The opinion of the court was delivered by: Thomas J. McAVOY Senior United States District Judge
Plaintiffs commenced the instant action against Defendants claiming that they conspired amongst themselves to keep down the wages of registered nurses in the Albany area. Presently before the Court are: (1) Defendants' Joint Motion to Exclude Expert Testimony of Orley Ashenfelter [Docket No. 355/358]; (2) Defendants' Joint Motion to Exclude Expert Testimony of Gregory Vistnes [Docket No. 344/356]; (3) Defendants' Joint Motion for Summary Judgment [Docket No. 345]; and (4) Plaintiffs' Motion to Exclude Portions of Expert Testimony of Robert Willig [Docket No. 342/343].
Plaintiffs allege that during the class period, June 20, 2002 to June 20, 2006, Defendants entered into at least two restraints of trade in violation of the Sherman Act. Count I alleges that Defendants engaged in a continuing conspiracy in restraint of trade to depress the compensation of RNs employed at hospitals in the Albany area. See Docket No. 1. Count II alleges that Defendants have engaged in a continuing agreement to regularly exchange detailed and non-public information about compensation being paid or to be paid to their RN employees, which not only facilitated the enforcement of the wage suppression conspiracy but unreasonably restrained competition on RN compensation in its own right. Id.
In a Decision and Order dated July 28, 2008, the Court certified a class of registered nurses with respect to two issues: "whether there has been a violation of antitrust law and whether there has been injury to the class that the Sherman Act was designed to prevent." Fleischman v. Albany Medical Center, 2008 WL 2945993, at *7 (N.D.N.Y. July 28, 2008). Following merits discovery, Plaintiffs moved the Court to amend the prior certification order to additionally certify the issues of impact and damages as to a narrower class of registered nurses. The Court denied Plaintiffs' motion. All Defendants have settled with Plaintiffs except Albany Medical Center and Ellis Hospital.
Presently before the Court are: (1) Defendants' Joint Motion to Exclude Expert Testimony of Orley Ashenfelter; (2) Defendants' Joint Motion to Exclude Expert Testimony of Gregory Vistnes; (3) Defendants' Joint Motion for Summary Judgment; and (4) Plaintiffs' Motion to Exclude Portions of Expert Testimony of Robert Willig. The facts as pertinent to each motion are set forth as follows.
a. Defendants Ellis and Albany Medical Center's Joint Motion to Exclude Expert Testimony of Orley Ashenfelter
Defendants move to exclude Orley Ashenfelter, who will testify concerning anticompetitive effect, injury-in-fact, and damages. Ashenfelter "currently serves as the Joseph Douglas Green Professor of Economics at Princeton, where he specializes in labor economics, and was recently elected to serve as President of the American Economic Association." See Plaintiffs' Opposition Memo. at 3. He has previously served "as the director of the Office of Evaluation of the U.S. Department of Labor and had testified for the Federal Trade Commission in a variety of antitrust matters." Id. at 4.
Ashenfelter opines "the fees that Defendants paid for agency nurses, when appropriately adjusted, are equal to or less than competitive staff nurse wages because in a competitive market employees are paid what they are worth." Plaintiffs' Opposition Memo. at 5. Ashenfelter selects agency nurses as a benchmark because they are used as a substitute for staff nurses in the workplace and their wages are not set by the Defendant hospitals.
Ashenfelter first determined the rates paid to agency nurses by Defendants during the class period. He then estimated separate competitive wages by hospital and year and for specialty and non-specialty jobs, shift differentials and on-call status because agency nurse wage rates were separately set for each of these variables. Next, these rates were adjusted so as to account for the flexibility offered by agency nurses and the additional costs incurred to employ staff nurses such as payroll taxes, workers compensation, human resources costs, and recruitment costs. Ashenfelter then compared this agency nurse wage benchmark to actual earnings of staff nurses, as reflected in payroll records. The analysis purports to take into account straight-time, overtime, shift differentials, on-call status, bonuses, and tuition.
Ashenfelter concluded that Plaintiffs and most other staff nurses should have, on average, earned 21% more than they were actually paid.
Ashenfelter also opines that in a competitive market more RNs would have been employed. Ashenfelter's report explains that underutilization is an anticompetitive effect of the conspiracy to depress RN wages.
Defendants challenge the reliability of Ashenfelter's methodology arguing that it is inadmissible under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and should be excluded from consideration both on summary judgment and at trial. Specifically, Defendants argue that Ashenfelter's methodology should be excluded because: (1) it is based on an assumption that contradicts his claims of anticompetitive effect, impact, and damages; (2) the "but for wages" do not vary by the experience of the nurse; (3) it is premised on the idea that Defendants made extensive long term use of agency nurses; (4) the "but for wages" are not credible; (5) the rate of employment of nurses in the Albany area is no different from the rate in New York state as a whole; (6) Ashenfelter did not assess whether there was a conspiracy or whether the anticompetitive effects resulted from a conspiracy or some other cause; (7) it applies only to the smaller subclass that the Court rejected; and (8) it is not reliable to prove impact and damages for the two named plaintiffs.*fn1
Plaintiffs maintain that Defendants' criticisms are unfounded or go to the weight of the evidence, rather than its admissibility. Specifically, Plaintiffs respond that Ashenfelter's methodology is reliable and admissible because: (1) he employed widely acceptable and reliable methods; (2) he properly relied on widely accepted economic principles and peer reviewed materials; (3) his benchmark comparisons reliably show impact and measure damages; (4) Defendants challenge results and not methodology; (5) agency bill rates allow reasonable estimation of competitive staff nurse wages; and (6) the validity of Ashenfelter's benchmark does not depend on whether the use of agency nurses was excessive.
b. Defendants Ellis and Albany Medical Center's Joint Motion to Exclude Expert Testimony of Gregory Vistnes
Defendants also move to exclude Gregory Vistnes, who will testify that Defendants conspired to suppress nurse compensation or agreed to exchange confidential information for the purpose, or with the effect, of doing so."Dr. Vistnes is a Vice President at Charles River Associates, an international economics and business consulting firm." See Plaintiffs' Opposition Memo. at 1. He has also "served as Deputy Director for Antitrust in the Federal Trade Commission's Bureau of Economics" and "held several positions in the Economic Analysis Group of the U.S. Department of Justice's Antitrust Division, including Assistant Chief of the Economic Regulatory Section." Id. at 1-2.
Although Defendants seek to exclude all of the expert testimony of Vistnes, Defendants specifically dispute the reliability of two opinions; his facilitation opinion and his softened competition opinion.
Vistnes' "facilitation opinion" asserts that "Defendants' information sharing made it easier [for Defendants] to form and maintain a wage-fixing agreement." See Plaintiffs' Opposition Memo. at 6. Specifically, it concludes "that direct, regular exchanges of detailed compensation information made it easier for Defendants to coordinate on nurse compensation." Id. Plaintiffs contend that this opinion is based "on a thorough understanding of the economics literature on information exchange, . . . and a full examination of the discovery record regarding Defendants' 60 information exchanges." Id. at 9.
Vistnes' "softened competition opinion" asserts that "the information exchanges in this case . . . reduced Defendants' incentive to compete." See Plaintiffs' Opposition Memo. at 10. According to Vistnes, a softening of competition "means that competition is reduced, such that Defendants would raise nurse wages less often and in smaller amounts, causing them to hire less often and in smaller numbers." Id. at 13. The theory purports to contemplate and allow for disparities in pay and employment levels across hospitals. It contends that softening reduces the hospitals' incentive to raise wages to gain a competitive advantage even if "rivals do not on all occasions immediately or exactly match that hospital's wage increase." Id. It theorizes that the incentive to increase wages may decrease because a hospital anticipates that the other hospitals will match the increased wages. This opinion "is based on a careful study of the details of those exchanges and the principles found in the economics literature regarding the competitive effect of information exchanges." See Plaintiffs' Opposition Memo. at 14-15.
Defendants argue that Vistnes' opinions are neither reliable nor relevant. Specifically, Defendants argue that Vistnes' facilitation argument is unreliable because: (1)his methodology is not related to the facts of the case; (2) his opinion is connected to the facts of the case only through ipse dixits; and (3) his reliance on the analysis and opinions of Ashenfelter, does not provide a reliable foundation for his conclusion. See Defendants' Memo. at 7-13. Defendants argue that Vistnes' softened competition opinion is unreliable because: (1) the opinion is contradicted by the facts; and (2) he failed to link Defendants' information exchanges and any harmful effect on competition. See Defendants' Memo. at 13-20.
Plaintiffs responds that Vistnes is a highly qualified expert and his opinions are admissible. Alternatively, Plaintiffs argue that because Defendants challenge only two of Vistnes' numerous opinions, the unchallenged opinions should be admitted even if the Court finds the challenged opinions inadmissible.
c. Defendants' Joint Motion for Summary Judgment
Defendants Ellis Hospital ("Ellis") and Albany Medical Center ("AMC") have also filed a joint motion for summary judgment arguing that Plaintiffs "have no evidence of any agreement by Defendants to fix registered nurse compensation, no evidence of parallel wage movements, and no evidence to support Plaintiffs' claim that Defendants' conduct harmed competition or injured the Plaintiffs."*fn2 See Defendants' Memo. at 1.
Following extensive merits discovery, the following facts are undisputed. Albany Medical Center (AMC) is the largest Defendant. Although there is no formal policy preventing AMC from altering the timing or procedure for setting compensation, RN compensation has traditionally been set in the following way: (1) "AMC establishes the amount of money available to compensate all AMC employees . . . during its annual budget process;" (2) "[i]n approximately August of each year, AMC's human resources department prepares a compensation proposal for the President's Council, a group comprised of AMC's President and CEO and its executive and senior vice presidents;" (3) "AMC's annual compensation proposal addresses all aspects of AMC's compensation for all employees;" (4) "AMC's annual compensation proposal reflects the human resources department's best estimate as to what AMC should budget for compensation for all AMC employees in the coming year"; (5) "AMC's President's Council may request additional information and make recommendations, which may result in modifications to the initial proposal, typically in September;" (6) "AMC's President's Cabinet can request additional modifications to the proposal as it shapes an annual budget;" (7) "[i]n October or November of each year, AMC's President's Cabinet meets with AMC's CEO to discuss the final budget document to be presented to the Board of Directors;" (8) "[t]he final budget is submitted to the Finance Committee and then to the full Board of Directors for approval in early December of each year;" and (9) "AMC approves the market adjustments and merit increases in December, and they are effective in May of the following year. See Plaintiffs' Response to Defendants' Statement of Undisputed Facts at 3-10.
Ellis hospital is the only Defendant whose nurses are unionized and whose nurse wages are established, at least as to the bargaining unit, through a collective bargaining process with the New York State Nurses Association (NYSNA).See Plaintiffs' Response to Defendants' Statement of Undisputed Facts at 21.When Ellis prepares to negotiate a new collective bargaining agreement, its bargaining objectives and proposals are determined, at least in part, by human resources (HR), the finance department, nursing management, legal counsel, the CEO, and the COO. Id. at 24. The NYSNA and Ellis negotiate until they reach an agreement. Id. at 24-25.
Northeast Health (Northeast) operates two hospitals, Samaritan Hospital in Troy and Albany Memorial Hospital in Albany. Id. at 33. Although there is no formal policy preventing Northeast from altering the timing or procedure for setting nurses compensation, it has traditionally been set as part of an annual budget process in the following way: (1) "[i]In August of each year, each department submits a budget request, which includes a compensation component, to the finance department;" (2) "[i]n September and early October, department administrators and the finance and human resources departments refine the budget requests;" (3) [i]n mid-October, Northeast's executive vice presidents consider the budget recommendations and decide on the need for a market adjustment;" (4) "[i]n mid-October, Northeast's human resources committee of the board reviews the budget recommendations;" and (5) "Northeast's finance committee of the board reviews and makes a final recommendation on the overall budget to the board of directors, and the board approved the budget in late November or early December." Id. at 33-36.
Seton Health System (Seton) is a member of Ascension Health, the nation's largest not-for-profit health care system and is the smallest Defendant. Id. at 41."Each year as part of the budget planning process, Seton budgets a certain amount of funds for possible market adjustments." Id. at 43. "Seton's budget process changed midway through the class period -in 2002 and 2003, Seton's fiscal year began January 1, and it established the budget the summer before; in 2004, Seton changed its fiscal year to begin July 1, and it reviewed employee compensation twice, in the summer of 2003 and in January 2004; and from 2005 forward, Seton's fiscal year began July 1, and its budget process began in January." Id. 43-44. Establishing RN compensation involves the human resources department, department directors, and nursing administrators as well as other executives. Id. at 44.The budget committee must approve all market adjustment proposals. Id. at 46.
St. Peter's Hospital (St. Peter's) has been recognized twice as one of the top 100 hospitals in the nation. Id. at 56. Although there is no formal policy preventing St. Peters from altering the timing or procedure for making market adjustments, they have traditionally been set in the following way: (1) "St. Peter's sets its budget for market adjustments in September or October and makes market adjustments in the spring;" (2) "[d]uring the annual budget process, St. Peter's sets aside a pool of money to use for market adjustments and divides the pool among those job titles where an adjustment is required;" (3) "St. Peter's human resources department makes a recommendation to the director and vice president of human resources regarding the amount St. Peter's should budget for market adjustments;" (4) "[t]he director and vice president of human resources then make a recommendation to the finance committee, which determines the amount of money to be given for the market adjustment." Id. at 57-60.
It is also undisputed that from 2003 through 2006 Defendants engaged in information exchanges regarding the compensation they paid to RNs. See Plaintiffs' Opposition Memo. at 3 n. 6 (Plaintiffs point to 60 documented instances but contend that based on the many surveys produced in discovery there were many more undocumented information exchanges conducted by telephone or in person. Furthermore, incomplete e-mail trails evidence that custodians deleted e-mails.) The parties dispute the purpose and scope that these exchanges played and the role they played in setting nurses wages. The record shows that the hospitals extensively shared information through group communications, e-mails, telephone calls, and in person conversations with the other defendants. See e.g. Plaintiffs' Response to Defendants' Statement of Undisputed Facts at paragraphs 8, 18, 21, 23, 25, 49, 71, 72, 97, 103, 106, 130, 137; see also Ex. 23 (in March 2005, John Barnett of Ellis shares Ellis' current and future new graduate rate with Cathy Halakan of AMC) (a June 2005 e-mail from Sandra Castilla of AMC to Louise Franz of Ellis asking for and obtaining updated information on Ellis' wage and compensation practices including RN new hire and per diem rates) (in May 2004 Louise Franz of AMC sent an internal e-mail reporting that she receiving information from St. Peter's about St. Peter's current wage structure and its plan to move to a different model in June). These communications also included one-to-one email communications and one-to-one verbal discussions. Id.; see e.g. Ex. 25 (Louise Franz of AMC asked Kathleen Occhiogrosso for Seton for Seton's new RN rate and also provides AMC's new rate).Defendant collected the information on compensation and benefits gathered from other hospitals and complied reports and surveys which were shared with other defendant hospitals. Id. Additionally, "if a request for compensation information was sent out to a group of hospital HR representatives via e-mail, some of them simply replied to the entire group . . . to share their hospitals current compensation information with the other hospitals." Id. There are also evidence of information sharing regarding merit and recruitment bonuses, tuition assistance, merit pay, health insurance co-payments, length of workweek, and loan forgiveness programs. Id.; see e.g. Ex. 25 (Erin Baker of St. Peter's provides Sandra Castilla of AMC with RN new hire, RN per diem rates, and merit increase information after Castilla stated that she needed updated information for AMC's 2006 Compensation and Benefits Budget).
Plaintiffs' argument is as follows. See Plaintiffs' Opposition Memo. at 1-2. During the class period, Defendants faced a serious nursing shortage. A nursing shortage should have led to intense competition for nurses. Instead, Defendants avoided competing by regularly sharing their most sensitive information about their nurse pay structure. Defendants would not have shared this information if their competitors used the information competitively to identify low paying hospitals and outbid them to attract more and better qualified nurses. Plaintiffs, therefore, maintain that the practice continued only because it was accompanied by an agreement and recognition that the exchanged information would not be used as a strategic asset to compete for nurses, but rather to coordinate on wages and ensure that any incentive to compete was eliminated.
Defendants respond as follows. The process for setting compensation was based on a review of published survey data and internal analysis of compensation and employee needs. During the class period, nurse compensation was steadily increased and as a result, employment levels also increased. Defendants argue that they are entitled to summary judgment because Plaintiffs: (1) cannot show an agreement to fix nurse pay; (2) cannot establish that Defendants' exchange of compensation information unreasonably restrained competition; (3) have no evidence of harm to competition or injury; and (4) cannot show a causal link between Defendants' information exchange and either the alleged anticompetitive effects or their alleged injury. Plaintiffs oppose Defendants' motion arguing that: (1) no formal agreement is required and there is extensive evidence for circumstantial proof of a per se claim; (2) they have produced evidence of an actual adverse effect on competition resulting from the information exchanges; and (3) their expert Ashenfelter has presented a legally appropriate benchmark analysis.
d. Plaintiffs' Motion to Exclude Portions of Expert Testimony of Robert Willig
Plaintiffs also move to exclude portions fo the expert testimony of Robert Willig. They argue that "Willig should be limited to testifying as to matters where his expert knowledge can assist the jury in understanding the evidence" and the Court should prohibit Willig from offering any opinion concerning: (1) "[w]hether the fact discovery record in this case is probative or not of the alleged conspiracy; and (2) "[t]he information the Defendants did or did not consider in making their compensation decisions, and the effect or lack of effect particular information had on such decisions." See Plaintiffs' Memo. at 6-7. Defendants oppose this motion. They maintain that Willig's testimony satisfies the requirements of admissibility under Rule 702 of the Fed. R. Evidence and, thus, should not be excluded. See Defendants' Opposition Memo. at 1.
a. Admissibility of an Expert
Rule 702 of the Federal Rules of Evidence, which governs the admissibility of expert and other scientific or technical expert testimony, provides as follows:
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. The Supreme Court interpreted the District Court's function under Rule 702 in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). The Second Circuit reiterated this function in Amorgianos v. National R.R. Passenger Corp., 303 F.3d 256, 265 (2d Cir. 2002) stating:
[t]he Supreme Court has made clear that the district court has a "gatekeeping" function under Rule 702 - it is charged with "the task of ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Id. at 597, 113 S.Ct. 2786; accord Campbell, 239 F.3d at 184; Federal Judicial Center, Reference Manual on Scientific Evidence 11 (2d ed.2000). In fulfilling this gatekeeping role, the trial court should look to the standards of Rule 401 in analyzing whether proffered expert testimony is relevant, i.e., whether it " 'ha[s] any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.'" Campbell, 239 F.3d at 184 (quoting Fed. R. Evid. 401) (alteration in original). Next, the district court must determine "whether the proffered testimony has a sufficiently 'reliable foundation' to permit it to be considered." Id. (quoting Daubert, 509 U.S. at 597, 113 S.Ct. 2786). In this inquiry, the district court should consider the indicia of reliability identified in Rule 702, namely, (1) that the testimony is grounded on sufficient facts or data; (2) that the testimony "is the product of reliable principles and methods"; and (3) that "the witness has applied the principles and methods reliably to the facts of the case." Fed. R. Evid. 702. In short, the district court must "make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field." Kumho Tire, 526 U.S. at 152, 119 S.Ct. 1167.
District courts consider various factors in determining reliability: (1) "whether a theory or technique can be (and has been) tested;" (2) "whether the theory or technique has been subjected to peer review and publication;" (3) a technique's "known or potential rate of error," and "the existence and maintenance of standards controlling the technique's operation;" and (4) whether a particular technique or theory has gained "general acceptance" in the relevant scientific community. See Amorgianos, 303 F.3d at 266. "These factors do not constitute a . . . definitive checklist or test, [r]ather, '[t]he inquiry envisioned by Rule 702 is . . . a flexible one, . . . and the gatekeeping inquiry must be tied to the facts of a particular case.'" Amorgianos, 303 F.3d at 266 (citing Kumho Tire, 526 U.S. at 150); see also Daubert, 509 U.S. at 593. "In undertaking this flexible inquiry, 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." Amorgianos, 303 F.3d at 266; see Daubert, 509 U.S. at 595. That being said, "conclusions and methodology are not entirely distinct from one another" and "[a] court may conclude that there is simply too great an analytical gap between the data and the opinion proffered." Amorgianos, 303 F.3d at 266 (quoting General Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997)); see Heller v. Shaw Indus., Inc., 167 F.3d 146, 153 (3d Cir.1999) ("[A] district court must examine the expert's conclusions in order to determine whether they could reliably follow from the facts known to the expert and the methodology used."). "Once the district court has deemed the evidence sufficiently reliable so as to be admissible, it is "bound to consider the evidence in the light most favorable to plaintiff" when deciding motions for summary judgment or judgment as a matter of law." In re Joint Eastern & Southern Dist, Asbestos Litigation, 52 F.3d 1124, 1135 (2d Cir. 1995).
Summary judgment, pursuant to Fed. R. Civ. P. 56(c), is warranted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The party moving for summary judgment bears the initial burden of showing, through the production of admissible evidence, that no genuine issue of material fact exists. Major League Baseball Properties, Inc. v. Salvino, 542 F.3d 290, 309 (2d Cir. 2008). Only after the moving party has met this burden is the non-moving party required to produce evidence demonstrating that genuine issues of material fact exist. Salahuddin v. Goord, 467 F.3d 263, 272-73 (2d Cir. 2006). The nonmoving party must do more than "rest upon the mere allegations ... of the [plaintiff's] pleading" or "simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-86 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); see also Fed. R. Civ .P. 56(e) ("When a motion for summary judgment is made [by a defendant] and supported as provided in this rule, the [plaintiff] may not rest upon the mere allegations ... of the [plaintiff's] pleading ...."). Rather, "[a] dispute regarding a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Ross v. McGinnis, 00-CV-0275, 2004 WL 1125177, at *8 (W.D.N.Y. Mar. 29, 2004) [internal quotations omitted] [emphasis added]. It must be apparent that no rational finder of fact could find in favor of the non-moving party for a Court to grant a motion for summary judgment. Gallo v. Prudential Residential Servs., 22 F.3d 1219, 1223-24 (2d Cir. 1994); Graham v. Lewinski, 848 F.2d 342, 344 (2d Cir. 1988). In determining whether a genuine issue of material fact exists, the Court must resolve all ambiguities and draw all reasonable inferences against the moving party. Schwapp v. Town of Avon, 118 F.3d 106, 110 (2d Cir. 1997) [citation omitted]; Thompson v. Gjivoje, 896 F.2d 716, 720 (2d Cir. 1990) [citation omitted].
a. Defendants' Ellis and Albany Medical Center's Joint Motion to Exclude Expert Testimony of Orley Ashenfelter
Plaintiffs employed Orley Ashenfelter to use "standard economic tools to study whether staff nurses in this action suffered impact and damages as a result of Defendants' alleged conspiracy." See Plaintiffs' Opposition Memo. at 4. Ashenfelter compared actual wages paid to staff nurses by the Defendant hospitals during the alleged conspiracy with wages that would be paid "but-for" the alleged conspiracy. Ashenfelter computed the "but-for" wages of staff nurses by using bill rates for agency nurses as a benchmark with which to compare staff nurse wages during the same period. He maintains that agency nurses "are an appropriate benchmark because: (1) agency nurses, as literal substitutes for staff nurses, perform the work that would otherwise be done by a staff nurse;" and (2) their bill rates, set by a national market, would not have been affected by the alleged conspiracy. Plaintiffs' Opposition Memo. at 2. Ashenfelter determined that "Plaintiffs, and most other staff nurses, had indeed suffered injury as a result of Defendants' alleged collusive wage suppression." Id. at 2-3. He concluded "that, on average, staff nurses had earned $28.11 per hour during the class period, but that in a competitive market, they would have earned an average of at least $35.74 per hour." Id. at 7.
Defendants argue that Ashenfelter's testimony should be excluded because it is unreliable as a matter of law. They do not challenge Ashenfelter's qualifications or the relevance of his testimony. Defendants instead challenge the reliability of his opinions, arguing that: (1) his benchmark theory is based on assumptions and is disconnected from the facts; (2) he failed to address whether a conspiracy existed and whether that conspiracy caused the wage suppression; and (3) his utilization theory does not take into consideration New York state specific conditions. The Court will address these arguments seriatim.
1. Whether the Methodology Used by Prof. Ashenfelter in Forming his Benchmark Theory is Reliable
The methodology used by Ashenfelter to determine that agency nurse bill rates and staff nurse wages should be comparable is based on the widely accepted economic concept of marginal revenue product (MRP). MRP is the "value that an employee creates for his or her employer." The concept promulgates that an employer will not "incur costs to employ a staff nurse or hire an agency nurse that, in total, exceed a nurses' [MRP]." In other words, according to economic theory, Ashenfelter opines that because agency nurses "are interchangeable with staff nurses, working instead of, and alongside, staff nurses at the exact same hospitals performing the exact same tasks on the same day" the two types of nurses are worth the same to the hospitals.
Ashenfelter explains that agency nurse bill rates and staff nurse wages differ because agency bill rates "pay for all the costs of employing an agency nurse, not just her wages, and include an amount to compensate the agency nurse for scheduling flexibility." Staff nurse wages are usually lower than agency nurse bill rates because they do not include this flexibility premium and fail to account for fringe benefits and other costs of employing a full time employee. Ashenfelter's methodology purports to adjust the competitive agency bill rate to account for these variables. He opines that the "but-for" wages of staff nurses will equal the MRP of the agency nurse minus the value of the flexibility.*fn3 Conversely, the competitive wage of a staff nurses equals the MRP of the staff nurse minus the "non-earning costs of employing that nurse." From these economic computations, Ashenfelter opines that he is able to determine the extent to which Defendants' alleged conspiracy affected the wages of staff nurses during the class period.
The validity of the economic concept MRP is not challenged by the Defendants. Ashenfelter based his methodology on this accepted economic principle. His methodology took into consideration the flexibility premiums offered by agency nurses, staff nurse fringe benefits, and the costs of employing full time staff nurses and he took the necessary logical steps from agency bill rates to estimate the competitive wage of individual staff nurses.
Similarly, Defendants do not challenge the data used by Ashenfelter to compute the "but-for" wages. The but-for wages are computed using wage and pay-roll data and differences in pay grade depending on on-call status and specialty placements at each of the Defendant hospitals during each year of the class period. The underlying data applied to the methodology to compute "but-for" wages is undisputed.
Defendants argue thatProf. Ashenfelter'smethodology is unreliable because: (1) it assumes that agency nurse rates are set in a national market; (2)it does not account for differences in experience; (3) it is based on the assumption that Defendants made extensive long term use of Agency nurses; (4) the but-for wages created by his methodology are not credible; (5) the but-for wages barely change over the class period; (6) the methodology can only be applied to a subset of the nurses; and (7) the methodology cannot prove impact and damages for the two named plaintiffs.
a. Agency Nurse Wages are Set in a National Market
Defendants argue that Ashenfelter has "no basis to believe that there is any connection between the adjusted bill rates for agency nurses and the competitive wages of staff nurses." Defendants' Memo. at 7-8. Defendants contend that wages for the two groups must be set in the same market for agency nurses to be properly used as a benchmark. They argue that because (1) Ashenfelter's methodology assumes that wages for agency nurses are set in a national market; and (2) Ashenfelter has stated that the Defendant hospitals would have little influence over the national market for staff nurse wages, he in effect acknowledges either that there is no link between agency nurse's and staff nurse's wages or that Defendants have no power to suppress wages.*fn4
Plaintiffs argue that the MRP theory does not require that staff nurse wages be set in the same market as agency nurse bill rates because "what matters is that the bill rate is equal to or less than the marginal revenue product of an agency nurse." See Plaintiffs' Opposition Memo. at 14. They further claim that after proper adjustments, his methodology computes the actual competitive wage of the staff nurse based on the staff nurses' economic worth to the hospital. The fact that Defendants dispute Ashenfelter's methodology does not render the methodology unreliable. Experts are entitled to differing opinions as to the validity of the methodology, so long as the challenged methodology is grounded in reliable scientific principles and facts. See McCullock v. H.B. Fuller Co., 61 F.3d 1038, 1044 (2d Cir. 1995), ("[d]isputes as to . . . faults in [expert's] use of [particular scientific analysis] as a methodology . . . ...