Complex Litigation Update: Bridging the Gap between Data on Causation of Lost Profits and the Admissibility of Expert Opinions

Jan 06, 2015   

January 6th, 2015

The Eleventh Circuit recently held in Chapman v. Procter & Gamble Distributing, LLC that when determining the admissibility of medical expert causation testimony, the court, acting as the gatekeeper, must find that the expert’s opinion on novel issues of causation is based on generally accepted methodologies rather than untested hypotheses or collateral evidence.  Namely, there must be enough data, analytical evidence, and scientific literature upon which the expert can base an inference—not a hypothesis—of causation.  Here, we address the issue of how Chapman might impact expert causation testimony relating to non-scientific causation testimony, such as an expert’s valuation of a business’s alleged lost profits.

It is well settled that an expert’s testimony must be reliable and relevant to the issue at hand to be admissible.  Specifically, the court must determine that the expert’s methods in reaching his or her conclusion are sufficiently reliable.  The court cannot just take the expert’s word for it.  As set forth in a landmark case dealing with the admissibility of novel causation expert testimony, Daubert v. Merrell Dow Pharmaceuticals, Inc., when determining reliability, the court should look at: “(1) whether the expert’s methodology has been tested or is capable of being tested; (2) whether the theory or technique used by the expert has been subjected to peer review and publication; (3) whether there is a known or potential error rate of methodology; and (4) whether the technique has been generally accepted in the relevant scientific community.”  Although the law addressing the admissibility of expert testimony on causation initially developed in the medical and scientific fields, courts following theDaubert method have utilized the same analysis when dealing with the admissibility of expert testimony in commercial cases.

With the focus being on the expert’s methodology in reaching his or her ultimate conclusion, those seeking to have an expert opine on the lost profits of a business  should ensure the expert’s analysis comports with the Daubert factors.  But as we learned in Chapman, this would likely mean that the expert testifying as to the cause of the plaintiff’s lost profits would have to establish that analytical evidence, generally accepted in the relevant professional community, exists whereby this cause and effect may be inferred, not just hypothesized.  Because hypotheses can only be verified by testing, it would be improper to submit a mere hypothesis of causation to the jury for consideration.  It is not enough for the expert to say the defendant’s action or inaction may have caused the loss of profits, the expert would have to demonstrate that the method utilized in determining loss causation are generally accepted in the relevant community.  The key is to show general acceptance in the relevant professional community of the specific cause and effect, not just a generalized notion that certain acts or inactions can cause the damage.  Experts seeking to opine on the cause of a plaintiff’s alleged lost profits must be armed with evidence to demonstrate their primary methods for proving the cause and effect of the loss in that particular case.

Likewise, parties seeking to exclude an opposing expert’s testimony as to loss causation may look to Chapman for the proposition that expert testimony must establish that the lost profits were in fact cuased by the defendant and did not occur coincidentally.  Just as the court in Chapman determined that the expert seeking to establish that the plaintiff’s exposure to a particular substance was the cause of the injury was required to base his opinion on analytical evidence, an expert in a commercial case seeking to establish that a defendant caused a plaintiffs to suffer lost profits would likewise need analytical evidence to bridge the gap between the data relied upon and the lost profits alleged by the plaintiff.  Just as it was not enough for the experts in Chapman to provide plausible explanations as to the cause and effect that led to the plaintiff’s damage, it will not be enough for experts to simply speculate on untested theories of the cause of lost profits. Chapman may thus prove to be a powerful tool for those defending parties seeking to exclude speculative expert testimony.

Whether seeking to admit expert testimony on a novel issue of loss causation or seeking to have such testimony excluded, Chapman dictates that the expert’s testimony must close the analytical gap between the data and evidence of causation generally accepted in that relevant professional community with the specific opinion being offered.  Requiring experts to rely on more than just unverified methodologies reduces the speculative nature of such opinions and ensures that the jury is not misled by opinions of causation that are insufficient proof of causation.

The commercial litigation attorneys at Fuerst Ittleman David & Joseph are experienced in litigating complex matters involving expert witnesses in state and federal court. We would be happy to address any questions about these or similar legal issues. Please do not hesitate to contact us via email at contact@fidjlaw.com or by telephone at (305) 350-5690.