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EEOC v. MORGAN STANLEY & CO.

July 2, 2004.

EEOC, et al., Plaintiffs,
v.
MORGAN STANLEY & Co., et al., Defendants.



The opinion of the court was delivered by: RONALD ELLIS, Magistrate Judge

OPINION & ORDER

I. INTRODUCTION

The parties in this class action sex discrimination lawsuit have submitted to the Court motions seeking to exclude expert testimony at trial under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). For the reasons discussed below, the motions to exclude Dr. Farrell Bloch, Dr. Barbara Gutek, Dr. William Wecker, Dr. Louis L. Wilde, and Sheldon Wishnick are DENIED; the motions to exclude Dr. William Bielby, Dr. June O'Neill, and Dr. Christopher Winship are DENIED, IN PART, and GRANTED, IN PART; and the motions to exclude Roger Blanc and Dr. Ira T. Kay are GRANTED.

  II. BACKGROUND

  The motions to exclude proposed experts span topics that include statistics, sociology, and damages. In total, plaintiff Equal Employment Opportunity Commission ("EEOC") has submitted six motions to exclude, plaintiff-intervenor Allison Schieffelin ("Schieffelin") has submitted one, and defendants Morgan Stanley & Co., Inc. and Morgan Stanley Dean Witter ("Morgan Stanley") have submitted three. Judge Richard M. Berman recently severed the EEOC's pattern and practice claim from Schieffelin's individual claims to conduct separate trials. See Order Dated June 3, 2004 at 1-2. Damages will be determined in a third, subsequent proceeding, in a format yet to be determined. See id. at 2. The experts challenged in the motions before the Court span all three proceedings.

  III. ANALYSIS

  A. STANDARD OF ANALYSIS

  Federal Rule of Evidence ("Rule") 702 governs the admissibility of expert testimony at trial:
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 thereto in the form of an opinion or otherwise, 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.
Rule 702, most recently amended in 2000, reflects the United States Supreme Court's analysis of the admissibility of expert testimony in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999). See FED. R. EVID. 702 advisory committee's notes at 423. The Daubert Court established that Rule 702 imposes a special role on the trial court to function as a "gatekeeper" regarding the admissibility of expert testimony, determining both its relevance and its reliability. 509 U.S. at 589; see also Amorgianos v. Nat'l R.R. Passenger Corp., 303 F.3d 256, 265 (2d Cir. 2002). The Court discussed a non-exhaustive list of specific factors that a court may consider, such as (1) whether the expert's theory or technique can be, or has been, tested; (2) whether the theory or technique has been subjected to peer review and publication, (3) the known or potential rate of error of a particular technique and the existence and maintenance of standards and controls, and (4) whether the technique or theory has been generally accepted in the scientific community. See Daubert, 509 U.S. at 593-94.

  In its Kumho opinion, the Court made clear that the trial court's gatekeeping obligation established under Daubert applies to all testimony based on "technical or other specialized knowledge," and not just scientific knowledge. Kumho, 526 U.S. at 141. It also held that the factors articulated in Daubert may apply to nonscientific expert testimony, id. at 150-51, but that the trial court possesses flexibility in determining what are reasonable measures of reliability. Id. at 152. The trial court's discretion in determining how to assess reliability, the Kumho court determined, should be as broad as its discretion regarding whether to find relevant evidence reliable. Id.; see also Robert Zaremba v. G.M.C., 360 F.3d 355, 357-58 (2d Cir. 2004).

  In Daubert, 509 U.S. at 595, the Court highlighted the fact that the trial court's focus regarding admissibility must be "solely on principles and methodology, not on the conclusions that they generate." See also Amorgianos, 303 F.3d at 266 ("the district court must focus on the principles and methodology employed by the expert, without regard to the conclusions the expert has reached or the district court's belief as to the correctness of those conclusions"). Testimony that meets the standards of Rule 702 is still subject to the rigors of "[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof," which provide the "traditional and appropriate means of attacking shaky but admissible evidence." Daubert, 509 U.S. at 596. The Advisory Committee Notes accompanying Rule 702 observe that "the rejection of expert testimony is the exception rather than the rule." FED. R. EVID. 702 Advisory Committee's Notes at 424; see also U.S. Info. Sys. v. IBEW Local Union No. 3, 313 F. Supp.2d 213, 226 (S.D.N.Y. 2004). Other evidentiary rules impact the trial court's assessment of the admissibility of expert testimony. The trial court must ensure that any testimony admitted meets the basic, foundational standard of admissibility set forth in Rule 104(a) of the Federal Rules of Evidence. See Daubert, 509 U.S. at 592-93; FED. R. EVID. 702 Advisory Committee's Notes at 423. The proponent of the proposed testimony continues to have the burden of establishing admissibility under Rule 104(a) by a preponderance of the evidence. See Bourjaily v. United States, 483 U.S. 171 (1987). The Court in Daubert also noted that Rule 403 provides the trial court with an important safeguard to limit otherwise relevant evidence. Id. at 595 (quoting Jack B. Weinstein, Rule 702 of the Federal Rules of Evidence is Sound: It Should Not be Amended (July 10, 1991), in 138 F.R.D. 631, 632).

  Finally, the trial court's determination regarding the admissibility of expert testimony is reviewed for abuse of discretion, Zaremba, 360 F.3d 355 at 357 (citing G.E. v. Joiner, 522 U.S. 136, 143 (1997)), and a "decision to admit or exclude expert scientific testimony is not an abuse of discretion unless it is `manifestly erroneous.'" Id. (quoting Amorgianos, 303 F.3d at 265).

  B. STATISTICAL EXPERTS

  1. Farrell Bloch

  The EEOC proposes to use the testimony of Dr. Farrell Bloch ("Bloch"), who holds a Ph.D. in labor economics, to "assist the jury in understanding whether there is a pattern of differential treatment with respect to compensation and promotion between men and women" in Morgan Stanley's Institutional Equities Division ("IED"). EEOC's Memorandum of Law in Opposition to Morgan Stanley's Motion to Exclude Expert Testimony of Dr. Farrell Bloch ("EEOC Mem. Opposing Excluding Bloch") at 1. In particular, the EEOC states that Bloch evaluated pay and promotion information from Morgan Stanley's personnel database, and found that it had paid comparable female employees less than men in similar departments. Id. at 2. He also found disparities in the promotion rates between men and women. Id. at 3. Bloch prepared an initial report in 2002, and a rebuttal report in 2004.

  Morgan Stanley argues that Bloch's testimony should be excluded because his opinions and statistical evidence are unreliable and irrelevant. See Morgan Stanley's Memorandum in Support of its Motion to Exclude Testimony of EEOC's Statistician Farrell Bloch at 1-2, 5-6. First, it asserts that Bloch's compensation analyses improperly group together employees performing different job functions, and his rebuttal report fails to cure this problem. Id. at 6-10. Because the elements of a pay discrimination case under Title VII require assessment of classmembers' pay in comparison to non-members for "work requiring substantially the same responsibility," id. at 6 (quoting Belfi v. Prendergast, 191 F.3d 129, 139 (2d Cir. 1999)), Morgan Stanley claims that Bloch's analyses are inadmissible. Second, while Bloch controls for department and length of service, id. at 13, Morgan Stanley asserts that his analyses do not incorporate non-discriminatory explanatory factors, and thus have no probative weight. Id. at 10-17. Third, Morgan Stanley claims that Bloch's analyses produce few statistically significant results. Id. at 17-21. Finally, Morgan Stanley claims that Bloch (1) improperly expanded his study to non-U.S. citizens in offices outside of the United States, who are not protected under Title VII, id. at 22; (2) improperly combined separate sets of results to create the appearance of statistically significant disparities, id. at 23-24; (3) used flawed methodology in his 2004 rebuttal report, id. at 25-27; (4) inappropriately pooled pay and promotion decisions by different decision makers, id. at 27-28; and (5) used software that produced fundamental errors. Id. at 28-30. The EEOC maintains that Bloch's testimony meets the requirements of Rule 702 and is admissible. See EEOC Mem. Opposing Excluding Bloch at 1, 4. It asserts that Bloch's use of experience and education are appropriate proxies for performance and productivity, id. at 9-10, and that even Morgan Stanley agrees that the variables it identified as missing are not objectively quantifiable. See id. at 8. The EEOC argues that these types of disputes should more properly be decided by the jury, and that Morgan Stanley has not come forth with analyses that rebut those of Bloch's studies. Id. at 10. The EEOC further notes that Bloch, in his rebuttal report, incorporated new analyses in an attempt to respond to Morgan Stanley's criticisms, and that the new analyses showed little difference. Id. at 3. The EEOC also submits a declaration by Bloch dated April 8, 2004, in which he points out that there exists no comprehensive, common database in this case. Declaration of Michael Ranis in Support of EEOC's Response to Morgan Stanley's Motion to Exclude Testimony of Plaintiffs' Expert Dr. Farrell Bloch, Exhibit 1 (Declaration of Dr. Farrell Bloch) at 2. As a result, Bloch states that the parties' analyses and critiques cannot properly be tested against each other. See id.

  The Court agrees with the EEOC that an evaluation of Bloch's testimony should be left to the jury and that Morgan Stanley's criticisms should be raised on cross-examination. First, Morgan Stanley does not dispute Bloch's academic qualifications. Disputes regarding the proper variables to employ in statistical studies are more properly left for juries to consider and to decide. Moreover, the variables identified by Morgan Stanley's statistical expert, Dr. William Wecker ("Wecker") — "an employee's ability to interact productively with other employees; assistance provided to co-workers; work ethic; participation in firm recruiting, mentoring and training; and competitive market dynamics. . . ." EEOC's Notice of Motion and Motion in Limine to Exclude the Opinions and Testimony of Dr. William Wecker, Exhibit 1 (Report of William Wecker, Ph.D.) at 4 — are subjective, and Wecker has identified no data that captures this information.*fn1 While Morgan Stanley is not required to perform its own analysis, the absence of such analysis means that the effect of such variables is speculative for statistical purposes. The jury can decide whether the objective items used by Bloch are reasonable substitutes. Finally, Wecker presents no data suggesting that characteristics not considered by Bloch vary by gender at Morgan Stanley.*fn2 At trial, each party may attempt to convince the jury what impact, if any, such variables might have on promotions. The Court thus finds that Bloch's testimony satisfies Rule 702, and concludes that Bloch's analyses are more probative than not. As a result, Morgan Stanley's motion is DENIED with respect to this proposed witness.

  2. William Wecker and Louis L. Wilde

  Morgan Stanley proposes to use the testimony and opinions of Wecker and Dr. Louis L. Wilde ("Wilde") to challenge the analyses and conclusions of Bloch. Morgan Stanley Memorandum of Law in Opposition to EEOC's Separate Motions to Exclude the Opinions and Testimony of William Wecker and Louis Wilde ("Morgan Stanley Mem. Opposing Excluding Wecker and Wilde") at 1. Wecker's report examines whether Bloch's statistical analyses permitted an inference that disparities in pay and promotion rates were caused by gender. Id. The report concludes that Bloch's 2002 compensation analyses "fail to consider the `two major determinates of compensation: job function and job performance,'" and that Bloch's compensation analysis does not take account of any factors assessed by IED managers. Id. at 2. Wecker also repeated and scrutinized Bloch's promotion analyses, and performed affirmative analysis of certain promotion data from 1995 to 2001, and concluded that there are many instances of statistical insignificance. Id. at 2-3. Wecker also concluded that Bloch, in his rebuttal report, was not able to cure the deficiencies that Wecker highlighted. Id. at 4. Wecker performed statistical analyses to support these criticisms. Id. at 4-5. In particular, he notes that Bloch was not able to incorporate "meaningful measures" of job function and job performance. Id. at 4.

  Wilde's report focuses on the validity of the statistical methods used by Bloch to estimate damages related to the claims that Morgan Stanley under-compensated and failed to promote women. See id. at 1. Through statistical analyses of Bloch's data, and his own affirmative analyses, Wilde claims to show that there are methodological shortcomings that render Bloch's calculations unreliable and irrelevant. Id. at 3-4. He also contends that his affirmative analysis demonstrates that the rate of growth in compensation is either identical for men or women, or favors women. Id. at 3. Wilde concludes that Bloch's 2004 report is also methodologically flawed. Id. ...


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