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Midwest Fence Corporation v. The United States Department of Transportation

United States District Court, Seventh Circuit

January 28, 2014

MIDWEST FENCE CORPORATION, Plaintiff,
v.
THE UNITED STATES DEPARTMENT OF TRANSPORTATION, et al., Defendants.

MEMORANDUM OPINION AND ORDER

HARRY D. LEINENWEBER, District Judge.

Before this Court is Plaintiff Midwest Fence Corporation's ("Midwest") Motion to Exclude the Opinions of Jon Wainwright [ECF No. 280]. For the reasons stated herein, the Motion is denied.

I. FACTUAL BACKGROUND

Midwest, a guardrail and fencing contractor owned entirely by white males, brings this action challenging government programs instituted to increase the flow of public dollars for road construction to companies owned by minorities or women that qualify as "disadvantaged business enterprises" (hereinafter, "DBEs" or "M/W/DBEs"). Expert discovery is underway regarding liability, including the question of whether Defendants have a strong basis to implement the race-conscious aspects of their DBE programs.

Two sets of Defendants, the "Federal Defendants" and the "Tollway Defendants, " both disclosed Dr. Jon Wainwright as their liability expert. In serving that role, Dr. Wainwright submitted a separate expert report on behalf of each group of Defendants. Dr. Wainwright, an economist, is the Senior Vice President of National Economic Research Associates ("NERA") with experience in performing disparity studies. Indeed, he was the primary author of disparity studies performed in 2004 and 2006 for some of the Tollway Defendants. These studies examine statistical evidence of DBE participation in public sector and private sector contracting and procurement activity, DBE representation in the relevant business population, and seek to explain the disparities observed between those factors.

According to Dr. Wainwright, there are four key elements to a disparity study: (1) determining the appropriate product market and geographic market area; (2) developing availability and utilization estimates and estimating public entity contracting disparities; (3) estimating economy-wide disparities; and (4) collecting anecdotal evidence in order to check for consistency with statistical findings. Pl.'s Mem. in Support of Excluding J. Wainwright ("Pl.'s Mem.") Ex. A at 4.

For as much paper as the parties have filed on the subject, the actual issue before the Court is rather narrow. The focus of Midwest's Motion is on the second element, specifically Dr. Wainwright's definition of "availability, " and the impact that definition has on disparity. Midwest claims that those definitions are not only inconsistent with their normal meaning, but that they are contrary to the directives of the Supreme Court as to the appropriate measures of availability and disparity.

Dr. Wainwright defines availability as "a statistic expressing the percentage of businesses in a relevant geographic and product market that are owned by minorities or women." Id. at 5. There are various methods to estimate availability. Dr. Wainwright favors a "custom census" designed to provide an accurate calculation of the current availability of DBEs in the relevant market. Id. The custom census analysis employs a seven-step approach that: (1) creates a database of representative public contracts; (2) identifies the appropriate geographic market for the entity's contracting activity; (3) identifies the appropriate product market for the entity's contracting activity; (4) counts all businesses in those relevant markets; (5) identifies listed minority-owned and women-owned businesses; (6) verifies the ownership status of listed minority-owned and women owned businesses; and (7) verifies the ownership status of all other businesses. Id. at 5-6.

After determining DBE availability, Dr. Wainwright estimates DBE utilization, which shows the fraction of public contracting and procurement dollars in a particular market that are spent with DBEs. Calculating both DBE utilization and availability is crucial. Indeed, as Dr. Wainwright explains, "[a] disparity analysis of agency spending is simply a comparison of M/W/DBE utilization to M/W/DBE availability." Id. at 8.

Midwest takes issue with Dr. Wainwright's method of estimating DBE availability. Key to the disagreement is a statement in one of Dr. Wainwright's reports in which he states "NERA's measure of M/W/DBE availability is, by design, independent of factors, such as readiness, willingness, and ability' or capacity' that are themselves most likely to be adversely impacted by the presence of business discrimination." Id. at 7. Midwest argues that this statement renders Dr. Wainwright's methodology contrary to both Supreme Court precedent and federal regulations, and as such, his opinions should be excluded.

II. LEGAL STANDARD

The admissibility of expert testimony is governed by Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) and its progeny. See, Ervin v. Johnson & Johnson, Inc., 492 F.3d 901, 904 (7th Cir. 2007). Rule 702 states: "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training or education may testify thereto in the form of an opinion or otherwise." FED. R. EVID. 702. The Seventh Circuit has developed a three-part analysis for determining the admissibility of expert testimony under Rule 702 and Daubert. See, Ervin, 492 F.3d at 904. First, "the witness must be qualified as an expert by knowledge, skill, experience, training or education.'" Id. (quoting FED. R. EVID. 702.) Second, "the expert's reasoning or methodology underlying the testimony must be scientifically reliable." Id. (citing Daubert, 509 U.S. at 592-93. Finally, the expert's testimony must be relevant, or "assist the trier of fact to understand the evidence or to determine a fact in issue." Ervin, 492 F.3d at 904.

Whether to admit expert testimony rests within the discretion of the district court. Nunez v. BNSF Ry. Co., No. 09-4037, 2012 U.S. Dist. LEXIS 97411 at *11 (C.D. Ill. July 13, 2012). A federal judge has the responsibility of being a "gatekeeper" regarding the expert evidence presented to the trier of fact. Daubert, 509 U.S. at 589, 597. A district court has "wide latitude in performing its gate keeping function and determining both how to measure the reliability of expert ...


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