"There are three kinds of lies," Mark Twain once said, "lies,
damned lies, and statistics."
In the courtroom,
neither lies nor damned lies have any place. Statistics, on the other hand, have
never been more popular.
In fact, while
the Twain quote is clever, the more prescient words may be those of famed Justice
Oliver Wendell Holmes Jr., who wrote more than a century ago about the coming
importance of statistics.
"For
the rational study of the law the black-letter man may be the man of the present," Holmes
wrote in his 1897 book The Path of the Law, "but the man of the
future is the man of statistics and the master of economics."
As Holmes
might have foreseen, statistical evidence and statistical experts are used with
increasing regularity in litigation and have seen a particular surge in recent
years. They are also being used in an ever-broadening range of cases.
And as
statistical evidence and experts become more important in litigation, the battles
over their admissibility are often being fought in the early stages of a case – particularly
if the case is a class action.
Reasons for the Surge
The reasons for the surge in the use of statistics are as varied as the cases
in which they are used. Statistics have been used as evidence in trials
for at least 40 years, experts say. But two factors in particular may have
boosted their use.
One was the
Supreme Court's 1993 decision in Daubert v. Merrell Dow Pharmaceuticals,
which clarified the standard for the admissibility of scientific evidence. Daubert
left no doubt that statistics, a long-established field of scientific inquiry,
are generally admissible.
The other
factor that helped boost the use of statistical evidence was the federal judiciary's
acknowledgement of its usefulness, first by including a section, "Reference
Guide on Statistics," in the Federal Judicial Center's 2000 publication, Reference
Manual on Scientific Evidence, and then by adding several references to
statistical evidence in its 2004 update of the Manual for Complex Litigation.
These developments helped judges become more aware of the role of statistics
in the courtroom and in turn to become more sophisticated in their understanding
of statistical evidence, says Dr. Will Yancey, a Dallas-based expert in statistics
and finance who also tracks the use of statistical evidence in litigation through
his Web site, WillYancey.com.
Statistics Now Prominent
Two other factors no doubt also helped boost the use of statistics. One
is the increasing number of class actions and the need they generate to
collect and analyze data across populations, industries and time ranges.
The other
is the sheer volume of data in some cases; particularly in financial cases where
there is a need to develop statistical models to show patterns across a range
of documents or records.
This much
is clear: statistics are now commonly used as evidence in a wide range of cases. "Statistical
assessments are prominent in many kinds of cases, ranging from antitrust to voting
rights," write the authors of the "Reference Guide on Statistics," David
H. Kaye, law professor at Arizona State University, and David A. Freedman, professor
of statistics at Berkeley.
"Statistical
reasoning can be crucial to the interpretation of psychological tests, toxicological
and epidemiological studies, disparate treatment of employees, and DNA fingerprinting," they
say, adding, "this list could easily be extended."
Indeed, the
list is being extended. Some of the other types of cases in which statistics
are commonly used include:
Securities class actions, as evidence to prove or disprove market
manipulation or to calculate damages.
Antitrust cases, to prove conspiracy to restrain trade or to establish
damages.
Products liability cases, as proof of causation.
Patent infringement cases, examining clinical trials, calculation
of damages, etc.
Real estate cases, to assist in property valuations.
Daubert Challenges
One consequence of this growing use of statistical evidence and experts is that
they are being challenged early on in a lawsuit, primarily through Daubert hearings.
This is particularly true in class actions.
Among the federal circuit courts,
there is an emerging consensus to require rigorous vetting of requests for class
certification, writes David S. Evans, a law professor at the University of Chicago,
in an article recently published on the Social Science Research Network. This
consensus "beckons the serious use of economic
and statistical evidence at the class certification stage and the use of dueling
experts to help the court assess competing views on class certification," he
explains.
It makes
sense to wage this battle at the class-certification stage rather than later
in the litigation, Evans suggests, because the outcome can encourage either defendants
to settle or plaintiffs to fold.
"Economic and statistical evidence is often
used to address whether the class proposed by the plaintiffs meet the Rule 23
requirements particularly with regard to common methods of proof and the preponderance
of class issues," Evans
writes.
The Danger of Statistics With
greater use of statistics comes greater sophistication among lawyers
in their understanding of the field. Dr. Simon Z. Wu, managing director
of forensic litigation at FTI Consulting in Washington, D.C. and IMS ExpertServices Elite
Expert, says that the lawyers he works with show great understanding
of this type of evidence.
Wu
specializes in securities and financial economics and serves as an
expert in cases involving securities trading, market manipulation,
securities fraud and damages, insider trading, market efficiency and related
matters.
For Wu, the greater challenge in using statistical evidence is in getting
juries to understand. "In my experience, it is hard to get the jury
to understand if the evidence is too technical," he says. "I see
my job as an expert to be to present this evidence in a way that does
not confuse the jurors."
Edward P. Schwartz, a trial and jury consultant based in Boston, says
he is always very cognizant of the danger of confusing jurors with
statistics.
The
danger is due not simply to jurors' lack of training in statistics,
but also to what Schwartz describes as "hindsight bias." "When
an event actually occurs, they tend to believe that it was much more
likely to have occurred than was actually true," he explains.
"Since
most torts are the result of a very low-probability event actually taking
place, hindsight bias is a thorn in the ass of any defense attorney," Schwartz
says. "In addition to believing that such events were more likely than
they were, jurors tend to view them as more foreseeable (and hence, preventable)
than is appropriate."
To get around these biases, Schwartz helps lawyers develop graphical
tools for helping jurors visualize and better understand probabilities
and statistics. "I ultimately believe that a combination of visual learning
and reasoning by analogy will be central to overcoming these kinds
of cognitive limitations of jurors."
The Reference Class Problem
One other danger in this type of evidence hearkens back
to Twain's quote equating statistics with lies
and damned lies, and that is their potential
for being manipulated. Brooklyn Law School Prof. Edward K.
Cheng calls this the "reference
class" problem.
In a forthcoming Columbia Law
Review article, "A Practical Solution to the Reference Class Problem," he
argues that the problem poses a serious challenge to the growing prevalence
and importance of statistical evidence.
"Statistical inferences depend
critically on how people, events, or things are classified," Cheng writes. "The
problem is that there are an infinite number of possible characteristics,
and (purportedly) no principle for privileging certain characteristics
over others. As a result, statistics become highly manipulable. The
resulting manipulability has the potential to completely undermine
the objectivity and certainty that make statistical evidence so promising
and attractive."
As
the title of his article suggests, Cheng proposes a solution. He argues
that courts should adapt modeling methods used by statisticians in other
contexts to select the most-appropriate reference class for any given case.
Such a system, he believes, would "autonomously and powerfully
mediate among the classes raised by the parties."
Regardless of whether
you agree with Twain or Holmes about the nature of statistics, their use
as evidence is likely only to continue to rapidly increase. On that, both
Twain and Holmes, were they alive today, would surely agree.
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