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KAY v. FIRST CONTINENTAL TRADING

September 26, 1997

GARY MARCUS KAY, Plaintiff,
v.
FIRST CONTINENTAL TRADING, INC., et al., Defendants.



The opinion of the court was delivered by: SHADUR

 In conjunction with the parties' joint submission of a proposed Final Pretrial Order that this Court then entered on September 2, 1997 (nunc pro tunc August 5, 1997), each of them has advanced a number of motions in limine, to all of which the respective targets have now responded. This is the third--and, it is expected, the last--of a series of memorandum opinions and orders issued to deal with those motions. This one deals with the motion of James E. Van Ella & Associates, Inc. ("Van Ella") to exclude the testimony and report of Donald Berlin ("Berlin") (Dkt. 95) and the combined motions of Van Ella (Dkt. 103) and First Continental Trading, Inc. ("First Continental") (part of Dkt. 104) to exclude the testimony of Steven Moffitt ("Moffitt"). Both Berlin and Moffitt are claimed "experts" proffered by plaintiff Gary Kay ("Kay").

 As for Berlin, it is entirely understandable that Van Ella but not First Continental has objected to his proposed opinion testimony, for that testimony is offered only to attack the adequacy of Van Ella's investigation--the investigation that led to Van Ella's erroneous report to First Continental regarding what proved to be a totally nonexistent criminal record in Kay's background. For the reasons explained in the ensuing discussion, Van Ella's motion in limine as to Berlin's testimony is granted in part and denied in part. *fn1"

 To begin with, it is an oversimplification (and an inaccurate one) for Van Ella to suggest that the methodology prescribed by Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 125 L. Ed. 2d 469, 113 S. Ct. 2786 (1993) necessarily applies across the board to all opinion testimony potentially admissible under Fed. R. Evid. ("Rule") 702--that is, to the possessors of "technical" or of "other specialized knowledge" as well as to witnesses having "scientific" knowledge. Both Daubert itself ( id. at 589-90 & n.8) and common sense teach that not all of the considerations that are identified in Daubert for trial judges' exercise of their gatekeeping function automatically extend beyond the realm of "science" (a term that itself has considerable breadth--see, e.g., Tyus v. Urban Search Management, 102 F.3d 256, 263 (7th Cir. 1996)).

 But this Court still has a comparable (though not identical) gatekeeping function with respect to the other categories of "expert" (that is, opinion) testimony that are embraced within Rule 702. And the application of the relevant criteria to Berlin's proposed testimony certainly permits him to state what he did by way of investigation and, based on his own experience, to state his opinion that Van Ella could have done the same. It is also appropriate for Berlin, if this indeed constitutes his opinion derived from his own experience, that Van Ella could not effectively have conducted such an investigation for the low price that it charged to First Continental.

 On the other hand, Kay's effort to elevate Berlin to expert status such as would enable him to offer opinion testimony as to industry standards, or otherwise to report on random conversations that he has had with colleagues, for example, must be rejected. Rule 703, which enables experts' opinions to be based upon facts or data that need not themselves be admissible in evidence, creates an obvious potential for the use of such opinions as a vehicle for creating a "back door" hearsay exception. *fn2" And that danger is particularly present with opinions of the type that Berlin has expressed in his report and on which he was examined in his deposition. In that respect a balancing approach, like that contained in Rule 403 for dealing with admissible evidence, may also serve as a useful vehicle for the exercise of the court's gatekeeping role as it would apply to limiting the injection of inadmissible evidence into a trial under the auspices of Rule 703.

 By contrast with Kay's disclaimer of a "scientific" label for Berlin's testimony, in part Kay does proffer the testimony of statistician Moffitt under the "scientific" rubric for Rule 702 purposes--Moffitt has a doctorate in statistics, and he also has experiential background in the trading industry. As such, Moffitt's proposed testimony qua statistician is to be evaluated under the analysis prescribed by Daubert. But Kay urges that the other aspects of his testimony fall outside of the "scientific" context and fit instead into the Rule 702 categories of "technical" or "other specialized knowledge."

 It is of course obvious that there is no bright line differentiation among the Rule 702 categories. But however the proffered Moffitt opinions may be classified, plainly they are more than merely suspect in material respects.

 For one thing, after Moffitt has applied the principles of regression analysis--something that is certainly permissible for an expert statistician--to the earnings of traders generally, and he has then proceeded to prepare a statistical model of the earnings of First Continental traders, he proceeds to misuse that model by leaping into the realm of the totally speculative (Kay R. Mem. 3):

 
Finally, he opined that Mr. Kay should be considered in the 55th to 85th percentile of traders, based upon his backgammon skills, which Dr. Moffitt believed made him a higher than average candidate as a trader.

 That aspect of Moffitt's opinion is not at all grounded in the type of foundation that can suffice to support its admissibility. Moreover, it must be recognized that a witness' justifiable patina, which may be conferred by his or her status as an expert in some acknowledged field of expertise, poses a special danger that the trier of fact may extend a comparable credence to the witness' opinions that fall outside of that area of expertise. That risk is especially high where, in the case of complex or extensive formulas, tables or other mathematical presentations by a statistician, the corollary ungrounded opinions are given a deceptive and unjustified appearance of precision. That type of hazard creates a prime prospect for an adverse ruling under Rule 403 balancing. *fn3"

 Next, Moffitt's opinion and his calculations based on the premise that the Van Ella and First Continental conduct caused Kay to lose the benefit of a 5 to 7.5 year career as a trader is likewise tendered without proper support. In that respect Kay R. Mem. 7 advances this bogus argument:

 
In the first instance, First Continental has waived this argument when its own expert issued a report which calculated ...

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