A New Standard for Expert Testimony

The California Supreme Court recently established a new standard regarding expert testimony for civil cases filed in the State of California. In Sargon Enterprises, Inc. v. University of Southern Cal. (2012) 55 Cal.4th 747, the Court unanimously adopted a uniform expert testimony admissibility standard wherein the trial courts have a duty to act as a “gatekeeper” and exclude speculative expert testimony.

Spanning over a decade, Sargon involved a review of the Court of Appeal’s decision to reverse a judgment and remand the matter to be tried for a third time. The underlying matter involved a lawsuit brought by a small, dental implant manufacturing company, Sargon Enterprises, Inc. (hereinafter “Sargon”), against the University of Southern California (hereinafter “USC”) for breach of contract involving a dental implant patented by Sargon. During the first trial, USC successfully moved to exclude evidence of Sargon’s lost profits on the grounds that such profits were not foreseeable. However, the jury found in favor of Sargon on both claims, finding that USC breached its contract, and awarded Sargon $433,000 in compensatory damages. On appeal, the Court of Appeal reversed the judgment on the ground that the trial court erred in excluding evidence of Sargon’s lost profits based on foreseeability.

Prior to the second trial, USC moved to exclude the opinions of Sargon’s expert, James Skorheim, as speculative. During the eight day evidentiary hearing, Mr. Skorheim testified that Sargon’s lost profits ranged from $220 million to $1.18 billion based on his opinion that within “reasonable certainty,” Sargon would have become a market leader within 10 years. In rendering his opinion, Mr. Skorheim essentially relied on the profits of other market leaders within the dental implant industry rather than Sargon’s profits, which at the time, was considered a small company. The trial court granted USC’s motion and excluded Mr. Skorheim’s opinions on the ground that his opinions were not “based upon matters which a reasonable expert would rely.” The parties then stipulated to entry of judgment for $433,000 on Sargon’s breach of contract claim to allow for another appeal. The Court of Appeal again reversed the judgment, finding that the trial court erred in excluding Mr. Skorheim’s opinions, and remanded the matter for a new trial to determine Sargon’s lost profits. The California Supreme Court subsequently granted USC’s petition for review on whether the trial court erroneously excluded Mr. Skorheim’s opinions.

On review, the California Supreme Court reversed the appellate court and found that the trial court properly excluded Mr. Skorheim’s opinions as speculative. By doing so, the Court held that under California law, “the trial court has the duty to act as a ‘gatekeeper’ to exclude speculative expert testimony.” The Court noted that under section 801 of the California Evidence Code, an “expert’s opinion may not be based on assumptions of fact without evidentiary support, or on speculative or conjectural factors.” The Court further noted that under section 802 of the California Evidence Code, a trial court may conduct a “circumscribed inquiry” to “determine whether, as a matter of logic, the studies and other information cited by experts adequately support the conclusion that the expert’s general theory or technique is valid.” Based on the foregoing principles, the Court found it unreasonable for Mr. Skorheim “or any such expert, to rely on much of the data which forms the basis of his opinions, because no data bears any resemblance of Sargon’s historical profits or those of any similar business.”

In other words, the Court found that his reliance on the profits of other market leaders within the dental implant industry rather than Sargon’s profits was pure speculation, especially since there was no reliable evidence to support Mr. Skorheim’s unfounded belief that Sargon would eventually become a market leader.