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Families Advocate, LLC v. Sanford Clinic North

United States District Court, D. North Dakota

February 11, 2019

The Families Advocate, LLC, an Arizona Limited Liability Corporation, as Conservator of D.M., a minor, and Sarina Bonno and Julian Moreno, individually, Plaintiffs,
v.
Sanford Clinic North d/b/a Sanford Clinic Jamestown, Sarah Schatz, M.D., and Lutheran Charity Association d/b/a Jamestown Regional Medical Center, Defendants.

          REPORT AND RECOMMENDATION ON MOTIONS TO EXCLUDE TESTIMONY OF STAN V. SMITH, PH.D.

          Alice R. Senechal, United States Magistrate Judge.

         In this action, plaintiffs allege medical negligence surrounding the 2014 birth of D.M. Plaintiffs are D.M.'s conservator-The Families Advocate, LLC-and D.M.'s parents-Sarina Bonno and Julian Moreno. Defendants are (1) Sarah Schatz, M.D., the attending physician at D.M.'s birth; (2) Sanford Clinic North d/b/a/ Sanford Clinic Jamestown, Dr. Schatz's employer; and (3) Lutheran Charity Association d/b/a Jamestown Regional Medical Center (JRMC), the hospital at which D.M. was born and which employs various healthcare providers involved in the care of D.M. and his mother.

         The Sanford defendants and JRMC move to exclude certain testimony of Stan V. Smith, Ph.D., an economist whom plaintiffs have disclosed to express opinions on damages sustained by D.M. and his family. The opinions defendants seek to exclude address reduction in value of D.M.'s life (RVL), loss of consortium, and loss of “household/family services.” (Doc. 57; Doc. 60). Plaintiffs oppose the motion. (Doc. 64). Defendants argue plaintiffs cannot meet their burden of proof as to admissibility of Dr. Smith's testimony. While they do not challenge Dr. Smith's qualifications, they contend his testimony is unreliable, not helpful to the fact-finder, not generally accepted in the economics community, confusing or misleading to the jury, unfairly prejudicial, time-wasting, and inconsistent with North Dakota law on damages. The court heard oral argument on the motion on December 18, 2018.[1]

         Background

         This dispute centers around hedonic damages, which Black's Law Dictionary defines as “damages that attempt to compensate for the loss of the pleasure of being alive.” Damages, Black's Law Dictionary (10th ed. 2014). Dr. Smith is a proponent of quantification of hedonic damages. To quantify hedonic damages, Dr. Smith uses a “willingness to pay” method, considering various economic indicators to estimate the “value of life” and the reduction in the value of a life resulting from an injury. (See Doc. 58-1, pp. 2-4).

         A recent case from the Western District of Missouri summarized Dr. Smith's qualifications:

Dr. Smith [is] a well-qualified expert in the fields of economics and finance. Dr. Smith has a Ph.D. in economics. He has been involved in research and education in the field of forensic economics for over forty years. He is President of Smith Economics Group, Ltd., former Vice President of the National Association of Forensic Economics, [and a] ten-year member of the Board of Editors of the Journal of Forensic Economics . . . . He has published scholarly articles and textbooks on the subject of forensic economics and taught the first course in forensic economics nationwide. Dr. Smith has specialized knowledge, skill, and training in the field of economics, and has been recognized as an economics expert in many courts throughout the country for more than three decades.

Streit v. Halverson, No. 17-4225-CV-WJE, 2018 WL 3763811, at *3 (W.D. Mo. Aug. 8, 2018).

         1. Dr. Smith's Proposed Testimony

         Plaintiffs disclosed two reports by Dr. Smith. One report addresses Dr. Smith's opinions on “(1) the reduction in value of life (‘RVL') [of D.M.], also known as loss of enjoyment of life; and (2) the loss of the society or relationship sustained by D.M.'s family.” (Doc. 58-1, p. 1).[2] Dr. Smith's second report addresses “(1) the loss of wages and employee benefits; (2) the loss of household/family services, including (a) the loss of the advice, counsel, guidance, instruction and training services sustained by D.M.'s family; (b) the loss of accompaniment services sustained by D.M.'s family; and (3) the present value of [D.M.'s] future life care.” (Doc. 58-2, p. 1). In their motions, defendants do not challenge Dr. Smith's testimony regarding D.M.'s loss of wages and employee benefits or regarding the cost of his future life care. (See Doc. 57; Doc. 60).

         Dr. Smith's opinion on D.M.'s RVL rests on an assumed value of life, which he derived from a “willingness to pay” framework. To arrive at a value of life, Dr. Smith uses economic studies that purport to consider what society pays to preserve the ability to lead a normal life. (Doc. 58-1, p. 3). The studies he considers are of three general categories: (1) consumer purchases of safety devices, (2) wage risk premiums paid to workers in occupations carrying a higher risk of death on the job, and (3) cost-benefit analyses conducted in connection with consideration of various health and safety regulations. Id. at 4. Based on his meta-analysis of various studies from those three categories, Dr. Smith estimates the value of a life to be $4, 700, 000 in 2017 dollars.[3] Id. He then assumed an “impairment rating benchmark of 95% reduction in [D.M.'s] ability to lead a normal life, ” and assumed D.M. has a life expectancy of 77.2 years. Id. at 4. He adjusted for inflation by estimating real wage growth of 1.00%-based on U.S. Bureau of Labor Statistics data-and adjusted to present value using an estimated annual real discount rate of 1.25%-based on U.S. Treasury investment yields. Under that methodology, Dr. Smith estimates the RVL of D.M.'s life to be $6, 874, 871. Id. at 2-5.

         Dr. Smith defines the “loss of society or relationship” as the loss to D.M.'s parents of the value of the love and affection D.M. would have provided to them but for his injury. Id. at 5. He states, “The value of the loss of society or relationship by family members with the injured can be based on a measure of the value of preserving the ability to live a normal life.” Id. Though not explaining why, Dr. Smith chose a “benchmark loss” of 20% for each parent and estimated the value of Moreno's loss to be $1, 137, 227 and the value of Bonno's loss to be $1, 282, 839. Id. The differences in the estimated losses of Moreno and Bonno are not explained in Dr. Smith's report but may be attributable to a difference in their ages and life expectancies.[4]

         Dr. Smith describes “household/family services” as a type of economic damages not including “loss of love, care, or affection, etc., but . . . the tangible services, valued as if they were provided by a person unknown to the household.” (Doc. 58-2, p. 4). Within the category of loss of “household/family services, ” Dr. Smith identifies two types of losses: (1) loss of the “advice, counsel, guidance, instruction and training services” (hereinafter loss of advice and counsel) that D.M.'s parents cannot expect to receive from him because of his injury, and (2) loss of the “household/family [accompaniment] services” (hereinafter loss of accompaniment services) that D.M. would have provided to his parents but for his injury. Id. Dr. Smith describes loss of advice and counsel as a tangible economic loss “beyond the physical housekeeping chores.” Id. at 12.

         To derive his estimate of the value of lost advice and counsel, Dr. Smith examined mean hourly earnings of “educational, vocational, and school counselors; marriage and family therapists; child, family and school social workers; social and human service assistants; clergy; directors of religious activities and education; coaches; elementary school teachers; and personal financial advisors.” Id. at 5. He calculated mean hourly earnings in those occupations to be $27.28 in 2016 dollars, using U.S. Bureau of Labor Statistics data. Id. Dr. Smith then adjusted the mean hourly earnings to account for non- wage components and overhead expenses. Id. Though not explaining why, he chose a benchmark loss to each parent of one half hour per day of D.M.'s advice and counsel, beginning when D.M. reaches age 25. Id. at 6. He estimates total loss of the value of D.M.'s advice and counsel as $208, 427 to Moreno and $279, 284 to Bonno. Id. Again, the reason for the difference between the estimated losses for the two parents is not explained, but may be attributable to a difference in their ages and life expectancies.

         Dr. Smith describes accompaniment services as the “normal social relationships that would be expected” between D.M. and his parents which were “completely disrupted” by his injury. Id. He based his estimate of the value of accompaniment services on mean hourly earnings of orderlies, attendants, home health aides, and personal care aides, which averaged $11.85 per hour in 2016 dollars using U.S. Bureau of Labor Statistics data. Id. at 7. He again adjusted to account for non-wage components and overhead expenses. Dr. Smith estimated D.M. would have provided his parents one hour of accompaniment services per day from ages 13 to 22 and a half hour per day thereafter, resulting in estimated total losses to Moreno of $148, 136 and to Bonno of $178, 901. Id. at 8.

         2. Defense Rebuttal Testimony

         JRMC disclosed an opinion of economic consultant David D. Jones, Ph.D., in response to Dr. Smith's reports. Dr. Jones has over forty years of experience in the field and a substantial number of professional publications. (Doc. 65-1, pp. 19-20). Dr. Jones' opinion is critical of Dr. Smith's hedonic damages opinions and of his general theory, which Dr. Jones asserts Dr. Smith introduced into litigation in Sherrod v. Berry, 629 F.Supp. 159, 162-64 (N.D. Ill. 1985), rev'd on other grounds, 856 F.2d 802 (7th Cir. 1988). (Doc. 65-1, p. 1).

         Dr. Jones points out that Dr. Smith uses the same estimate of value of life-$4, 700, 000-for all individuals, and so does not account for any differences among individuals.[5] Id. at 3. Dr. Jones analyzes the three categories of studies on which Dr. Smith's value of life estimation is based and asserts none of those studies can validly be used in the manner in which Dr. Smith employs them.

         As to studies on consumer behavior and purchases of safety devices, Dr. Jones points out a perception issue regarding consumer decisions to purchase smoke detectors. Dr. Jones asserts that, for Dr. Smith's methodology to be valid, consumers would have to be willing to “spend $100 on a device that lowers the risk of death from 30 to 28 per 10, 000 (by .00002 from .00030 to .00028).” Id. As Dr. Jones notes, the study of smoke detector purchases on which Dr. Smith relies acknowledges this problem:

[T]he individual is required to react to small changes in small probability and to distinguish between the probability reductions of 2 x 10-6 and 4 x 10-6. This is a risk perception/risk response problem which has not been sufficiently addressed. Yet, it is fundamental to the entire willingness-to-pay approach.

Id. (quoting Rachel Dardis, The Value of a Life: New Evidence from the Marketplace, 70 Am. Econ. R. 1077, 1081 (Dec. 1980)).

         Concerning wage-risk premium studies, Dr. Jones cites research showing an increased risk of death on the job does not necessarily lead to higher pay:

The analysis finds that there is no statistically significant evidence that changes in occupational mortality are associated with changes in wages and, thus, there is no empirical basis for using the willingness-to-pay concept as a reliable method for valuing a life or evaluating regulatory policies.

Id. at 4 (quoting William P. Jennings & Albert Kinderman, The Value of a Life: New Evidence of the Relationship Between Changes in Occupational Fatalities and Wages of Hourly Workers, 1992 to 1999, 70 J. Risk and Ins. 549, 549 (Sept. 2003)) (using Bureau of Labor Statistics data for the period 1992-1999).

         As to the cost-benefit studies done in connection with consideration of government regulations, Dr. Jones points out that many of the researchers who provided data on which Dr. Smith relies have rejected the idea of using that data for determining the value of life in litigation. Id. at 5-6. Dr. Jones and the researchers whom he cites assert that governmental estimates, made in the context of regulatory policy decisions, are “not in any way connected with the joie de vivre [joy of living] that an individual or family members might lose” because of an injury. Id. at 6.

         Dr. Jones also criticizes Dr. Smith's use of 95% RVL and 20% loss of society in estimating losses of D.M. and his parents. Id. at 7. Dr. Smith's report cites an article, which he co-authored, stating that determination of those percentages requires ratings and judgments of a psychologist or mental health professional evaluating the individual subject. See Edward P. Berla, Michael L. Brookshire, and Stan V. Smith, Hedonic Damages and Personal Injury: A Conceptual Approach, 3 J. Forensic Econ., No. 1, at 3 (Winter 1990). As Dr. Jones notes, “Dr. Smith has not revealed the name of the medical professional who determined that D.M. will lose 95% and his family 20% each of their joie de vivre in the next seven decades.” (Doc. 65-1, p. 7).

         As to Dr. Smith's estimated loss of the value of D.M.'s “household/family services, ” Dr. Jones questions Dr. Smith's assumption that, after age 25, D.M. would provide advice and counsel for one-half hour per day to each parent, and accompaniment services for one-half hour per day to each parent. Dr. Jones cites a recent government survey showing that men, on average, spend less that five minutes per day caring for and helping adults who are not part of their household. Id. at 17 (citing U.S. Department of Labor, Bureau of Labor Statistics “American Time Use Survey-2016 Results, ” USDL-11-0880, June 27, 2017).

         Dr. Jones also cites a series of surveys of members of the National Association of Forensic Economics regarding testimony about hedonic damages. Id. at 8-12. From 1990 to 2017, the surveys reflect a decline in the number of forensic economists providing or willing to provide hedonic damages testimony, from 83 out of 159 in 1993 to 6 out of 165 in 2012. Id. at 12. Dr. Jones opines that these surveys “[do] not support [Dr. Smith's] contention that [hedonic damages] is ‘generally accepted.'” Id. at 13.

         Law and Discussion

         Analysis begins with Federal Rule of Evidence 702, which provides:

A witness who is qualified as an e xpe rt by knowledge, sk ill, experience, training, or education may testify in the form ...

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