Eighth Circuit Notes "Relaxed" Application Of Daubert Expert Gatekeeping Standards For Bench Trial

In affirming tax deficiency judgment for unpaid FICA tax, Eighth Circuit notes that because the opinion evidence was introduced during a trial before the judge and not a jury, a relaxed standard applied to Daubert gatekeeping in the assessment of expert witness's methodology and application of that methodology, in David E. Watson, P.C. v. United States, __ F.3d __ (8th Cir. Feb. 21, 2012) (No. 11–1589)

The Federal Evidence Blog has occassionally noted relaxation of the Daubert Gatekeeping in bench trials or proceedings that have the form of factfinding by the judge rather than jury. See, e.g. , "De Novo Review Of Conclusory Daubert Findings At Bench Trial," (Jan. 7, 2010) (in bench trial of diversity contract suit, although testimony by plaintiff's expert was admitted without making Daubert findings, the court's failure to enter Daubert reliability findings was not an error in the context of a bench trial); "Expert Witness Qualification Process Is 'Necessarily Different' In A Bench Trial Than A Jury Trial" (while the same standards of admissibility to admit expert testimony under Daubert and FRE 702 apply, the manner in which they are considered are different in a bench trial). Recently, the Eighth Circuit had occasion to consider again the application of Daubert standards to an expert's opinion testimony in a bench trial. The circuit noted that while the standards of reliability are the same in bench as in jury trials, the application of those Daubert standards are "relax[ed]" in the context of a bench trial.

In the case, the tax payer, a business accounting entity (David E. Watson, P.C.) was assessed by the IRS for underpayment of FICA payments. The trial of this tax deficiency issue was conducted by the judge alone, without use of a jury. In assessing the amount of employment taxes due, the trial judge received testimony by the government's expert (Ostrovsky). The expert "opined [on] the market value of Watson's accounting services" although the expert was only "a general engineer with the IRS and has worked on approximately 20 to 30 cases involving reasonable compensation issues." The circuit noted the expert's reliance on "several compensation surveys and studies particular to accountants" compensation to opine that the taxpayer "would receive approximately $176,000 annually." The expert concluded that the taxpayer had underpaid." David E. Watson, P.C., __ F.3d __.

The taxpayer's appeal of this determination was based in part on the taxpayer's contention that the witness should not have been allowed to opine under FRE 702 "on the issue of reasonable compensation." This argument was based on the taxpayer's contention that the expert witness "was not competent to testify on that issue." The circuit disagreed, showing that the expert's testimony was qualified. The circuit noted that the trial court had entered no Daubert findings, yet the record reflected sufficient facts to support opinion testimony by the expert. David E. Watson, P.C., __ F.3d __.

The circuit rejected the taxpayer's contention that the witness's lack of qualification was amply demonstrated by the witness's need to "revise" his opinion in the case. This revision was not an indication of the expert's unsound methods, but rather reflected "new facts revealed at" the taxpayer's deposition in the matter. The change in conclusion was a result of the expert gaining new data, not a result of not knowing what data to use or how to apply it. David E. Watson, P.C., __ F.3d __.

But even assuming that the taxpayer's Daubert Gatekeeping challenge to the expert's opinion had merit, there was still no error in the case. As explained by the Circuit"even if [taxpayer] did raise a proper Daubert challenge ... we conclude the court acted within its discretion. At most, [taxpayer] DEWPC has expressed a disagreement with the underlying assumptions Ostrovsky made in his calculations. This “mere disagreement with the assumptions and methodology used does not warrant exclusion of expert testimony.” The circuit noted that the taxpayer failed to explore other appropriate means of calculation "through cross-examination and by presenting [its] own expert witness.” David E. Watson, P.C., __ F.3d __.

But this was applied in the context of a "relaxed Daubert standard" that applied to this bench trial. Accordingly there was no error in admitting the expert testimony at the bench trial. As explained by the Eighth Circuit:

Pursuant to Daubert, the district court must conduct this initial inquiry as part of its gatekeeping function. However, Daubert is meant to “protect juries from being swayed by dubious scientific testimony.” When the district court sits as the finder of fact, “ ‘[t]here is less need for the gatekeeper to keep the gate when the gatekeeper is keeping the gate only for himself.’” Thus, we relax Daubert's application for bench trials.
David E. Watson, P.C., __ F.3d __ (citing Glastetter v. Novartis Pharm. Corp., 252 F.3d 986, 988 (8th Cir. 2001) (per curiam), In re Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d 604, 613 (8th Cir. 2011) (quoting United States v. Brown, 415 F.3d 1257, 1269 (11th Cir.2005)).

The Watson case is another of what is becoming a common example of relaxing the application of Daubert factors in assessing expert opinion to be used at a court trial rather than one by jury.


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