Antitrust Law Daily Wrap Up, ANTITRUST—EDMich: Economist Can Testify on Classwide Impact of Alleged Suppression of Nurses' Wages in Detroit Area, (Apr 23, 2013)

By Jeffrey May, J.D.

In an action brought by registered nurses (RNs) against Detroit-area hospitals for conspiring to restrain wages for RNs by exchanging compensation-related information among themselves, the federal district court in Detroit has denied a motion by the defending hospitals to exclude the testimony of the plaintiffs’ expert economist (Cason-Merenda v. Detroit Medical Center, April 22, 2013, Rosen, G.). The court rejected the hospitals' arguments that the economist's "benchmark" analysis rested upon an unreliable methodology and was "fatally undermined by unwarranted assumptions, oversimplifications, and leaps in logic."

The plaintiffs brought their antitrust action in 2006 on behalf of a proposed class of RNs against eight hospital groups, including Detroit Medical Center—the largest healthcare provider in southeast Michigan. Over the last seven years, a number of the defendants have settled the allegations.

The plaintiffs hired Orley Ashenfelter, Ph.D., a Professor of Economics at Princeton University, to give expert testimony on economic issues in the litigation, including the ability of the plaintiffs to pursue a class action. According to Ashenfelter, "all or almost all of the class was harmed by the alleged conspiracy," and "this can be shown using evidence that is common to the class."

Ashenfelter employed a benchmark analysis as a class-wide method for both identifying and quantifying the impact of the alleged conspiracy upon members of the plaintiff class. The economist opined that the fee paid by a defendant to a temporary agency for an agency nurse provided a conservative benchmark for the cost to a hospital of employing an RN in that job in a competitive market. He used the agency nurse benchmark "to calculate what each member of the class would have earned in the absence of the alleged conspiracy." He contended that this calculation "show[s] that almost all of the members of the class actually earned less than they would have in the ‘but-for’ world."

The court held that the defendants' challenges to Ashenfelter’s analysis went to the weight, and not the admissibility, of his proposed testimony. "[Q]uarrels with the accuracy of Dr. Ashenfelter’s calculations, as opposed to his underlying benchmark approach to estimating RN wages in the absence of Defendants’ alleged antitrust violations, must be left for the trier of fact to resolve," according to the court.

Also rejected was the defendants' assertion that the "one size fits all" nature of the benchmark disqualified it as a reliable measure of RN wages in a competitive market. Even though RN wages varied widely within a hospital, Ashenfelter was offering a conservative estimate of but-for RN wages to establish that the challenged conduct had a common impact on the members of the plaintiff class, the court explained. The benchmark might not accurately measure the precise harm suffered by each individual class member. Moreover, this "acknowledged imprecision" did not preclude Ashenfelter from testifying with sufficient reliability as to the damages suffered by the plaintiff class.

The court did not reject Ashenfelter's proposed testimony on the ground that he failed to test his benchmark approach by examining agency fees and nurse wages paid by hospitals outside the Detroit metropolitan area. Ashenfelter contended that such a test could not be reliably conducted due to the limited available data as to agency fees paid by hospitals in other markets. One of the defendants' experts attempted to perform such an analysis. While testing was one of the factors to be considered in determining the admissibility of an expert’s testimony, the court decided this "battle of the experts" was not appropriate for resolution in the context of a Federal Rule of Evidence 702 motion to exclude an expert’s testimony.

The court concluded that the defendants' challenges to the plaintiffs' expert were best left for resolution by the trier of fact.

The case is No. 06-15601.

Attorneys: Stephen F. Wasinger (Stephen F. Wasinger PLC) for Pat Cason-Merendo. David A. Ettinger (Honigman, Miller, Schwartz and Cohn LLP) for Detroit Medical Center.

Companies: Detroit Medical Center

Cases: Antitrust MichiganNews