and hardly ever was painless. Id. This evidence

was sufficient to support a finding that plaintiff had suffered a loss of earning capacity.

Iowa again looked at this issue in Carradus v. Lange, 203 N.W.2d 565, 569 (Iowa 1973).

In Carradus, a mother suffered injuries in a car accident. As a result of her injuries, she had to

quit her job at the Anamosa Head Start. Id. at 568. Plaintiff testified as to how much she made at

her job and her future intentions to obtain additional post-high school education for the position.

Id. at 568. She also testified that as a result of the injuries she suffered in the accident, she was no

longer able to work at that job. Id. Plaintiff was also able to testify to the activities that she did as

a wife and mother. Id. at 569. The Court noted that plaintiff only needed to prove diminution in

her ability to perform services as a wife and mother. Id.

More recently, the Iowa Supreme Court addressed the issue of lay testimony to support

economic damages in Vasconez v. Mills, 651 N.W.2d 48, 57 (Iowa 2002). In Vasconez, plaintiff

testified to his inability to get a masters or doctorate in education and his loss of the related salary

increase. Id. Based on his knowledge before his accident, plaintiff was able to testify to the value

that an advanced degree in education likely had and the procedure that he would have to utilize to

obtain that degree. Id. Plaintiff also was allowed to testify to the procedure that most of his

associates had used to obtain advanced degrees. Defendant objected to the speculative nature of

whether plaintiff would have obtained an advanced decree, which the trial court determined went

to the weight, not the admissibility of the evidence. Id. The trial court was affirmed on appeal,

with the court finding it is the loss of earning capacity that is compensable, not the loss of earnings.

By testifying that he was unable to attend night and weekend classes as a result of his injuries,

plaintiff was able to demonstrate that he had in fact suffered a loss of earning capacity. The court

also noted in Vasconez, “Moreover, it is not necessary to produce the expert testimony of an

economist in order to generate a jury issue on the question of projected economic loss.” Id. (citing

Carradus, 203 N.W.2d at 569).