Beltran v. Noonan et al
Filing
813
ORDER denying 606 Motion to Exclude Expert Testimony of William Kerr Pursuant to F.R.E. 702 by Magistrate Judge Kathleen M. Tafoya on 1/24/2018. (jgonz, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Magistrate Judge Kathleen M. Tafoya
Civil Action No. 14–cv–03074–CMA–KMT
JOHANA PAOLA BELTRAN,
LUSAPHO HLATSHANENI,
BEAUDETTE DEETLEFS,
DAYANNA PAOLA CARDENAS CAICEDO,
ALEXANDRA IVETTE GONZALEZ,
SARAH CAROLINA AZUELA RASCON,
LAURA MEJIA JIMENEZ,
JULIANE HARNING,
NICOLE MAPLEDORAM, and those similarly situated,
Plaintiffs,
v.
INTEREXCHANGE, INC,
USAUPAIR, INC.,
GREAT AUPAIR, LLC,
EXPERT GROUP INTERNATIONAL INC., d/b/a Expert AuPair,
EURAUPAIR INTERCULTURAL CHILD CARE PROGRAMS,
CULTURAL HOMSTAY INTERNATIONAL,
CULTURAL CARE, INC. d/b/a Cultural Care Au Pair,
AUPAIRCARE INC.,
AU PAIR INTERNATIONAL, INC.,
APF GLOBAL EXCHANGE, NFP, d/b/a AuPair Foundation,
AMERICAN INSTITUTE FOR FOREIGN STUDY d/b/a Au Pair in America,
AMERICAN CULTURAL EXCHANGE, LLC, d/b/a GoAuPair,
GOAUPAIR OPERATIONS, LLC, d/b/a GoAuPair,
AGENT AU PAIR,
A.P.EX. AMERICAN PROFESSIONAL EXCHANGE, LLC d/b/a/ ProAuPair, and
20/20 CARE EXCHANGE, INC. d/b/a The International Au Pair Exchange,
Defendants.
ORDER
This matter is before the court on “Defendants’ Motion to Exclude Expert Testimony of
William Kerr Pursuant to F.R.E. 702” [Doc. No. 606]. “Plaintiffs’ Opposition to Defendants’
Daubert Motion as to Class Certification Opinions” [Doc. No. 650] was filed on August 8, 2017
and Defendants’ Reply in Support of Defendants’ Motion to Exclude Expert Testimony of
William Kerr Pursuant to F.R.E. 702 (ECF No. 606)” [Doc. No. 666] was filed on August 21,
2017. A hearing was conducted on January 9, 2018.
A detailed and lengthy motion for Fed. R. Civ. P. 23 class certification has been filed by
the Plaintiffs.1 [Doc. No. 562/559.] Defendants vigorously oppose such certification. The class
action is “an exception to the usual rule that litigation is conducted by and on behalf of the
individual named parties only.” Califano v. Yamasaki, 442 U.S. 682, 700–701 (1979). To come
within the exception, a party seeking to maintain a class action “must affirmatively demonstrate
his compliance” with Rule 23. Wal–Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). The
Rule “does not set forth a mere pleading standard.” Id. Rather, a party must not only be prepared
to prove that there are, in fact, sufficiently numerous parties, common questions of law or fact,
typicality of claims or defenses, and adequacy of representation, as required by Rule 23(a), but
also satisfy through evidentiary proof at least one of the provisions of Rule 23(b). Rule 23(b)(3)
requires a court to find that “the questions of law or fact common to class members predominate
over any questions affecting only individual members.” Comcast Corp. v. Behrend, 569 U.S. 27,
33 (2013). As stated by the dissent in Comcast, “it remains the ‘black letter rule’ that a class
may obtain certification under Rule 23(b)(3) when liability questions common to the class
predominate over damages questions unique to class members.” Id. at 42–43.
1
Preliminary certification of an FLSA collective action was entered on June 9, 2017. [Doc. No.
569.]
2
In attempting to meet the burden to show treatment as a class action is justified in this
case, the plaintiffs presented two expert reports from William O. Kerr. (See “Expert Report of
William O. Kerr” (“Kerr Rpt.”) [Doc. No. 560-65] and “Rebuttal Expert Report of William O.
Kerr” (“Kerr Rebut. Rpt.”) [Doc. No. 560-66].) As it relates to Dr. Kerr’s reports and expert
testimony, the District Court will be required to consider the common impact on the members of
the proposed class from the complained-of activities. The activity is allegedly conspiring to fix
the stipend paid to au pairs at an artificially and illegally low $195.75 per week. Dr. Kerr, an
economist, presents two models which address the harm (or damages) to the au pair class(es)
caused by Defendants’ alleged anti-competitive behavior. Both models utilize the so-called
“but-for” comparative analysis, meaning that the expert looks to the economic circumstances that
would likely have transpired absent the wrongdoing by Defendants.
Dr. Kerr concludes that “but-for the actions of the defendants, standard au pairs would
have been paid at least the legally required amount of weekly stipend.”2 (Kerr Rebut. Rpt. at 11,
¶ 20, emphasis added.) Given this conclusion, Dr. Kerr presents the court with a model for
calculation of damages for the proposed classes at the floor – to wit: at least the legally required
amount of stipend pursuant to federal and state minimum wage laws – and another model
applicable to the competitive ceiling – to wit: comparing the au pair class in this case against
benchmark groups of workers operating in the free market of the United States, which includes
within it, the market’s legislative restrictions such as minimum wage laws.
2
What dollar figure actually represents the “legally required amount” is also in dispute. See
Second Amended Complaint [Doc. No. 395], Count VIII, violations of the Fair Labor Standards
Act.
3
Defendants assert Dr. Kerr’s opinions should be disallowed because he lacks any
workable methodology for calculating damages on a class-wide basis. As a preliminary
challenge, Defendants claim that a survey Dr. Kerr relied upon in determining that all the au pair
classes nearly uniformly received $195.75 per week as a stipend did not comply with
professional standards that govern survey research. Second, Defendants claim Dr. Kerr’s “Wage
and Hour Law Compliance Model” for computing damages for the classes is a mere restatement
of Plaintiffs’ legal position concerning labor law violations and is therefore inapplicable to an
antitrust class. Third, Defendants claim Dr. Kerr’s “Price Competition Model” lacks a reliable
basis for calculating damages because the benchmark comparative groups chosen by Dr. Kerr are
flawed and the Price Competition Model does not live up to the standards set by Daubert v.
Merrell Dow Pharms., Inc., 509 U.S. 579 (1993) for the admissibility of expert opinion
testimony. Defendants therefore urge that Dr. Kerr’s reports and testimony should be stricken
and not considered for any purpose in the court’s determination regarding Rule 23 class
certification.
A.
Dr. Kerr’s Survey Results
Commonality requires the plaintiffs to demonstrate that the class members have suffered
the same injury. Gen. Tel. Co. of the Southwest v. Falcon, 457 U.S. 147, 157 (1982). This does
not mean merely that they have all suffered a violation of the same provision of law. Dukes, 564
U.S. at 349–50. In considering the applicability of class treatment, the District Court’s analysis
will likely entail “overlap with the merits of the plaintiff[s’] underlying claim[s].” Id. That is so
because the “‘class determination generally involves considerations that are enmeshed in the
factual and legal issues comprising the plaintiff’s cause of action.’” Falcon, 457 U.S. at 160
4
(internal quotations omitted); Comcast, 569 U.S. at 33-34. Dr. Kerr opines that the proposed
classes suffered common harm from the complained-of actions of Defendant because the au pairs
“were paid for employment at amounts below what they would have been paid had Defendants’
complied with the law[.]” (Kerr Rebut. Rpt. at p. 5, ¶ 4.)
Obviously, the amount of money the putative class members were paid is the first step in
any analysis which seeks to prove that the payment was insufficient. To determine that amount,
Dr. Kerr reviewed the extensive evidence of Defendants’ business practices, which show that
every one of the defendants consistently represented the stipend as “fixed,” “set,” or that it
simply “is” $195.75. (Kerr Rep. at 16.) The evidence relied upon by Dr. Kerr included:
contemporaneous business records of the actual stipend amount, including statements
Defendants made about the stipend in their marketing materials, policies and guidelines (Kerr.
Rebut. Rpt. at ¶ 14); Defendants’ standard form contracts, which attempt to legally bind the au
pairs to the represented stipend (id. at 17-18, 20); Defendants’ own ordinary-course surveys,
showing that host families uniformly adhere to Defendants’ fixed wages (id. at 22); and the
parties’ depositions, which also support the proposition that au pairs were paid a fixed wage (id.
at 17, 19-22). (See also Kerr Rep. ¶¶ 39-55 & Exs. 7-10.)
Dr. Kerr also gathered information to support his findings from sponsor announcements
to au pair candidates and potential host families, sponsor organization marketing material
directed toward host families, a declaration from a host parent, deposition testimony of a foreign
au pair agency director who worked with U.S. sponsors to place au pairs, monthly contact reports
administered by certain sponsors and audit reports submitted to the Department of State. (Kerr
Rebut. Rpt. at 7-8.) In paragraph 18, id., Kerr lists at least five other sources evidencing that au
5
pairs were paid $195.75 per week by host families at the direction of all the sponsor
organizations. All those sources—direct and indirect, contemporaneous and retrospective—
show the same thing. Au pairs’ wages were consistently fixed at or very near $195.75 per week.
Id.; see also Rule 23 Mot. at 33 n.43 (Rodr. Decl. Ex. 30); Kerr Rep. ¶ 51. Into this broad mix of
evidentiary sources comes the survey about which Defendants complain.
Dr. Kerr’s survey was provided to every host family for which Defendants provided an
email. There was “no sampling involved at all.” (Resp. at 10.) A total of 8,806 families
responded, of which 4,583 both (1) concerned an au pair within one of the alleged classes and (2)
contained a specific response to the question “what was the typical weekly stipend amount
paid?” (Id.) The only other question on the survey was the year the au pair worked and the type
of au pair the host family employed. While the numbers of responses were in the thousands, as a
percentage of the whole, the number of responding host families represented only an 18%
response rate from the total number of surveys sent out. (Mot. at 13.)
If the survey were the only evidence supporting the base finding that au pairs were paid
$195.75 per week, such a low response rate would have to be carefully considered, even though
it reached a very broad spectrum of host families in the au pair group.3 But such is not the case
here. The survey in question was merely some confirmation of all the other voluminous
evidence supporting the conclusion that putative class member au pairs were almost uniformly
paid $195.75 per week as a stipend by the host families.
The court finds that even if the survey and its results were discounted entirely, Dr. Kerr’s
conclusion that “all, or a substantial majority of, au pairs were offered and paid a weekly stipend
3
The responses covered every Defendant and almost every state, spanning a period of 10 years.
(Resp. at 10.)
6
of approximately $195.75” (Kerr Rpt. ¶ 39) is amply supported by the other overwhelming
evidence he considered. For class certification purposes, Dr. Kerr’s expert opinion that the
record demonstrates commonality with regard to the weekly stipend amount is based on
sufficient facts, data and testimony to render it reliable. See Fed. R. Evid. 702.
B.
Wage and Hour Law Compliance Model
The general principles governing antitrust damages are settled. A plaintiff must prove
there is a causal connection between an antitrust violation and an injury sufficient to establish the
violation as a substantial factor in the occurrence of damage. Sharp v. United Airlines, Inc., 967
F.2d 404, 407 (10th Cir. 1992). In other words, there must be some element of actual damages
caused by the defendant’s violation of the antitrust laws. Eleven Line, Inc. v. N. Texas State
Soccer Ass’n, Inc., 213 F.3d 198, 206 (5th Cir. 2000). If some damages attributable to the
antitrust activities are shown, a more relaxed burden of proof applies for the amount of damages
than would justify an award in other civil cases. Id.
Relying upon the Supreme Court reasoning in Comcast Corp. v. Behrend, Defendants
argue that when a plaintiff asserts an antitrust injury, presenting a damages model pertinent to a
wage law claim is not adequate to support commonality of damages in an antitrust class
certification. Defendants broadly advance the holding of Comcast as “Plaintiff cannot utilize a
damages theory for one claim (i.e. labor) to obtain certification for another (i.e. antitrust).”
Reply at 3. This court disagrees with Defendants’ reading of Comcast.
In Comcast, the Respondents4 claimed that they, and other Comcast subscribers in the
Philadelphia area, were harmed by Comcast’s behavior of ‘clustering’ which they claimed
4
Respondents were the named plaintiffs in the underlying class-action antitrust suit.
7
resulted in four different kinds of antitrust injury which lessened area competition and led to
supra-competitive prices. The Respondents’ theories of antitrust injury were that: (1) Comcast’s
clustering made it profitable for Comcast to withhold local sports programming from its
competitors, resulting in decreased market penetration by direct broadcast satellite providers; (2)
Comcast’s clustering reduced the level of competition from “overbuilders,” companies that build
competing cable networks in areas where an incumbent cable company already operates; (3)
Comcast’s clustering reduced the level of “benchmark” competition on which cable customers
could rely to compare prices, and; (4) Comcast’s clustering increased its bargaining power
relative to other content providers. Each of these forms of impact, Respondents alleged,
increased Comcast’s cable subscription rates throughout the Philadelphia area. Comcast, 569
U.S. at 31. The District Court accepted only one of Respondent’s theories of antitrust injury ̶
that Comcast’s clustering intentionally lessened competition from “overbuilders.” Id.
Accordingly, in its certification order, the District Court limited Respondents’ “proof of antitrust
impact” to “the theory that Comcast engaged in anticompetitive clustering conduct, the effect of
which was to deter the entry of overbuilders in the Philadelphia DMA.” Id. Given that ruling, if
the Respondents were to prevail on their claim, the Supreme Court held they would be entitled
only to damages resulting from reduced overbuilder competition, since that is the only theory of
antitrust impact accepted for class-action treatment by the District Court, stating,
It follows that a model purporting to serve as evidence of damages in this class
action must measure only those damages attributable to that theory. If the model
does not even attempt to do that, it cannot possibly establish that damages are
susceptible of measurement across the entire class for purposes of Rule 23(b)(3).
Id. at 35. Simply put, the Supreme Court held
8
at the class-certification stage (as at trial), any model supporting a “plaintiff's
damages case must be consistent with its liability case, particularly with respect to
the alleged anticompetitive effect of the violation.”
Id. (quoting ABA Section of Antitrust Law, Proving Antitrust Damages: Legal and Economic
Issues 57, 62 (2d ed. 2010).
Unfortunately for Respondents in Comcast, their expert put forth a model for damages
which considered all four liability injury theories together, without a provision for calculating
injury arising just from the overbuilders behavior. In fact, at a hearing before the lower court,
Respondents’ expert admitted that his model calculated damages resulting from “the alleged
anticompetitive conduct as a whole” and did not attribute damages to any one particular theory
of anticompetitive impact. Id. at 36-37. The court found it improper to consider a methodology
in support of commonality that identifies damages that are not the result of the specific antitrust
damage alleged. Id. at 37-38.
In this case, there is one theory of antitrust misconduct – that Defendants conspired to fix
the weekly stipend payable to au pairs by their host family at $195.75. So far this is similar to
Comcast. There, the antitrust misconduct was alleged to be ‘clustering.’ In Comcast, the
Respondents identified four distinct types of antitrust injury arising from the misconduct. Here,
Plaintiffs identify two types of antitrust injury, the failure to pay au pairs at least a minimum
wage as prescribed by law and the failure to pay au pairs comparable to other groups of childcare
workers in the United States. In Comcast, there was one model of damages which the court held
impermissibly conflated all four injury theories and which was, thus, not supportive of the
commonality prong pertaining to class-wide injury. In this case, Dr. Kerr presents two models of
damages corresponding to the two theories of antitrust injury. Both models, together and
9
separately, apply to the class as a whole. If the case ultimately moves forward on both injury
theories, the models work together to show both the floor of damages accounting for minimum
wage laws and also the ceiling supported by a competitive model. If one of the theories of
antitrust injury were to not go forward, the expert has presented separate models each aimed at
the specific antitrust injury alleged. Each model would separately address the but-for calculation
showing wages au pairs should have expected to receive absent a conspiracy to fix the amount of
stipend paid to au pairs. The existence of the two separate damages models successfully
remedies the problem the Supreme Court discussed in Comcast.
The court finds that Comcast does not bar a model of damage calculation based on au
pairs’ entitlement to at least the federal, state and local minimum wage laws, simply because a
similar method would be used to calculate damages for the labor law claims involving the same
classes of au pairs also brought in the case. The antitrust laws’ underlying policy is to assure that
anticompetitive conduct does not go unpunished for mere uncertainty in the amount of loss
inflicted. Eleven Line, Inc., 213 F.3d at 209. This is precisely the reason behind inclusion of the
Wage Loss Model of damages proposed by Dr. Kerr. His models provide that in no event,
should the Plaintiffs prevail on their wage loss and antitrust claims, should the stipend payable to
au pairs have been less that that prescribed by the federal, state and local minimum wage laws.
In the antitrust context, the damages are based on a but-for scenario, to wit: but for the
defendants’ antitrust conduct, i.e. the conspiracy to fix the weekly stipend payable to all au pairs
at $195.75, the au pairs’ weekly pay rate would have been at least the minimum wage set by
federal, state and/or local authorities.
10
This court finds the Wage and Hour Compliance model set forth by Dr. Kerr is
appropriate under the holding of Comcast and supports one theory of antitrust injury derived
from Defendants’ alleged antitrust behavior.
C.
Scientific Methodology – Reliability and Fit
The proponent of an expert’s opinion testimony on the issue of class certification as well
as other litigation issues bears the burden of establishing that the expert is qualified, that the
methodology he or she uses to support his or her opinions is reliable, and that his or her opinion
fits the facts of the case and thus will be helpful to the tribunal. Norris v. Baxter Healthcare
Corp., 397 F.3d 878, 881 (10th Cir. 2005). See Ralston v. Smith & Nephew Richards, Inc., 275
F.3d 965, 970 n.4 (10th Cir. 2001); Mitchell v. Gencorp Inc., 165 F.3d 778, 781–82 (10th Cir.
1999); Cook v. Rockwell Int’l Corp., 580 F. Supp. 2d 1071, 1083 (D. Colo. 2006) (the proponent
of an expert witness must demonstrate the expert’s proffered testimony meets Rule 702’s
requirements—relevance/fit, qualifications, and reliability—before the expert’s testimony will be
admitted.) The qualification standard is expressed in the Rule itself and is not, alone, the thrust
of Defendants’ motion.5 Rule 702 allows expert testimony if the witness is “qualified as an
expert by knowledge, skill, experience, training, or education.” Fed. R. Evid. 702.
In addition to the expert’s qualifications, however, expert testimony must be based on a
reliable methodology to be admissible. See, e.g., Bitler v. A.O. Smith Corp., 400 F.3d 1227,
1232 (10th Cir. 2005). The “reliability” prong requires that “the expert’s opinion must be based
on the ‘methods and procedures of science' rather than on ‘subjective belief or unsupported
5
Defendants have not attacked Dr. Kerr’s credentials other than his qualification to design and
administer a survey. (See Section A herein.) Given the court’s findings concerning the survey’s
impact, it is unnecessary to address Dr. Kerr’s expertise in survey drafting.
11
speculation'; the expert must have ‘good grounds’ for his or her belief.” Magdaleno v.
Burlington N. R. Co., 5 F. Supp. 2d 899, 902 (D. Colo. 1998) (quoting Daubert, 509 U.S. at 59293.) An assessment of “the reliability of scientific evidence under Rule 702 requires a
determination as to its scientific validity.” In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 742
(3d Cir. 1994) Where the expert’s “factual basis, data, principles, methods, or their application
are called sufficiently into question, . . . the trial judge must determine whether the testimony has
‘a reliable basis in the knowledge and experience of [the relevant] discipline.’” Kumho Tire Co.
v. Carmichael, 526 U.S. 137, 149 (1999) (internal quotations omitted).
Reliability does not mean, however, that the offering party must prove “that the expert is
indisputably correct” for the expert evidence to be admissible. Cook, 580 F. Supp. 2d at 1085
(internal quotations omitted). Rather, the party need only prove that “the method employed by
the expert in reaching the conclusion is scientifically sound and that the opinion is based on facts
which sufficiently satisfy Rule 702’s reliability requirements.” Id. (internal quotations omitted).
“The evidentiary requirement of reliability is lower than the merits standard of correctness.” In
re Paoli, 35 F.3d at 744 (quoted with approval in Fed. R. Evid. 702, 2000 advisory committee’s
note), and gaps or inconsistencies in an expert’s reasoning may go to the weight of the expert
evidence, not its admissibility. Cook, 580 F. Supp. 2d at 1085. See, e.g., Campbell v. Metro.
Prop. & Cas. Ins. Co., 239 F.3d 179, 186 (2d Cir.2001). As the Supreme Court acknowledged in
Daubert, expert evidence can be “shaky” and yet still admissible, and may be attacked through
the traditional means of “[v]igorous cross-examination, presentation of contrary evidence, and
careful instruction on the burden of proof . . . .” Daubert, 509 U.S. at 596. Maintaining this
distinction between the evidentiary requirement of reliability and the higher standard of whether
12
the expert’s conclusions are correct or sufficient to prove the merits “is indeed significant as it
preserves the fact finding role of the jury.” In re TMI Litig., 193 F.3d 613, 665 n.90 (3d Cir.
1999); Cook, id. A key component of the analysis here is that the expert testimony is offered to
assist the court, not the jury, in making a decision concerning certification of a Rule 23 class.
If the two prongs of reliability and qualification are satisfied, the court must then decide
whether the expert testimony “fits.” “The Supreme Court has described the consideration of
relevant evidence as one of ‘fit.’” Bitler, 400 F.3d at 1234 (quoting Daubert, 509 U.S. at 591).
In other words, the court must also look to relevance. “It is the specific relationship between an
expert’s method, the proffered conclusions, and the particular factual circumstances of the
dispute that renders testimony both reliable and relevant.” Basanti v. Metcalf, 35 F. Supp. 3d
1337, 1342 (D. Colo. 2014), aff'd sub nom. Basanti v. United States, 666 F. App’x 730 (10th Cir.
2016). Even if an expert’s proffered evidence is scientifically valid and follows appropriately
reliable methodologies, it might not have sufficient bearing on the issue at hand to warrant a
determination that it has relevant fit.
The two most common methods of quantifying antitrust damages are the “before and
after” and “yardstick” measures of lost profits. See Lehrman v. Gulf Oil Corp., 500 F.2d 659,
668 (5th Cir. 1974). In the business profits context, the before and after theory compares the
plaintiff’s profit record prior to the violation with that subsequent to it. The yardstick test
consists of a study of the profits of entities or businesses that are closely comparable to the
plaintiff’s and who have not engaged in the complained of antitrust behavior. Although
allowances can be made for differences between the business to which the subject is compared,
the business used as a standard must be as nearly identical to the plaintiff’s as possible. Lehrman
13
at 667. In terms of considering an expert’s opinion, “Rule 702 and Daubert do not require an
expert to use the best method available, they only require that the evidence be relevant and
reliable.” Bullock v. Daimler Trucks N. Am., LLC, No. 08-CV-00491-PAB-MEH, 2010 WL
3922084, at *4 (D. Colo. Sept. 30, 2010) (internal quotations omitted).
Dr. Kerr’s Price Competition Model of antitrust damages is of the yardstick variety and
examines whether an au pair would have been paid more than the stipend they were actually paid
under Defendants’ regime (including whether an au pair would be paid more than the minimum
wage) under competitive conditions. (Kerr Rep. at ¶ 88.) This requires more inputs than the
Wage Compliance Model because two primary drivers of competitive wages are the local cost of
living in the area of the country where the au pair is employed, over a period of time, and the
relevant level of competition – the labor supply and demand across geographies. (Kerr. Rep. at
¶¶ 73, 97, 103.) The other key axis for labor markets according to Dr. Kerr is the qualification
and quality of workers in a given field and in a given location. (Id. at ¶¶ 70, 101.) A yardstick
comparison model therefore needs to predict the direction and degree of variation over time and
across geographies. It also needs to estimate the amount of a premium, if any, that buyers of
labor put on experience and qualifications. The process is known as “calibrating” the model, and
the first step is finding market-priced benchmarks. (Resp. at 7.)
The benchmarks proposed by Dr. Kerr are “childcare workers” as defined by the U.S.
Bureau of Labor Statistics (“BLS”) (Kerr Rpt. At ¶ 71) and “nannies” as described by the
International Nanny Association (“INA”) surveys. (Kerr Rpt. At ¶ 74.) The BLS explains that
“Childcare Workers” (Standard Occupational Classification 39-9011) tend “children at schools,
businesses, private households, and childcare institutions” and perform “a variety of tasks, such
14
as dressing, feeding, bathing, and overseeing play.” Bureau of Labor Statistics, Standard
Occupational Classification 39-9011, available at https://www.bls.gov/soc/2010/soc399011.htm.
The defendants object to this group as a benchmark for its au pairs because they claim that
although the BLS definition encompasses some workers in private households, Dr. Kerr does not
account for what proportion of the workers underlying the index work in private households - or
whether childcare workers in the other settings earned more or less than those in private
households.
The INA conducts surveys to estimate prevailing wages in various locales. Dr. Kerr
obtained survey results for 2009, 2011, 2012, 2013, and 2014. (Kerr Rep. ¶ 75.) The data
available as of the date of the class certification report already demonstrated that variables such
as experience levels could be estimated using the INA data. (Id. at ¶¶ 78-84.) The defendants
object to the use of the INA surveys as benchmarks because Kerr did not account for the
specialty types of nannies included in the survey, such as household managers, newborn care
specialists, or specialty nurses, did not analyze the differences in education levels and college
degrees, and did not analyze whether living with the family affects compensation. (Mot. at 6-7.)
Further, Defendants argue Dr. Kerr did not undertake any analysis to determine whether nanny
wages and au pair stipends had a predictable economic relationship during periods in which
Plaintiffs do not allege a conspiracy. (Mot. at 7.)
While there are differences between any group of workers, in order to be a benchmark the
group has to be similar but cannot be the same. A full analysis and proper calibration could
account for variables in the groups. Dr. Kerr’s model explains the presence of explicit
differentials and does not rely on national averages. See In re Pharmacy Benefit Managers
15
Antitrust Litig., No. CV 03-4730, 2017 WL 275398, at *21 (E.D. Pa. Jan. 18, 2017),
reconsideration denied, No. CV 03-4730, 2017 WL 1493029 (E.D. Pa. Apr. 26, 2017) (noting
that numerous courts have rejected the use of average price differentials to show evidence of
antitrust impact that is common to the class.) Dr. Kerr explains that the data and analysis he used
in his report are preliminary and that “additional factual development would allow for the full
specification of a mode.” (Kerr Rpt. at ¶ 103.) Dr. Kerr states that to complete an estimate
based on his Price Comparison Model he would look to obtain information of greater specificity
on various demographic, geographic, and economic factors that might explain the observed
differences in the earnings of the worker groups. Dr. Kerr acknowledges that a mere comparison
of au pairs to nannies, for instance, without accounting for numerous other factors would be
insufficient to attribute any difference in pay between the groups to the antitrust conduct
allegedly engaged in by the defendants. This does not render the Model insufficient or
unscientific at this stage, however. Instead, it is merely incomplete. Only if the defendants were
able to show that the differentials could not be analyzed and accounted for would the Model
itself be unfit.
If a model presented by an expert is workable, a District Court can only deny class
certification on the basis of this portion of the test “if it conclude[s] that no reasonable juror
could have believed” the model and its output. Tyson Food v. Bouaphakeos,___ U.S. ___, 136
S. Ct. 1036, 1049 (2016). Daubert must be carefully applied and “tailored” to the importance of
the expert opinion to the class certification decision. In re Zurn Pex Plumbing Prod. Liab. Litig.,
644 F.3d 604, 612 (8th Cir. 2011). The district court’s “gatekeeping function” under Daubert
ensures that expert evidence “submitted to the jury ” is sufficiently relevant and reliable, Bonner
16
v. ISP Technologies, Inc., 259 F.3d 924, 929 (8th Cir.2001) (emphasis added), but “[t]here is less
need for the gatekeeper to keep the gate when the gatekeeper is keeping the gate only for
himself.” United States v. Brown, 415 F.3d 1257, 1269 (11th Cir. 2005). A full and stringent
application of Daubert to this preliminary finding process can be both prejudicial or impractical
where (as in this case), the class certification and expert phases take place before the close of
discovery and therefore before the parties have the chance to fully develop the facts. Class
certification does not make final judgments or determinations, but looks forward to how the case
is likely to unfold and whether it will be practical, superior, and manageable to litigate on a class
basis. Id.
This court finds that, in this case, Dr. Kerr’s Report and Rebuttal Report meet the criteria
for consideration by the District Court at this stage of the class certification analysis and that
striking them on an over-technical application of Daubert is inappropriate at this time. See also
In re Urethane Antitrust Litig., 251 F.R.D. 629, 637 (D. Kan. 2008) (refusing to “disregard” the
plaintiffs’ expert’s opinion “[a]t this procedural juncture” because the court was “satisfied that
[plaintiffs’ expert’s] opinions are grounded in a sufficiently accurate understanding” of the
relevant industry), aff’d, 768 F.3d 1245, 1256 (10th Cir. 2014) (observing that the district court
certified the class despite the fact that “the court did not even have [plaintiffs’ expert’s] models
or any other sort of extrapolation evidence”); Johnson v. Arizona Hosp. & Healthcare Ass’n, No.
CV07-1292-PHX-SRB, 2009 WL 5031334, at *10 (D. Ariz. July 14, 2009) (“While the
benchmark model is not fully fleshed out in [the expert’s] report, the Court is satisfied that it
could be used to provide an estimate,” which “the Court can revisit . . . if it becomes clear at a
later point in the litigation that the benchmark method is flawed.”).
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Accordingly, it is
ORDERED that “Defendants’ Motion to Exclude Expert Testimony of William Kerr
Pursuant to F.R.E. 702” [Doc. No. 606] is DENIED.
Dated January 24, 2018.
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