ORDER 943: Kessler Rules Bazerman Testimony Admissible under Daubert

May 7, 2005 7:35 pm by Gene Borio

Judge Kessler has ruled the testimony of Dr. Max Bazerman meets Federal Rule of Evidence #702* under the standards set by the US Supreme Court in Daubert v. Merrell Dow Pharmaceuticals.

The order, issued Friday May 6, 2005, promises to produce some fireworks Tuesday, May 10, when she explains it, since:

1. Judge Kessler had previously expressed considerable skepticism about Dr. Bazerman’s Written Direct, before he even took the stand:

I’ve read the testimony very carefully, and I think there are serious Daubert problems, but I’m going to admit it conditionally, of course subject to my final rulings on the Daubert issues.

2. Dr. Bazerman’s live testimony itself, according to news sources, had turned out very badly for the DOJ.

3. There have been at least three post-testimony filings concerning the testimony: the Defense had posted a lengthy and strong objection to it based on Daubert and others, the DOJ filed an almost desperate-sounding request for “an evidentiary Daubert hearing” and Defense filed another lengthy opposition to that hearing.

In Judge Kessler’s order, she said simply,

In light of the fact that the Court has now concluded that the testimony of Dr. Bazerman does, in fact, satisfy the standards set forth in Daubert, for reasons which will be articulated in open court on Tuesday, May 10, it is unnecessary for the United States to file a response to Joint Defendants’ submission.

The order’s lack of a written rationale seems odd. It will be interesting to see if the Defense will try rebut her reasoning in court Tue, or even if they will be able to try, as any further argumentation appears precluded by her Order 943. They certainly won’t be able to prepare as they don’t really know her rationale.

Judge Kessler could also present serious qualifications surrounding her decision which may be negative for the DOJ.

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An interesting facet which the Defense addressed in its objections is that Dr. Bazerman in court often could not distinguish between intentional or non-intentional RICO violations by the Defendants. Defense claimed that this rendered his testimony as irrelevant under RICO, which cannot be used for unintentional wrongful conduct.

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Links to relevant files (in chronological order):

JOINT DEFENDANTS’ SUPPLEMENTAL MEMORANDUM REGARDING THE TRIAL TESTIMONY OF DR. MAX BAZERMAN (PDF)

DOJ Request for Bazerman Hearing (PDF)

JOINT DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO THE UNITED STATES’ REQUEST FOR DAUBERT HEARING CONCERNING EXPERT TESTIMONY OF MAX BAZERMAN, Ph.D. (PDF)

Order # 943 admitting Bazerman Testimony (PDF)

Texts of these files follow:

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JOINT DEFENDANTS’ SUPPLEMENTAL MEMORANDUM REGARDING THE TRIAL TESTIMONY OF DR. MAX BAZERMAN (PDF)

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JOINT DEFENDANTS’ SUPPLEMENTAL MEMORANDUM REGARDING THE TRIAL TESTIMONY OF DR. MAX BAZERMAN (PDF)

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

PHILIP MORRIS USA INC.,

f/k/a PHILIP MORRIS INC., et al.,

Defendants.

Civil Action No. v. : 99-2496 (GK)

Next Scheduled Court Appearance: Trial (ongoing)

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JOINT DEFENDANTS’ SUPPLEMENTAL MEMORANDUM REGARDING THE TRIAL TESTIMONY OF DR. MAX BAZERMAN

Pursuant to leave granted by the Court, Joint Defendants herewith submit their supplemental memorandum in support of their motion to strike the trial testimony of Dr. Max Bazerman on the grounds that it does not qualify for admission under Fed. R. Evid. 702 and Daubert. Federal Rule of Evidence 702 sets for the following requirements governing the admissibility of expert testimony:

If scientific, technical or other specialized knowledge will assist the trier of fact to understand the evidence or to 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, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

To be admissible under Rule 702, proffered expert testimony must be both scientifically reliable and relevant. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589-92 (1993); Ambrosini v. LaBarraque, 101 F.3d 129, 133 (D.C. Cir. 1996); Dyson v. Winfield, 113 F.Supp.2d 44, 47 (D.D.C. 2000). The proponent of the testimony bears the burden of demonstrating scientific reliability and relevance. McReynolds v. Sodexho Marriott Services, Inc., 349 F. Supp.2d. 30, 35 (D.D.C. 2004).

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I. Dr. Bazerman’s Recommendation For The Appointment of Court Monitors Cannot Be Admitted Under Rule 702 And Daubert

The primary reason for striking Dr. Bazerman’s testimony is that he has but one actual recommendation, which clearly is not the product of applying valid and recognized scientific principles to the facts of this case. As set forth in Dr. Bazerman’s written direct examination:

Q: Dr. Bazerman, are you recommending specific structural changes to defendants’ businesses?

A: No, I recommend that the Court appoint monitors who will have the authority, with the utilization of outside experts as needed, to review all aspects of defendants’ businesses and make particularized and specific recommendations for structural changes, or with a mandate from the Court to implement structural changes, such as those that I have identified, that address the incentives and biases that in my opinion will likely cause misconduct to continue.

Id. at 2:20 - 3:3. Dr. Bazerman reiterated throughout his live trial examination that he is only recommending the appointment of monitors to study the defendants’ businesses and implement changes or make recommendations to the Court; he is not recommending any particular remedies or structural changes. See, e.g., Trial Tr. at 20358:10-14, 20359:16-20, 20383:20-20384:3, 20410:9-13, 20415:22 - 20416:6, 20420:10-23, 20423:21 - 20424:9.

Dr. Bazerman has absolutely no experience or expertise, has done absolutely no scientific analysis or study, and can cite no peer-reviewed or other scientific articles that would support his recommendation for monitors. As he admitted on cross-examination:

Q. This whole process called this monitor process that you recommend in your report, during your career can you identify for the court any other proceeding in which you have presented testimony to a court in which you have recommended monitors be appointed to carry out the type of activities that you set forth in your written direct?

A. No. As my testimony provides, I’ve been an expert in two cases prior and they wouldn’t remotely fit this kind of domain.

. . . .

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Q. Based on your expertise in this field called behavioral decision research in the area of organizations, can you identify for the court any other expert in that field who’s ever testified in a court of law and recommended the type of monitor remedy that you set forth in your testimony?

A. No.

Trial Tr. at 20448:15-23, 20449:17-22. Clearly, there is no basis on which the Court can allow Dr. Bazerman’s recommendation for court monitors to stand under Daubert.

II. The Remainder Of Dr. Bazerman’s Testimony Likewise Does Not Qualify For Admission Under Rule 702 And Daubert

Dr. Bazerman’s testimony regarding the various structural changes and measures that court-appointed monitors might wish to consider implementing or recommending to the Court likewise cannot withstand scrutiny. As noted above, Rule 702 plainly requires that an expert witness apply “principles and methods reliably to the facts of the case.” Under Daubert, the Court must determine whether Dr. Bazerman’s reasoning or methodology “properly can be applied to the facts in issue.” Daubert, 509 U.S. at 592-93; Ambrosini, 101 F.3d at 133. Expert testimony is inadmissible when “there is simply too great an analytical gap between the data and the opinion proffered.” General Electric Co., et. al. v. Joiner, 522 U.S. 136, 146 (1997); Groobert v. President and Directors of Georgetown College, 219 F.Supp.2d 1, 6 (D.D.C. 2002).

It is beyond dispute that Dr. Bazerman’s testimony fails to comply with the express requirement of Rule 702 that an expert apply “principles and methods reliably to the facts of the case.” As Dr. Bazerman admitted to the Court, he has not been accepted as an expert in the field of behavioral decision research by any other court. See Trial Tr. at 20508:19 - 20509:23. Dr. Bazerman has repeatedly stated that he bases his opinions exclusively on assumptions supplied by the Government. See Bazerman Direct Examination at 3:16-19; Trial Tr. at 20325:1-3, 20335:22 - 20336:2, 20439:16-24, 20504:11-22. As already noted above, he also repeatedly testified that he

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is not recommending any particular remedies or structural changes. See, e.g., Trial Tr. at 20358:10-14, 20359:16-20, 20383:20-20384:3, 20410:9-13, 20415:22 - 20416:6, 20420:10-23, 20423:21 - 20424:9. Thus, even assuming that Dr. Bazerman is an expert in behavioral decision research, he has not applied that expertise to the facts in this case in order to reach conclusions regarding the remedies that this Court should impose. In other words, he offers nothing that “will assist the trier of fact to understand the evidence or to determine a fact in issue,” as required for the admission of expert testimony under Rule 702.

Finally, even assuming that Dr. Bazerman qualifies as an expert in behavioral decisionmaking in the organizational context, and ignoring his failure to apply his expertise to the facts of the case, Dr. Bazerman’s testimony fails to qualify for admission under Rule 701 for two additional reasons: (1) it is not scientifically reliable; and (2) it is not relevant to the issues in this case. These reasons are addressed below.

A. Dr. Bazerman’s Testimony Is Not Scientifically Reliable

In Daubert, the Supreme Court enumerated specific factors to be used in determining whether expert testimony meets the scientific reliability requirement. These include (1) whether the theory or technique can be, or has been, tested, (2) whether the theory or technique has been subjected to peer review and publication, (3) the method’s known or potential rate of error, and (4) whether the theory or technique is generally accepted in the relevant scientific community.

Daubert, 509 U.S. at 593-94; Dyson, 113 F. Supp.2d at 47. The application of each of these factors to Dr. Bazerman’s testimony shows that it is unreliable, and therefore inadmissible.

1. Acceptance Within The Relevant Scientific Community

The methods and theories of behavioral decision research are, in fact, not generally accepted in the relevant scientific community of psychologists, economists, and behavioral

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researchers. For example, Dr. Bazerman cited the work of Professor George Loewenstein in his Written Direct Examination. Bazerman Direct Examination at 6:7 - 7:2. Nevertheless, Professor Loewenstein has written that “behavioral decision researchers themselves have increasingly voiced doubts about the validity and university applicability of their own perspective.” G. Loewenstein, “The Creative Destruction of Decision Research,” Journal of Consumer Research, Vol. 288, p. 499 (December 2001) (Exhibit A). Professor Loewenstein has further written that “there is surprisingly little evidence beyond introspection to support the decision-making account of behavior, and introspection is a notoriously fallible source of insight into the causes of behavior (Nisbett and Wilson 1977).” Id. at 500. Other researchers have also expressed serious concerns about the reliability, validity and applicability of behavioral decision research. See, e.g., G. Gigerenzer, “On Narrow Norms and Vague Heuristics: A Reply to Kakneman and Tversky,” Psychological Review, Vol. 103, no. 3, p. 593 (1996), (Exhibit B) (”The heuristics in the heuristics-and-biases program are too vague to count as explanations.”); J. Shanteau, “Cognitive Heuristics and Biases in Behavioral Auditing: Review, Comments and Observations,” Accounting, Organizations and Society, (1998) (Exhibit C) (”Given the popularity of this approach, it may be surprising for some to learn of the extent of criticism offered in the psychological literature of the heuristics and biases research.”). Indeed, as noted during his trial testimony, Dr. Bazerman himself has repeatedly expressed serious concerns about whether behavioral decision research theories and constructs concerning psychological bias, which have been tested predominantly with students in artificial laboratory settings, actually apply to experienced decision makers in real-world settings. See Trial Tr. at 20468:24 - 20469:24, 20474:12 - 20475:12, 20475:13 - 20476:13, 20476:14 -20477:4.

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In light of these criticisms, including serious criticisms raised by Professor Loewenstein and Dr. Bazerman’s testimony itself, the Government cannot show that behavioral decision research theory and methods are generally accepted in the relevant scientific community.

2. Known Or Potential Rate Of Error

In Daubert, the Supreme Court also stated that, in the case of a particular scientific method or technique, “the court ordinarily should consider the known or potential rate of error.” Daubert, 509 U.S. at 594. In the present case, there is absolutely no evidence in the record that would allow a determination of the error rate associated with Dr. Bazerman’s methods. For example, since Dr. Bazerman has failed to apply behavioral decision theory or methods to any specific fact at issue in this case, it is impossible to estimate any rate of error for his conclusions or opinions about past and future intentional and unintentional conduct of the defendants. Due to Dr. Bazerman’s exclusive reliance on assumptions, his rate of error is inestimable (perhaps by design). The “rate of error” factor enumerated in Daubert therefore indicates that Dr. Bazerman’s testimony should be excluded as unreliable.

3. Testing Of Theory Or Method

Another factor articulated by the Supreme Court in Daubert is whether the expert’s theory or method can be and has been tested. Daubert, 509 U.S. at 593-94; Ambrosini, 101 F.3d at 133- 34. There is no doubt that some hypotheses and predictions of behavioral decision research have been tested. However, as noted above, even Dr. Bazerman himself has repeatedly expressed serious reservations about whether his theories concerning psychological bias have been properly tested with experienced decision-makers in real-world settings, as opposed to testing with students in artificial laboratory settings. Trial Tr. at 20468:24 - 20469:24, 20474:12 - 20475:12,

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20475:13 - 20476:13, 20476:14 - 20477:4. And, as noted above, his sole recommendation — the appointment of court monitors — is totally untested in any scientific or reliable way.

Further, Dr. Bazerman has failed to apply behavioral decision theory or method to a single fact in the present case. It is therefore impossible to turn to the scientific literature, identify arguably analogous research paradigms, and evaluate whether Dr. Bazerman’s application of behavioral decision theory and methods to the present case has been tested, and if so, what the results have been. Defendants are thus deprived of the opportunity to confront Dr.

Bazerman with contradictory results from analogous research, and the Court is deprived of the opportunity to evaluate Dr. Bazerman’s testimony against the backdrop of analogous research findings. The Daubert factor thus likewise indicates that Dr. Bazerman’s testimony should be excluded.

4. Peer Review And Publication

In Daubert, the fourth reliability factor the Supreme Court enumerated is whether the theory or method has been subjected to peer review and publication. Daubert, 509 U.S. at 593- 94; Ambrosini, 101 F.3d at 133-34. Indeed, there are peer-reviewed publications of behavioral decision experiments and analyses. However, the record is devoid of any information concerning how Dr. Bazerman applied behavioral decision theory to the facts of the present case, and exactly which theoretical constructs he applied to which facts. It is therefore impossible to turn to the literature and determine whether Dr. Bazerman’s analysis of the present case is of a type that is routinely supported or unsupported, routinely accepted or rejected by Dr. Bazerman’s peers in the scientific journals. The fourth Daubert factor therefore indicates that Dr. Bazerman’s testimony should be excluded.

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B. Dr. Bazerman’s Testimony Is Irrelevant

Under Daubert, proffered expert testimony must not only be scientifically reliable, it must also be relevant to be admissible. Daubert, 509 U.S. at 589-92; Ambrosini, 101 F.3d at 133; Dyson, 113 F.Supp.2d at 47. Dr. Bazerman’s testimony fails the relevance test because the remedies that he identifies for the Court and monitors to consider are intended to address unintentional as well as intentional, wrongful conduct, even though unintentional conduct clearly cannot be remedied under RICO.1

According to Dr. Bazerman, much or most of defendants’ alleged misconduct, past and future, is unintentional. See, e.g., Bazerman Direct Examination at 23:9-16; Trial Tr. at 20327:20 - 20328:1, 20328:20 - 20329:2, 20333:3-9. Dr. Bazerman has made no effort to distinguish between unintentional and intentional conduct of the defendants, and admits that he cannot do so.

See, e.g., Trial Tr. at 20453:23 - 20454:22. Furthermore, Dr. Bazerman has proposed remedies that are calculated to prevent and restrain at the same time both unintentional and intentional conduct. See Bazerman Direct Examination at 24:18-21; Trial Tr. at 20452:3-7. Indeed, Dr. Bazerman testified that he was not asked to consider remedies that would address only intentional misconduct, and thus failed to do so. See Trial Tr. at 20455:19 - 20456:2.

Section 1964(a) of RICO limits this Court to preventing and restraining future RICO violations. RICO violations generally, and the alleged mail and wire fraud violations involved in this case specifically, requiring a finding of some intentional wrongful conduct on the part of a defendant. Accordingly, because the remedies which Dr. Bazerman would have this Court and

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1 Joint Defendants also respectfully submit that Dr. Bazerman’s testimony is irrelevant because he proposes to invest court-appointed monitors with powers and authority that go far beyond the powers and authority that any courtappointed officer, by whatever name, could exercise under Article III of the U.S. Constitution and relevant D.C. Circuit caselaw, at least without the Defendants’ consent. See Joint Defendants’ Objections to Written Direct Examination of Max H. Bazerman, Ph.D. and Accompanying Exhibits at 2-5. Joint Defendants understand that the Court already has ruled on this objection, but they reiterate it here for purposes of maintaining a clear record.

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court-appointed monitors consider range beyond the remedies that this Court can properly impose, Dr. Bazerman’s testimony fails to address the central remedies issues in this trial. It is thus irrelevant and should be stricken under Rule 702 and Daubert.

CONCLUSION

For the foregoing reasons, Dr. Bazerman’s trial testimony should be stricken under Fed. R. Evid. 702 and Daubert.

DATED: May 6, 2005 Respectfully submitted,

/s/ Jane E. Chang for______________________

Timothy M. Broas (D.C. Bar No. 391145)

WINSTON & STRAWN LLP

1700 K Street, N.W.

Washington, D.C. 20006-3817

Telephone: (202) 282-5000

Fax: (202) 282-5100

Dan K. Webb

Thomas J. Frederick

WINSTON & STRAWN LLP

35 West Wacker Drive

Chicago, Illinois 60601-9703

Telephone: (312) 558-5600

Fax: (312) 558-5700

Theodore V. Wells, Jr. (D.C. Bar No. 468934)

James L. Brochin (D.C. Bar No. 455456)

PAUL, WEISS, RIFKIND, WHARTON &

GARRISON LLP

1285 Avenue of the Americas

New York, New York 10019-6064

Telephone: (212) 373-3000

Fax: (212) 757-3990

Attorneys for Defendants

Altria Group Inc. and Philip Morris USA Inc

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/s/ Jane E. Chang for______________________

Robert F. McDermott (D.C. Bar No. 261164)

Peter J. Biersteker (D.C. Bar No. 358108)

Jonathan M. Redgrave (D.C. Bar No. 474288)

JONES DAY

51 Louisiana Avenue, N. W.

Washington, D.C. 20001-2113

Telephone: (202) 879-3939

Fax: (202) 626-1700

Robert C. Weber

Paul G. Crist

JONES DAY

North Point

901 Lakeside Avenue

Cleveland, Ohio 44114-1190

Telephone: (216) 586-3939

Fax: (216) 579-0212

Attorneys for Defendant

R. J. Reynolds Tobacco Company

/s/ Jane E. Chang for______________________

Kenneth N. Bass (D.C. Bar No. 386070)

KlRKLAND & ELLIS LLP

655 15th Street, N.W., Suite 1200

Washington, D.C. 20005

Telephone: (202) 879-5000

Fax: (202) 879-5200

David M. Bernick

Stephen R. Patton

KIRKLAND & ELLIS LLP

200 East Randolph Drive, Suite 5900

Chicago, Illinois 60601

Telephone: (312) 861-2000

Fax: (312) 861-2200

Attorneys for Defendant

Brown & Williamson Tobacco Holdings, Inc.

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/s/ Jane E. Chang for______________________

Edward C. Schmidt (D.C. Bar No. 199315)

Matthew D. Schwartz (D.C. Bar No. 436619)

THOMPSON COBURN LLP

1909 K Street, N.W.

Suite 600

Washington, D.C. 20006

Telephone: (202) 585-6900

Fax: (314) 552-7597

J. William Newbold

Michael B. Minton

Richard P. Cassetta (D.C. Bar No. 457781)

THOMPSON COBURN LLP

One US Bank Plaza, Suite 3500

St. Louis, Missouri 63101-1693

Telephone: (314) 552-6000

Fax: (314) 552-7597

Gene E. Voigts

Richard L. Gray

SHOOK, HARDY & BACON LLP

2555 Grand Blvd.

Kansas City, Missouri 64108-2613

Telephone: (816) 474-6550

Fax: (816) 421-2708

Attorneys for Defendant

Lorillard Tobacco Company

/s/ Jane E. Chang for______________________

David L. Wallace

Jessica L. Zellner

CHADBOURNE & PARKE LLP

30 Rockefeller Plaza, 34th Floor

New York, New York 10112-0219

Telephone: (212) 408-5100

Attorneys for Defendant

British American Tobacco (Investments)

Limited (f/k/a British-American Tobacco

Company Limited)

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/s/ Jane E. Chang for______________________

Steven Klugman

Steven S. Michaels

DEBEVOISE & PLIMPTON LLP

9 1 9 Third Avenue

New York, New York 10022

Telephone: (212) 909-6000

J. William Newbold

Michael B. Minton

Richard P. Cassetta (D.C. Bar No. 457781)

Jason A. Wheeler

THOMPSON COBURN

One US Bank Plaza, Suite 3500

St. Louis, Missouri 63101-1693

Telephone: (314) 552-6000

Attorneys for Defendant

The Council for Tobacco Research-U.S.A.,

Inc.

/s/ Jane E. Chang for______________________

James A. Goold

COVINGTON & BURLING

120 1 Pennsylvania Avenue, N. W.

Washington, D.C. 20004-2401

Telephone: (202) 662-6000

Attorneys for Defendant

The Tobacco Institute, Inc.

REVISED:5.

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DOJ Request for Bazerman Hearing (PDF)

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

PHILIP MORRIS USA INC.,

f/k/a PHILIP MORRIS INC., et al.,

Defendants.

Civil Action No. v. : 99-2496 (GK)

Next Scheduled Court Appearance: Trial (ongoing)

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UNITED STATES’ REQUEST FOR Daubert HEARING CONCERNING EXPERT TESTIMONY OF MAX BAZERMAN, PH.D.

Defendants’ April 29, 2005 objections to the written direct testimony of Dr. Max Bazerman included a Daubert challenge for the first time. Immediately before Dr. Bazerman took the stand earlier today, May 4, 2005, the Court stated that it believed there might be serious Daubert issues with Dr. Bazerman’s expert testimony, and in light of defendants’ motion, stated that it would conditionally accept his written direct testimony. Following the completion of Dr. Bazerman’s live testimony today, defendants renewed their motion, and the Court stated that it had concerns about whether Dr. Bazerman’s expert testimony could pass the Daubert test. The defendants then requested additional briefing, and the Court granted their request over the United States’ objection. The United States hereby requests an evidentiary Daubert hearing to address the challenge so that it may respond fully to the Court’s stated concerns. We are filing this request promptly after the conclusion of the Court day so that defendants may respond if appropriate in the brief they will file on Friday.

A court must allow the party resisting a Daubert challenge with the opportunity to develop evidence to counter the Daubert challenge. In re Paoli R.R. Yard PCB Litig., 916 F.2d 829, 836, 859 (3d Cir. 1990) (reversing and remanding grant of summary judgment for

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defendant based upon “putative but unspoken exclusionary rulings”; “The court not only failed to give plaintiffs an adequate opportunity to present their factual and legal contentions on evidentiary issues, but it also ruled on an inadequate factual record and it failed adequately to articulate the bases for its rulings.”). Accordingly, the Third Circuit has held that a district court should hold a Daubert hearing – even if neither party requested one – if the reason for exclusion is that the bases for a proposed expert witness’s opinion ‘’are insufficiently explained and the reasons and foundations for them inadequately and perhaps confusingly explicated.’‘ Padillas v. Stork-Gamco, Inc., 186 F.3d 412, 417-18 (3d Cir. 1999) (reversing grant of summary judgment based upon exclusion of expert evidence; “when the ruling on admissibility turns on factual issues, as it does here, at least in the summary judgment context, failure to hold such a hearing may be an abuse of discretion.”).

Should the Court ultimately rule that it will exclude Dr. Bazerman’s testimony, it will need to ensure that the record includes both the court’s ruling, as well as the reasons for its ruling. In particular, the Court will need to make clear evidentiary findings concerning the Daubert factors, on a full record. “[W]e specifically hold that a district court, when faced with a party’s objection, must adequately demonstrate by specific findings on the record that it has performed its duty as gatekeeper.” Goebel v. Denver & Rio Grande Western Ry. Co., (10th Cir. 2000), 215 F.3d 1083, 1088 (emphasis added); United States v. Lee, 25 F.3d 997, 999 (11th Cir. 1994) (“encourag[ing] district courts to make specific fact findings concerning their application of Rule 702 and Daubert in each case where the question arises, because such findings will facilitate this Court’s appellate review.”) (emphasis added). Holding a Daubert hearing is often the best way to address Daubert issues: “However, in complex civil litigation that has the potential to affect numerous persons, the trial court may conclude that extensive

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evidentiary hearings are the most efficacious way for the court to inform itself about the factors it will have to take into account in ruling on admissibility.” Margaret Berger, “The Supreme Court’s Trilogy on the Admissibility of Expert Testimony,” in Reference Manual on Scientific Evidence at 29 (Federal Judicial Center, 2d ed. 2000). Similarly, in United States v. Shay, 57 F.3d 126, 134 (1st Cir. 1995), the First Circuit reversed and remanded a district court’s decision to exclude proffered expert testimony without either providing a Daubert hearing, or otherwise letting the proponent of the expert testimony create an appropriate evidentiary record:

“The district court did not hold an evidentiary hearing on these issues, nor did the court make any findings that would support the exclusion of the evidence for the reasons cited by the government.” Id.

In the present case, Dr. Bazerman’s re-direct testimony this afternoon was the United States’ first and only opportunity to develop evidence to respond to the Daubert arguments raised in defendants’ April 29, 2005 objections and which the Court stated this morning that it believed might pose serious issues. The Court’s case management orders precluded a Daubert hearing before Dr. Bazerman’s testimony. Order #230 at 8. Likewise, under the Court’s case management orders, Dr. Bazerman’s written direct testimony was filed before defendants made their Daubert objections. Accordingly, the United States’ first and only opportunity to develop testimony to address defendants’ Daubert objections arose during re-direct examination this afternoon.

Although the Court did permit some examination on some Daubert issues during the United States’ re-direct, it excluded other avenues of questioning on these issues, and sustained numerous objections to questions designed to develop record evidence demonstrating that the Daubert criteria were satisfied. For example, in response to an objection, the Court stated that it

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would allow only a question or two concerning where in universities behavioral decision researchers work; and in response to an objection, the Court precluded the United States from eliciting testimony from Dr. Bazerman concerning the ways in which he drew upon his expertise and prior experience to arrive at his expert conclusion. Most troubling, the Court precluded the United States from eliciting testimony from Dr. Bazerman concerning which testimony and other record evidence he relied upon in drawing his expert opinion. Had the United States been permitted to develop this line of questions, Dr. Bazerman would have been able to testify not only to which senior executives’ testimony he relied upon and what they said in the relevant portions of their testimony, but also to explain how those executives’ testimony supported his conclusions. In fact, surprisingly, the Court stated that this was not a Daubert factor. Contrast Ambrosini v. Labarraque, 101 F.3d 129 (D.C. Cir. 1996) (“[a] court must know the basis for an expert’s opinion before it can determine that the basis is not of a type reasonably relied on by experts in the field.”) (internal quotation marks and citation omitted).

The Court is obliged to provide the United States the opportunity to develop evidence (and not just a legal brief) “to respond to the court’s concerns” in response to defendants’ Daubert challenge. Padillas, 186 F.3d at 418. Because the United States was prevented from developing a full record during Dr. Bazerman’s trial testimony to demonstrate that the Daubert factors are satisfied, the Court is obliged to conduct a Daubert hearing now to allow the United States this opportunity now if it is going to entertain defendants’ renewed oral Daubert motion.

CONCLUSION

Accordingly, for the foregoing reasons, the United States respectfully requests that the Court convene a Daubert hearing; and, at the conclusion of or following that hearing, make specific factual findings in support of its evidentiary ruling on defendants’ Daubert challenge.

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Dated: May 4, 2005 Respectfully submitted,

Washington, D.C.

PETER D. KEISLER

Assistant Attorney General

/s/ Sharon Y. Eubanks

SHARON Y. EUBANKS (DC Bar # 420147)

Director, Tobacco Litigation Team

/s/ Stephen D. Brody

STEPHEN D. BRODY (DC Bar # 459263)

Deputy Director, Tobacco Litigation Team

/s/ Renée Brooker

RENÉE BROOKER (D.C. Bar # 430159)

Assistant Director, Tobacco Litigation Team

DANIEL K. CRANE-HIRSCH

LEO JOSEPH WISE

ALLISON CENDALI (D.C. Bar # 468763)

Trial Attorney, Tobacco Litigation Team

United States Department of Justice

Post Office Box 14524

Ben Franklin Station

Washington, DC 20044-4524

(202) 616-4185

Attorneys for Plaintiff

United States of America

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JOINT DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO THE UNITED STATES’ REQUEST FOR DAUBERT HEARING CONCERNING EXPERT TESTIMONY OF MAX BAZERMAN, Ph.D. (PDF)

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

PHILIP MORRIS USA INC.,

f/k/a PHILIP MORRIS INC., et al.,

Defendants.

Civil Action No. v. : 99-2496 (GK)

Next Scheduled Court Appearance: Trial (ongoing)

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JOINT DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO THE UNITED STATES’ REQUEST FOR Daubert HEARING CONCERNING EXPERT TESTIMONY OF MAX BAZERMAN, Ph.D.

Citing no D.C. Circuit law or any law from this District, the Government advances the proposition that after its purported expert witness, Dr. Bazerman, has completed his trial testimony, the United States is now entitled to an evidentiary hearing to establish that his testimony is admissible under the standards set forth in Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). United States’ Request for Daubert Hearing Concerning Expert Testimony of Max Bazerman, Ph.D. at 1, 4 (“Request for Hearing”).1 The Government bases its request on the unsupported assertion that the Court failed to afford it an “opportunity to develop evidence to counter the Daubert challenge.” Id. at 4.2

The Government’s assertion is pure fantasy. As the Government admitted when opposing further briefing on the Daubert issue:

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1 The Government’s so-called “Request” is obviously a motion, filed without a meet and confer as required by LCvR 7(m). It can be denied for this reason alone.

2 See id. at 1 (“A court must allow the party resisting a Daubert challenge to develop evidence to counter the Daubert challenge)”; at 3-4 (arguing that the Court’s rulings on objections prevented the United States from developing its evidentiary record); at 4 (“Because the United States was prevented from developing a full record during Dr. Bazerman’s trial testimony to demonstrate that the Daubert factors are satisfied . . . .”).

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We have a sufficient record here. The court clearly understands the Daubert issues. It’s fresh from the testimony. But to file another brief when certainly after Dr. Bradley testified we went through exactly the same procedure, where counsel made their arguments, reinforced what was set forth in the briefing already. Defendants raised it in their brief filed on Friday. On Saturday when we responded we put in our legal arguments. The witness has been examined. It’s ripe for a decision by the court.

Trial Tr. at 20505:15-22 (emphasis added). The Government’s statement — that the record is “sufficient” and that the Daubert issue is “ripe for a decision by the court” — cannot be reconciled with its current position that the Court lacks the evidentiary basis on which to rule or that the Court denied the Government an opportunity to develop a record.3 As detailed below, there were four separate opportunities for the Government to lay a Daubert foundation for Dr. Bazerman’s testimony. That the Government failed to do so does not bestow upon the Government the right to have another bite at the evidentiary apple. For the reasons set forth below, the Court should deny the United States’ Request for a Daubert hearing.

I. Nothing In Order #230 Negated the Government’s Obligation to Lay the Daubert Foundation Through Its Witness at Trial

The Government ignores Order #230, which made clear to all parties that the Court would — as it must — make Daubert determinations, but instead of doing so during the pre-trial phase of this case, the Court would make those determinations after hearing evidence at trial:

To the extent that the parties are raising challenges to the qualifications of the experts, the scientific reliability, replicability or validity of their methods, or the relevance of their testimony to the allegations of the lawsuit, all of these issues can be dealt with by cross-examination during trial. Consequently, no Daubert motions will be permitted.

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3 Joint Defendants’ have no doubt that the Court is well aware of and will discharge any obligation to articulate its findings and reasons in support of its ultimate decision on this issue. If that is all the United States seeks through its request, then a hearing is both unnecessary and a waste of time. If, however, the United States is using its Request as a subterfuge by which to recall Dr. Bazerman to plug the Government’s self-induced evidentiary gaps, then the Court should summarily deny the Request.

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Order #230 at 9 (emphasis added). Order #230 put all parties on notice that the Court intended to make Daubert determinations after each side presented evidence relevant to those standards.

Accordingly, the Government cannot credibly assert surprise or prejudice because Joint Defendants first raised a Daubert challenge in their April 29, 2005, objections to Dr. Bazerman’s written direct testimony. See Request for Hearing at 1. Under Order #230, April 29, 2005, was the first opportunity Joint Defendants’ had to raise a Daubert challenge. Moreover, nothing in Order #230 or any other order negated the Government’s pre-existing obligation to set forth a sufficient evidentiary foundation for the admission of Dr. Bazerman’s purported expert opinions in his written direct testimony.

II. The Government Ignored Another Opportunity to Lay the Daubert Foundation During Its Oral Examination of Dr. Bazerman

That the Government may have erroneously believed it had laid a sufficient Daubert foundation in Dr. Bazerman’s written direct testimony is simply of no moment. The Court advised the Government before Dr. Bazerman testified that it had carefully read Dr. Bazerman’s written direct testimony and admonished the United States to address the Court’s Daubert concerns in its questioning of Dr. Bazerman:

I had ruled originally, as you all know, that I would make Daubert determinations after hearing testimony, and in particular after hearing — based on information I would obtain from cross-examination. All I’m going to say at this point is that there are very serious Daubert issues about this witness and I’m well aware of them, and therefore I will expect both sides to be questioning this witness on whether he can meet the standards set forth in Daubert and the case law in our jurisdiction, which I know joint defendants have cited. . . . I just want to put everybody on notice. I’ve read the testimony very carefully, and I think there are serious Daubert problems, but I’m going to admit it conditionally, of course subject to my final rulings on the Daubert issues.

Trial Tr. at 20317:22 - 20318:12 (emphasis added). The Government elected to ignore the Court’s admonition and devoted the majority of its one-hour live direct examination to trolley

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cars, foot bridges, and other testimony which had little or nothing to do with the question of whether Dr. Bazerman’s proposed remedies testimony had a sufficient scientific basis under Daubert.

III. The Government Was Afforded Multiple Opportunities to Lay an Adequate Foundation under Daubert

The process established by the Court afforded four separate opportunities by which Dr. Bazerman could testify and make the record necessary to meet the Daubert standard: (1) his written direct testimony; (2) the Government’s one-hour oral direct; (3) during Dr. Bazerman’s answers to Joint Defendants’ cross examination questions; and (4) during the Government’s redirect examination. The fact that the Government squandered these opportunities does not bestow upon it the right to a post-testimony evidentiary hearing. Nor does the fact that the Government was unprepared to or incapable of adducing evidence from Dr. Bazerman sufficient to meet the Daubert standard on re-direct mean that the Court denied the Government the opportunity to present such evidence.4

D. The Government’s Cases Are Completely Inapposite

The cases the Government cited in support of its Request are not only completely inapposite (a number are pre-Daubert cases), they demonstrate that the Government is not entitled to the evidentiary hearing it seeks. The Government fails to cite a single case from this

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4 The Court again warned the Government that it needed to make its evidentiary record for purposes of Joint Defendants’ Daubert challenge during this exchange on re-direct:

MR. WISE: I was addressing Daubert issues. But I can certainly short-circuit what — but I’m trying to get a sense of what Your Honor would like me to cover in terms of Daubert issues.

THE COURT: Wait a minute. Daubert is a Supreme Court case. It’s been on the books for quite a number of years. We have some case law in our circuit. You have to make your own record, Mr. Wise.

Trial Tr. at 20505:15-22. The fact that Mr. Wise was “addressing Daubert issues” at the time of this exchange makes clear that the Court fully afforded the United States every opportunity to lay a sufficient foundation.

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or any other Circuit holding that a District Court is obliged to conduct a Daubert hearing after a proponent has fully presented the witness’ testimony at trial; after the witness has been cross examined; and after the proponent has conducted re-direct of its the witness. To the contrary, the cases the Government cited only support the use of Daubert hearings as preliminary, pre-trial proceedings to give the proponent an opportunity to offer proof of the necessary foundation for the expert’s opinion and to determine the adequacy of that offer before questions on the expert’s opinions and conclusions are entertained.5 Thus, the cases the Government cited establish only that, as a preliminary matter, the Government was entitled to lay a testimonial foundation for Dr.

Bazerman’s opinions and that Defendants are entitled to test the reliability of that foundational testimony on cross examination. That is precisely what happened during Dr. Bazerman’s trial testimony. The cases the Government cited require no more and certainly do not require an evidentiary hearing after the witness has testified at trial and after the Government had multiple opportunities to lay an adequate foundation under Daubert, which it failed to do.

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5 See, e.g., In re Paoli R.R. Yard PCB Litig., 916 F.2d 829, 835-836, 858 (3d Cir. 1990) (reversing a pre- Daubert summary judgment decision where the district court excluded expert evidence prior to trial based solely on affidavits, before experts were even deposed, and without a hearing at which the bases for the expert opinions could be evaluated); Padillas v. Stork-Gamco, Inc., 186 F.3d 412, 417-418 (3d Cir. 1999) (reversing summary judgment and holding that district court’s reliance on motion for summary judgment and contents of expert report, without an opportunity to be heard by the proponent, was inadequate to evaluate the factual issues of admissibility); Goebel v. Denver & Rio Grande Western R.R. Co., 215 F.3d 1083 (10th Cir. 2000) (noting that a Daubert hearing is not necessary so long as the court has sufficient evidence to perform “the task of ensuring that an expert’s testimony both rests on a reliable foundation and is relevant to the task at hand,” but remanding on the ground that the district court failed to explicitly articulate its Daubert analysis); United States v. Lee, 25 F.3d 997, 999-999 (11th Cir. 1994) (vacating narcotics conviction where district court improperly admitted technical evidence under the superseded Frye rule, and noting that in light of the subsequently decided Daubert opinion, “[t]he district court may hold any hearings it deems necessary to make specific fact findings concerning the application of [the rule]”); United States v. Shay, 57 F.3d 126, 133-134 (1st Cir. 1995) (remanding conviction for conspiracy where district court prevented defendant’s expert witness from testifying without conducting an evidentiary hearing or making any findings that would support the exclusion of evidence); Ambrosini v. Labarraque, 101 F.3d 129, 133 (D.C. Cir. 1996) (stating that in “[p]erforming [its] gatekeeping role, the district court must engage in a preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts at issue” (emphasis added) (internal quotations omitted)).

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CONCLUSION

For the foregoing reasons, the Government’s request for a further evidentiary hearing should be denied.

DATED: May 6, 2005 Respectfully submitted,

/s/ Jane E. Chang for______________________

Timothy M. Broas (D.C. Bar No. 391145)

WINSTON & STRAWN LLP

1700 K Street, N.W.

Washington, D.C. 20006-3817

Telephone: (202) 282-5000

Fax: (202) 282-5100

Dan K. Webb

Thomas J. Frederick

WINSTON & STRAWN LLP

35 West Wacker Drive

Chicago, Illinois 60601-9703

Telephone: (312) 558-5600

Fax: (312) 558-5700

Theodore V. Wells, Jr. (D.C. Bar No. 468934)

James L. Brochin (D.C. Bar No. 455456)

PAUL, WEISS, RIFKIND, WHARTON &

GARRISON LLP

1285 Avenue of the Americas

New York, New York 10019-6064

Telephone: (212) 373-3000

Fax: (212) 757-3990

Attorneys for Defendants

Altria Group Inc. and Philip Morris USA Inc

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/s/ Jane E. Chang for______________________

Robert F. McDermott (D.C. Bar No. 261164)

Peter J. Biersteker (D.C. Bar No. 358108)

Jonathan M. Redgrave (D.C. Bar No. 474288)

JONES DAY

51 Louisiana Avenue, N. W.

Washington, D.C. 20001-2113

Telephone: (202) 879-3939

Fax: (202) 626-1700

Robert C. Weber

Paul G. Crist

JONES DAY

North Point

901 Lakeside Avenue

Cleveland, Ohio 44114-1190

Telephone: (216) 586-3939

Fax: (216) 579-0212

Attorneys for Defendant

R. J. Reynolds Tobacco Company

/s/ Jane E. Chang for______________________

Kenneth N. Bass (D.C. Bar No. 386070)

KlRKLAND & ELLIS LLP

655 15th Street, N.W., Suite 1200

Washington, D.C. 20005

Telephone: (202) 879-5000

Fax: (202) 879-5200

David M. Bernick

Stephen R. Patton

KIRKLAND & ELLIS LLP

200 East Randolph Drive, Suite 5900

Chicago, Illinois 60601

Telephone: (312) 861-2000

Fax: (312) 861-2200

Attorneys for Defendant

Brown & Williamson Tobacco Holdings, Inc.

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/s/ Jane E. Chang for______________________

Edward C. Schmidt (D.C. Bar No. 199315)

Matthew D. Schwartz (D.C. Bar No. 436619)

THOMPSON COBURN LLP

1909 K Street, N.W.

Suite 600

Washington, D.C. 20006

Telephone: (202) 585-6900

Fax: (314) 552-7597

J. William Newbold

Michael B. Minton

Richard P. Cassetta (D.C. Bar No. 457781)

THOMPSON COBURN LLP

One US Bank Plaza, Suite 3500

St. Louis, Missouri 63101-1693

Telephone: (314) 552-6000

Fax: (314) 552-7597

Gene E. Voigts

Richard L. Gray

SHOOK, HARDY & BACON LLP

2555 Grand Blvd.

Kansas City, Missouri 64108-2613

Telephone: (816) 474-6550

Fax: (816) 421-2708

Attorneys for Defendant

Lorillard Tobacco Company

/s/ Jane E. Chang for______________________

David L. Wallace

Jessica L. Zellner

CHADBOURNE & PARKE LLP

30 Rockefeller Plaza, 34th Floor

New York, New York 10112-0219

Telephone: (212) 408-5100

Attorneys for Defendant

British American Tobacco (Investments)

Limited (f/k/a British-American Tobacco

Company Limited)

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/s/ Jane E. Chang for______________________

Steven Klugman

Steven S. Michaels

DEBEVOISE & PLIMPTON LLP

9 1 9 Third Avenue

New York, New York 10022

Telephone: (212) 909-6000

J. William Newbold

Michael B. Minton

Richard P. Cassetta (D.C. Bar No. 457781)

Jason A. Wheeler

THOMPSON COBURN

One US Bank Plaza, Suite 3500

St. Louis, Missouri 63101-1693

Telephone: (314) 552-6000

Attorneys for Defendant

The Council for Tobacco Research-U.S.A.,

Inc.

/s/ Jane E. Chang for______________________

James A. Goold

COVINGTON & BURLING

120 1 Pennsylvania Avenue, N. W.

Washington, D.C. 20004-2401

Telephone: (202) 662-6000

Attorneys for Defendant

The Tobacco Institute, Inc.

REVISED:5.

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Order # 943 admitting Bazerman Testimony (PDF)

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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

PHILIP MORRIS USA INC.,

f/k/a PHILIP MORRIS INC., et al.,

Defendants.

Civil Action No. v. : 99-2496 (GK)

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ORDER #943

The Court has reviewed the Supplemental Memorandum of the Joint Defendants Regarding the Trial Testimony of Dr. Max Bazerman and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), Ambrosini v. La Barraque, 101 F. 3d 129, 133 (D.C. Cir. 1996), and other applicable case law from this Circuit. In light of the fact that the Court has now concluded that the testimony of Dr. Bazerman does, in fact, satisfy the standards set forth in Daubert, for reasons which will be articulated in open court on Tuesday, May 10, it is unnecessary for the United States to file a response to Joint Defendants’ submission.1

So ordered.

Date: May 6, 2005 /s/

Hon. Gladys Kessler

United States District Judge

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1 In view of this ruling, the United States’ Request for a Daubert Hearing on Dr. Bazerman is denied as moot.

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* Rule 702: Testimony by Experts

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to 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, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

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