Antitrust Law Daily Wrap Up, RICO—11th Cir.: Unreliable expert report doomed RICO claim, (Aug 29, 2013)

By Peter Reap, J.D., LL.M.

The federal district court in Birmingham properly excluded an expert report submitted by two former hourly-wage employees in support of their RICO claim against the owners and several human resources personnel of their former employer Maples Industries, Inc., the U.S. Court of Appeals in Atlanta has determined (Broussard v. Maples, August 28, 2013, Per curiam). Because the excluded report was the plaintiffs’ only evidence of causation, their RICO claims failed and summary judgment in favor of the defendants was affirmed.

Background. The employees, Audrey Broussard and Darlene Harbin, asserting their civil RICO claims on behalf of themselves, and attempting to do so on behalf of all legally authorized, hourly-wage workers employed by Maples since August 2005, alleged that the defendants conspired to hire large numbers of illegal immigrants and falsely certify I-9 work-authorization forms in order to drive down wages at Maples and thereby increase the company’s profits.

In support, the plaintiffs submitted reports from a purported immigration expert, Edward Mallon, and a professor of economics at Harvard’s Kennedy School of Government, Dr. George J. Borjas. Dr. Borjas’ report, which was the plaintiffs’ only evidence of causation, concluded that Maples’ hiring of illegal immigrants depressed real hourly wages at the company by 2.3% over a period of years.

The district court, on the defendants’ motion, struck Dr. Borjas’ report in its entirety and Mallon’s report in part as not sufficiently reliable under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 113 S.Ct. 2786 (1993). The court found that Dr. Borjas’ report failed to satisfy the reliability requirements of Rule 702 for two distinct reasons: (1) his use of Hispanic enrollment figures for the Jackson County and Scottsboro school districts as a proxy for the total number of immigrants, legal and illegal, in the local workforce was novel and untested; and (2) existing economic scholarship, including Dr. Borjas’ own peer-reviewed academic work, did not show that the impact of immigration on wages could reliably be measured at the level of single firm, instead of at the level of the national economy as a whole.

The plaintiffs challenged the district court’s exclusion of their experts’ reports, either in whole or in part, and the grant of summary judgment in favor of the defendants, though they conceded that their claims could not survive summary judgment if the district court did not abuse its discretion in striking Dr. Borjas’ report

Analysis. The appellate court affirmed the grant of summary judgment and the exclusion of Dr. Borjas’ expert report based solely on his use of Hispanic school enrollment data as a proxy for the size of the available immigrant workforce in the Scottsboro and Jackson County areas. In light of the plaintiffs’ concession that they could not withstand summary judgment on their RICO claims in the absence of Dr. Borjas’ report, the court declined to address the plaintiffs’ arguments challenging the partial exclusion of Mallon’s report and other aspects of the district court’s summary judgment ruling.

However, the appellate court did address two arguments raised by the plaintiffs concerning the exclusion of Dr. Borjas’ report.

First, the plaintiffs contended that the district court abused its discretion by failing to give them prior notice of its specific concerns about the reliability of Dr. Borjas’ report and an opportunity to respond to those concerns. The district court was under no obligation to hold a Daubert hearing or otherwise provide the plaintiffs with an additional opportunity to lay a proper foundation for the admissibility of Dr. Borjas’ report, at least not under the particular circumstances of this case, the court decided. As plaintiffs’ counsel conceded at oral argument, under the particular circumstances of this case, they were aware of the district court’s concerns and “[w]e knew [the exclusion of the report] was coming, yes we did judge, yes we did.”

Next, the plaintiffs’ assertion that the district court applied the wrong legal standard when it evaluated Dr. Borjas’ reliance on Hispanic school enrollment data under Rule 702, instead of Rule 703, of the Federal Rules of Evidence was without merit, according to the appellate court. The plaintiffs contended that, under Rule 703, Dr. Borjas was entitled to base his opinion on Hispanic school enrollment figures because it is the type of data that economists would reasonably rely upon.

This argument misconstrued the respective roles of Rules 702 and 703, as well as the nature of the district court’s objections to Dr. Borjas’ use of the school enrollment figures as a proxy for the local immigrant population. Rule 702, which governed the admissibility of expert testimony, provides that an expert witness may offer opinion testimony if (1) the expert’s specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue, (2) the testimony is based on sufficient facts or data, (3) the testimony is the product of reliable principles and methods, and (4) the expert has reliably applied the principles and methods to the facts of the case, the court noted.

Rule 703, by contrast, allowed an expert to base his opinion on facts or data that would otherwise be inadmissible, such as hearsay, if other experts in the particular field would reasonably rely on those kinds of facts or data in forming an opinion. That rule did not supplant the district court’s obligation under Rule 702 to ensure that an expert’s opinion, regardless of the admissibility of the facts or data relied on, is the product of reliable methods and principles.

The plaintiffs’ only argument concerning the district court’s application of Rule 702 to the use of the school enrollment data was that the rule should not have been applied at all, that only Rule 703 mattered. Since that position was rejected, the plaintiffs failed to show that the district court abused its discretion in excluding Dr. Borjas’ report and the court declined to address the soundness of the district court’s additional reasons for striking the report.

The case is No. 12-15336.

Attorneys: Robert J. Camp (The Cochran Firm) for Audrey Broussard. Robert Carl Cannon (Constangy Brooks & Smith, LLP) for Wade Maples.

Companies: Maples Industries, Inc.

Cases: RICO AlabamaNews FloridaNews GeorgiaNews