ALICE H. ALLEN, LAURANCE E. ALLEN, d/b/a Al-lens Farm, GARRET SITTS, RALPH SITTS, JONATHAN HAAR, CLAUDIA HAAR, and RICHARD SWANTAK, on behalf of themselves and all others similarly situated, Plaintiffs,
DAIRY FARMERS OF AMERICA, INC., and DAIRY MARKETING SERVICES, LLC, Defendants.
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO EXCLUDE VARIOUS OPINIONS OF PLAINTIFFS' MERITS EXPERT DR. GORDON RAUSSER (Doc. 372)
CHRISTINA REISS, Chief Judge.
Plaintiffs Alice H. Allen and Laurance E. Allen, d/b/a Al-lens Farm, Garret Sitts and Ralph Sitts, Jonathan and Claudia Haar, and Richard Swantak (collectively, "Plaintiffs") have brought this lawsuit against Defendants Dairy Farmers of America, Inc. ("DFA") and Dairy Marketing Services, LLC ("DMS") (collectively, "Defendants"), alleging five violations of the Sherman Act, 15 U.S.C. §§ 1-2: (1) conspiracy to monopolize/monopsonize in violation of § 2 of the Sherman Act; (2) attempt to monopolize/monopsonize in violation of § 2 of the Sherman Act; (3) unlawful monopoly/monopsony in violation of § 2 of the Sherman Act; (4) price fixing in violation of § 1 of the Sherman Act; and (5) conspiracy to restrain trade in violation of § 1 of the Sherman Act.
This matter came before the court on Defendants' motion to exclude various opinions of Plaintiffs' expert witness Gordon Rausser, Ph.D. (Doc. 372.) Defendants argue that, in several respects, Dr. Rausser's testimony is unreliable and inadmissible under Fed.R.Evid. 702 and under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993), and its progeny. Defendants have, however, withdrawn their challenge to Dr. Rausser's application of the Herfindahl-Hirschman Index.
Plaintiffs oppose the motion, arguing that any weaknesses in the opinions and methodologies offered by Dr. Rausser are appropriately addressed not by exclusion before trial, but by vigorous cross-examination during trial. Plaintiffs have filed their own motion to exclude certain opinions of Defendants' expert witness, Joseph Kalt, Ph.D., which will be addressed in a separate opinion.
The court heard oral argument on both pending motions on August 1 and 5, 2013. The parties completed their post-hearing filings on August 21, 2013.
I. Factual and Procedural Background.
Plaintiffs allege that Defendants engaged in a wide-ranging conspiracy at both the processor and cooperative levels to fix, stabilize, and artificially depress prices for fluid Grade A milk and to allocate markets within Federal Milk Market Order 1 ("Order 1") among the co-conspirators.
Plaintiffs' proposed product market is fluid Grade A milk. Their proposed geographic market is Order 1 covering areas in Connecticut, Delaware, the District of Columbia, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia.
The court has certified a class consisting of all dairy farmers, whether individuals, entities, or members of cooperatives, who produced and pooled fluid Grade A milk in Order 1 during any time from January 1, 2002 to the present. Defendants and Defendants' co-conspirators are excluded from the class. Plaintiffs identify Defendants' co-conspirators as Dean Foods ("Dean"), HP Hood LLC ("Hood"), National Dairy Holdings ("NDH"), Farmland Dairies LLC ("Farmland"), Kraft, Dairylea Cooperative, Inc. ("Dairylea"), St. Albans Cooperative Creamery, Inc. ("St. Albans"), Agri-Mark, Inc. ("Agri-Mark"), Land O'Lakes, Inc. ("LOL"), and Maryland and Virginia Milk Producers Cooperative Association, Inc. ("MDVA").
Plaintiffs seek monetary damages in an amount which represents the additional amount Plaintiffs and other class members would have received for sales of fluid Grade A milk in the absence of the antitrust violations alleged, and treble damages under Section 4 of the Clayton Act, 15 U.S.C. § 15. In addition to their request for monetary relief, Plaintiffs seek an injunction prohibiting conduct found by the court or a jury to be illegal.
II. Conclusions of Law and Analysis.
A. Standard of Review.
Rule 702 of the Federal Rules of Evidence provides that "[a] witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(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.
Fed. R. Evid. 702.
"General acceptance' is not a necessary precondition to the admissibility of scientific evidence under the Federal Rules of Evidence[, ]" but a judge does have the responsibility of "ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand. Pertinent evidence based on scientifically valid principles will satisfy those demands." Daubert, 509 U.S. at 597. "Under Daubert [, ] the district court functions as the gatekeeper for expert testimony." Raskin v. Wyatt Co., 125 F.3d 55, 66 (2d Cir. 1997) (internal citation omitted).
In evaluating expert testimony, the "court must focus on the principles and methodology employed by the expert, without regard to the conclusions the expert has reached or the district court's belief as to the correctness of those conclusions." Amorgianos v. Nat'l R.R. Passenger Corp., 303 F.3d 256, 266 (2d Cir. 2002). An expert's opinion should be excluded if it "is based on data, a methodology, or studies that are simply inadequate to support the conclusions reached." Id. Nothing requires the court to admit expert opinion evidence "that is connected to existing data only by the ipse dixit of the expert." Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997).
B. Defendants' Motion to Exclude.
Defendants seek to exclude the opinions of Dr. Rausser with respect to: (1) the relevant geographic market; (2) his SSNIP tests; (3) the alleged role and economic motivation of certain non-party processors and cooperatives to participate in the alleged conspiracy; and (4) the calculation of damages. Defendants assert that the problem is not with the reliability of the analytical models that Dr. Rausser used, but rather that Dr. Rausser "consistently failed to follow the established methodologies for these techniques, and instead altered and misapplied them in order to reach opinions that are scientific in name only." (Doc. 372-1 at 8.) Plaintiffs counter that Defendants fail to identify a bar to admissibility for any of Dr. Rausser's opinions and that in light of the lenient standards for admissibility of expert testimony, the court should permit Dr. Rausser's opinions to be presented to the jury subject to cross-examination and impeachment.
1. Geographic Market.
For antitrust purposes, "the relevant geographic market is defined as the area of effective competition... in which the seller operates, and to which the purchaser can practicably turn for supplies.'" United States v. Eastman Kodak Co., 63 F.3d 95, 104 (2d Cir. 1995) (quoting Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961)). "These factors are reversed in the context of a buyer-side conspiracy." Todd v. Exxon Corp., 275 F.3d 191, 202 (2d Cir. 2001). This makes the relevant geographic market the area in which a monopsonist can profitably exercise power over price.
Market definition is not necessary for per se unlawful conduct and may not be necessary where actual power to control price can be shown. In other contexts, however, "[m]arket definition is often the most critical step in evaluating market power and determining whether business conduct has or likely will have anticompetitive effects." Jonathan B. Baker, Market Definition: An Analytical Overview , 74 Antitrust L.J. 129, 129 (2007). Indeed, "[b]ecause market power is often inferred from market share, market ...