Seagulls on the Water?¹ Has California Supreme Court Indicated A Major Change in Direction for the Admissibility of Expert Opinion Testimony?

by Low, Ball & Lynch

California courts have generally granted qualified experts wide latitude in permitting their opinion testimony to be heard by a jury.  In the recent case of Sargon Enterprises, Inc. v University of Southern California (2012) 55 Cal.4th 747, the California Supreme Court clarifies the standards trial courts should use when exercising their responsibilities as “gate-keepers” of admissible opinion evidence and mandates that courts consider not only the type of testimony offered but also the adequacy of the reasons upon which the opinion is based.
Since at least 1976, when the California Supreme Court decided the case of People v Kelly 17 Cal.3d. 24, expert testimony based on a new scientific technique or methodology was admissible only if the proponent of the evidence established that it had attained “general acceptance” in the relevant field.  The Kelly decision was based on the analysis and test developed in the earlier federal case of Frye v United States (D.C. Cir., 1923) 293 F. 1013 and, as a result, the California test for the admissibility of expert testimony became known as the Kelly-Frye test.  However, the Court itself staked out an exception to Kelly-Frye in cases of expert medical opinion testimony.  For example, in People v. McDonald (1984) 37 Cal.3d 351, 372: “We have never applied the Kelly–Frye rule to expert medical testimony, even when the witness is a psychiatrist and the subject matter is as esoteric as the reconstitution of a past state of mind or the prediction of future dangerousness, or even the diagnosis of an unusual form of mental illness[.]”.  The reason for the distinction between the admissibility of the different types of expert testimony was stated as follows: “When a witness gives his [or her] personal opinion on the stand—even if he [or she] qualifies as an expert—the jurors may temper their acceptance of his [or her] testimony with a healthy skepticism born of their knowledge that all human beings are fallible. But the opposite may be true when the evidence is produced by a machine: like many laypersons, jurors tend to ascribe an inordinately high degree of certainty to proof derived from an apparently ‘scientific’ mechanism, instrument, or procedure. Yet the aura of infallibility that often surrounds such evidence may well conceal the fact that it remains experimental and tentative. [Citation.]” People v. McDonald, supra, at 372–373.  As a result, California trial courts, and courts of appeal reviewing California trial courts, have generally adopted a “hands off” attitude when it came to the admissibility of expert opinions, generally allowing the opinions to go to the jury, so long as a qualified expert expressed the opinion.
In contrast to the California approach, at least since the 1993 opinion of Daubert v Merrell Dow Pharmaceuticals, Inc. (1993) 509 U.S.579, the federal courts have adopted and applied a different standard.  The Supreme Court’s analysis began with a recognition that the holding of the Frye case with respect to the “general acceptance” test, had been superseded by the adoption of the Federal Rules of Evidence Rule 702 which provides: “If 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.”  In noting the displacement of the Frye test by Rule 702, the Court also noted what it called the “gate-keeping function” of the trial judge with respect to expert testimony: “That the Frye test was displaced by the Rules of Evidence does not mean, however, that the Rules themselves place no limits on the admissibility of purportedly scientific evidence. Nor is the trial judge disabled from screening such evidence. To the contrary, under the Rules the trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable.” Daubert, supra, at 589.         
The Daubert opinion, and its subsequent progeny, made no distinction between expert testimony based on new scientific techniques and methodology and medical or other expert opinion testimony, but rather subjected both types of expert opinion testimony to the same “gatekeeping” function by the trial judge: “Faced with a proffer of expert scientific testimony, then, the trial judge must determine at the outset, pursuant to Rule 104(a),whether the expert is proposing to testify to (1) scientific knowledge that (2) will assist the trier of fact to understand or determine a fact in issue. This entails 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. We are confident that federal judges possess the capacity to undertake this review. Many factors will bear on the inquiry, and we do not presume to set out a definitive checklist or test.”  Daubert, supra, at 592. Among the factors that the Supreme Court identified that the trial judge should consider in its gate-keeping function were the following: (1) whether the theory/technique can be/has been tested; (2) whether the theory/technique has been subjected to peer review and publication; (3) the potential rate of error; and (4) general acceptance in the scientific community.  The Supreme Court concluded its analysis of this new standard with the following: “We recognize that, in practice, a gatekeeping role for the judge, no matter how flexible, inevitably on occasion will prevent the jury from learning of authentic insights and innovations. That, nevertheless, is the balance that is struck by Rules of Evidence designed not for the exhaustive search for cosmic understanding but for the particularized resolution of legal disputes.”  Daubert, supra, at 597.
Now, it appears, the California Supreme Court has embraced the federal Daubert gate-keeping function, at least for expert opinion testimony, albeit in a case where the expert opinion was economic rather than medical. The court stated its holding in this regard as follows: “Thus, under Evidence Code sections 801, subdivision (b), and 802, the trial court acts as a gatekeeper to exclude expert opinion testimony that is (1) based on matter of a type on which an expert may not reasonably rely, (2) based on reasons unsupported by the material on which the expert relies, or (3) speculative. Other provisions of law, including decisional law, may also provide reasons for excluding expert opinion testimony.”  Sargon Enterprises, Inc. v University of Southern California (2012) 55 Cal.4th 747, at 771-772.  The Court was careful not to completely disavow Kelly-Frye in the context of new scientific techniques: “In People v. Leahy (1994) 8 Cal.4th 587, 604, 34 Cal.Rptr.2d 663, 882 P.2d 321, this court held that the “general acceptance” test for admissibility of expert testimony based on new scientific techniques (see People v. Kelly (1976) 17 Cal.3d 24, 130 Cal.Rptr. 144, 549 P.2d 1240) still applies in California courts despite the United States Supreme Court’s rejection, in Daubert v. Merrell Dow Pharmaceuticals, Inc. (1993) 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469, of a similar test in federal courts. Nothing we say in this case affects our holding in Leahy regarding new scientific techniques.” Sargon Enterprises, Inc., supra, at 772, fn. 6.   
The California Supreme Court expressed its view of the trial court’s gate-keeping function as follows: “In short, the gatekeeper’s role “is to make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” (Kumho Tire Co. v. Carmichael, supra, 526 U.S. at p. 152, 119 S.Ct. 1167.)” Sargon Enterprises, Inc. supra, at 772.

The Court in Sargon summarized the pertinent background facts as follows: “A small dental implant company that had net profits of $101,000 in 1998 has sued a university for breach of a contract for the university to clinically test a new implant the company had patented. The company seeks damages for lost profits beginning in 1998, ranging from $200 million to over $1 billion. It claims that, but for the university’s breach of the contract, the company would have become a worldwide leader in the dental implant industry and made many millions of dollars a year in profit. Following an evidentiary hearing, the trial court excluded as speculative the proffered testimony of an expert to this effect.”  Sargon Enterprises, Inc., at 753.
The Sargon case, as the Court stated it, “…stands at the intersection of two legal principles: (1) Expert testimony must not be speculative, and (2) lost profit damages must not be speculative.”   Having stated that, the court also noted “Where the fact of damages is certain, the amount of damages need not be calculated with absolute certainty. [Citations.] The law requires only that some reasonable basis of computation of damages be used, and the damages may be computed even if the result reached is an approximation. [Citation.]”  Sargon Enterprises, Inc., at 774. Further, the court stated: “Once again, we add a cautionary note. The lost profit inquiry is always speculative to some degree. Inevitably, there will always be an element of uncertainty. Courts must not be too quick to exclude expert evidence as speculative merely because the expert cannot say with absolute certainty what the profits would have been.”  Sargon Enterprises, Inc., supra, at 775.  Under this leg of the court’s analysis and under the “general acceptance” test, as long as a qualified expert was offering an opinion within his expertise, the opinion seemingly ought to have gone to the jury.  However, the court held otherwise: “We conclude that the trial court has the duty to act as a “gatekeeper” to exclude speculative expert testimony. Lost profits need not be proven with mathematical precision, but they must also not be unduly speculative. Here, the court acted within its discretion when it excluded opinion testimony that the company would have become extraordinarily successful had the university completed the clinical testing.”  Sargon Enterprises, Inc., supra, at 755.
The Court’s bottom line was as follows: “The trial court properly acted as a gatekeeper to exclude speculative expert testimony. Its ruling came within its discretion. The majority in the Court of Appeal erred in concluding otherwise.” Sargon Enterprises, Inc., supra, at 781.

In reversing the Court of Appeal, the Supreme Court clearly intended to, and did, vest the trial court with the ultimate discretion to decide the admissibility of expert testimony and, further, signaled that it would uphold the use of that discretion, even over a contrary view by a Court of Appeal, unless there was a clear abuse of discretion.  In so doing, and in affirming the trial court’s gate-keeper responsibility, the Supreme Court also signaled that notwithstanding the jury’s knowledge that “all human beings are fallible” that knowledge, in itself, is not sufficient to allow otherwise inappropriate expert opinion testimony to be heard by the jury. 

[1] See, Lanza v Drexel & Co. (2nd Cir., 1973) 477 F.2d 1277, at 1321 (concurring and dissenting opinion of Timbers, J.), Fn.2 [“As experienced mariners know, well in advance of a storm seagulls assume a V-formation on the surface of the water, heading into the wind to weather the storm. When old salts see this, they take heed and prepare for the storm.”]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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