A business interruption case that was appealed at the 7th Circuit Court of Appeals for review of the district court’s Daubert decision may restore some sanity to the Daubert review process, according to R. James Alerding (Alerding Consulting LLC). The plaintiff had claimed losses for the collapse of its office building in Paris. The defendant’s insurance company contested the claims, and the case found its way into federal court.

Too far: The district court excluded the plaintiff’s expert under Daubert even though it approved of his methodology; it simply disapproved of the data he relied on in his analysis. The 7th Circuit found that it went too far. Even though the court as a gatekeeper has some leeway in determining reliability, it is not unlimited. “Reliability, however, is a primary question of the validity of the methodology employed by an expert, not the quality of the data used in applying the methodology or the conclusions produced,” the appellate court said.

“I could not have said it any better,” says Alerding. “That is exactly what it should be.” He adds: “I think this decision is not so much a victory for expert witnesses as it is for reason and boundaries of the application of Daubert.” He is concerned that the more a court injects its own opinion as to the data an expert uses, the greater the risk of protracted litigation. The lower court excludes proper expert testimony, and one party has to appeal to stay in the litigation.

Alerding and BVR’s legal editor and attorney Sylvia Golden conduct a regular webinar update of significant business valuation cases. To listen to an archive of their latest webinar, click here.

The case discussed above, Manpower, Inc. v. Ins. Co. of Pa., LLC, 2013 U.S. App. LEXIS 20959 (Oct. 16, 2013), is available at BVLaw.