Expert Witness Profiler

Tag: Wheat

  • Economics Expert Witness’ Event Study Admitted Despite the High Rate of False Positives

    Economics Expert Witness’ Event Study Admitted Despite the High Rate of False Positives

    Plaintiffs Richard Dennis, Port 22, LLC, and Michael Glass asserted Commodity Exchange Act and Sherman Antitrust Act claims, alleging that The Andersons, Inc. (“TAI”)  and Cargill Incorporated, who were supposed competitors, operated multiple grain storage warehouses in Ohio and collaborated to manipulate prices of soft red winter wheat (“SRW wheat”) futures and options contracts on the Chicago Board of Trade (“CBOT”). 

    According to the Plaintiff, the Andersons, Inc. sold SRW wheat to the major purchasers in October and November 2017 to suppress demand for physical SRW wheat and then, on November 29, 2017, registered for delivery two thousand certificates of CBOT December 2017 SRW wheat.

    This registration (falsely, Plaintiffs say) signaled that TAI would sell ten million bushels of physical SRW wheat to parties holding long positions in December 2017 SRW wheat futures and caused a marked price decrease in the December 2017 SRW wheat futures contract and widened the spread between the December 2017 and March 2018 SRW wheat futures contracts.

    TAI and Cargill later repurchased some of the shipping certificates TAI had delivered at the decreased prices. Plaintiffs allegedly transacted in December 2017 and March 2018 SRW wheat futures and lost money because of the decreased prices caused by the scheme.

    Plaintiffs’ expert Craig Pirrong opined that Defendants’ manipulation of December 2017 and March 2018 SRW wheat futures injured Plaintiffs on a class-wide basis. Pirrong estimated class-wide damages and proposed a methodology for determining individual damages. Defendants challenged the reliability of Pirrong’s study through the report of their expert, Professor Justin McCrary.

    Economics Expert Witness

    Craig Pirrong‘s extensive qualifications includes approximately 30 years of concentrating professionally on competition and manipulation of prices with a focus on Chicago Mercantile Exchange wheat, soybean, and corn futures contracts; publishing a dozen peer-reviewed articles and a book on commodity futures manipulation and pricing; presenting to and consulting with federal agencies on manipulation; and testifying as an expert.

    Want to know more about the challenges Craig Pirrong has faced? Get the full details with our Challenge Study report. 

    Discussion by the Court

    Defendants argued that the magistrate judge’s order contained the following four clearly erroneous conclusions. First, the magistrate judge declined to exclude the March 2018 portion of Pirrong’s event study, which Defendants alleged lacked sufficient statistical significance. Second, the magistrate judge declined to exclude Pirrong’s ipse dixit assumption that Defendants’ manipulation caused a constant level of price artificiality that persisted for three months. Third, the magistrate judge found that the December 2017 portion of Pirrong’s event study is admissible despite the high rate of false positives that it produces. Fourth, the magistrate determined that Pirrong’s linear programming (“LP”) damages model, which Defendants contend is neither reliable nor helpful to a factfinder, is admissible. With the deferential standard of review discussed above in mind, the Court will review the magistrate judge’s order for clear error on each of these four bases.

    Statistical significance of March 2018 event study

    Pirrong’s expert report includes an event study, a regression analysis that uses specified control variables to estimate the daily market price of SRW and then compares those estimates to the prices observed in the market. An event study is used to determine the direction and magnitude of the effect of an unspecified variable, here, the alleged market manipulation.

    Pirrong’s event study contains p-values associated with the cumulative residual on each day of the study. A residual is the difference between the observed value (here, the actual daily market price) and the estimated value (here, the daily market prices estimated by the control variables). The cumulative residuals used in Pirrong’s event study are simply the sum of each day’s residual and all the residuals that came before it within the period studied.

    Because many of the p-values in Pirrong’s event study exceed commonly used thresholds of statistical significance (such as the 1%, 5%, and 10% thresholds), Defendants argued before the magistrate judge that Pirrong’s entire event study is unreliable. After carefully considering the issue, the magistrate judge was “unconvinced that all of [Pirrong’s] results should be excluded due to some p-values above 0.05, particularly where seven of eleven days (November 30 through December 8, 2017) within the December 2017 SRW wheat contracts regression analysis returned p-values with statistical significance at the five percent level.”

    Defendants advanced the same statistical significance arguments before this Court, contending that the magistrate judge’s conclusions constitute clear error.

    The Court held that it is reasonable that the magistrate judge, like many of our sister courts, declined to use statistical significance at the five percent level, or any other bright line threshold, as a proxy for reliability, and thus the admissibility, of Pirrong’s entire event study.

    The Court is not left with the definite and firm conviction that a mistake has been made

    Plaintiff’s theory of this case is that a discrete event—the registration of two thousand certificates of CBOT December 2017 SRW wheat on November 29, 2017, (after Defendants had saturated the market through major SRW wheat sales in October and November)—drove the market price of December 2017 and March 2018 SRW wheat futures downward. Pirrong’s event study uses a regression analysis to isolate the effect of this event from the innumerable other market factors—captured by the control variables—that determine the market price of SRW wheat futures.

    The downward price impact of this discrete event would be easiest to pick out from the “noise” of other market factors right at the time of the event. As time passes and the other market factors continue to exert pressures on price, the manipulation event would become more difficult to pick out from the noise; what was first a bang fades into an echo. This is what Pirrong’s event study shows. For December SRW wheat futures, the lowest, or most statistically significant, p-values occur on November 30, 2017, and the days immediately following it. The Court found Pirrong’s conclusion that Defendants’ alleged market manipulation depressed prices in the December SRW wheat futures market statistically robust.

    For March SRW wheat futures, the same conclusion is considerably less statistically robust. Even on the first day after Defendants’ registration of two thousand certificates of CBOT December 2017 SRW wheat, the negative residual returns a p-value of 0.20. Given the mixed statistical robustness of the results of the event study, this Court agreed with the magistrate judge that they are sufficiently reliable to be admissible. 

    Ipse dixit assumption that price artificiality in the commodities marketplace spanned three months at a fixed amount

    Before the magistrate judge, Defendants argued that Pirrong’s conclusion that the March 2018 SRW wheat futures contract had a permanent, fixed, artificial price depression of 1.2¢ per bushel from December 14, 2017, to March 14, 2018, is unreliable because it is asserted with no empirical proof. Defendants renew that challenge here, arguing that Pirrong “is left only with his own word as to the existence of permanent price artificiality spanning three months in a marketplace where prices change every second of every day.”

    The magistrate judge determined that Pirrong “reviewed the identified records, performed studies, and applied his extensive experience in futures markets to reach” his conclusion that the 1.2¢ per bushel artificial price depression held through the period from December 14, 2017, to March 14, 2018. 

    The Court held that while Pirrong’s explanation of why the price artificiality would remain constant is open to dispute, a disputable explanation is different than no explanation.

    False positives

    Defendants argued before the magistrate judge that Pirrong’s event study is unreliable because of the high rate of false positives it produces. A test for false positives takes Pirrong’s model and applies it to time periods where there is no alleged market manipulation. A false positive occurs when a residual has a p-value below a specified threshold of statistical significance. Defendants’ test for false positives employed a 43% threshold of statistical significance because that is the highest p-value reported for any day in Pirrong’s event study. Using a high threshold of statistical significance yields a high rate of false positives. Here, it indicated that there was price manipulation on “85% of the days for which Plaintiffs do not claim manipulation.”

    After carefully considering this issue, the magistrate judge concluded that “[b]ecause Defendants’ false positives argument spins off from the p-values discussion and applies an across-the-board 43% threshold for statistical significance not adopted by Pirrong, the Court is disinclined to reach a different result here.”

    Defendants advanced the same false positives argument here. The Court finds that the magistrate judge’s decision to admit the event study despite the high rate of false positives was correct. The 85% false positive rate reported by Defendants comes from the application of an across-the-board 43% threshold for statistical significance that is not endorsed by Pirrong (and is obviously not endorsed by the Defendants given their arguments on statistical significance). More troubling is the 19.66% false positive rate yielded by testing at a 5% level of statistical significance. The magistrate judge concluded that Pirrong’s testimony is “closer to shaky than unreliable.”

    Linear programming (“LP”) damages model

    First, Defendants renew their argument that Pirrong’s LP damages model is unreliable because it relies on an estimate of artificiality generated by the event study to calculate a range of aggregate damages for the class members. The reliability of the use of a constant 1.2¢ artificiality estimate is already addressed above.

    Second, as the magistrate judge notes throughout her opinion, Defendants attack the output and not the methodology of Pirrong’s estimation of a theoretical range of possible damages.

    Third, Defendants argued that the LP damages model is not helpful to the finder of fact because it “estimates a theoretical $20 million range of possible damages” and “provides no means for the trier of fact to estimate where in that broad range a reasonable, or probable, estimate of damages falls.” The magistrate judge correctly concluded that “the Court is not seeking to calculate actual damages” at the class certification stage. Instead, Plaintiffs must show that “proof of the damages caused by the scheme will either fail or succeed on a class-wide basis.”

    The Court agreed with the magistrate judge that Pirrong’s LP model is sufficiently helpful and reliable to be admissible.

    Held

    The Court denied Defendants’ objection to the order denying in part Defendants’ motion to exclude the testimony of Plaintiffs’ expert Dr. Craig Pirrong.

    Key Takeaways:

    • It is noteworthy that Defendants attacked the output and not the methodology of Pirrong’s estimation of a theoretical range of possible damages.
    • The magistrate judge concluded that Pirrong’s testimony is “closer to shaky than unreliable.” The 85% false positive rate reported by Defendants comes from the application of an across-the-board 43% threshold for statistical significance that is not endorsed by Pirrong (and is obviously not endorsed by the Defendants given their arguments on statistical significance).
    • The Court held that while Pirrong’s explanation of why the price artificiality would remain constant sparks a debate, a questionable explanation is not the same as having no explanation.

    Please refer to the blog previously published about this case:

    Economics Expert Witness’ Improper State-of-Mind Testimony Excluded

    Case Details:

    Case Caption: Dennis V. The Andersons Inc.
    Docket Number: 1:20cv4090
    Court: United States District Court, Illinois Northern
    Order Date; December 17, 2024
  • Economics Expert Witness’ Improper State-of-Mind Testimony Excluded

    Economics Expert Witness’ Improper State-of-Mind Testimony Excluded

    Plaintiffs Richard Dennis, Port 22, LLC, and Michael Glass asserted Commodity Exchange Act and Sherman Antitrust Act claims, alleging that the Andersons, Inc. and Cargill Incorporated, who were supposed competitors, operated multiple grain storage warehouses in Ohio and collaborated to manipulate prices of soft red winter wheat futures and options contracts on the Chicago Board of Trade. 

    According to the Plaintiff, the Andersons, Inc. sold SRW wheat to the major purchasers in October and November 2017 to suppress demand for physical SRW wheat and then, on November 29, 2017, registered for delivery two thousand certificates of CBOT December 2017 SRW wheat.

    This registration (falsely, Plaintiffs say) signaled that TAI would sell ten million bushels of physical SRW wheat to parties holding long positions in December 2017 SRW wheat futures and caused a marked price decrease in the December 2017 SRW wheat futures contract and widened the spread between the December 2017 and March 2018 SRW wheat futures contracts.

    TAI and Cargill later repurchased some of the shipping certificates TAI had delivered at the decreased prices. Plaintiffs allegedly transacted in December 2017 and March 2018 SRW wheat futures and lost money because of the decreased prices caused by the scheme.

    Plaintiffs’ expert Craig Pirrong opined in relevant part that Defendants artificially depressed prices of the December 2017 and March 2018 SRW wheat futures through a market manipulation that injured Plaintiffs on a class-wide basis; Pirrong also provided a methodology for determining individual damages. Through the report of their expert, Professor Justin McCrary, Defendants purported to challenge the reliability of Pirrong’s studies. Plaintiffs attacked Professor McCrary’s qualifications.

    Economics Expert Witnesses

    Justin McCrary is an “economist with expertise in microeconomics, economic modeling, and statistical method,” who teaches at the Law School at Columbia University. He has taught courses on economic theory econometric theory, antitrust, law and economics, and statistics and is a reviewer for leading peer-reviewed economics journals. He served on the Board of Directors of the American Law and Economics Association and has published papers in prominent economic journals.

    Get the full story on challenges to Justin McCrary’s expert opinions and testimony with an in-depth Challenge Study. 

    Craig Pirrong‘s extensive qualifications includes approximately 30 years of concentrating professionally on competition and manipulation of prices with a focus on Chicago Mercantile Exchange wheat, soybean, and corn futures contracts; publishing a dozen peer-reviewed articles and a book on commodity futures manipulation and pricing; presenting to and consulting with federal agencies on manipulation; and testifying as an expert.

    Want to know more about the challenges Craig Pirrong has faced? Get the full details with our Challenge Study report. 

    Discussion by the Court

    Professor Justin McCrary

    Plaintiffs argued McCrary: (1) is unqualified to give an opinion in this class action alleging market manipulation in wheat futures and options; (2) tenders opinions that are unreliable because they lack a scientific basis and he has never performed such quantitative work before; and (3) offers irrelevant opinions.

    McCrary’s Qualifications

    Plaintiffs insisted McCrary is unqualified to render an opinion in the realm of the commodity futures market, a conclusion they say is underscored by his professed unfamiliarity with “basic industry terminology” like “front month,” “spot month,” “strong stopper,” and “cash contract.”

    The Court held that Plaintiffs’ surface-level attack on McCrary’s background and education is insufficient to demonstrate his lack of qualification, and the Court declines to exclude McCrary’s opinions, which Plaintiffs do not deny are rooted in statistics and economics, merely because he neither purports to be nor appears to be an expert in commodities futures trading or manipulation.

    Reliability of McCrary’s Opinions

    Plaintiffs argued McCrary’s opinions are unreliable, first, for lacking a scientific basis—because he opines Pirrong’s analyses fail to account for confounding fundamental factors that McCrary himself neither identified nor analyzed to determine any potential impact. But, as Defendants retort, that was not McCrary’s task; neither Daubert nor Rule 702 required McCrary to perform independent studies.

    Although Plaintiffs labelled McCrary’s analysis thin and McCrary a mere mouthpiece for the defense, the Court finds he sufficiently explained the underpinnings for his opinions, which flow from his review of relevant literature, his expertise, experience and knowledge.

    Finally, Plaintiffs attacked an isolated sentence of McCrary’s opinion regarding Pirrong’s event study and further attacked his criticism of Pirrong’s damages model because McCrary had “never worked with” data types he used in performing his calculations. The Court agreed with Defendants that the former argument takes McCrary’s statement out of context , and the latter argument lacks force because Plaintiffs identified no errors in McCrary’s calculations.

    Relevance of McCrary’s Opinions

    Plaintiffs finally briefly recycle most of the foregoing arguments, which the Court already has rejected, into an argument that Professor McCrary’s opinions will not help the trier of fact. Again, the Court disagreed. Although Professor McCrary does regurgitate some record evidence (such as that SRW wheat would be aging between December 2017 and March 2018), he does not merely repeat evidence but adds his opinions to the evidence he recites, including that Pirrong should have accounted for the aging of the wheat and other factors. For these reasons and those set forth above in addressing Plaintiffs’ prior arguments, the Court declines to strike McCrary’s opinions because they are relevant to understanding and analyzing Pirrong’s opinions regarding class certification.

    Craig Pirrong

    Plaintiffs proffered their expert witness, Dr. Craig Pirrong, an economist, who intended to testify that Defendants’ alleged manipulation artificially deflated prices in the December 2017 and March 2018 SRW wheat futures markets and caused damages to the proposed class that are capable of calculation on a class-wide basis. 

    In support, he presented: (1) an event study with regression analysis meant to measure the existence and amount of alleged price-artificiality in the December 2017 and March 2018 SRW futures and options contracts that is attributable to Defendants’ conduct rather than chance or other market factors; and (2) a damages model that takes the output from the event study as an input to calculate a range of aggregate damages. Such models may meet Plaintiffs’ burdens at the class certification stage. 

    A. Pirrong’s Event Study with Regression to Predict “But For” Wheat Prices

    Pirrong first employed an event study with regression analysis intended to predict what prices would have been absent Defendants’ actions and statements. 

    In the context of this case, Pirrong’s regression model uses other grain commodities traded on CBOT as control variables; he estimates the historical relationship among the SRW wheat futures prices and the control variables by using “a control period consisting of data from March 1 to November 29 for the CBOT wheat futures contract for each year from 2005 through 2017.”

    According to Pirrong, the model computes what would have been, but for Defendants’ conduct, the prices for December 2017 and March 2018 SRW wheat futures for each trading day between November 30, 2017 and December 14, 2017. He attributed the difference between his model’s output of estimated prices for December 2017 and March 2018 SRW wheat futures prices and the actual December 2017 and March 2018 SRW wheat futures prices to a “price artificiality” due to Defendant’s conduct. 

    Thought Defendants acknowledged that statistical regression is an established methodology, they argued that Pirrong “employed a ‘reliable methodology in an unreliable way” because the “results” are not “statistically significant” under generally accepted statistical principles and lead to an unacceptably high rate of false positives (predicted price manipulation in years in which none is alleged). They insisted that the study “cannot rule out” other potential causes of the SRW wheat futures price changes and has “dubious predictive value.”

    1. Statistical Significance

    Pirrong himself described p-values as “giving the probability of observing the residual,” which, here, is price artificiality, and conceded that “conventional thresholds” for statistical significance are five percent (0.05) and ten percent (0.1).

    Defendants asserted that p-values above 0.05 indicate unreliable regression study results and emphasize “Pirrong offered no thresholds for determining when his event study results should be considered statistically significant,” despite having agreed that one must “choose a threshold” to “establish statistical significance.”

     The Court is unconvinced that all of his results should be excluded due to some p-values above 0.05, particularly where seven of eleven days (November 30 through December 8, 2017) within the December 2017 SRW wheat contracts regression analysis returned p-values with statistical significance at the five percent level. Nor does the Court find that Pirrong’s non-articulation of a statistical significance threshold warrants blanket exclusion of his results here.

    Second, even if Defendants sought to exclude just dates for which a p-value above 0.05 was returned, the Court under these circumstances declines to adopt a “hard and fast rule” requiring p-values of 0.05 or below, which in essence “evaluates statistical significance as a binary question” where “statistical significance lies at the 4.99% level but not at the 5.01% level.’”

    Pirrong also emphasized that “eminent statisticians” have increasingly criticized the use of statistical significance cutoffs “because it is misleading and leads to erroneous conclusions” and that one should avoid “‘dichotomization as statistically significant or not.’”

    The Court held that Defendants’ arguments go to the weight, rather than the admissibility, of the regression study results. Pirrong’s event study results in the December 2017 and March 2018 SRW Wheat futures contracts are sufficiently reliable for consideration.

    2. Rate of False Positives

    Defendants next asserted Pirrong’s study is undermined by the rate of “false positives,” or instances in which Pirrong’s model predicts price artificiality in years in which no manipulation is alleged. Defendants argued the higher the threshold for statistical significance one accepts as to the event study, the higher the rate of false positives the model returns. Accepting, for example, a 43% threshold for statistical significance (drawn from the highest p-value result Pirrong endorses, 0.43, applied across both the December 2017 and March 2018 studies) suggested price manipulation on 85% of the days for which Plaintiffs did not claim manipulation. 

    Adopting a 5% statistical significance level (which would result in statistical significance for the results of just seven days in the December 2017 study and none in the March 2018 study) garners a 19.66% rate of false positives. Defendants argued that these rates of false positives show the event study does not reflect a reliable application of statistical methods to this case.

    Although the explanation regarding false positives is not robust, the Court nevertheless found that Pirrong’s testimony is “closer to shaky than unreliable.”

    B. Pirrong’s Damages Estimates

    Pirrong proffered damages methodologies to calculate individual damages and estimate aggregate class-wide damages using linear programming (the LP model).

    1. Pirrong’s Use of “Permanent Artificiality” in March 2018 SRW Wheat Futures from December 14, 2017 through March 14, 2018

    Defendants first attacked Pirrong’s opinion that the March 2018 SRW wheat futures contract had a permanent fixed artificial price depression of 1.2¢ per bushel from December 14, 2017 to March 14, 2018. Defendants asserted this use of a constant 1.2¢ residual is undermined by Pirrong’s choice to use a day-to-day approach for other transactions, as well as his opinion that publicly available information is immediately incorporated into the SRW futures marketplace.

    Pirrong, though, opined that Defendants “distorted consumption by making excessive deliveries,” only a “fraction” of which they later repurchased, causing immediate consumption of wheat that “should have remained in storage for consumption later.” The effects of their actions “persisted into the indefinite future beyond November 30, 2017,” thus “distorting supply-demand fundamentals far into the future” and causing ongoing effects on prices. This price artificiality, Pirrong asserted, would remain constant after the December 2017 SRW wheat contract expired both because Defendants’ actions in the December contract could not affect prices after the expiration, and in an efficient futures market, the impacts of Defendants’ actions would be reflected in prices quickly and permanently.

    Pirrong’s explanation provides support for his choice. And, despite Defendants’ attack, the Court held that his testimony is not “unsupported ipse dixit” because, rather than “pluck his conclusions out of thin air” he reviewed the identified records, performed studies, and applied his extensive experience in futures markets to reach those conclusions.

    2. Outputs of the Damages Model

    Defendants challenged the LP Model outputs for the model’s reliance “on the daily artificiality residual (i.e., the daily artificiality estimate produced by the event study) to calculate hundreds of thousands of hypothetical possible trade scenarios and conjures a supposed aggregate damage range for class members,” because it “cannot be applied to estimate the loss for any class member,” includes “computational errors that artificially inflate the damages estimate,” and did not “account for characteristics specific to many entities and individuals included in the group Pirrong purports to study,” like intraday traders and traders with offsets.

    The Court held that Pirrong’s calculations, based upon his event studies, are sufficient to meet Plaintiff’s low burden here.

    Defendants’ argument that “the LP model has several computational errors that artificially inflate the damages estimate” did not suggest damages cannot be calculated on a class-wide basis, and the Court is not seeking to calculate actual damages at this stage. As Plaintiffs point out, Defendants’ related argument that Pirrong’s model did not account for the characteristics of certain traders, boils down to an argument that some members of the defined class “ultimately were not harmed” by Defendants conduct, i.e., that their claims “will fail on the merits if and when damages are decided,” which is “a fact generally irrelevant to the district court’s decision on class certification.”

    C. State-of-Mind Opinions and Legal Conclusions by Pirrong

    Defendants argued that “Pirrong, an economist, lacks an analytically sound basis for ostensibly psychological conclusions” about Defendants’ “knowledge or intentions.”

    The Court held that Pirrong properly may testify regarding “conclusions drawn only in his capacity as an economist.” This includes opining on potential economic motives of a party but not testimony of what a party knew because Pirrong is not more qualified than an ordinary juror to make the latter inferences.

    Held

    The Court denied Plaintiffs’ motion to exclude the testimony of Professor Justin McCrary, and the Court granted in part and denied in part the Defendants’ motion to exclude the testimony of Craig Pirrong. 

    Key Takeaways:

    • Professor McCrary neither purports to be nor appears to be an expert in commodities futures trading or manipulation but his opinions are rooted in statistics and economics.
    • The Court, like many others presented with the question, declines to use statistical significance at the five percent level as a proxy for reliability, and thus admissibility, for the purposes of Rule 702 and Daubert. Considering the entire data set presented, Pirrong’s explanations, and the class definition Plaintiffs propose regarding transactions of December 2017 and March 2018 SRW wheat set forth above, Defendants’ arguments go to the weight, rather than the admissibility, of the regression study results. 
    • First, the Court has resolved the related argument regarding p-values, finding they do not render Pirrong’s testimony inadmissibly unreliable, in large part due to Pirrong’s explanation that “sound economic reasoning” indicates the impact of Defendants conduct would not have dispersed within days, despite the p-value results, and the spread was wider than anticipated for the December 2017 through March 2018 SRW wheat futures. Because Defendants’ false positives argument spins off from the p-values discussion and applies an across-the-board 43% threshold for statistical significance not adopted by Pirrong, the Court is disinclined to reach a different result here. Second, Defendants point to no flaws in Pirrong’s inputs to his studies. Defendants may explore false positives or other questions as to Pirrong’s studies through traditional evidentiary mechanisms. 
    • Legal conclusions are inadmissible, while state-of-mind testimony is admissible where helpful to the jury and its probative value is not outweighed by a risk of unfair prejudice. The admissibility of alleged state-of-mind assertions is more nuanced. Direct opinions regarding state of mind are improper, although an expert may testify regarding the consistency of a certain action with a particular state of mind.

    Case Details:

    Case Caption: Dennis V. The Andersons Inc.
    Docket Number: 1:20cv4090
    Court: United States District Court, Illinois Northern
    Order Date: October 07, 2024
  • Testimony of Plant Genetics Expert Witness Based on his own Academic Research Admitted

    Testimony of Plant Genetics Expert Witness Based on his own Academic Research Admitted

    A district judge in Arizona decided against excluding the testimony of a plant geneticist considering his specialized technical expertise in wheat genetics and breeding.

    Plaintiff, Calyxt Inc. is an agricultural company specializing in gene-editing technology for crops like wheat and soybeans. In October 2019, Calyxt planted a genetically engineered high fiber wheat (“HFW”) product in two different fields in Yuma, Arizona (“Field One” and “Field Two,” respectively). Calyxt claims that in 2019, pesticides sprayed aerially on nearby fields drifted onto Calyxt’s two respective fields and destroyed parts of the HFW crops in each field.

    Plaintiff alleged two incidents of pesticide drift (collectively, “the Yuma Incident”), one incident affecting Field One and the other affecting Field Two. Field One and Field Two are miles apart. The aerial application near Field One occurred six days prior to the aerial application near Field Two. Moreover, the incidents involve two separate sets of Defendants. The Field One incident involved Amigo Farms, Inc. (“Amigo”), Morris AG Air Southwest (“Morris”), and Jeffrey Nigh, all of whom are no longer parties to this suit. The remaining Defendants—D’Arrigo, Tri-Rotor, Consaul, and Luke—are all allegedly involved with the pesticide drift onto Field Two.

    Field Two Defendants’ filed motions to exclude two of Plaintiff’s expert witnesses, Michael J. Giroux and William W. Wilson.

    Plant Genetics Expert Witness

    Dr. Michael J. Giroux is a plant geneticist and breeder and has a Ph.D. in plant molecular and cellular biology. Currently, he is a professor and department head of the Plant Sciences and Plant Pathology Department at Montana State University. 

    Fortify your strategy by reviewing a Challenge Study detailing grounds for excluding Michael Giroux’s expert testimony. 

    Agriculture Expert Witness

    Dr. William W. Wilson, Ph.D. is a Professor at North Dakota State University in Agribusiness and Applied Economics with periodic sabbaticals at Stanford University. Moreover, he received his PhD in Agricultural Economics from the University of Manitoba in 1980.

    Get the full story on challenges to William Wilson’s expert opinions and testimony with an in-depth Challenge Study. 

    Discussion by the Court

    Field Two Defendants’ Motion to Exclude Dr. Michael J. Giroux

    Giroux has specialized technical expertise in wheat genetics and breeding

    To begin with, Calyxt retained Giroux to opine on the reasonableness of Calyxt’s actions in developing its HFW product, both before and after it suffered damage from the alleged 2019 drift, and on the agronomic importance of Calyxt’s HFW project.

    Field Two Defendants challenged four parts of Giroux’s opinion: (1) that Calyxt’s HFW product is “valuable” and “innovative;” (2) that the Yuma Incident killed Calyxt’s most desirable wheat lines; (3) that Calyxt’s HFW development plan post-Yuma Incident was reasonable; and (4) that Calyxt followed industry standards in developing its HFW product. Field Two Defendants did not challenge the reliability of Giroux’s methods or his application of such methods. Rather, they contended that Giroux is not qualified to opine on the value of Calyxt’s HFW and that Giroux’s remaining opinions are based on insufficient facts and data.

    There is no dispute that Giroux has specialized technical expertise in wheat genetics and breeding. However, Field Two Defendants asserted that because Giroux is not an economist, he cannot testify about the “value” of Calyxt’s HFW.

    The Court held that Giroux’s opinion on Calyxt’s product is based on his own knowledge, experience, and research in plant genetics and breeding and not, as Field Two Defendants contend, some unfounded understanding of the economy. Giroux noted that starch-based foods with increased resistant starch are associated with a variety of health benefits.

    Giroux reviewed case pleadings and discovery materials

    Also, Giroux reviewed case pleadings and discovery materials submitted by each party, including written discovery responses, deposition testimony, exhibits, and documents produced in the case. Moreover, these materials detailed, among other things, Calyxt’s HFW genetic selection and breeding process (including the specific gene-edits Calyxt used); Calyxt’s planting strategy (such as what seed lines were planted, how much was planted, and where the lines were planted); the testing and analysis of Calyxt’s HFW; and the phased design of Calyxt’s commercialization plan. Giroux also relied on his own as well as outside academic research and studies to support his findings. 

    To conclude, the Court found that Giroux’s opinion was based on sufficient facts and data.

    Field Two Defendants argued that Giroux’s opinion on the value of Calyxt’s product was based on a speculative assumption that consumers want to eat higher dietary foods. The Court held that Giroux’s report sufficiently supported such an assumption with research and data.

    Moreover, Field Two Defendants argued that Giroux did not examine breeding techniques that Calyxt’s competitors use; and that Giroux did not review certain documents related to Calyxt’s development plan post-Yuma Incident. Still, Field Two Defendants failed to persuade the Court that these points demonstrated that Giroux’s opinions were baseless.

    Field Two Defendants’ Motion to Exclude Dr. William W. Wilson

    Field Two Defendants did not challenge Wilson’s qualifications or credentials. Nor did they challenge his general methodology for calculating damages—using an empirical model to derive the estimated damages using standard net present value analysis.

    Rather, Field Two Defendants challenged five assumptions that Wilson made in computing the estimated damages: (1) that the Yuma Incident was the sole cause of the one-year delay in Calyxt’s commercialization of its HFW; (2) that HFW will comprise 45% of the domestic wheat market by 2028; (3) that 2022 is the appropriate start date for the logistics market adoption curve model; (4) that Calyxt’s HFW product would capture one-third of the HFW market share; and (5) the royalty fee for Calyxt’s HFW product.

    To begin with, Field Two Defendants’ asserted that Wilson failed to consider other potential setbacks that could have caused the one-year delay in commercialization and this failure was fatal to the reliability of Wilson’s opinion. Whether other potential setbacks could have caused the one-year delay is an issue related to causation. The Court held that Wilson was not retained to opine on causation; his opinion was limited to providing an approximate estimation of damages.

    As to the remaining four assumptions that Field Two Defendants challenged, the Court held that any criticisms go to the weight of Wilson’s opinion, not the admissibility. To conclude, although other assumptions could have been made, this does not render Wilson’s opinion so fundamentally flawed that it could be of no assistance to the jury on the issue of damages. 

    Held

    To sum it up, the Court denied the Field Two Defendants’ motions to exclude Michael Giroux and William Wilson.

    Key Takeaways:

    • First, as a plant geneticist, the Court held that Giroux was qualified to opine about the import of developing higher-fiber wheat crops. Contrary to Field Two Defendants’ assertion, Giroux need not be a trained economist to be sufficiently qualified to understand and opine about the wheat industry and to conclude that higher-fiber foods are valuable products.
    • Second, the Court also found that Wilson was not retained to opine on causation; his opinion was limited to providing an approximate estimation of damages because it is perfectly permissible for an expert to assume liability (of which causation is an element) and simply focus on the issue of damages.

    Case Details:

    Case Caption: Calyxt Incorporated V. Morris Ag Air & Sons Incorporated Et Al
    Docket Number: 2:20cv1221
    Court: United States District Court, Arizona
    Order Date: May 23, 2024