Antitrust Law Daily Wrap Up, ANTITRUST—D. Vt.: Expert witness opinion admissible in part, (Jan 3, 2014)

By Jody Coultas, J.D.

In an antitrust class action suit filed by dairy farmers against Dairy Farmers of America, Inc. (DFA), the federal district court in Rutland, Vermont granted in part DFA’s motion to exclude the dairy farmers’ expert witness testimony (Allen v. Dairy Farmers of America, Inc., December 31, 2013, Reiss, C.).

The dairy farmers alleged that DFA and others monopolized and monopsonized the market for raw Grade A milk in much of the Northeast United States, including all of Vermont (Order 1 market). In their complaint, the dairy farmers sought damages in the amount class members would have received for sales of fluid Grade A milk in the absence of the antitrust violations. DFA sought to exclude various opinions of the dairy farmers’ expert witness.

Federal Rule of Civil Procedure 702 states that an expert witness may testify if: (a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine an issue of fact; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

The court denied DFA’s motion to exclude the expert’s definition of the relevant geographic market. In antitrust cases, the relevant market is the area of effective competition in which sellers operate, and to which purchasers can practicably turn for supplies. Here, the dairy farmers’ alleged geographic market differed from their expert’s opinion regarding the relevant geographic market. An expert opinion that differs from a plaintiffs’ proposed geographic market has less relevance, even where the difference of opinion can be sufficiently explained. However, in order for the court to exclude the expert’s opinion in this case, the conflict must be of such a fundamental nature that it rendered the opinion unhelpful, confusing, or misleading to the jury. The expert could offer opinions regarding the geographic market and the jury must decide whether the conflict made a difference.

DFA’s motion to exclude the expert’s opinion regarding a small but significant non-transitory increase in price (SSNIP test) was granted by the court. In a SSNIP test, one asks whether a hypothetical monopolist controlling all suppliers in the proposed market could profit from a small price increase. The expert’s SSNIP test was described as an economic analysis to determine which, if any, processing plants outside the defined market might yield class members a higher net price in the face of a hypothetical price suppression of 5% over and above the price suppression the dairy farmers allege existed during the years of conspiracy. A court must exclude evidence if its probative value is substantially outweighed by a danger of confusing or misleading the jury. Here, the dairy farmers essentially sought to present the jury with two different version of an analysis purporting to be a SSNIP test. The expert’s analysis served no purpose beyond suggesting to the jury that the expert had conducted a series of sophisticated economic experiments that support his opinions.

The expert’s opinion regarding certain alleged non-party participants in the alleged conspiracy were admissible in part, according to the court. DFA alleged that the expert’s opinions regarding this issue did not rely on factual or economic analyses, suggested motives contrary to the participants’ self-interests, and relied on contracts that were not anti-competitive. The expert’s area of expertise included the economic incentives of various participants and his opinions were based on fact. Thus, the expert could present his opinion regarding the identity of co-conspirators, their economic incentives to participate in the conspiracy, and whether the climate of the market was consistent with a conspiracy. However, the expert could not testify regarding passive participants as it would not be helpful to the jury, was contrary to the law, and would allow the dairy farmers to proceed on the assumption that an entity is a co-conspirator without any proof of that status.

There was no factual or economic support for the expert’s measurement of damages using a Boston base blend price in order to calculate damages, according to the court. The expert created his own measure of comparison called the “Farmers Premium,” which was calculated by subtracting the blend price announced by the USDA Market Administration for Order 1 milk delivered to Boston from a dairy farmer’s gross pay price. However, there was no reason for the expert to use the Boston base blend price in order to calculate a Farmers Premium for all dairy farmers in Order 1. This approach was likely to artificially inflate the farmers’ damages.

The court denied DFA’s motion to dismiss the expert’s use of certain benchmarks in his regression analysis and use of a multivariate regression analysis. The expert used other markets as benchmarks for his regression analysis to determine the amount of alleged suppression of Famers Premiums in Order 1. Although the expert lacked familiarity with the other markets, the dairy farmers presented sufficient support for using those benchmarks. The multivariate regression model was an accepted methodology, and will assist the jury in determining whether the dairy farmers satisfied their burden of proof.

The case is No. 5:09-cv-230.

Attorneys: Danyll W. Foix (Baker & Hostetler LLP) and Emily J. Joselson (Langrock Sperry & Wool, LLP) for Alice H. Allen. Amber L. McDonald, Esq. (Baker & Miller PLLC) and Carl R. Metz (Williams & Connolly LLP) for Dairy Farmers of America, Inc.

Companies: Dairy Farmers of America, Inc.

Cases: Antitrust VermontNews