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The Application of the Federal Rules and Daubert and its progeny to Antitrust Litigation: Perspectives from the Bench, Experts, and the Trial Bar. Presentation to the Antitrust Committee of the Chicago Bar Association – March 1, 2011
Winston & Strawn LLP © 2011
WASHINGTON, D.C.
Topics to be Covered • • • • • • • • • •
Expert Testimony Under Fed. R. Civ. P. 26 and FRE 702, 703 and 705 Preparation of Expert Reports Be Careful about those who try to "add" new Expert Opinions Preparation for Expert's Deposition Communications with Experts Expert Testimony Under Fed. R. Civ. P. 26 and FRE 702, 703 and 705 Basis for Expert Testimony under FRE 702 The Judge as Gatekeeper under FRE 702 Antitrust Cases Have Routinely Applied Daubert Rules FRE 703: Basis of Opinion Testimony by Experts
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Topics to be Covered (Cont'd.) • • •
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An Expert's Reliance on Hearsay Rule 703 also requires that the opinion must be “base[d]” on those declarations Courts carefully assess whether the expert testimony is in reality being used as a vehicle to evade the hearsay rule -- either intentionally or inadvertently Can the Expert Report (replete with hearsay) be admitted? Exclusion of Expert Testimony Where and When to Challenge? Daubert Motions May Be Case Dispositive Reported Daubert Decisions are on the upswing In Antitrust Cases Antitrust Injury under § 4 of Clayton Act also a Fertile Area for Expert Attack Don't Forget About Role of Daubert Analysis in Class Actions!
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Expert Testimony Under Fed. R. Civ. P. 26 and FRE 702, 703 and 705 • Fed. R. Civ P. 26 •
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Rule requires party to disclose identity of any expert witness who may be used at trial under Rules 702, 703 and 705 of the Federal Rules of Evidence Disclosure is of testifying experts, not consulting experts Disclosures Rule 26 (a)(2)(A) Expert Reports Rule 26 (a)(2)(B) • Complete statement of all opinions and the basis and reasons therefore • Data or information considered • Exhibits to be presented at trial • Qualifications of the witness • List of all publications (last 10 years) • Compensation • List of Expert Testimony or trial for the last four years Rule 26 (a)(2)(B)
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Expert Testimony Under Fed. R. Civ. P. 26 and FRE 702, 703 and 705 • Timing of Expert Disclosures • Without schedule, at least 90 days before trial (FRCP 26(a)(2)(D) • Most federal courts enter Scheduling Order with expert disclosure deadlines
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Preparation of Expert Reports • Report must be "prepared and signed by the" expert • Rules don't preclude attorneys assisting the expert, but the expert "cannot be a conduit for the opinions of the attorney." Advisory Committee Notes to FRCP 26(a)(2) • Expert must be able to state it's my report, my opinions, experience, education, training and specialized knowledge • Drafts are discoverable but many instances counsel can agree to override this provision • Make sure report is accurate, truthful, does not overstate the case • Credibility undermined at deposition/trial if inaccurate assertions • Prepare supplemental report if opinions changed or bases changed before trial (See FRCP 26(e)(1)) 6 Winston & Strawn LLP © 2011
Be Careful about those who try to "add" new Expert Opinions And what if the expert's testimony at trial goes beyond the expert report? Alternatively under what circumstances can an expert report be "supplemented" under FRCP 26(e)? Can the plaintiffs' expert in a Sherman Act case attempt to add new theories not plead in the complaint? Behrend v. Comcast Corp., 626 F. Supp. 2d 495 (E. D. Pa. 2009) (Padova, J.)
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Preparation for Expert's Deposition • • • • • • • •
Ongoing Review reports Prior reports/conflicting positions Obtain prior depositions and trial testimony Research opposing expert Review CV – articles, etc. Use expert report as a road map Expert will be asked about all of the expert's opinions and underlying bases and foundations for his/her opinions
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Communications with Experts • Assume all are discoverable • Any documents provided to expert, not produced in discovery, will be discoverable • Don't disclose legal theories to expert • Minimize written communications • Experts should not prepare a report without discussing conclusions with counsel first • Separate teams to do consulting v. testimony
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Expert Testimony Under Fed. R. Civ. P. 26 and FRE 702, 703 and 705 • Preparation of expert witnesses is an ongoing process
Keep in mind problems jurors have with experts, i.e., argumentative, evasive, arrogance, language too complex, etc.
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Basis for Expert Testimony under FRE 702 • Admissibility of Expert Opinions Governed by FRE 702 • "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 … 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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The Judge as Gatekeeper under FRE 702 The Supreme Court made clear in Daubert v. Merrell Dow Pharma., Inc., 509 U.S. 579 (1993) that courts have to play a gate-keeping role with respect to expert testimony under FRE 702. A party can offer testimony of an expert only if the expert is qualified, the methodology used by the expert is reliable and has been subject to peer review, and the opinion fits the facts of the case at hand. With regards to the latter quality, the data underlying the expert's opinion must pass muster under FRE 104 (the type of data reasonably relied on by experts in the field) and 703. 12 Winston & Strawn LLP © 2011
Antitrust Cases Have Routinely Applied Daubert Rules Gatekeeper judge in antitrust case must establish that plaintiffs' expert testimony is sufficiently reliable under FRE 702, is scientifically valid, and properly applied to the facts of the case -- further questions about reliability beyond the initial standard of reliability are for the jury to consider. Energy Mktg. Services, Inc. v. Columbia Gas Transmission Corp., 2009 WL 778778 (S.D. W. Va. March 17, 2009) (Chambers, J.).
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Antitrust Cases Have Routinely Applied Daubert Rules (Cont'd.) Experts' submission of unreliable testimony in effort to define relevant markets resulted in dismissal of plaintiffs' Sherman Act Sections 1 and 2 claims. Testimony was unreliable in that its methodology was never tested or subjected to peer review, had no support within the scientific community and was produced solely for the litigation. Kentucky Speedway, LLC v. NASCAR, 588 F.3d 908 (6th Cir. 2009). 14 Winston & Strawn LLP © 2011
FRE 703: Basis of Opinion Testimony by Experts Under FRE 703, an expert can base his or her opinion on facts or data that are not admissible in evidence if the evidence is of a type reasonably relied upon by experts in the particular field in forming opinions or inferences on the subject. Courts routinely admit this sort of evidence, not for the truth of the matters asserted, but to inform the jury of the basis of the expert's opinion. In re James Wilson Associates, 965 F.2d 160, 172-73 (7th Cir. 1992). Except in criminal cases where the Confrontation Clause overlay and analysis make things more complicated, United States v. Lawson, 653 F.2d 299, 302 (7th Cir. 1981), many courts seem to have been largely untroubled by the potential inability of the jury to disregard the hearsay aspects of the evidence. United States v. 68.94 Acres of Land, 918 F.2d 389, 393 (3d Cir. 1990); Lewis v. Rego Co., 757 F.2d 66, 73 (3d Cir. 1985) (error not to allow one expert to testify as to his conversation with another expert when expected testimony would have shown there was no divergence of opinion); Trepel v. Roadway Express, Inc., 194 F.3d 708 (6th Cir. 1999) (reversible error to prohibit an expert from testifying to out-of-court conversations with others regarding their willingness to sell artifacts like that at issue in the case in order to show the jury the basis of the expert's valuation). 15 Winston & Strawn LLP © 2011
FRE Rule 703: Basis of Opinion Testimony by Experts (Cont'd.) This is not to say that courts have been insensitive to the problems that could result from jury exposure to the hearsay underlying the expert's testimony, or that the cases do not attempt to articulate the considerations that delimit the broad range within which lines must be drawn and do not attempt to relate these considerations to the facts of the particular case. But the results of the cases are anything but harmonious. See Annotation, Admissibility of Testimony of Expert, as to Basis of His Opinion, to Matters Otherwise Excludible as Hearsay—State Cases, 89 A.L.R. 4th 456 (1991). 16 Winston & Strawn LLP © 2011
FRE Rule 703: Basis of Opinion Testimony by Experts (Cont'd.) Nonetheless, the liberality with which many courts dealt with the problem engendered considerable confusion about the interplay between Rule 703 and the hearsay rule. As a consequence, Rule 703 was amended in 2000 to add the following provision: “Facts or data that are otherwise inadmissible shall not be disclosed to the jury by the proponent of the opinion or inference unless the court determines that their probative value in assisting the jury to evaluate the expert's opinion substantially outweighs their prejudicial effect.” The amended rule emphasizes that when an expert reasonably relies on inadmissible information to form an opinion, the underlying information does not become admissible simply because the opinion testimony is admitted. Rather, the inadmissible evidence shall not be disclosed by the proponent of the opinion without the court's first performing the appropriate balancing test, which necessitates an assessment of the probable effectiveness of a limiting instruction, and without informing the jury that the underlying information cannot be used for substantive purposes. Jeffrey Cole, Hearsay, Juries, White Elephants, and Hippopotamuses, Litigation Magazine (ABA) (Winter 2004) 17 Winston & Strawn LLP © 2011
FRE Rule 703: Basis of Opinion Testimony by Experts (Cont'd.) •
Judge Posner’s opinion in Dura Automotive Systems of Indiana, Inc. v. CTS Corp., 285 F.3d 609 (7th Cir. 2002) is instructive, as it deals with the issue of an expert relying upon the work of others to formulate the expert’s opinion. In Dura Automotive, the plaintiff’s expert admitted that he was not an expert in a certain field and that he had relied upon modeling done by other employees to reach his conclusion. The defendant moved to strike the plaintiff’s expert, and the plaintiff responded with affidavits from the employees who had done the foundational modeling. The Seventh Circuit considered whether it was permissible for the expert to rely upon data from the four employees who were not themselves disclosed as experts. Writing for the court, Judge Posner held that an “expert witness is permitted to use assistants in formulating his expert opinion, and normally they need not themselves testify,” but the analysis “becomes more complicated if the assistants aren’t merely gofers or data gatherers but exercise professional judgment that is beyond the expert’s ken.” Id. at 613. Judge Posner noted that “a “scientist, however well credentialed he may be, is not permitted to be the mouthpiece of a scientist in a different specialty.” Id. at 614. After examining the expert’s report and the affidavits from the four employees, Judge Posner concluded that “[i]t is apparent from these affidavits that [the expert’s] assistants did not merely collect data for him to massage or apply concededly appropriate techniques in a concededly appropriate manner, or otherwise perform routine procedures, and that he himself lacks the necessary expertise to determine whether the techniques were appropriately chosen and applied.” Id. at 615.
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FRE Rule 703: Basis of Opinion Testimony by Experts (Cont'd.) • •
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Numerous cases from the Northern District of Illinois have analyzed and applied the court’s holding in Dura Automotive to cases dealing with the interplay between Rule 703 and the hearsay rule: In re Sulfuric Acid Antitrust Litig., 446 F. Supp. 2d 910, 915 (N.D. Ill. 2006) (Cole, J.) (“the permissibility of reliance on the data from the third party who will not be testifying is a question answered by the Federal Rules of Evidence, not by Rule 26. Each spoke at length to the principle that while Rule 703 was intended to liberalize the rules relating to expert testimony, it was not intended either to abolish the hearsay rule or to allow oblique evasions of it.”); Sommerfield v. City of Chicago, 254 F.R.D. 317, 321 (N.D. Ill. 2008) (Cole, J.) (holding that “under Rule 703, an expert may rely on hearsay in formulating his opinion if it is of the type reasonably relied on by experts in the field, and that the evidence is not admissible for the truth of the matters asserted” and noting that expert’s opinion depended “on the accuracy of the plaintiff’s lawyer’s several page summary of the thousands of pages of deposition testimony”); Loeffel Steel Prods., Inc. v. Delta Brands, Inc., 387 F. Supp. 2d 794 (N.D. Ill. 2005) (Cole, J.) (barring economic expert’s testimony because he was merely the mouthpiece for the defendant’s employees); Thakore v. Univeral Mach. Co. of Pottstown, Inc., 670 F. Supp. 2d 705, 720 (N.D. Ill. 2009) (Cole, J.) (denying motion to bar expert’s opinion without prejudice to proponent’s showing that the “reports are the type normally relied upon by surgeons in formulating opinions”).
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An Expert's Reliance on Hearsay Attempting to preclude an expert from being allowed to relate the underlying basis for an opinion may prove difficult even after the 2000 amendment to Rule 703. The amendment does, however, provide a textual basis for constraining admissibility of the underlying hearsay. The plain language of Rule 703 requires that the out-of-court declaration must be “of a type reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject ....” If it is not, it cannot be used for any purpose. Plourde v. Gladstone, 190 F. Supp. 2d 708, 719-21 (D. Vt. 2002). The expert's word that experts in the particular field regularly form opinions based on the kind of hearsay statements on which the expert claims to rely, is not final. It is for the court to make the decision under Rule 104. ID Security Systems Canada, Inc. v. Checkpoint Systems, Inc., 249 F. Supp. 2d 622, 695-96 (E.D. Pa. 2003). 20 Winston & Strawn LLP © 2011
Rule 703 also requires that the opinion must be “base[d]” on those declarations If it is not, Rule 703 precludes their admission for the non-hearsay purpose allowed by the rule. The declarations are then hearsay, and their introduction is prohibited by Rule 802. Terry v. Rice, 2003 WL 1921818, at *2 (S.D. Ind. Apr. 18, 2003) (plaintiff's expert said he relied on a doctor's letter in forming his opinion. In concluding that the letter should not have been admitted, the court said, “Rule 703, however, does not allow an expert witness to cure so easily the hearsay problem for what is otherwise inadmissible evidence.”).
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Courts carefully assess whether the expert testimony is in reality being used as a vehicle to evade the hearsay rule -either intentionally or inadvertently Hutchinson v. Groskin, 927 F.2d 722 (2d Cir. 1991) (expert referred to letters from three experts and said they were “consistent” with his opinion. The court of appeals reversed, condemning this “tactic” to evade the hearsay rule); State v. Vandeweaghe, 799 A.2d 1, 9 (N.J. Super. 2002) (“Simply put, ‘[e]xpert testimony is not a vehicle for the wholesale introduction of otherwise inadmissible evidence.”’); United States v. Dukagjinih, 326 F.3d 45, 57-59 (2d Cir. 2003) (“[I]n this case the expert was repeating hearsay evidence without applying any expertise whatsoever, thereby enabling the government to circumvent the rules prohibiting hearsay.”); Option Resource Group v. Chambers Dev. Co., Inc., 967 F. Supp. 846, 850 n.6 (W.D. Pa. 1996) (“‘Rule 703 cannot be used as a backdoor to get the evidence before the jury.”’); Plourde v. Gladstone, 190 F. Supp. 2d at 719-21 (If the doctors and veterinarians are not available at trial, then the toxicologist's opinion “really amounts to nothing more than inadmissible ‘hearsay in disguise’ under Rule 703.”); 22 Winston & Strawn LLP © 2011
Courts carefully assess whether the expert testimony is in reality being used as a vehicle to evade the hearsay rule -either intentionally or inadvertently (Cont'd.)
Law v. Na't Collegiate Athletic Ass'n, 185 F.R.D. 324, 341 (D. Kan. 1999) (“The NCAA basically presented [the expert] as a channeler, seeking to present nonexpert, otherwise inadmissible hearsay through the mouth of an economist.”); In re Lake States Commodities, Inc., 271 B.R. 575, 585 (Bankr. N.D. Ill. 2002) (otherwise inadmissible evidence relied upon by an expert “is not somehow transmogrified into admissible evidence simply because expert relies on it”); ID Security Systems Canada, 249 F. Supp. 2d at 622; Wantanabe Realty Corp. v. City of New York, 2004 WL 188088 (S.D.N.Y. Feb. 2, 2004) (expert relied on estimate from a builder of replacement cost 23 Winston & Strawn LLP © 2011
Courts carefully assess whether the expert testimony is in reality being used as a vehicle to evade the hearsay rule -either intentionally or inadvertently (Cont'd.) in forming opinion. “But an expert may not act as a ‘mere conduit’ for the hearsay of another.”); Charles Alan Wright & Victor James Gold, 29 Fed. Prac. and Proc. Evid. § 6273 (1997) (“Rule 703 does not authorize admitting hearsay on the pretense that it is the basis for expert opinion when, in fact, the expert adds nothing to the out-of-court statements other than transmitting them to the jury. In such a case, Rule 703 is simply inapplicable and the usual rules regulating the admissibility of evidence control.”).
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Can the Expert Report (replete with hearsay) be admitted? Consider arguing that the expert's report is itself hearsay and should be excluded. An additional argument is that there is no justification for admitting the expert report in addition to the expert's testimony, and that the report is “needlessly cumulative” evidence. Fed. R. Evid. 403. See Engebretsen v. Fairchild Aircraft Corp., 21 F.3d 721, 72829 (6th Cir. 1994) (expert reports were erroneously admitted on their direct examination because Rules 702 and 703 permit the admission of expert opinion testimony, not opinions contained in documents prepared out of court); State Dep't of Roads v. Whitlock, 634 N.W.2d 480 (Neb. 2001) (“‘Admission of evidence of this type is prejudicially erroneous because during its 25 Winston & Strawn LLP © 2011
Can the Expert Report (replete with hearsay) be admitted? (Cont'd.) deliberations, the jury might place more weight on written summaries than on its collective recollection of the actual testimony.”’); [Westfed Holdings, Inc. v. United States,] 55 Fed. Cl. 544, 569 (Fed. Cl. 2003) (expert reports were inadmissible for the truth of the matters asserted and inadmissible under Rule 703). But see NAACP v. A.A. Arms, Inc., 2003 WL 2003750, at *1 (E.D.N.Y. Apr. 4, 2003) (“As a general matter the admission of written expert reports into evidence when the expert has testified orally at trial is not redundant. Having available an expert's comprehensive written report may help a jury to more fully understand and evaluate that expert's testimony and conclusions and their impact on the case. Oral testimony is often chopped up and hard to follow. In some instances, the proponent may simply offer the report, subject to cross examination.”). 26 Winston & Strawn LLP © 2011
Exclusion of Expert Testimony • Motion in Limine • Failure to Comply with Disclosure Procedures under FRCP 26 and 37 • Challenge under FRE 702 or 703 • • •
Scope of relief can vary Completely exclude witness's and testimony Exclude part of witness' testimony
• Daubert and Related Cases 27 Winston & Strawn LLP © 2011
Where and When to Challenge? Antitrust expert opinions can be challenged in a formal Daubert motion, a motion to strike or exclude, or a motion in limine. Univac Dental Co. v. Dentsply Int'l, Inc., 2010 WL 1816745 (M.D. Penn. Apr. 27, 2010) (Conner, J.) (damages expert report is admitted as expert was not required to account for all possible outside factors causing losses as plaintiffs enjoy a considerable amount of leeway in constructing a hypothetical world free of defendants' exclusionary conduct). See also United Nat'l Maint., Inc. v. San Diego Convention Center Corp., Inc., 2010 WL 3034025 (S.D. Cal. Aug. 3, 2010). 28 Winston & Strawn LLP © 2011
Daubert Motions May Be Case Dispositive A motion to bar an expert's testimony under Rules 702 and 703 of the Federal Rules of Evidence and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), if granted, may make it impossible for the proponent of the testimony to prevail. Nonetheless, it is one of those non-dispositive matters that the magistrate judge may properly decide subject to an appeal to the district judge. Jeffrey Cole, Reversing the Magistrate Judge, Litigation Magazine (ABA Winter 2010) Exclusion of expert testimony in an antitrust case alleging that defendants used their monopoly power to charge supracompetitive prices resulted in dismissal of case. In re Fresh Del Monte Pineapples Antitrust Litig., 2009 U.S. Dist. LEXIS 97289 (S. D. N. Y. Sept. 30, 2009 ) (Berman, J.).
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Reported Daubert Decisions are on the upswing In Antitrust Cases • District Court erred in refusing to grant motion to strike forensic accountant damages expert's opinion who failed to account for other possible reasons for lost profits. Saks Fifth Avenue, Inc. v James, Ltd., 630 S.E. 2d 304 (Va. 2006) • Economist's use of inherently unreliable underlying data to construct profit and loss damage analysis caused motion to exclude expert testimony to be granted even though expert had used commonly accepted methodologies. ZF Meritor LLC v. Eaton Corp., 646 F. Supp. 2d 663 (D. Del. 2009) • When the expert's damages report in an antitrust case is unsupported by the record, exclusion is proper because the speculative report (seeking lost profits for 25 years into the future) can offer no assistance to the jury. Cole v. Homier Distrib. Co., 599 F.3d 856 (8th Cir. 2010) 30 Winston & Strawn LLP © 2011
Antitrust Injury under § 4 of Clayton Act also a Fertile Area for Expert Attack An expert's damages methodology must show that the alleged monopolistic activity was a substantial cause of the antitrust injury. This does not mean that expert must account for every conceivable causal connection between alleged illegal activity and harm. Remainder of defendants' objections to damages model goes to weight and credibility which can be adequately explored in crossexamination. Discover Fin. Services v. VISA USA, Inc., 582 F. Supp. 2d 501 (S.D.N.Y. Oct. 14, 2008) (Jones, J.).
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Antitrust Injury under § 4 of Clayton Act also a Fertile Area for Expert Attack (Cont'd.) Antitrust injury may also be established by economic expert testimony; however, if deemed unreliable and plaintiffs have nothing else to offer in the way of record support for antitrust injury, the case will be dismissed. Mercedes- Benz USA, Inc., v. Coast Automotive Group, Ltd., 362 Fed. Appx. 332, 2010 WL 258785 (3d Cir. Jan. 25, 2010)
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Don't Forget About Role of Daubert Analysis in Class Actions! Experts are used to establish common impact under FRCP 23; even in that event, the Daubert standards must be met. "Multiple regression analysis is not a magic formula" -- Judge Grady 'dug into' the econometric analysis of plaintiff's expert to conclude that it had several fundamental flaws and did not meet the requirement of FRE 702 that the expert had applied the principles and methods reliably to the facts of the case. Reed v. Advocate Health Care, 268 F.R.D. 573 (N.D. Ill. 2009).
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Don't Forget About Role of Daubert Analysis in Class Actions! (Cont'd.) There is certainly some authority to suggest that a full blown Daubert analysis is appropriate at the class certification stage. Reed, supra, at n. 20. The Supreme Court, however, has not addressed this issue under FRCP 23. See In re Hydrogen Peroxide Antitrust Litig., 552 F. 3d 305 (3d Cir. 2008). However, Daubert issues must be addressed before certifying a class under FRCP 23. Am. Honda Motor Co. v. Allen, 600 F.3d 813 (7th Cir. 2010). 34 Winston & Strawn LLP © 2011
Conclusion
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