Idaho District Court Affirms Its Role as the Gatekeeper of Expert Testimony

Melissa Kenney | The Subrogation Strategist

Many subrogation claims involving fire losses rely heavily on expert testimony. Expert testimony is admissible under Federal Rule of Evidence 702 if it is both relevant and reliable. In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), whose standard has been incorporated into Federal Rule of Evidence 702, the Supreme Court instructed federal trial courts to act as a “gatekeeper” of expert testimony, giving them the power to exclude expert testimony that is not supported by sufficient evidence. In Maria Fernanda Elosu and Robert Luis Brace v. Middlefork Ranch Incorporated, Civil Case No. 1:19-cv-00267-DCN, 2021 U.S. Dist. LEXIS 14449 (D. Idaho Jan. 22, 2021) (Brace), the United States District Court for the District of Idaho exercised its gatekeeper role when it granted in part and denied in part the defendant’s motion to exclude expert testimony pursuant to Daubert and Federal Rule of Evidence 702.

Brace, involved a fire at a vacation cabin in McCall, Idaho. The cabin, owned by Maria Elosu (Elosu) and Robert Brace (Brace and collectively with Elosu, Plaintiffs) was part of a homeowner’s association called Middlefork Ranch, Incorporated (MFR). The cabin had a “wrap around” deck with a propane-fired refrigerator on the north side. On the day before the fire, Brace stained the deck using an oil-based stain. That night, Elosu smoked cigarettes on the deck. The next morning, Plaintiffs used rags to clean up excess oil from the deck and an MFR employee changed the propane on the refrigerator and relit the pilot light. At 4:00 p.m., a fire started in or around the cabin while no one was home. The fire was discovered by a group of contractors who testified that the fire was isolated to the east side of the cabin when they first arrived. Importantly, one witness testified that there was no fire and no flames around the propane-fired refrigerator. The fire destroyed the cabin and the contents within.

Plaintiffs sued MFR for negligently starting the fire and alleged that the MFR employee had knowledge of the hazard when he lit the refrigerator pilot light on the oil-stained deck. To prove its claim, Plaintiffs retained a fire investigator, Michael Koster (Koster), who inspected the scene ten months after the loss occurred, and a mechanical engineer, Richard Mumper (Mumper), who conducted various lab tests. Both experts concluded that “the fire started on the north deck as a result of excess oil vapors being ignited by the pilot light on the propane fridge.” In anticipation of trial, MFR filed a motion to exclude the opinions of Plaintiffs’ experts.

Motion to Exclude Koster’s Expert Opinion Regarding the Fire Origin and Cause

With respect to Koster, MFR argued that his conclusions should be excluded because they were speculative and not supported by evidence. The court agreed, finding that Koster failed to satisfy the standards set forth in Daubert and Federal Rule of Evidence 702 because his conclusion was mere speculation, either contrary to or unsupported by evidence in the record. Among other flaws, the trial judge focused on the fact that Koster, by his own admission, stated there was no concrete physical or testimonial evidence to support his theory that the fire started on the north side of the deck.

The court also took issue with the fact that Koster relied on an interested party’s version of the facts without conducting an independent investigation to verify the accuracy of those statements. He discounted other possible explanations for the fire, such as the spontaneous combustion of the oil rags and the careless disposal of smoking materials, based “solely off of the information that was given to [him] by [Plaintiffs].” Additionally, none of the witness interviews or transcripts supported his theory, including the testimony of the disinterested construction workers that reported observing fire on the east side of the cabin when they first arrived. Koster explained his conclusion was a “hypothesis” and that because he could not disprove it, “then there’s a high probability that it did occur.” As stated by the court: “Failing to disprove a theory that is speculative in the first place . . . would swallow the rules as applied to experts if allowed. If an expert could throw out any idea – and claim that so long as it remains unproven it’s a viable option – without oversight, the [c]ourt’s gatekeeping role is meaningless.”

Motion to Exclude Mumper’s Expert Opinion Regarding the Cause of the Fire

Plaintiffs hired Mumper to examine the remnants of the appliances including the propane refrigerator. Mumper conducted various lab tests, examined the evidence, found no abnormal electrical activity, and concluded there was no mechanical malfunction with the refrigerator that caused the fire. He goes on to opine, however, that the refrigerator pilot light caused the fire.

MFR asked the court to exclude Mumper’s opinion regarding the cause of the fire because he was not a certified fire investigator. The court noted that, because he worked for a firm that specialized in forensic fire investigations, Mumper might be qualified to offer opinions as to the origins of the fire. In the end, the court held that it would not preclude Mumper from testifying “about the tests he ran, his conclusions about those tests, and his opinion that those things did not start the fire.” On the other hand, the court ruled that Mumper could not testify as to the cause of the fire because his opinions lacked a proper foundation. The court based its decision on the fact that Mumper’s role appeared to be limited to investigating whether the refrigerator (or other appliances) malfunctioned and that he did not independently investigate other possible causes.

The primary purpose of an origin and cause investigation is to determine where the fire started and why. Expert testimony is admissible under Federal Rule of Evidence 702 if it is: (1) from a qualified source, (2) based on sufficient facts or data, and (3) will assist the trier of fact in resolving an issue that is relevant to the case. As established in Brace, it is generally not enough for a consulting expert to reach a conclusion as to the origin of a fire when his/her conclusion is contrary to or unsupported by evidence in the record.

Expert Determination Clauses: A Tailored Alternative for Construction Projects?

James Ebert and Steven Fleming | Jones Day

In Short

The Situation: Construction disputes face unique challenges in addition to those faced in other types of commercial disputes. Parties often agree to adopt independent expert determination as a means of managing these challenges. 

The Concern: Many boiler-plate independent expert determination clauses are not sufficiently tailored to the nature of construction projects or the particular circumstances of the project.

Looking Ahead: Independent expert determination can be a useful tool for the management of disputes in construction projects. In order to obtain this benefit, expert determination clauses should be carefully drafted to ensure that the prescribed process reflects the intention of the parties and is tailored to the circumstances of the particular project.

Construction disputes face additional challenges compared to other commercial disputes for various reasons, including:

  • projects involve a multitude of participants and stakeholders, including principals, contractors and subcontractors with a range of different interfaces and interests; 
  • the disputes concern complex technical matters in addition to legal issues;
  • huge volumes of documentation from many sources are generated during projects, including technical documents, correspondence and emails; and
  • participants are required to balance the legal and commercial aspects of claims and timely resolution of disputes with good project execution and the maintenance of ongoing relationships. 

To overcome these challenges in major projects, parties often agree to adopt independent expert determination for disputes that may arise. This is a process in which an independent expert is appointed to decide disputes. The types of dispute that can be determined, the relief that can be awarded and whether the expert’s decision is binding will depend on the terms of the expert determination clause. 

The popularity of the mechanism has increased due to the flexibility it can offer compared to full-scale litigation in terms of simpler procedure, expedited timing and reduced costs, as well as the perception that it is less subject to judicial intervention. However, parties should also consider whether it will be appropriate to the type of disputes anticipated. For example, a likely lack of a right to appeal and the typical absence of features of litigation such as discovery and cross-examination may be less attractive for higher-stakes disputes. 

Status of Expert Determination / Role of the Courts in Expert Determinations 

Typically, there are two stages of an expert determination process where courts may become involved: 

  1. at the outset, when a party seeks to engage the expert determination process, the other party might seek to restrain the process from proceeding by seeking a stay of the process; or
  2. after a determination has been made, an aggrieved party might seek to have a court overturn the determination. 

In both stages, Australian courts are generally reluctant to interfere and typically interpret clauses liberally so that parties are held to the agreed expert determination process. This has resulted in few instances where an expert determination has been stayed or overturned. The circumstances where this has in fact occurred are generally limited to where:

  • enforcing the expert determination procedure could result in a multiplicity of proceedings;
  • persons not party to the contract have an interest in the outcome of the determination;
  • the expert’s determination goes beyond the task that the expert was engaged to perform (e.g., they have misconceived their role or function or asked themselves the wrong question); or
  • there has been an error of law in the expert’s determination.

Judicial reluctance to interfere with expert determination was recently confirmed in The Illawarra Community Housing Trust Limited v MP Park Lane Pty Ltd [2020] NSWSC 751The plaintiff argued that an absence of express procedural rules, mechanisms and safeguards in the expert determination process rendered the clause unenforceable. The court disagreed and held that the lack of prescribed steps meant the parties had agreed to leave it to the expert to determine the process. 

Tips for Drafting

When drafting the expert determination clause, parties should carefully consider the language they are using and ensure that the clause:

  • accurately defines the scope of the disputes to be resolved by expert determination so that there can be little argument as to which disputes are subject to expert determination, and considers how to deal with any possibility of multiple and differing types of disputes;
  • clearly identifies the circumstances in which an expert determination will be binding, or will be open to further agreed review mechanisms or still permit a party to litigate the issue in court;
  • considers what expertise the expert should possess and how they will be selected;
  • provides adequate time periods and allows the expert to test the veracity of key factual matters for the nature of construction disputes. Many boilerplate commercial dispute resolution clauses include short timeframes that are unrealistic, and lack sufficient avenues for testing key facts, given the significant volume of documents and complex technical and legal matters that arise on projects; and
  • does not imitate traditional court procedure too closely. Clauses that imitate court procedure too closely, e.g., by requiring witness evidence under oath or cross-examination, risk losing the benefits provided by the flexibility of expert determination.

These aspects should be tailored to the parties’ commercial objectives, and made as clear as possible to minimise the risk of ancillary disputes over the scope or procedure for expert determination.

Two Key Takeaways

  1. Adopting contractual expert determination mechanisms may assist the parties to manage disputes in a way that better supports the project and minimises costs.
  2. Parties should avoid adopting generic boilerplate clauses and instead tailor expert determination processes to the needs of the project.

Floor Tile Defendant’s Motion for Summary Judgment Denied Due to Conflicting Expert Reports

Andrea M. Sciarratta | Goldberg Segalla

In this action, defendant American Biltrite Inc. filed a motion for summary judgment, arguing that the plaintiff has failed to establish general or specific causation for the plaintiff’s lung cancer in relation to American Biltrite’s products. The deceased plaintiff had alleged that his fatal lung cancer was caused by his exposure to asbestos over the course of his career as an electrician at three worksites, and the plaintiff had testified that floor tile made by American Biltrite was used at these worksites.

American Biltrite argued the plaintiff failed to demonstrate general causation as he did not offer any scientific evidence to prove that the floor tiles release chrysotile asbestos fibers at a level capable of being a substantial contributing factor to the development of lung cancer in the general population. In support of its claims, American Biltrite offered expert affidavits and reports, which concluded that the plaintiff did not have sufficient exposure to American Biltrite products to deem it a substantial contributing factor to his development of lung cancer.

In response, the plaintiff submitted its own medical expert report, demonstrating that the plaintiff was exposed to sufficient levels of asbestos to contribute to his development of lung cancer. In contrast to American Biltrite’s expert, the plaintiff’s expert claimed that cumulative exposure to asbestos from American Biltrite’s product was a substantial contributing factor to the plaintiff’s development of lung cancer and subsequent death.

Based on the conflicting expert reports, the court determined that there was a “credibility issue that cannot be resolved without jury consideration.” The court found that the plaintiff had produced evidence of causation related to American Biltrite and therefore denied American Biltrite’s motion for summary judgment.

Assess Whether Your Witness Is Able to Counterpunch

Dr. Ken Broda-Bahm | Holland & Hart

Attorneys know the feeling: With some of your witnesses, you just want to keep it simple, encourage them to keep their heads down, and limit the possible damage. With any luck, they’ll get through it with minimal damage to your case. But for other witnesses, testimony is an opportunity. The right witness, and the prepared witness, will be able to say things that advance your case and make it harder for the other side to win. Preparing the right kind of witness is a chance to inflict some damage on the other side.

But how do you know when the witness you have is capable of safely leaving the world of “Yes or no,” and able to enter the world of the artful parry? If you fill the wrong vessel with too much confidence, they could end up missing the meaning of opposing counsel, they could say things that you don’t want in evidence, or they could take it too far by being too clever and too argumentative with the lawyer on the other side. The bottom line is, you need to consciously assess to see what your witness is capable of. If they’re fuzzy or fragile, then you probably want to keep their answers to a minimum. But if they’re tough and smart, then you want to teach them sensitive and smart ways to punch back on your adversary’s questions. It all starts with assessing the witness.

Assess Occupation and Mental Habits

When advising on jury selection, I always feel that if you know what someone does every day, five days a week, you’ve got a good start on knowing them. The same goes for witnesses. If someone works in a repetitive context where they aren’t called upon to exercise judgment very often, it will be hard for them to rise to the challenge of powerful testimony. But if someone works in a context where they’re expected to be analytical, sensitive, and professional, it will be less of a challenge. There are exceptions of course, in both categories, but I’ve found that executives, managers, doctors, and academics will, more often than not, have the native skills to be more thoughtful, assertive, and empowered in the ways they answer opposing counsel’s questions.

Assess Attitude

In addition to their capability and experience, it is also essential to assess their attitudes. Are they comfortable that they understand enough about the opposing counsel’s tactics and objectives, and about their own testimony, that they can feel comfortable pushing back against that adversary’s language and assumptions? Even if they could, they may not want to. Of course, part of the attorney’s role as a counsellor is to get them to the point that they will do as well as they can. But the legal process can be stressful, and if you add in the force of accusation for a defendant, the psychological barriers can be too high. Alternately, if you have someone who is a little too eager to mix it up with counsel, then they could easily come off as argumentative or evasive when they’re really trying to be assertive. Ultimately, you’re looking for a witness who can be savvy, but also patient and calmly persistent.

Test

Ultimately, the only way to be sure that a witness can effectively testify in a way that moves from ‘not hurting’ to ‘helping’ your case is to see them do it. Hold several practice sessions where you don’t just talk about testifying, but you actually practice it. Play the role of the lawyer on the other side, using as much as you know about their substance and their style, and see how your witness handles it. For very important testimony, I have found that three meetings is often the right number: the first to assess the witness and teach sensitivity in responding, the second to practice it and really nail it down, and the third to see if it sticks after they leave and come back.

Many attorneys will say that giving testimony is largely an act of defense: like being on the receiving side in a volleyball game, you can’t score, but you can prevent them from scoring. That is a largely accurate and useful sentiment. Still, when your witness has the ability, attitude, and training, they could use some assertiveness in both preventing those scores, and maybe scoring a point or two back. It all starts with assessing the witness.

Genuine Dispute Summary Judgment Reversed for Abuse of Discretion and Trial of Fact Questions About Expert Opinions

Christopher Kendrick and Valerie A. Moore | Haight Brown & Bonesteel

In Fadeeff v. State Farm General Ins. Co. (No. A155691, filed 5/22/20 ord. pub. 6/8/20), a California appeals court held that triable issues of fact and the trial court’s failure to address a request for a continuance precluded summary judgment for an insurer under the genuine dispute doctrine.

In Fadeeff, the policyholders made a claim to State Farm for smoke damage to their home from the 2015 Valley Fire in Hidden Valley Lake, California. With State Farm’s approval, the insureds retained the restoration company, ServPro, to assist with smoke and soot mitigation. State Farm documented smoke and soot on the interior walls, ceilings and carpeting, and on all exterior elevations, including on the deck and handrail. State Farm made a series of payments on the claim totaling about $50,000.

The insureds then hired a public adjuster and submitted supplemental claims for further dwelling repairs and additional contents replacement, totaling approximately $75,000. State Farm responded by using its own independent adjuster to investigate, who was neither licensed as an adjuster, nor as a contractor. State Farm also retained forensic consultants for the structure and the HVAC system, but neither the independent adjuster nor the consultants were aware that State Farm had an internal operation guide for the use of third-party experts in handling first party claims, which guidelines were therefore not followed. In addition, the consultants made allegedly superficial inspections, with one attributing smoke and soot damage to other sources of combustion, including the insureds’ exterior propane barbecue, an internal wood fireplace and wood stove and candles that had been burned in the living room. None of the consultants asked the insureds when they had last used any of the sources of combustion.

State Farm denied the supplemental claim and in the subsequent bad faith lawsuit, State Farm, relying on its use of experts, moved for summary judgment on the ground that the “genuine dispute” doctrine defeats the bad faith claim where an insurer reasonably relies upon expert opinions in reaching a claim decision. The insureds’ opposition was based on declarations from their own adjuster and expert, who opined that the work performed to date had not completely removed soot throughout the structure, or the HVAC system. The declaration from the insureds’ expert also refuted the opinions of State Farm’s expert. Plus, the insureds made a request for a continuance under Code of Civil Procedure section 437c(h), which authorizes a court to order a continuance for additional discovery, on affidavits of necessity.

At the hearing on the summary judgment motion, the trial court did not address the request for continuance. The court sustained State Farm’s objections to portions of the insureds’ declarations and reports, which gutted the insureds’ evidence contradicting State Farm’s expert, and granted State Farm’s motion. On appeal, however, the appeals court found both factual questions and an abuse of discretion by the trial court, mandating reversal.

Regarding the former, the Fadeeff court said that the use of experts does not automatically insulate an insurer from bad faith liability under the genuine dispute doctrine. (Citing Guebara v. Allstate Ins. Co. (9th Cir. 2001) 237 F.3d 987, 994.) In particular, the Fadeeff court said that where the dispute is purely factual, such as differing opinions of experts, whether there was a genuine dispute can only be decided on a case-by-case basis. (Citing Chateau Chamberay Homeowners Assn. v. Associated International Ins. Co. (2001) 90 Cal.App.4th 335, 348.) The Fadeeff court quoted Chateau Chamberay’s list of circumstances where a biased investigation claim should go to jury: (1) the insurer was guilty of misrepresenting the nature of the investigatory proceedings; (2) the insurer’s employee’s lied during the depositions or to the insured; (3) the insurer dishonestly selected its experts; (4) the insurer’s experts were unreasonable; and (5) the insurer failed to conduct a thorough investigation. (Quoting Chateau Chamberay, supra, at 348-349.)

The Fadeeff court pointed out that the insureds had presented evidence that part of their claim had been denied by State Farm in violation of the California fair claim handling regulations, based on ServPro’s work power washing the outside of the structure, which had caused the paint to peel. State Farm had denied that part of the claim on the ground that it, as well as damage to carpets and wall coverings, was not smoke or fire damage, and excluded as wear, tear or deterioration. But the insureds argued that the damage to the exterior caused by power washing was required to be covered under California Code of Regulations, title 10, section 2695.9(a)(1), as “consequential physical damage incurred in making the repair or replacement not otherwise excluded by the policy [which should] be included in the loss.” The court also noted the problem of the internal operation guide, and the State Farm independent adjuster’s failure to follow it. That and several other inconsistencies lead the Fadeeff court to conclude that there were triable issues regarding whether State Farm could have reasonably relied on its experts in denying the supplemental claims.

The Fadeeff court also reversed the summary adjudication on punitive damages, finding that State Farm failed to carry its burden to show that the Fadeeffs could not prove that State Farm acted with an absence of malice, oppression or fraud. (Civ. Code, § 3294, subd. (a); § 437c, subd. (f)(1); Basich v. Allstate Ins. Co. (2001) 87 Cal.App.4th 1112, 1118.) The Fadeeff court found that “The fact that an individual plaintiff may not believe that the people at State Farm ’wanted to harm you or hurt you intentionally’ does not conclusively answer the question whether State Farm intentionally misrepresented or concealed a material fact, or acted with knowing disregard of the rights of others.” (Citing CACI No. 3946—Punitive Damages.)

More fundamentally, the Fadeeff court found that reversal was required in any case, because of the trial court’s failure to address the request for a continuance, either at the hearing or in its ruling. The court stated that whether or not to grant a continuance under section 437c(f) is a matter within the court’s discretion, and is reviewed for abuse of discretion. But the Fadeeff court stated that reversal was mandated because a trial court’s failure to exercise discretion is itself an abuse of discretion. (Citing Kim v. Euromotors West/The Auto Galley (2007) 149 Cal.App.4th 170, 176.)