This putative class action was initiated by Plaintiffs, a group of individuals who are leaseholders of oil and gas leases, against Defendant XTO Energy Inc (“XTO”) alleging that XTO breached their leases when it deducted unreasonable and excessive post-production costs from their royalty payments.
John Burritt McArthur has been serving as an arbitrator for 22 years and working as a trial lawyer, representing Plaintiffs and Defendants in courts around the country, for 33 years. He has offices in Berkeley California and in Houston and is a past partner of Susman Godfrey LLP in Houston and Hosie McArthur LLP of San Francisco, both firms with national trial dockets.
Also, McArthur was Editor in Chief of the Texas Law Review, a Chancellor, and a member of the Order of the Coif in law school. He is a Phi Beta Kappa, magna cum laude graduate of Brown University. Moreover, McArthur clerked for Judge Joseph Sneed on the Ninth Circuit after law school.
In addition to his J.D., he holds an M.A. in economics, an M.P.A. from Harvard University’s Kennedy School of Government, and has graduate-level economics training from the London School of Economics and a Ph.D in public policy from the Goldman School of Public Policy at the University of California (Berkeley).
XTO argues that portions of McArthur’s reports should be stricken because McArthur improperly offers legal conclusions advocating for class certification under Fed. R. Civ. P. 23.
Plaintiffs did not dispute that McArthur’s reports consisted of some legal conclusions (and indicated they did not intend to offer that testimony as an expert opinion) but maintained the reports also consisted of testimony based on industry standard in the oil and gas field.
However, the Court held that McArthur’s reports highlighted by XTO largely offered legal opinions about whether Plaintiffs’ proposed class should be certified under the Fed. R. Civ. P. 23 factors and will not be considered in the forthcoming recommendation on the motion for class certification.
However, to the extent McArthur’s expert reports contain opinions based on standards, customs and practices of the oil and gas industry, the Court will consider those opinions where relevant.
Held
The Court granted XTO’s motion to exclude certain legal opinions by Plaintiffs’ expert John Burritt McArthur.
Key Takeaway:
Basically, experts are allowed to testify about customs and practices in a field of business but not whether those customs or practice complied with the law or regulations.
Therefore, where an expert offers a legal opinion, the court must “exclude opinions phrased in terms of inadequately explored legal criteria.”
Case Details:
Case Caption:
Kriley v. Xto Energy Inc.
Docket Number:
2:20cv416
Court Name:
United States District Court for the Western District of Pennsylvania, Pittsburgh Division
Allstate Insurance Company sells property, casualty, and life insurance in California through independent and exclusive agents. The Plaintiffs, who were exclusive agents for the Defendant from 1990 to 2023 and had signed Exclusive Agency Agreements, have filed a class-action lawsuit. Their claim centers on unreimbursed business expenses they incurred, including costs for rent, internet, licensed staff, payroll taxes and fees, mandatory insurance coverage, marketing, licensing, a cloud-based telephone system (Allstate Agency Voice), and computer equipment.
Pursuant to Federal Rule of Evidence 702, the Plaintiffs filed a motion seeking to exclude the expert report of the Defendant’s witness, Professor Paul Oyer. A key point of contention in their motion is Professor Oyer’s assertion that the Defendant provided “indirect” reimbursement for exclusive agents’ business expenses via outcome-based compensation.
The Court first addressed Plaintiffs’ Daubert Motion, and then considered whether Plaintiffs have met the requirements for class certification.
Economics Expert Witness
Paul Oyer is the Mary and Rankine Van Anda Entrepreneurial Professor and Professor of Economics at Stanford Graduate School of Business. He is also a research associate with the National Bureau of Economic Research and the editor-in-chief of the Journal of Labor Economics.
He has done several studies of how firms pay and provide incentives for their workers. Oyer looked at how salespeople and executives react to incentive systems and why some firms use broad-based stock option programs.
Motion to Exclude the Opinions of Professor Paul Oyer
Plaintiffs specifically contested Professor Oyer’s opinions that: (1) Defendant reimbursed exclusive agents’ business expenses “indirectly” by providing outcome-based compensation; and (2) that “Plaintiffs’ approach for damages based on expenses alone is conceptually flawed” because “[e]valuating the harm to members of the proposed class must be analyzed in the context of the total compensation to the [e]xclusive [a]gency, specifically the compensation used to cover the [e]xclusive [a]gency’s expenses that Plaintiffs seek as damages,” and “individualized inquiry is necessary to estimate the harm” to the agencies, if any.
The Plaintiffs contended that both of Professor Oyer’s opinions are irrelevant to the Court’s class certification analysis because they offer legal conclusions and conflict with California law regarding the reimbursement of business expenses.
Defendant argued that these opinions are relevant and admissible because Professor Oyer’s opinions “concerning the wide variations in the types and amounts of Plaintiffs’ expenses show that a determination of reasonable and necessary business expenses will change depending on the specific facts and circumstances of a particular [e]xclusive [a]gency’s business” and thus that individualized issues predominate.
Analysis
The Court concurred with the Plaintiffs, finding that the challenged opinions constituted impermissible legal conclusions. Here, Professor Oyer repeatedly opined that individualized inquiry is necessary to assess the proposed class’s damages stemming from unreimbursed business expenses. Professor Oyer also opined that Defendant’s “outcome-based compensation . . . is an efficient compensation method that indirectly compensates the [e]xclusive [a]gency for its efforts (including expenses)” and “any member of the proposed class who received compensation to cover the [e]xclusive [a]gency’s allegedly reimbursable expenses is not harmed.” The Court found that these opinions addressed “central legal questions” raised by Plaintiffs’ Motion for Class Certification, namely commonality and predominance.
In other words, Oyer’s opinions regarding commonality and predominance improperly invaded the province of the Court.
Moreover, the Plaintiffs demonstrated that the proposed class meet the requirements of Class Certification.
Held
The Court granted the Plaintiff’s motion to exclude the testimony of Paul Oyer.
Key Takeaway:
Experts may not opine on “matters of law for the Court.” Plaintiffs challenged Oyer’s assessment of the proposed class’ damages. His opinions on the necessity of the individualized inquiry and the outcome-based compensation structure improperly invaded the province of the Court.
Case Details:
Case Caption:
Canchola v. Allstate Ins. Co.
Doket Number:
8:23cv734
Court:
United States District Court for the Central District of California
108 named Plaintiffs admitted that they purchased their Shipyard properties for residential purposes.
Plaintiffs each bought units on Parcel A of the former Hunters Point Naval Shipyard (“HPNS”). HPNS is a Superfund site where Tetra Tech EC, Inc. (“TtEC”) conducted environmental remediation work in certain areas years before the Plaintiffs bought their units. Plaintiffs now bring claims against the Tetra Tech Defendants for purported lost profits, in addition to other damages, under theories of fraud and misrepresentation (among other claims not addressed in this motion).
Plaintiffs sought class certification, citing their claims for negligence, nuisance, common law fraud, and California statutory fraud.
In support of their motion for class certification, the Plaintiffs submitted a nine-page declaration from their expert, Brett Reynolds. He investigated multiple areas of potential damages including appreciation impairment, and excess charges incurred by impacted Shipyards homeowners.
The Defendants moved to exclude Reynolds’ opinions under Federal Rule of Evidence 702. They argued that Reynolds lacked the necessary expertise to offer the opinions in his declaration and that the methodology underlying his conclusions was fundamentally flawed, rendering his testimony unreliable.
Real Estate Valuation Expert Witness
Brett Reynolds is a licensed appraiser with almost 18 years of experience in the real estate industry, with an emphasis on valuation, acquisition, and asset management.
He has a degree in economics from the University of Southern California and holds the top designations in the appraisal profession. Reynolds has been a Designated Member of the Appraisal Institute (MAI) since 2008 and a Certified Commercial Investment Manager (CCIM) since 2009. He has been a licensed appraiser in the State of California (Certified General License 042466) since 2007. He has testified as an expert witness in both Federal Tax Court and California State Court.
Reynolds opined on the two primary sources of economic damages incurred by the class members: (1) appreciation impairment/ diminution in value of the Parcel A homes owned by the putative class members, and (2) excess tax charges/ Mello-Roos damages.
For the appreciation impairment damages, Reynolds stated that he was provided with a list of 241 market-rate homes that had been sold on Parcel A as of August 2, 2018. Assuming an average appreciation impairment of 20.4%, he concluded that these units have suffered a total appreciation impairment of $55,523,536. Additionally, Reynolds calculated the amount of past Mello-Roos liabilities incurred by each of the 241 market-rate homes sold on Parcel A on the same date. Assuming certain Communities Facilities District (CFD) rates as specified in his declaration, Reynolds opined that the Parcel A homeowners have incurred $8,393,735.00 in Mello-Roos liabilities.
Defendants said that Reynolds “has no relevant expertise on which to base his opinion on the cutoff date Plaintiffs use for the class definition.”
However, Reynolds did not express a substantive opinion about the cutoff date for Plaintiffs’ class definition. Reynolds mentioned events that took place in 2018, but that is not in the context of giving an opinion as to why August 2, 2018, and not, say, another date in 2018, might be the proper cut-off date. Consequently, the Court overruled this objection.
For Reynolds’ methodology, Defendants’ main contention is that Reynolds’ choice of index was wrong because it “measures different types of homes than those present at the shipyard” and also “measures non-representative neighborhoods.” The Court decided that the details of what Reynolds “did or didn’t take into account in running his analysis . . . may be grist for a good cross-examination at trial, but they do not play a material role in deciding whether [Reynolds’] work should be admitted under Rule 702.”
According to the Court, Plaintiffs have not identified any common evidence that might warrant class certification. This shortfall is particularly problematic for causation, which is a necessary element of each of the claims for which they are seeking certification. Plaintiffs relied solely on the Reynolds declaration as the ostensible common proof of causation. The Reynolds declaration is also identified as the only common evidence of the damages the class suffered because of Defendants’ alleged fraud and negligent misrepresentation. But the Reynolds’ declaration did not even try to supply class-wide proof on these issues. Also, Reynolds did not offer any opinions whatsoever about causation.
Held
The Court denied Defendants’ motion to exclude the testimony of Brett Reynolds.
Key Takeaway:
Reynolds investigated multiple areas of potential damages. Exclusion is denied because it was the Court’s opinion that the details of what Reynolds “did or didn’t take into account in running his analysis . . . may be grist for a good cross-examination at trial, but they do not play a material role in deciding whether [Reynolds’] work should be admitted.”
Case Details:
Case Caption:
Pennington Et Al V. Tetra Tech, Inc. Et Al
Docket Number:
3:18cv5330
Court:
United States District Court for the Northern District of California
Plaintiffs The Tripp Plating Works, Inc. (“Tripp”) and Finch Paper, LLC (“Finch”) (collectively referred to as “Indirect Purchaser Plaintiffs” or “IPPs”) alleged that Defendants Olin Corporation (“Olin”), K.A. Steel Chemicals, Inc. (“K.A. Steel”), Occidental Chemical Corporation (“OxyChem”), Westlake Chemical Corporation (“Westlake”), Shintech Incorporated (“Shintech”), and Formosa Plastics Corporation, U.S.A. (“Formosa USA”) (collectively, “Defendants”) conspired to artificially reduce or eliminate competition for the pricing of caustic soda sold in the United States. IPPs claimed that Defendants colluded to fix caustic soda prices, forcing purchasers to pay inflated, supracompetitive prices.
In response, Shintech and Formosa USA separately moved to strike portions of the testimony provided by IPPs’ expert witness, Dr. Gareth Macartney, Ph.D. Additionally, all Defendants jointly moved to exclude certain opinions offered by Macartney. IPPs, in turn, have also moved to strike and exclude certain opinions offered by the Defendants’ expert witness, John H. Johnson IV, Ph.D.
Economics Expert Witnesses
John H. Johnson IV, Ph.D, is the Chief Executive Officer of Edgeworth Economics, LLC, a consulting firm that provides clients with objective expert economic and financial analysis for complex litigation and public policy debates. He holds a B.A. in Economics from the University of Rochester and a Ph.D. in Economics from the Massachusetts Institute of Technology (MIT), where he specialized in labor economics and econometrics. Johnson leverages his expertise to deliver analytical clarity and strategic insights to clients facing high-stakes legal and policy challenges.
Gareth Macartney is the Senior Economist, Director of Competition, and Chief Executive Officer at OnPoint Analytics, Inc., an economic and statistical consulting firm. He holds a Ph.D. in Economics from University College London. Macartney specializes in providing rigorous economic and statistical analysis, particularly in matters related to competition and complex litigation.
On December 28, 2023, the Court denied a motion for class certification filed by the Direct Purchaser Plaintiffs (DPPs), including Miami Products & Chemical Co., Amrex Chemical Co., Inc., Main Pool and Chemical Co., Inc., Midwest Renewable Energy, LLC, Perry’s Ice Cream Company, Inc., and VanDeMark Chemical, Inc. The Court now addresses a similar request by the Indirect Purchaser Plaintiffs (IPPs) to certify two classes under Federal Rule of Civil Procedure 23. The Court assumes familiarity with the DPP Class Certification Decision and Order and prior proceedings in this matter.
IPPs adopted the factual background from the DPPs’ motion for class certification. The Court incorporated by reference the detailed summary of Defendants’ alleged manipulation of the caustic soda market, which purportedly caused customers to pay supracompetitive prices. The allegations focused on Defendants’ price increase announcements and their impact on the caustic soda market.
The IPPs argued that common issues predominated, justifying class certification. However, the Court found that IPPs failed to meet the requirements of Rule 23(b)(3). Their damages model, prepared by Macartney, relied on flawed data from Dr. Russell Lamb, who misclassified contract types by not reviewing individual contracts. This error undermined the model’s ability to demonstrate class-wide injury. Additionally, Macartney’s assumption that price increase announcements influenced index-based pricing was speculative and lacked evidentiary support. He failed to show how inflated prices were incorporated into price indices, a critical component for proving class-wide injury.
The pass-through model, based on data from only three distributors out of more than 155, was not representative of the proposed class. This limited dataset did not capture the complexities of the supply chain, leading to individualized issues that overshadowed common questions. Therefore, the Court concluded that IPPs did not provide a reliable method for proving class-wide injury and damages, and denied class certification.
b. John HJohnson IV
Johnson has provided an expert report responding to and critiquing Macartney’s opinions. Johnson argues, among other things, that: (1) Macartney’s assessment of the impact of Defendants’ price increase announcements is disconnected from economic evidence, in part because pricing for caustic soda is individually negotiated between each supplier and distributor, and the pricing mechanisms and terms vary substantially across distributors, Defendants, and over time; (2) the overcharge regression fails to account for global supply and demand conditions that impact the domestic price of caustic soda; (3) the overcharge regression improperly calculates an average overcharge for distributor and non-distributor purchasers, rather than customer-specific overcharges; (4) the pass-through model relies on data from only three distributors to estimate pass-through rates for 155 distributors, with no statistical tests to support the conclusion that the purchases and sales associated with these three distributors are representative of those excluded from the analysis; and (5) the pass-through model oversimplifies the caustic soda supply chain.
As part of his critique of the regression model, Johnson conducted his own multiple regression analysis, adding various export price measures. He ran six additional regressions, each incorporating one measure of export prices (contemporaneous and three-month lagged). These additional tests yielded an estimate of the purported overcharge that was negative or statistically insignificant.
Admissibility of Johnson’s Opinions
IPPs argue that Johnson’s overcharge regression analyses, and his opinions and testimony based on them, are unreliable because they are prone to endogeneity and fail to reliably control for global supply and demand for caustic soda. More specifically, IPPs contend that Johnson committed a fundamental error by using spot export prices as a variable, asserting that such prices are not reliable indicators of international prices or demand in their respective localities. IPPs acknowledge that DPPs raised a similar argument regarding Johnson’s opinions during their class certification motion and similarly seek exclusion of his spot export price analyses.
Previously, the Court considered and rejected the argument that Johnson’s use of spot export prices rendered his analysis and testimony unreliable. The Court found Johnson’s explanation of his methodology reasonable and persuasive. Nothing in the IPPs’ submissions provides a basis for the Court to reconsider its prior finding that there is no justification under Rule 702 to strike or exclude Johnson’s opinions. Accordingly, the Court denies IPPs’ motion to strike Johnson’s opinions and testimony.
c. Gareth Macartney
Macartney has opined, among other things, that: (1) common evidence demonstrates that the structure of the caustic soda industry is conducive to anticompetitive behavior; (2) common evidence and methods demonstrate that Defendants engaged in collusive behavior that artificially increased the price of caustic soda; and (3) a common, reliable standard economic methodology may be used to calculate damages on a classwide basis. Applying that methodology, he has estimated class-wide damages of $155 million for the State Antitrust Class.
Macartney has further opined that class-wide damages for the Unjust Enrichment Class can also be calculated using common evidence, amounting to $712 million in revenue terms, $355 million in gross profit terms, and $348 million in net profit terms.
A key part of his opinion is the performance of a reduced-form pricing regression analysis to demonstrate that caustic soda prices were artificially inflated during the alleged class period. To conduct this analysis, Macartney used a standardized database of Defendants’ transaction data received from Russell Lamb, DPPs’ expert economist. His model shows an overcharge of 11.61% for all of Defendants’ customers and a 16.37% overcharge for distributor customers. He then applied a regression model to estimate the proportion of Defendants’ price increases passed through to distributor customers. This model provides an estimate of passthrough at a rate of 81%.
The Court denies the Defendants’ motions to strike Macartney’s opinions and testimony as moot.
Held
The Court denied Shintech’s and Formosa’s motions to exclude certain opinions and proposed testimony of Gareth Macartney as moot and denied Defendants’ joint motion to exclude his opinions and testimony. The Court also denied IPPs’ motion to strike and exclude portions of John H. Johnson IV’s opinions and proposed testimony.
Key Takeaways:
When the opponent contended that Johnson’s use of spot export prices constitutes a true error that requires his analyses to be excluded because the spot export prices are not indicators of international prices or demand in their respective localities, the Court held that Johnson has explained his methodology in a way that was both reasonable and persuasive.
Case Details:
Case Caption:
Miami Products & Chemical Co. V. Olin Corporation Et Al
Docket Number:
1:19cv385 ; 1:19cv975
Court:
United States District Court for the Western District of New York
The present consumer class action stemmed from Defendant Experian Information Solutions, Inc.’s (“Defendant” or “Experian”) violations of the Fair Credit Reporting Act (“FCRA”) and the California Consumer Credit Reporting Agencies Act (“CCRAA”). Experian violated consumers’ rights under these laws by failing to implement procedures that ensure the highest possible accuracy of the consumer background records it creates and sells. As a result, it produced inaccurate consumer reports that were then sold to third parties.
Experian specifically breached the FCRA and CCRAA by improperly linking innocent consumers to individuals involved in illegal activities, such as terrorists, narcotics traffickers, money launderers, and arms dealers subject to U.S. government sanctions.
Experian filed a motion to exclude or limit the opinions and testimony of Plaintiff’s credit reporting expert witness Evan Hendricks. Plaintiff Maria Pena (“Plaintiff” or “Mrs. Pena”), successor in interest to Jose Pena (“Mr. Pena”), opposed the Motion.
Credit Reporting Expert Witness
Since 1981, Evan Hendricks has been Editor/Publisher and founder of Privacy Times, a newsletter based in the Washington, D.C. area.
He has written a book on credit reports, testified before Congress and the Federal Trade Commission on credit reports a dozen times, maintains an FCRA Certification from the National Credit Reporting Association.
Hendricks has served as a consultant on privacy issues to Federal and State governmental organizations, and businesses.
Experian filed a motion to exclude two statements made by Evan Hendricks from the Court’s consideration.
Opinion One: Legal Opinion on Office of Foreign Assets Control (“OFAC”) Information
Experian argued that Hendricks’ statement that Ramirez v. TransUnion, LLC and follow-on decisions “provided that OFAC information is subject to the FCRA and engaging in loose or name-only matching violated the FCRA,” amounts to an improper legal opinion.
The challenged statement is offered in support of Hendricks’ first proffered opinion that “credit reporting agencies have been provided ample guidance on the need for multi factor matching to assure the accuracy of information on credit reports, including OFAC information.” In bolstering his opinion, Hendricks quotes from two court cases, as well as other government bodies such as the Consumer Financial Protection Board.
The Court held that Hendricks’ statement is not an ultimate issue of law because Hendricks is not offering a legal opinion on whether Experian’s specific matching procedures were “reasonable,” a legal standard articulated by the Federal Credit Reporting Act (“FCRA”) and left for the factfinder. Instead, Hendricks is stating there are certain procedures that enforcement authorities, such as courts, found to be lacking in accuracy and Experian is on notice of those deficient procedures.
The Court held that a statement explaining how Experian was on notice of certain procedures courts found to be deficient is testimony within the reasonable confines of Hendricks’ subject area.
Opinion Two: Consumer Access to OFAC Information
Second, Experian stated Hendricks’ opinion that “consumers do not typically have access from third parties to OFAC information on credit reports” is based on “raw speculation.” Experian alleged each source referenced by Hendricks’ in this part of his report is inadequate to establish Hendricks’ opinion.
The Court held that Hendricks’ opinion would be permissible based on his experience alone considering Hendricks has a wealth of experience evaluating the credit reporting industry. Additionally, the sources Hendricks’ cites to bolster his opinion are not speculation or cherry-picked evidence, as Experian argues. For instance, the undisputed fact that the Department of Treasury does not require creditors to notify consumers of OFAC hits on their credit report does make it more likely that consumers are unaware of this information and its effect on their credit score. Further, if Experian takes issue with the basis for Hendricks’ opinion, it is best challenged in front of the ultimate factfinder.
Held
The Court denied Experian’s motion to exclude Plantiff’s credit reporting expert witness Evan Hendricks’ testimony.
Key Takeaway:
Hendricks’ report does not assess the reasonableness of Experian’s specific matching procedures or offers legal conclusions; instead, the report provides a general overview of the industry standards shaped by courts for the purpose of demonstrating what Experian knows or should have known. Hendricks is qualified to provide this relevant opinion.
Case Details:
Case caption:
Jose Pena V. Experian Information Solutions, Inc. Et Al
Docket Number:
8:22cv1115
Court:
United States District Court for the Central District of California
The underlying case concerns the alleged release of toxic chemicals from a manufacturing facility in Canoga Park between 1968 and 1970 by Litton Systems, Inc., an entity now owned by Defendants Northrop Grumman Corporation and Northrop Grumman Systems Corporation (“Northrop Grumman”). Plaintiffs moved for class certification on their claims for negligence, private nuisance, and trespass relating to the contamination.
Defendants submitted an expert report by Dr. Dominique Hanssens purporting to show, among other things, that class members’ homes contained other potential sources of the relevant toxins—sources unrelated to the contamination from Litton’s manufacturing facility—such as common household cleaning products.
To reach this conclusion, Hanssens designed and conducted a survey sent by mail to homes in Plaintiffs’ Proposed Class Area (“PCA”).
Marketing Expert Witness
Dominique Hanssens is a Distinguished Research Professor of Marketing at the UCLA Anderson Graduate School of Management. He has served as the school’s faculty chair, associate dean, and marketing area chair. From 2005 to 2007 he served as executive director of the Marketing Science Institute in Cambridge, Massachusetts.
Hanssens studied econometrics at the University of Antwerp in his native Belgium. He then obtained an M.S. and Ph.D. in marketing from Purdue University. His research focuses on strategic marketing problems, in particular marketing productivity, to which he applies his expertise in data-analytic methods such as econometrics and time-series analysis.
Plaintiffs argued that Defendants tricked and coerced putative class members into responding to the survey—designed to undermine class certification—by including a two-dollar bill that was visible through the envelope window and giving survey respondents a $20 Walmart gift card. Additionally, according to Plaintiffs, Hanssens should have disclosed to participants that Northrop Grumman was sponsoring the survey and that the respondents could be undermining their legal position by responding.
Since the survey itself appeared to be facially neutral and created in accordance with accepted principles, the survey did not require the Court to take the corrective actions Plaintiff seeks.
Plaintiffs pointed to no statement that is likely to leave respondents with a false impression of the litigation or cause respondents to abandon their legal rights. And the Court found no statement in the survey to be clearly misleading or coercive. For example, the Court is not overly troubled with the statements that the recipient was sent the survey as a “resident of the greater Los Angeles area” or that “the results of this survey will not be used to try to sell you anything” and would be “kept in confidence.”
The Court believes that although Plaintiffs can come up with a misleading interpretation of these statements, they simply do not rise to the level of deception that would convince the Court to restrict the parties’ speech rights. Nor are they the type of statements that would enable the Court to craft a narrowly-tailored restriction on speech.
Held
The Court denied Plaintiffs’ motion to strike the expert report of Dominque Hanssens.
Key Takeaway:
Rule 23(d) gives the Court the power “to impose limitations when party engages in behavior that threatens the fairness of the litigation.” For example, courts have found that limitations are necessary in the wake of ex parte communications “soliciting opt-outs” or “discouraging participation in a case.” In contrast to these cases, Hanssens’ survey here was “facially neutral, did not require the participants to waive any of their rights in this litigation, and was conducted pre-certification when Defendants may generally gather information about the putative class.”
Case Details:
Case Caption:
Jed Behar Et Al V. Northrup Grumman Corporation Et Al
This case involved a putative class action lawsuit brought by Plaintiff Gail Parrish against Defendant Gordon Lane Healthcare, LLC (Gordon Lane), which operated a long-term skilled nursing facility where Parrish resided. Parrish, by and through his daughter and successor in interest, Monica Parrish, alleged that Gordon Lane failed to adequately staff the facility in violation of California law. Specifically, Parrish claimed that Gordon Lane gave residents an admission agreement stating it would provide adequate staffing, but concealed the fact that staffing was inadequate.
Parrish filed this action in the Superior Court of the State of California on August 17, 2022. On September 29, 2022, Gordon Lane removed the action to federal court. On November 15, 2022, Parrish filed the complaint against Gordon Lane and several other Defendants, requesting injunctive and monetary relief. Defendants moved to dismiss the Complaint. The Court dismissed the claims as to all Defendants except Gordon Lane, and it struck Parrish’s prayer for injunctive relief. The claims for monetary relief against Gordon Lane remain.
Parrish asserted two claims against Gordon Lane: (1) violation of California’s Consumer Legal Remedies Act (CLRA) by making misrepresentations in the admission agreement and concealing inadequate staffing levels; and (2) violation of California Health and Safety Code Section 1430(b) for violating residents’ rights through inadequate staffing.
Parrish moved to certify three classes under Federal Rule of Civil Procedure 23(a) and 23(b)(3) and one of the classes, alternatively, under Rule 23(b)(2), consisting of Gordon Lane residents within the three years prior to the filing of the complaint. In support, Parrish offered expert testimony from Dr. Charlene Ann Harrington on determining adequate staffing levels. Gordon Lane moved to exclude Harrington’s testimony and opposed class certification, arguing Parrish lacked Article III standing and most potential class members, including Parrish, signed arbitration agreements waiving participation in class actions.
Nursing Expert Witness
Charlene Ann Harrington is a Professor Emerita of Sociology and Nursing, Department of Social & Behavioral Sciences, School of Nursing at the University of California, San Francisco (“UCSF”). She earned her Bachelor of Science in Nursing from the University of Kansas, her Master’s degree in Community Health Nursing from the University of Washington, and her joint Ph.D. in Sociology and Higher Education from the University of California, Berkeley. She has been a Registered Nurse in California since 1970. She has held several positions relevant to nursing home care over the course of her career.
Discussions by the Court
Gordon Lane moved to exclude the expert opinion of Charlene Harrington, who proposed to analyze the adequacy of staffing levels at Gordon Lane’s facility. In her declaration, Dr. Harrington outlined her method for evaluating the sufficiency of staffing levels at the Gordon Lane facility. Her approach involved four steps: first, determining the collective acuity level of residents at the facility; second, evaluating the actual staffing levels per resident per day of the facility; third, comparing these levels with recognized staffing requirements and standards; and finally, determining the overall adequacy of facility nurse staffing levels. Dr. Harrington’s analysis relied on data from the Centers for Medicare and Medicaid Services (CMS), Gordon Lane’s staffing reports, federal and state regulations, and her extensive experience. Notably, she used “Resource Utilization Group” (RUG) scores which is a facility-wide measure of acuity, derived from data submitted using the Minimum Data Set (MDS) form to CMS. Her method involved converting Gordon Lane’s RUG scores into expected staffing hours and comparing them to actual staffing hours to ascertain if the facility met adequacy standards.
The Court explained that the standard for evaluating expert testimony in support of class certification under Daubert and Ninth Circuit precedent do not require the Courts to conduct a thorough analysis of admissibility. Rather, the testimony must be sufficiently reliable and relevant such that it can help in developing a sound opinion on the class certification requirements. To sum it up, Daubert stresses on the basis of what the experts have to say instead of what they actually say.
Gordon Lane insisted on a different acuity scoring system—the “Patient Driven Payment Model” or “PPDM”— which was used “for all but two weeks of the proposed class period.” Dr. Harrington, however, contended that she could convert PDPM scores to RUG scores using a “crosswalk” published by CMS, and derive the number of necessary staffing hours from there.
Gordon Lane first argued Harrington’s method of converting RUG scores into time measurements should be excluded because it was not mandated by federal or state governments to calculate required staffing levels. The Court found this unpersuasive. The CMS State Operations Manual did not consist of an objective formula for determining adequate staffing levels. The lack of a governmental mandate did not make Harrington’s methodology unreliable.
Next, Gordon Lane contended there are various methods for measuring acuity and experts sincerely disagree on the best approach. The Court stated that disagreement among experts regarding methodology does not necessitate exclusion under Daubert. The Court must analyze the basis for the expert’s opinion, not simply differing expert views.
Gordon Lane also asserted Harrington impermissibly relied on her subjective judgment and experience. However, the Court found reliance on personal knowledge and experience is permissible for specialized testimony under Ninth Circuit precedent. Harrington’s extensive, relevant experience lent reliability to her conclusions.
Ultimately, the Court was satisfied that Harrington employed a reliable methodology incorporating government data, facility records, regulations, and her expertise. Her opinion was relevant since the claims relied on Gordon Lane’s alleged understaffing. Though not applying Daubert’s admissibility requirements strictly, the Court found Harrington’s testimony sufficiently reliable and relevant to the issues at hand. Therefore, the Court denied Gordon Lane’s motion to exclude.
Held
The Court denied Gordon Lane’s motion to exclude, finding Harrington’s methodology reliable and relevant. The Court also found Parrish had Article III standing. However, the Court denied class certification because Gordon Lane correctly pointed out that proposed class definitions were impermissible because certification would require this Court to conduct an individual assessment of every potential class member to determine 1) whether they executed the arbitration agreement, and 2) whether the arbitration agreement was valid and binding as to that individual class member. Not only would such a determination defeat the superiority of proceeding as a class action, but it would also exceed the Court’s authority.
The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways
This case demonstrates important points about using expert witness testimony in support of a class certification motion. First, lack of a governmental mandate for an expert’s methodology need not necessarily render it unreliable as long as the expert can point to appropriate data sources, regulations, and experience reliably incorporated in the methodology. Second, disagreement among experts did not automatically warrant exclusion. The judge must evaluate the basis for the expert’s particular methodology. Third, an expert can rely on judgment and experience, especially for specialized testimony, if they have relevant background. Finally, while class certification should entail rigorous analysis, poking holes in the merits of an expert’s underlying conclusions sometimes goes beyond the appropriate level of inquiry.
