FRE 703 And Plaintiff's Damage Expert's Reliance On Plaintiff's Records

In a breach of contract suit, plaintiff's damages expert could reasonably rely on plaintiff company’s summary of lost sales, obtained through data from plaintiff's records kept in the ordinary course of business, discussions with plaintiff's management team, deposition testimony of the defendant company’s personnel, and the defendant company’s annual reports and investor presentations, in Structural Polymer Group, Ltd. v. Zoltek Corp., 543 F.3d 987 (7th Cir. Oct. 8, 2008) (Nos. 07-2057, 07-2171)

Establishing a reasonable bases for expert testimony is one of the most common challenges to establishing that the facts or data that the expert used for forming his or her opinion are reasonable for experts in the field to use under FRE 703. One common way for this foundation to be laid is to cover the issue in conducting an examination of the expert - asking whether there is a basis for believing the facts and data the expert used were reasonable for experts in the field to use. Generally, a trial court will consider the expert’s own testimony as a basis for concluding that the facts or data are those experts use in the field. In a case several years ago, the Eighth Circuit described how a plaintiff's expert opinion on lost profits could be used by the court to conclude the expert was qualified to “testify that the method and sources she used to calculate the plaintiff's lost profits was ‘generally accepted by experts in this field.’” Structural Polymer Group, Ltd., 543 F.3d at 998 (citing FRE 703). The case stands as a useful reminder that often the testimony of the expert to be qualified, regarding his or her own expertise and its similarity to the practice of other experts in the field, is a prime way in which a party can use the testifying expert to establish the sources used in forming the proffered opinion were generally accepted for use by other experts in the field.

In the case, Zoltek was a Missouri corporation that manufactured and sold carbon fiber. Zoltek contracted with the plaintiff, Structural Polymer Group and Structural Polymer Systems (“SP”), to supply the British corporation with “prepreg,” a substitute for fiberglass. Under the terms of the agreement, Zoltek promised to manufacture and sell “Large Filament Count Carbon Fibers (Carbon Fibers) as defined by PANEX 33 specifications,” at “then-current market price” for ten years. SP agreed to “obtain their total requirements for suitable quality, in the reasonable opinion of [SP], Carbon Fibers from [Zoltek].” After some time under this contract, SP sued Zoltek for breach of contract, alleging lost profits and future lost profits. Structural Polymer Group, Ltd., 543 F.3d at 990.

After a dispute arose over two unfilled orders in 2005 and 2006, SP filed a beach of contract action. At trial, damage expert provided an opinion concerning the lost profits. The expert relied upon “SP’s lost profits based primarily on a document created by SP’s then-Managing Director called ‘Summary of Vestas and Gamesa Lost Sales,’ budget figures kept in the ordinary course of business by SP, as well as on conversations with SP management, deposition testimony of Zoltek personnel, and Zoltek’s annual reports and investor presentations.” Structural Polymer Group, Ltd., 543 F.3d at 998.

The jury found for plaintiff SP and awarded $36 million in lost profits. However, the jury declined to award future profits. The trial court reduced the award to $21 million. On appeal, Zoltek contended that the plaintiff's expert opinion testimony was based on unreliable sources of data, such as “summaries of lost sales provided by SP management, conversations with SP management, and projected sales from SP budgets.” Structural Polymer Group, Ltd., 543 F.3d at 997.

The circuit affirmed the jury award as sufficiently supported by the evidence. The information on which the damage expert relied upon were “reasonably relied upon by experts in the particular field” under FRE 703. The expert “testified that the method and sources she used to calculate SP’s lost profits was ‘generally accepted by experts in this field.’” Structural Polymer Group, Ltd., 543 F.3d at 998 (citing Arkwright Mut. Ins. Co. v. Gwinner Oil, Inc., 125 F.3d 1176, 1182 (8th Cir. 1997) (“an expert may rely on otherwise inadmissible hearsay in forming [her] opinion if the facts and data upon which [she] relies are of a type reasonably relied upon by experts in the field”)).

The circuit noted that the defense had the opportunity to cross-examine the expert during the trial on the bases for her opinion, such as whether they “were consistent with professionally accepted standards, and to dispute the reliability of the underlying factual information on which she relied.” Structural Polymer Group, Ltd., 543 F.3d at 998 (citing Brennan v. Reinhart Inst’l Foods, 211 F.3d 449, 451 (8th Cir. 2000) (“Once expert testimony has been admitted, the rules of evidence then place the full burden of exploration of facts and assumptions underlying the testimony of an expert witness squarely on the shoulders of opposing counsel’s cross-examination.”) (internal quotation omitted)). Finally, the disputed “factual underpinnings of the expert’s opinion “went to the weight the jury could assign to the damage expert’s testimony. Structural Polymer Group, Ltd., 543 F.3d at 998 (citing South Cent. Petroleum, Inc. v. Long Bros. Oil Co., 974 F.2d 1015, 1019 (8th Cir. 1992) (quoting Hurst v. United States, 882 F.2d 306, 311 (8th Cir. 1989) (“Any weaknesses in the factual underpinnings of (the expert’s) opinion go to the weight and credibility of his testimony, not to its admissibility.”)).

For discussion of other issues in the Structural Polymer Group, Ltd. case, see Counsel Statements At Preliminary Injunction Hearing Admitted Against Party During Trial (considering issues under FRE 801(d)(2)(D) (Statement by Party’s Agent) and FRE 403 (Exclusion of Relevant Evidence on Grounds of Prejudice, Confusion, or Waste of Time).

Federal Rules of Evidence