Category Archives: In the News

Bamboo stick massage

No Expert Testimony Required to Prove Negligent Supervision of Massage Provider Who Sexually Assaulted a Customer

As a general rule, expert testimony is required to prove the liability of a healthcare provider for negligence. That rule is typically enforced in medical malpractice cases alleging that a doctor harmed a patient by breaching a duty of care. The injury victim must use an expert witness to establish the duty of care because ordinary jurors do not usually understand what the medical profession expects a prudent doctor to do when caring for a patient.

An exception to the rule allows medical negligence cases to proceed without an expert witness when the negligence is obvious to ordinary people. A doctor who operates on the wrong knee is a classic example. A jury does not need expert testimony to understand that a doctor should verify which knee is injured before surgery begins.

The Tennessee Supreme Court was recently asked whether the “common knowledge exception” to expert testimony should apply to a case involving negligent hiring and supervision by a spa. Under the facts of the case, the court held that no expert testimony was required to prove liability.

Facts of the Case

Lataisha Jackson went to Gould’s Day Spa & Salon in Cordova for a massage. She alleged that she was sexually assaulted by a masseur.

Jackson alleged that two other customers of Gould’s had made complaints about the masseur’s inappropriate conduct but Gould’s took no action to protect her from similar misconduct. She sued Gould’s for negligently hiring, training, supervising, and retaining the masseur who assaulted her.

Whether or not Jackson’s massage meets an ordinary understanding of “health care,” all the courts that considered the case categorized it as a “health care liability” lawsuit. Tennessee’s Health Care Liability Act applies to lawsuits against any “health care practitioner” if the practitioner must be licensed under Tennessee laws governing “professions of the healing arts.”

Tennessee law deems massage practitioners to be members of a profession of the healing arts who must be licensed. Without discussing whether licensing alone makes a massage provider a “health care practitioner,” the supreme court concluded in a footnote that Gould’s was protected by the Health Care Liability Act.

Certificate of Good Faith

The Act requires plaintiffs to file a “certificate of good faith” with a complaint that alleges the negligence of a health care practitioner. The certificate must state that the plaintiff consulted with an expert who is competent to testify under the Act and that the expert determined the existence of a good faith basis for bringing the lawsuit.

Jackson did not file the certificate because she viewed a lawsuit for negligent hiring and supervision as outside the scope of the Health Care Liability Act. The trial court decided that the Act applied to the negligence claims that Jackson alleged. The court granted summary judgment against her because she did not file a certificate stating that she had consulted with an expert.

The court of appeals, over a dissent, concluded that the standard a spa should follow after receiving a complaint about a massage provider was not within the common knowledge of jurors. The dissenting judge opined that the need to protect disrobed customers from being touched inappropriately by a masseur was not the kind of complex question that could only be answered with expert assistance.

The Common Knowledge Exception in Tennessee

Whether an expert witness was required to prove that Gould’s was negligent turned on the applicability of the common knowledge exception. The exception excuses plaintiffs from providing expert testimony when the alleged misconduct falls within the understanding of lay members of the public. If an applicable standard of care, a breach of that standard, and resulting injury would all be obvious to ordinary people, no expert testimony is required.

The common knowledge exception is widely accepted. The Tennessee Supreme Court filled two pages of its opinion with cases from other jurisdictions that recognize the exception.

While Tennessee’s Health Care Liability Act applies to negligence claims against health care providers, the court decided that consultation with an expert is only necessary in cases that require expert testimony. When the common knowledge exception applies, no certificate of good faith is required. Since the legislature supposedly required the certificate to assure courts that a health care liability claim had arguable merit, requiring the certificate would be pointless when the claim’s merit would be obvious to a lay member of the public.

Tennessee Supreme Court Decision

The court relied on Tennessee precedent in deciding whether a health care provider’s negligence is obvious. The court cited a case involving an X-ray technician who asked a patient to stand on a wobbly stool. The patient fell and was injured. Since telling a patient to stand on unsafe furniture is obviously negligent, no certificate of good faith was required.

In a case with facts that more closely parallel to Jackson’s, a patient at a mental health facility sued the facility for the negligent hiring and training of a security guard who attacked him. While providing security scarcely qualifies as health care, the court decided that the Health Care Liability Act applied to the lawsuit. It concluded, however, that whether the facility negligently breached its duty to protect patients from the assaultive conduct of security guards was a question that a jury could answer without the assistance of expert testimony.

In light of that precedent, the supreme court sensibly decided that the need for expert testimony turns on whether the allegedly negligent conduct “involved the exercise of medical judgment or skill.” When a jury will be called upon to consider whether a doctor used the skill that a reasonable doctor should possess, or made professional judgments involving medical risks and benefits that a reasonable professional would make, the plaintiff must provide expert evidence in support of the negligence claim.

Applying that rule to Jackson’s case, the court decided that expert testimony was not required. The claim that a spa knew or should have known, based on customer complaints, that a masseur might assault customers can be decided without expert evidence. Ordinary jurors have sufficient knowledge and experience to decide whether a spa negligently hired, retained, or supervised an employee who sexually assaulted a customer.

A different result might apply when the plaintiff claims that a massage provider “negligently performed the massage, used improper technique or excessive force, or erred in decision-making as a massage therapist.” In cases involving hiring or retention decisions that do not require professional expertise, however, no expert testimony is required to prove negligence.

 

Georgia

Georgia Court Says No Conflict in Same Firm Expert Affidavit

The Georgia Court of Appeals has ruled that there is no conflict of interest in using an expert affidavit supporting a complaint written by an attorney who is also a law partner of the filing attorney.

The Personal Injury Case

Plaintiff David Mitchell retained attorney Randall Cade Parian of Parrian Injury Law, LLC to represent him in a personal injury action. Without informing Mitchell, Parian referred the case to Brian Wesley Craig of Craig & Avery, LLC. Attorney Craig filed a personal injury action on Mitchell’s behalf in Fulton County State Court.

Mitchell contacted Parian numerous times in the two years after retaining them. Parian told Mitchell that the case was “chugging along” and never informed him that the case was actually being handled by another law firm.

The defendants in the personal injury case set a deposition for Mitchell and notified Craig, but neither Parian nor Craig notified Mitchell of the deposition. The defendants filed a motion to compel and a motion for sanction, but neither Craig nor Parian contacted Mitchell. As a result of the motions, Mitchell’s case was dismissed with prejudice.

When Mitchell learned of the dismissal, he reviewed the complaint that Craig had filed on his behalf. Mitchell saw that the allegations had little resemblance to the facts of his case, leading him to conclude that Craig had simply used a complaint his firm had filed in a different case and substituted Mitchell as the plaintiff.

The Malpractice Action

Mitchell retained attorney William Ney to represent him in a legal malpractice action against Parian and Craig. Ney filed a complaint that was supported by the affidavit of Jacob Rhein, an attorney who is licensed to practice law in Georgia. In his affidavit, Rhein indicated that he was familiar with the standard of care for Georgia attorneys and that it was his opinion that Parian and Craig had breached that standard of care. The day after Rhein executed his affidavit, he and Ney formed a law firm together, Ney Rhein, LLC.

Parian and Craig filed a motion to dismiss, arguing that because Rhein was a member of Ney’s law firm, he was not competent to provide the affidavit that was required to support a legal malpractice action. Following a hearing, the trial court granted the motion to dismiss. The court ruled that there was “an inherent conflict between Rhein making the affidavit as a witness and being a member of the law firm” that represented Mitchell.

The Appeal

Mitchell appealed the trial court’s ruling. On appeal, the Georgia Court of Appeals, First Division, looked to the language of the statutory requirement. OCGA § 9-11-9.1 provides, in relevant part, that to assert a claim for legal malpractice, the plaintiff is “required to file with the complaint an affidavit of an expert competent to testify, which affidavit shall set forth specifically at least one negligent act or omission claimed to exist and the factual basis for each such Claim.”

The Georgia Court of Appeals found that Rhein met the statutory requirements for an expert witness as set forth in OCGA § 24-7-702. The court further found that Rhein’s status as Ney’s law partner affected Rhein’s qualifications as an expert witness. Presiding Judge Anne Elizabeth Barnes authored the opinion with the concurrence of Judges Elizabeth Gobeil and John Pipkin III.

Attorney for the plaintiff William Ney said of the ruling, “It just confirms what the ethics rules are: That members of the same firm can provide pretrial affidavits on behalf of each other’s clients and still comply with [the statute].” Whether a member of the firm could testify at trial, as opposed to filing a pretrial affidavit attesting to the claim’s legal merit, was not a question the court needed to answer.

 

Ohio wooden Mallet

No Expert Required to Admit Lidar Results in Ohio Speeding Cases

With little analysis, state courts have routinely held that common scientific instruments used by law enforcement agencies should be presumed accurate and that their results should be admissible without expert testimony. For example, Wisconsin’s appellate courts have firmly followed the holding that “tests by recognized methods need not be proved for reliability in every case of violation. Examples, speedometer, breathalyzer, radar.”

The court presumed the accuracy of those devices without giving the matter much thought and without considering any expert evidence that they are, in fact, accurate. How to decide that a method is “recognized” is another question that the court neglected to answer.

Presuming the accuracy of a device makes life easier for prosecutors who would otherwise need to call an expert witness in each trial to explain why the device works as intended. Presumptions shift the burden to defendants to establish that the device did not produce a reliable result. Whether a system that requires each element of the offense to be proved beyond a reasonable doubt by the prosecution is undermined by presuming the accuracy of the prosecution’s evidence has been a source of contention for decades.

The presumption of accuracy sometimes overlooks doubtful assumptions made by the manufacturers of devices sold to law enforcement agencies. Breath testing devices, for example, generate results based on the assumption that the ratio of alcohol concentration in blood to alcohol concentration in breath is 2100:1. But that number is just an average. The actual ratio ranges from 1500:1 to 3000:1, depending on the person.

Since breath testing devices make the false assumption that everyone has the same blood to breath concentration of alcohol, breath testing devices produce blood alcohol results that are low for some people and high for others. The discrepancies have rarely troubled judges, who too often believe it is more important for prosecutors to present their cases quickly than to assure their convictions are based on accurate evidence.

Radar and Laser Devices

Radar and laser devices are commonly used to measure speed. A radar device shoots a radio signal at a moving vehicle and detects the signal when it bounces back to the device. The change in frequency of the signal as the vehicle moves is assumed to be proportional to the vehicle’s speed.

A laser device shoots a concentrated beam of light rather than a radio signal. It measures the time it takes for the reflected light to return to the device. By comparing multiple readings over time (usually less than a second), the device can calculate the speed at which the vehicle is moving.

Laser speed detection devices, sometimes known as Lidar, have grown increasingly popular with law enforcement agencies. While radar emits a wide beam that might capture a passing bird or a vehicle the operator did not intend to target, the narrow laser beam arguably reduces the risk of operator error.

Police officers are commonly presented in court as “expert operators” of radar and Lidar, which simply means they have been trained to use and calibrate the devices. They typically have little understanding of the scientific principles upon which the devices are based. Again, the presumption that the devices work as intended saves the prosecution from calling an expert witness to fill in the gaps in the officer’s knowledge.

Ohio Considers Admissibility of Lidar Device Results

The Ohio Supreme Court recently considered whether courts should take judicial notice of the accuracy of laser devices used to measure speed. A police officer in Brook Park stopped Joseph Rodojev for driving 15 mph over the speed limit.

The officer captured Rodojev’s speed on a Lidar device manufactured by Laser Technologies Inc. The company markets its TruSpeed products as “a laser speed device that any department can afford.”

The city prosecutor introduced the readout from the budget-saving device through the testimony of its operator. No expert testimony was introduced to establish the reliability of the device. The judge did not take judicial notice of its reliability.

The Ohio Supreme Court decided in 1958 that radar was based on valid scientific principles — in particular, the Doppler effect — and that radar results did not need to be supported by expert testimony. The state court of appeals decided that Lidar was similar to radar, notwithstanding that laser devices do not rely on the Doppler effect, and that the same result should therefore apply. Since the court’s lazy reasoning conflicted with the decision of another state appellate court, the state supreme court agreed to resolve the conflict.

Based largely on an explanatory law review article and court decisions in other states, the Ohio Supreme Court decided that Lidar devices are reliable. Since no expert ever testified in the case, it reached that conclusion without the benefit of expert assistance. The court did a favor for prosecutors by reducing their burden in speeding cases, but like other courts, it did so with remarkably little consideration of the science underlying the devices.

The court did note that Lidar results are still subject to challenge at trial, “including challenges involving the angle at which the officer held the device in relation to the targeted vehicle, the device’s accuracy-validation algorithms, the device’s calibration and maintenance schedule, and the officer’s qualifications to use the device.” Cross-examining the officer by comparing the officer’s actual use of the device to the procedure required by the device manufacturer’s manual is often a fruitful way to beat a speeding ticket. But those challenges, the court said, go to the weight of the evidence, not to Lidar’s reliability. The bottom line is that in Ohio and many other states, no expert testimony is required to admit Lidar results into evidence.

 

PAM Spray Defect Case Tossed Out for Lack of Admissible Expert Evidence

The Eastern District of New York has dismissed claims against the makers of PAM cooking spray after the plaintiffs failed to present admissible expert witness testimony.

The Incident

In August 2016, Lucita Arena was in her kitchen preparing dinner when a nearby can of PAM cooking spray exploded and injured her. Lucita and her husband Jose Urena sued ConAgra Goods, Inc. and DS Containers, Inc., the makers of PAM and its container. The couple alleged design defect, failure to warn, and loss of consortium.

The type of PAM canister that exploded has four U-shaped score lines that are designed to open when the pressure inside the can rises to a particular level. The can features warnings including, “USE ONLY AS DIRECTED. FLAMMABLE. DO NOT SPRAY ON HEATED SURFACES OR NEAR OPEN FLAME … CAN MAY BURST IF LEFT ON STOVE OR NEAR HEAT SOURCE.” The canister that injured Lucita Arena was discarded by her attorney’s custodial staff after it was left in a conference room before experts had the opportunity to examine it.

The Design Expert

Plaintiffs retained Dr. Lester Hendrickson, Ph.D., as a design expert to help them prove their theory of causation. Dr. Hendrickson had a Ph.D. in metallurgical engineering and serves as a professor emeritus at Arizona State University. He has authored more than 1,000 technical reports as an expert witness. Dr. Hendrickson planned to testify that “absent the vents in this can, the circumstances under which” the plaintiff “was burned would not have occurred.”

The defendants objected to the design expert and the district court decided to exclude him. The court ruled that Dr. Hendrickson did not satisfy Daubert because he had failed to explain how the alternative design that he proposed would be safer. The court also found that Dr. Hendrickson’s opinion failed to satisfy Daubert’s criteria for reliability because he had criticized the PAM canister’s propellant, but had not proposed a safer proponent, nor tested any. Further, his proposal had never been subjected to peer review or publication. Therefore, the court found that Dr. Hendrickson had failed to show general acceptance of his design or methodology.

The defendants filed a motion for summary judgment. The defendants argued that the plaintiff’s design defect failed because they had not offered admissible evidence that the design of the PAM canister and not a manufacturing defect had caused the plaintiff’s injuries. The plaintiffs had also failed to offer admissible evidence from an expert regarding a defect or a feasible alternative design. The court agreed with the defendants.

The court also ruled that the plaintiffs’ failure to warn claim did not raise any triable questions of fact because they could not show that any inadequacy of the warnings was the proximate cause of the plaintiff’s harm. The court ruled that the plaintiff’s theory that the warnings were inadequate for failure to warn about the canister’s vent design failed because they could not show that the absence of the warning was the cause of the plaintiff’s injuries.

 

Missouri

Missouri Appeals Court Throws Out Sanctions Against Expert Witness

The Missouri Court of Appeals Eastern District has thrown out sanctions against a plaintiff’s expert witness, ruling that he did not act unethically in negotiating a settlement with another law firm.

District Court Case

Attorney Gregory Leyh and the law firm Millsap & Singer have been litigating against each other for years. Leyh has represented hundreds of plaintiffs in lawsuits against Millsap, alleging that Millsap engaged in improper conduct in connection with its representation of banks and mortgage holders in foreclosures and collections. Leyh was also appointed class counsel on a pending class action lawsuit for similar improper conduct. Millsap has sought to sanction Leyh, decertify the class in his suit, and filed suit against him personally for malicious prosecution and abuse of process.

In 2010, Debra Woodson filed a suit against Millsap and its client Bank of America for wrongful foreclosure. Woodson’s attorney retained Leyh as an expert witness in the case. The parties entered a protective order which indicated that documents that were marked confidential were not to be disclosed or used in any current or future litigation. However, Leyh was never made aware of that order.

Leyh was given access to a confidential deposition for his role as an expert in the Woodson case. Leyh later disclosed that deposition in discovery to the case in which he was serving as class counsel.

Millsap filed a motion for contempt, arguing that Leyh’s disclosure and use of the deposition was a knowing and intentional violation of the Woodson protective order.

The parties negotiated a settlement agreement but could not come to a final agreement on all settlement terms.

Millsap filed a motion to enforce the settlement.  Following a two-day hearing, the trial court found that the parties had reached a settlement agreement, agreed to modify that agreement, and that Leyh’s refusal to execute the agreement was in bad faith. The court also found that Leyh’s assertion that his attorney had the authority to negotiate, but not settle the dispute was not credible. The court further found that Leyh’s failure to advise Millsap’s counsel about this limited authority was a violation of Rule 4-4.1 of the Missouri Supreme Court’s Rules of Professional Responsibility, which require Leyh to be truthful to opposing counsel. The court imposed a $35,000 sanction against Leyh, based on its determination that he had behaved unethically and in bad faith.

Missouri Court of Appeals

Leyh appealed to the Missouri Court of Appeals. On appeal, the Court of Appeals agreed with the trial court that the parties had reached a settlement agreement; however they disagreed that the parties had agreed to modify that agreement. The court also disagreed with the finding that Leyh had acted in bad faith.

The Court of Appeals also reversed the trial court’s finding that Leyh had violated Rule 4-4.1 of the Missouri Supreme Court’s Rules of Professional Responsibility. It noted that Leyh was not acting as a lawyer in this case, he was acting as an expert witness. Rule 4-4.1 only applies to lawyers when they are representing clients.

The case was decided by Judges James M. Dowd, Gary M. Gaertner, Jr., and Robin Ransom.

Kentucky

Court Excludes Expert Report in Antitrust Case

The State of Kentucky sued Marathon Petroleum and related parties for violating antitrust laws. Kentucky claimed that Marathon’s anticompetitive practices caused consumers to be overcharged.

Marathon asked the court to exclude the testimony of Kentucky’s expert economist. The court granted that motion and, since Kentucky could not prevail without the expert’s testimony, dismissed the case.

Antitrust Arguments

Marathon owns the largest refineries in the Midwest and the only refinery in Kentucky. It is also the largest supplier of gasoline in Northern Kentucky.

Kentucky argued that Marathon monopolized the wholesale market for Summer RFG, a kind of gasoline that some Kentucky retailers are required to sell during the summer months. A necessary ingredient of RFG is a petroleum product abbreviated as RBOB. Wholesalers purchase RBOB and add ethanol and other products to create RFG. They then sell the RFG from their terminals to retailers.

Kentucky argued that Marathon controls the influx of RBOB and thus monopolizes the downstream market for RFG. Kentucky alleged that Marathon used its market share dominance to manipulate the wholesale and retail price of gasoline. That price, according to Kentucky, was higher than the prices that prevail in competitive markets. Kentucky also alleged that Marathon uses anticompetitive supply agreements (known as exchange agreements) to maintain its market dominance.

Expert Testimony in Antitrust Cases

When a plaintiff alleges that a defendant has restrained trade or engaged in monopolistic pricing within a market, the plaintiff’s first task is to define that market.

The plaintiff must define a product market and a geographic market. The product market analysis asks whether there are readily available interchangeable substitute goods that consumers could purchase to serve their needs. A substitute is interchangeable if an increase in price for one product would cause an increase in demand for the substitute product.

A geographic market is the area in which sellers compete against each other to make sales to the same consumers. In simple terms, it is the market area in which the allegedly anticompetitive seller operates.

The relevant market is a fact question that must generally be determined by a jury. A judge’s disagreement with the plaintiff about the relevant market should not lead to a dismissal of the case unless no reasonable juror could agree with the plaintiff’s definition.

Courts usually require the relevant market to be proved by an expert opinion based on sound principles of economics. While a judge cannot dismiss a case simply because the judge disagrees with the expert’s view of the facts, a judge can exclude the expert’s testimony if the judge finds that the testimony is not based on a reliable methodology.

Kentucky relied on a single expert witness, Dr. Michael Sattinger. Marathon did not challenge Sattinger’s qualifications to render an expert opinion. Rather, it challenged the methodology he used to determine the relevant market, to determine the existence of an antitrust injury, and to calculate damages.

Relevant Market

Sattinger defined the relevant geographic market as the Kentucky terminals where RBOB is blended with other products and sold to retailers as RFG. The court decided that Sattinger failed to base that definition on a reliable methodology.

Economists usually use a “hypothetical monopolist” or “small but significant and non-transitory increase in price” (SSNIP) test to determine the relevant market. That test asks whether consumers would leave a market for competing goods if a supplier were to impose a 5% price increase for at least one year. If consumers would not leave the market, the market is worth monopolizing. The smallest market from which consumers would not exit is the relevant market.

Courts have generally agreed that the SSNIP test is a reasonable methodology for defining a relevant market. Sattinger acknowledged that the SSNIP test is widely used but chose not to use it. The court noted that economists are not required to use the SSNIP test to define a relevant market, but are required to use some other reasonable methodology. The court faulted Sattinger for failing to explain why he limited the relevant market to terminals in Kentucky.

The court also concluded that defining Kentucky terminals as the relevant market did not reflect the economic realities of the wholesale RFG market. The court thought Sattinger should have asked whether there were other places wholesalers could look to buy RBOB. The court noted that Marathon’s only local competitor had RBOB transported by barge from other states, and that Marathon itself had met its need for RBOB by transporting it to Kentucky by truck.

Since Sattinger did not define a geographic market that included all reasonably available sources of RBOB, Sattinger did not base his opinion on a reasonable methodology. According, his opinion was inadmissible.

Antitrust Injury

To demonstrate that Marathon’s anticompetitive behavior caused a harm, Sattinger compared markets for RFG in Baltimore and St. Louis to the Kentucky market. He determined that market prices were lower in those cities and attributed the price differential to Marathon’s anticompetitive behavior. He calculated the price difference over the time period covered by the lawsuit and produced a damages calculation of about $173 million.

While the court recognized that Sattinger’s “yardstick method” of damages calculation can be appropriate in antitrust cases, the method must take account of other factors (such as market size, product demand, proximity to supply sources, and cost of operations) that might have an independent impact on prices. Economists generally use a regression analysis to account for those variables, but Sattinger failed to rule out other possible explanations for price differences that were unrelated to Marathon’s anticompetitive pricing.

Kentucky also considered Marathon’s use of exchange agreements to be anticompetitive. Competing refiners use exchange agreements to trade gasoline when a competitor has an insufficient supply. Sattinger did not determine whether exchange agreements are used in Baltimore or St. Louis and therefore failed to determine whether the supposedly anticompetitive agreements had an impact on price.

The court ultimately concluded that Sattinger’s methodology did not rest on sound economic principles. Accordingly, his opinions did not satisfy Daubert and were not admissible as evidence.

Lessons Learned

Different judges view Daubert in different ways, but precedent authored by some appellate judges supported the exclusion of Sattinger’s testimony. Part of case preparation should include a thorough review of Daubert precedent in the case at hand. In this case, a review of Daubert decisions in antitrust cases might have prepared Kentucky’s lawyers for Marathon’s challenges.

Experts should be urged to complete a first draft of a report for an attorney’s review well in advance of the disclosure deadline. If Kentucky’s lawyers had identified attacks that could be made on their expert’s methodology, perhaps those perceived flaws could have been corrected before a final draft was prepared.

Experts understand their field of expertise but lawyers understand precedent. Helping experts understand how a court might respond to Daubert challenges is a key role that lawyers must play after they hire expert witnesses.

 

Lender Liability

Court Allows Expert to Testify that Advertising Was Not Misleading

The Federal Trade Commission (FTC) sued Lending Club for violating federal laws that prohibit deceptive or unfair business practices. A federal judge recently decided several motions in the case, including the FTC’s Daubert motion to exclude the testimony of Lending Club’s expert witness.

Facts of the Case

Lending Club is not itself a lender. Rather, it connects borrowers with lenders. Lending Club charges borrowers a percentage of the borrowed amount as a loan origination fee. The fee, which averages 5% on unsecured loans, is deducted from the loan and paid to Lending Club when the loan proceeds are advanced to the borrower.

From 2012 to 2018, Lending Club’s advertising claimed it charged “no hidden fees.” Loan applicants who met baseline criteria could apply for a loan. The Lending Club website would then display a loan offer page showing the loan amount, the number and amount of monthly payments, and the annual percentage rate (“APR”).

The loan offer page did not disclose an origination fee unless a consumer clicked a question mark beside the term “APR” (on the desktop version) or hovered over the term “APR” (on the mobile version). Borrowers were not required to perform those actions before completing the loan.

The FTC contended that Lending Club falsely claimed that loans included “no hidden fees” when, in fact, an origination fee is literally hidden in the loan offer and only becomes visible if a consumer happens to click or hover in the right place.

The origination fee was mentioned again on a terms page that included a federally required Truth in Lending Disclosure. The “amount financed” box includes the full amount of the loan for which the borrower applied, but the borrower must scroll down the page to learn that an origination fee would be deducted from the “amount requested,” resulting in a smaller “amount received.”

The final page asks the borrower to enter bank account information where the loan will be deposited. The page then says “Your [$ amount requested] loan is on the way.” The FTC contended that the statement was false, because the amount requested minus the origination fee was “on the way.”

The origination fee is more conspicuously explained on a separate “rates and fees” page. However, borrowers were not required to view that page before completing the loan.

In addition, nearly all Lending Club customers elect to pay their loans through an automatic bank account withdrawal each month. The FTC alleged that Lending Club had a habit of “mistakenly” taking too much money or continuing to take withdrawals after the borrower canceled the automatic withdrawal feature. The FTC alleged that consumers had contacted their banks to force Lending Club to reimburse $3.8 million. Apart from that inconvenience, if consumers failed to notice that they were overcharged, Lending Club might have simply pocketed their money.

Expert Testimony

A key dispute in the case involved the number of consumers who proceeded with the loan process because they didn’t know they would need to repay a loan origination fee that would be deducted from their loan proceeds. Lending Club argued that a more conspicuous disclosure of the origination fee would not have reduced the number of borrowers who decided to continue the application process.

Lending Club supported that claim with the expert report of Dr. Yoram Wind. Wind conducted an experiment with prospective borrowers. He showed the actual Lending Club website to a test group. He removed the “no hidden fees” statement from the website he showed to the control group.

Wind then surveyed successful applicants in each group, asking whether they received the amount of money they expected to receive. About 89% of the test group and about 94% of the control group indicated that they received the amount of money that they expected to receive.

Wind shared the results with the FTC, which indicated that Lending Club had changed its website during the years covered by the complaint and that the experiment did not take those changes into account. Wind then designed a new experiment with three test groups.

The first test group saw a “no hidden fees” offer page that omitted the origination fee disclosure that Lending Club added to a footer in June 2017. The second test group saw a “no hidden fees” offer page and the origination fee footer that appeared from June 2017 to May 2018. The third test group saw the page that was displayed to the second test group but without a “no hidden fees” statement. The court thought the evidence was inconsistent as to whether the third group saw a footer disclosing the origination fee.

In response to an FTC objection, Wind also modified the survey invitation to state that borrowers’ responses would not affect their relationship with Lending Club or their credit score.

In the new version of the study, Wind concluded that the percentage of control group applicants who misunderstood the amount they would receive was virtually identical to the first study, while the percentage of applicants in each test group who misunderstood was very similar to the test group results in the first study.

Wind also found that about 19% of participants in all test groups and the control group accepted the loan. Wind concluded that the similar results proved that the “no hidden fees” claim had no impact on the decision to complete the loan process.

Daubert Ruling

The FTC contended that Wind’s methodology was unreliable because he asked the wrong question. In the FTC’s view, asking whether borrowers received the money they expected did not address Lending Club’s misleading advertising. The real question, according to the FTC, was whether borrowers were aware of the origination fee by the time they completed the loan.

The court decided that the principles Wind used to design his survey, including assuring an adequate sample size and random assignment to test or control groups, were scientifically valid. In addition, one of the test groups saw the “No Hidden Fees” advertisement described in the complaint, so the test results were relevant.

The question that Wind asked — whether applicants received the loan payout they expected — provided insight into whether applicants were aware of the origination fee. Whether that was the best question to ask could be explored on cross-examination. Surveys do not need to be perfect to be admissible. In that regard, the court provided a more forgiving interpretation of Daubert than the interpretation used by judges who insist that only a perfect methodology can be reliable.

The court also regarded the FTC’s remaining challenges as bearing on the weight that the evidence should receive rather than its admissibility. Whether the question that Wind asked was improperly leading, whether he should not have disclosed that Lending Club was sponsoring the survey, whether he should have screened out applicants who learned of the origination fee from other sources, and whether Wind waited too long to survey applicants were not questions that exposed a blatant bias in the test results, as the FTC claimed.

Lessons Learned

Whether an arguable deficiency in a research methodology goes to admissibility or weight is a question that different courts, confronted with the same facts, will answer in different ways. Sometimes the same judge will answer the question in different ways in different cases, depending on which party the judge favors. Unless the methodology is obviously error-free or egregiously flawed, decisions about admissibility depend more on the judge’s philosophy than on any clear rule of law.

The judge in this case may have been influenced by the fact that she will be the ultimate factfinder. The trial will be to the court, not to a jury. Caselaw allows judges to be less vigilant about their “gatekeeping” role in bench trials because judges are assumed to be less likely than juries to be influenced by expert evidence that might be less than rigorous. Whether or not that assumption has merit, it is worth remembering that judges are less likely to grant Daubert motions when no jury will hear the evidence, if only because admitting the evidence and discounting it after a trial provides a shield against appellate reversal.

 

dollar bills

Louisiana Bill Seeks to Change Lawyer Advertising Rules

A new bill by the Louisiana Senate would outlaw lawyer ads that it finds to be deceptive — ads that state how much a client received as a settlement or judgment, without deducting for things like attorney fees, expert witness fees, or court filing costs.

Louisiana Senate Bill 395

The bill enacts R.S. 51:1429, which provides in pertinent part, that, “No person in any advertisement shall make, or permit to be made, a false, misleading, or deceptive statement about a monetary result obtained on behalf of a client or fail to disclose information necessary to prevent the information supplied in an advertisement from being false, misleading, or deceptive.”

The law defines “false, misleading, or deceptive statement” as “any communication that states or infers that a person actually received an amount of money that they did not actually receive.” The law defines “actually received” as “the net amount of money received by a person, calculated by deducting from the person’s gross recovery all expenses including but not limited to attorney fees, broker fees, expert witness fees, interest, court costs, costs of collection or recovery, and all other expenses related to litigation.”

This means that Louisiana lawyers who run billboards, print and digital ads, or television and radio spots will need to say how much of a total settlement went to attorneys’ fees, court costs, and expert witness fees.

Any violation of this law would be prosecuted under the state’s Unfair Trade Practices and Consumer Protection Law by the Louisiana Attorney General’s Office.

The Louisiana Senate gave final approval to the bill on June 1 with a 37-0 vote. The state House of Representatives voted 78-23 on the bill on May 29.

The bill’s sponsor was Senator Heather Cloud (R), who argued that lawyer advertisements that make false promises of substantial payouts encourage people to sue businesses without understanding that they may only receive a small fraction of the settlement or final verdict amount.

Co-sponsors of this bill included: Sen. Michael Fesi, Sen. Sharon Hewitt, Sen. Ronnie Johns, Sen. Barry Milligan, Sen. Robert Mills, Sen. Beth Mizell, Sen. Mike Reese, Sen. Mack White, Rep. Beryl Amedee, Rep. Tony Bacala, Rep. Rhonda Butler, Rep. Dewith Carrier, Rep. Raymond Crews, Rep. Phillip DeVillier, Rep. Rick Edmonds, Rep. Julie Emerson, Rep. Gabe Firment, Rep. Larry Frieman, Rep. Raymond Garofalo, Rep. Jonathan Goudeau, Rep. Lance Harris, Rep. Dodie Horton, Rep. Mike Johnson, Rep. Danny McCormick, Rep. Charles Owen, Rep. Thomas Pressly, Rep. Troy Romero, Rep. Rodney Schamerhorn, Rep. Alan Seabaugh, Rep. John Stefanski, and Rep. Polly Thomas.

All sponsoring senators and representatives are Republicans.

Ramifications of Law

According to the legislative analysis, the Louisiana Attorney General’s office expects about six investigations each year would result from the new law. Complaints about deceptive advertising would be required to start an investigation and would be handled by existing staff within its Public Protection Division. The Public Protection Division is staffed by a total of 34 employees, including 13 attorneys. The Louisiana AG’s office received 2,910 consumer complaints in 2017; 3,120 consumer complaints in 2016; and 2,696 consumer complaints in 2015.

The state should also expect litigation based on First Amendment challenges to the law. The Supreme Court has upheld attorney advertising from efforts to prevent lawyers from making truthful statements about their services. Saying that a jury awarded a specific amount is truthful, and it does not imply that the lawyer earned no fee or that the client received the full amount awarded. Forcing lawyers to add information to their advertising that they view as unnecessary may result in constitutional challenges.

The bill is now headed to Governor John Bel Edwards (D). The new rules would take effect August 1, 2020.

 

Newborn Baby

Mississippi Supreme Court to Review Shaken Baby Case

The Mississippi Supreme court has agreed to review the case of a man whose murder conviction was overturned last year. The court will decide whether to reinstate the conviction, order a new trial, or drop the charges entirely.

The Crime

In January 2008, Joshua Clark was left in charge of his infant daughter Kylie and three other children. When Kylie’s mother returned home, she found Kylie limp in the recliner and Clark playing video games.

Kylie was taken to the hospital, where doctors found numerous injuries to her brain. Clark was charged with capital murder in connection with the death of his daughter.

Circuit Court Trial

At trial, the state argued that Clark had gotten angry with his daughter and violently shook her. Clark’s defense argued that he was not known to be violent and that Kylie’s injuries were more consistent with a short fall to the ground from the couch or chair.

The state retained Dr. Karen Lakin to testify as an expert witness. Dr. Lakin testified that “in her opinion, the child had been violently shaken, causing a fatal brain injury.”

Clark was convicted of second degree murder and sentenced to 40 years in prison.

Court of Appeals

Clark appealed his conviction. One of his defense team’s arguments was that the circuit court erred by admitting Dr. Lakin’s testimony.

In October 2019, the Mississippi Court of Appeals reversed Clark’s conviction. In a split decision, the appellate court ruled that Dr. Lakin had not provided supporting materials for her findings. The court remanded Clark’s case back to the circuit court for a new trial.

Mississippi Supreme Court

Clark appealed his case to the Mississippi Supreme court. Clark’s attorney, Jim Waide, argues that Shaken Baby Syndrome has been disproven by new medical science. Without the shaken baby syndrome argument, Waide claims, the state has no case. Waide argues that Clark should be released from prison to await a new trial or that all charges against him should be dropped.

In his petition, Waide wrote, “The only issue worthy of review by (the supreme court) is whether the state should be allowed to have a second trial to produce scientific evidence which it failed to produce at the first trial.”

The state also appealed the Court of Appeals’ decision. The state has argued that the Court of Appeals was wrong to throw out the expert witness testimony about Shaken Baby Syndrome. It has asked the Supreme Court to reinstate Clark’s conviction.

Arguing for the state, Mississippi Special Assistant Attorney General Scott Stuart claims that if the Court of Appeals’ ruling is allowed to stand, it will cause new problems and “set new higher standards for expert testimony.” One might hope that high standards would be demanded for opinions that are based on the discredited notion of Shaken Baby Syndrome.

The Mississippi Supreme Court has not yet announced the time frame for its review.

Clark is likely to remain in state prison until the Mississippi Supreme Court makes its final ruling. Waide had argued that Clark should be released pending the Mississippi Supreme Court’s decision. Circuit Court Judge Kelly Mims disagreed with Waide. Judge Mims stated that since the case is still being appealed, Clark is still technically a convicted murderer and should remain in prison.

Clark has been in jail or prison for 12 years at this point.

 

Lab Analysts May Be Required to Testify in Person in Criminal Trials

Deposing Experts in the Age of COVID-19

Taking discovery from experts was fairly routine before the coronavirus pandemic. Under the federal rules in civil cases, an expert would write a report, the report would be disclosed to the opposing party, and that party would typically take the expert’s deposition. State rules generally track those procedures.

After the pandemic, taking a deposition is a more complicated issue. Social distancing is difficult in a conference room where the expert, at least two lawyers, a court reporter and a possibly a videographer all gather. Experts and lawyers may be reluctant to sit across from each other at a conference table. They might also have reservations about handing documents back and forth.

Wearing a mask muffles questions and answers and makes it difficult for a court reporter to produce an accurate transcript. Since depositions are typically recorded on video, the mask also interferes with the viewer’s opportunity to gain nonverbal cues about the expert’s credibility by watching the expert’s facial expressions.

Remote Depositions

Rule 30(b) of the Federal Rules of Civil Procedure allows parties to stipulate, or the court to order, “that a deposition be taken by telephone or other remote means.” In the past, parties sometimes refused to stipulate to remote depositions because they wanted to drive up the opposing party’s cost of litigation.

The importance of social distancing during a pandemic, and the likelihood that precautions will be the “new normal” for an extended time, will likely make it easier to persuade federal judges to grant Rule 30(b) motions permitting remote depositions. Objecting to remote depositions during a pandemic is unlikely to curry favor with a judge who is truly neutral.

Platforms like Zoom and WebX allow people at multiple locations to participate in a meeting. Those platforms lend themselves to remote depositions. The court reporting service might suggest a different platform that offers helpful features, such as exhibit display and the ability to read real-time transcription.

Most companies that provide court reporters and videographers have experience with remote depositions. It makes sense to select a reporter shortly after the deposition is scheduled and to listen to the reporter’s suggestions to make the expert’s deposition proceed smoothly.

It is usually preferable for the court reporter to be in the same location as the expert witness. Errors caused by internet lags and equipment glitches are less likely when the reporter is present to hear the witness testify.

Practical Concerns

Taking or offering a remote deposition raises practical concerns that lawyers for both parties need to address. First, the party taking the deposition should assure that the reporter or videographer is “an officer authorized to administer oaths” as Rule 28(a) requires, unless the parties stipulate otherwise. A reporter or videographer who is also a notary will typically satisfy the requirement that the deposition be taken before an officer, although it may be possible to stipulate that a notary at a remote location will administer the expert’s oath.

Second, it makes sense to mark and circulate exhibits ahead of the deposition. The expert report will likely be an exhibit that everyone will have in advance, but marking exhibits on the fly and then showing them to a witness — a common practice during in-person depositions — is problematic when the witness is asked to view an exhibit on a screen.

While attorneys might still try to surprise an expert with a “gotcha” exhibit, the effective use of document discovery prior to an expert’s deposition and good witness preparation should limit the likelihood that an expert will be asked about an exhibit the expert has not seen in advance. Marking exhibits and circulating them by email or through a shared link will make a remote deposition proceed more smoothly. Depositions conclude more quickly when the expert witness is familiar with the exhibits and can consult a hard copy rather than squinting at a screen.