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Miller v. Holzmann

June 23, 2008


The opinion of the court was delivered by: Royce C. Lamberth, Chief Judge


Ironically enough, this sordid tale of filthy dealing and dirty money began in the sewers of Cairo. After the Camp David Accords of 1979, the United States saw an opportunity to reward Egypt for its recognition of Israel with funding for public works projects. According to plaintiffs' evidence, defendants also saw an opportunity: to enrich themselves at U.S. taxpayers' expense by colluding to secure, and then overcharge on, contracts for these projects.

Nearly twenty years after these underlying events, this multi-defendant*fn1 conspiracy case came to trial.*fn2 Over the course of seven weeks, a jury absorbed a vast amount of evidence, including testimony from forty-one witnesses and over 500 exhibits, and witnessed a vigorous and thorough defense. After resolving numerous factual disputes and weighing the credibility of each witness, the jury returned a verdict for plaintiffs on May 14, 2007, awarding over $34 million in damages to the United States. This Court ultimately fixed total liability at $90,438,087.66.*fn3

Each defendant now challenges the jury's verdict and/or the Court's judgment.*fn4 Their motions present issues relevant to both liability and damages. Defendants' challenges, in their new trial motions, to this Court's evidentiary and other rulings necessarily implicate the sufficiency of the evidence objections raised by their motions for judgment as a matter of law. Hence, this Opinion first considers defendants' proposed grounds for a new trial, then considers the sufficiency of the evidence along with defendants' other offered bases for judgment as a matter of law, and finally evaluates certain defendants' arguments for remittitur and/or relief.

I. Applicable Legal Standards

A. Rule 59(a) -- New Trial

Federal Rule of Civil Procedure 59(a) affords a court discretion to grant a new trial on all or some issues "for any reason for which a new trial has heretofore been granted in an action at law in federal court." Fed. R. Civ. P. 59(a). Such reasons have included excessive damages, "substantial errors . . . in the admission or rejection of evidence[,] or the giving or refusal of instructions." Nyman v. FDIC, 967 F. Supp. 1562, 1569 (D.D.C. 1997) (Urbina, J.). Yet "minor evidentiary errors . . . in the course of a long trial," do not suffice. Wild v. Alster, 377 F. Supp. 2d 186, 189 (D.D.C. 2005) (Walton, J.) (quotation marks and citations omitted). Rather, the court's discretion to grant a new trial -- which is to be exercised "sparingly and cautiously," Miller v. Penn. R.R. Co., 161 F. Supp.633, 641 (D.D.C. 1958) (Holtzoff, J.) -- "has generally been understood to include actions rendering the trial unfair." Sparshott v. Feld Entm't, Inc., 311

F.3d 425, 433 (D.C. Cir. 2002). Only "a clear miscarriage of justice," Wild, 377 F. Supp. 2d at 189, or "manifest error of law or fact" will warrant a new trial, Nyman, 967 F. Supp. at 1569.

When a court concludes that the jury's "verdict is against the weight of the evidence," rather than grant judgment as a matter of law, it may instead order a new trial. Nyman, 967 F. Supp. at 1569; see Fed. R. Civ. P. 50(b)(2). "The standard for a new trial is less onerous than the one applicable to a Rule 50 motion." Nyman, 967 F. Supp. at 1569. But just as with a motion for judgment as a matter of law, the Court should "not disturb a jury verdict 'unless the evidence and all reasonable inferences that can be drawn therefrom are so one-sided that reasonable men and women could not disagree on the verdict.'" Duncan v. Wash. Metro. Transit Auth., 240 F.3d 1110, 1113 (D.C. Cir. 2001) (en banc) (quoting Curry v. District of Columbia, 195 F.3d 654, 659 (D.C. Cir. 1999)).

B. Judgment as a Matter of Law -- Rule 50

Under Federal Rule of Civil Procedure 50, a court may, on motion, direct entry of judgment contrary to a jury verdict when "a reasonable jury would not have a legally sufficient evidentiary basis to find for that party on that issue." Fed. R. Civ. P. 50(a). Courts "do not, however, lightly disturb a jury verdict." McGill v. Munoz, 203 F.3d 843, 845 (D.C. Cir. 2000). A court may enter judgment contrary to that verdict only when "the evidence[,] and all reasonable inferences that can be drawn therefrom[,] are so one-sided that reasonable men and women could not" have reached the jury's verdict. Scott v. District of Columbia, 101 F.3d 748, 752 (D.C. Cir. 1996).

"[A]lthough the court should review the record as a whole, it must disregard all evidence favorable to the movant that the jury was not required to believe." In re Lorazepam & Clorazepate Antitrust Litig., 467 F. Supp. 2d 74, 80 (D.D.C. 2006) (Hogan, C.J.) (citing Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 151 (2000)). Further, "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Reeves, 530 U.S. at 150. "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Thus, a court should grant a Rule 50 motion only when, "under the governing law, there can be but one [] conclusion as to the verdict" -- that it defies reason. Id. at 250.

C. Remittitur -- Rule 60(b)

Federal Rule of Civil Procedure 60(b) empowers courts to grant relief from a final judgment when "the judgment has been satisfied, released, or discharged." Fed. R. Civ. P. 60(b)(5). "[A] motion for a credit on a judgment should be treated as a Rule 60(b)(5) motion for relief from [that] judgment." Kassman v. Am. Univ., 546 F.2d 1029, 1033 (D.C. Cir. 1976) (per curiam). Like a motion for a new trial, "the decision to grant or deny a rule 60(b) motion is committed to the discretion of the District Court." United Mine Workers 1974 Pension v. Pittston Co., 984 F.2d 469, 476 (D.C. Cir. 1993).

D. Alteration or Amendment -- Rule 59(e)

Federal Rule of Civil Procedure 59(e) provides for alteration or amendment of a previously-entered judgment. Fed. R. Civ. P. 59(e). "While the court has considerable discretion in ruling on a 59(e) motion, the reconsideration and amendment of a previous order is an extraordinary measure." Zyko v. Dep't of Def., 180 F. Supp. 2d 89, 90 (D.D.C. 2001) (Urbina, J.). Hence, such a motion "need not be granted unless the district court finds that there is . . . 'the need to correct a clear error or prevent manifest injustice.'" Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996) (quoting Nat'l Trust v. Dep't of State, 834 F. Supp. 453, 455 (D.D.C. 1993)).

II. New Trial Motions

A. Prior Criminal Proceedings

In 2002, Defendant Bilhar pleaded guilty to an antitrust conspiracy in violation of the Sherman Act, 15 U.S.C. section 1. (See Exs. A, B to Pl.'s Mot. [558].) In its Order of March 14, 2007, this Court granted plaintiffs' motion in limine [558] to preclude Bilhar from contesting its liability on Contracts 20A and 29 based on this plea. (See Mem. Op. & Order of Mar. 14, 2007 [713] at 5-6; Mem. Op. & Order of Mar. 20, 2007 [738] at 1-2 (denying motion for reconsideration).) The Court subsequently admitted both Bilhar's plea agreement and the accompanying Joint Rule 11 Memorandum, against all defendants, under Federal Rule of Evidence 803(22). (Mem. Op. & Order of Mar. 16, 2007 [722] at 3-4; Mem. Op. & Order of Mar. 20, 2007 [738] at 2 (denying motion for reconsideration); Mem. Op. & Order of Mar. 21, 2007 [743] at 4-5 (denying motion to sever).) Defendants challenge both rulings.*fn5

1. Collateral Estoppel

"Courts have often held that issues determined in connection with a criminal conviction may be preclusively established in later civil trials." Otherson v. Dep't of Justice, 711 F.2d 267, 271 (D.C. Cir. 1983). While recognizing that at least seven other Circuits have done so, our Court of Appeals has not taken a definitive position on whether issues determined in connection with a defendant's guilty plea may similarly be given preclusive effect. Id. at 275 n.8.

Meanwhile, district courts in this Circuit have routinely treated criminal convictions -- including those based on guilty pleas -- "[a]s conclusive proof of the facts supporting the conviction," and have thus given them preclusive effect in subsequent civil actions. See, e.g., Int'l Telecomm. Satellite Org. v. Colino, No. 88-1266, 1992 U.S. Dist. LEXIS 4887, at *20 (D.D.C. Apr. 15, 1992) (Lamberth, J.); United States v. Uzzell, 648 F. Supp. 1362, 1363 (D.D.C. 1986) (Green, J.). As a general matter, issue preclusion between the same parties*fn6 is available where, in the prior proceeding, (1) an identical issue*fn7 (2) was actually litigated (3) and necessarily determined, and where (4) "[p]reclusion in the second trial [would] not work an unfairness."Otherson, 711 F.2dat 273. When the proceeding is a criminal one, and the defendant enters a guilty plea, preclusion "extends only to those issues that were essential to the plea." Alsco-Harvard Fraud Litig., 523 F. Supp. 790, 802 (D.D.C. 1981) (Oberdorfer, J.).

Bilhar now insists it merits a new trial because the central issues in the False Claims case were not essential to its plea to antitrust conspiracy. (Motion Six at 2; Reply Six at 7-9.) Before examining this contention, the Court must first elucidate precisely which issues it precluded Bilhar from contesting in this civil trial. This Court treated Bilhar's guilty plea as conclusively establishing that Bilhar: (1) knowingly submitted or caused to be submitted to the government a false or fraudulent claim; (2) knowingly made or used, or caused another to make or use, a false or fraudulent record or statement to get the government to pay its claim; and (3) conspired with one or more persons -- at least one of whom performed an act to effect the conspiracy's object -- to get a false or fraudulent claim allowed or paid by the U.S. (See Mem. Op. & Order of Mar. 14, 2007 [713] at 5-6; Verdict Form [858] at 2, 3, 4, 6, 7).

Next, "it is necessary to examine the issues [Bilhar] necessarily admitted by pleading guilty." Alsco-Harvard Fraud Litig., 523 F. Supp. at 802. As Bilhar concedes, (Motion Six at 2-4), its plea embraces the bare elements of a Sherman Act conspiracy, McCarthy v. United States, 394 U.S. 459, 466 (1968) (guilty plea is an admission of all elements of the charge). These elements are: "(1) the conspiracy charged was formed, and it was in existence at or about the time alleged; (2) the defendant knowingly formed or participated in that conspiracy; and (3) the activity that was the object of the conspiracy was within the flow of, or substantially affected, interstate or foreign commerce." (Ex. B to Pl.'s Mot. [558] at 3.) Thus, by pleading guilty, Bilhar conclusively established that it had knowingly entered into "a continuing agreement, understanding, and concert of action" to "rig the bids" on U.S. government-funded Contracts 20A, 29, and 07. (Id. at 4, 5.)

Construed in this narrow sense, Bilhar's plea establishes, at least, that it conspired with others to get a false or fraudulent claim allowed or paid by the United States: claims submitted to the government under any contract secured through a collusive conspiracy are, inevitably, false or fraudulent. United States ex rel. Marcus v. Hess, 317 U.S. 537, 543-45 (1943) (characterizing claims submitted under contract obtained through collusive bidding as "false" under the False Claims Act ("FCA")).*fn8

For issue preclusion to have been proper, however, Bilhar's plea must also have established that claims were actually submitted pursuant to that conspiracy (which would also constitute the requisite overt act for FCA conspiracy). As this Court previously concluded in ruling on the government's original motion in limine, (Mem. Op. & Order of Mar. 14, 2007 [714] at 5-6), and on Bilhar's motion for reconsideration, (Mem. Op. & Order of Mar. 20, 2007 [738] at 1-2), it did.

Bilhar's guilty plea extends to the essential elements of a Sherman Act conspiracy, but its reach does not end there. Federal Rule of Criminal Procedure 11(f) mandates that before entering judgment on a guilty plea, a court must "mak[e] such inquiry as shall satisfy it that there is a factual basis for the plea." Fed. R. Crim. P. 11(f). Because the court may not enter judgment without this factual basis, there is good reason to give preclusive effect to factual admissions made in Rule 11 proceedings. Though he avoids a contested trial, "a defendant who pleads guilty does not save the court as much work as does a party who" -- for example -- "stipulates to the truth of a fact in a civil trial." Otherson, 711 F.2d at 275 n.8. Moreover, because the court must conduct a Rule 11 inquiry, "the facts underlying a guilty plea are more reliable than those established only by stipulation."*fn9 Id. Disincentives to litigate other than the truth of every fact alleged in an indictment may impact a defendant's decision to plead guilty. See Haring v. Prosise, 462 U.S. 306, 318-19 (1983) (describing possible pragmatic motivations for defendant's guilty plea). But as the Eleventh Circuit has observed, "[a] federal criminal defendant wishing to avoid both a trial and any collateral estoppel effects may ask for court permission to plead nolo contendere." In re Raiford, 695 F.2d 521, 523 (11th Cir. 1983). Moreover, a defendant may choose to plead only to particular portions of an indictment, thus limiting his plea's potential preclusive effect. See, e.g. United States v. Podell, 572 F.2d 31, 36 (2d Cir. 1978).

These considerations suggest that factual admissions in a Rule 11 proceeding may broaden a guilty plea's preclusive effect beyond the mere abstract elements of the crime charged.*fn10 Indeed, various other courts have approved the extension of pleas' collateral estoppel effects to defendants' accompanying factual admissions. See, e.g., DeCavalcante v. Commissioner, 620 F.2d 23, 24, 26, 28 & n.10 (3d Cir. 1980) (approving Tax Court's holding that defendant who had pleaded guilty to conspiracy to operate an illegal gambling enterprise could not deny connection with gambling activities admitted during Rule 11 hearing); United States v. Electro-Therapeutics, Inc., No. 94 Civ. 4008, 1996 U.S. Dist. LEXIS 2563, at *7-9 (S.D.N.Y. Mar. 6, 1996) (precluding defendant who pleaded guilty under general conspiracy statute from denying overt acts admitted during plea proceedings).*fn11

In one such case, the defendants, who managed a home health services company, had pleaded guilty to conspiracy to commit health care fraud and mail fraud based on their submission of reimbursement claims to Medicare for personal expenses. United States v. Szilvagyi, 398 F. Supp. 2d 842, 844, 848 (E.D. Mich. 2005). In a subsequent FCA action, the U.S. sought damages from the same defendants for "knowingly present[ing], or caus[ing] to be presented, . . . a false or fraudulent claim for payment or approval" by the United States.*fn12 Id. at 844; 31 U.S.C. § 3129(a)(1) (2008). During the plea colloquy, both defendants had "admitted, as part of the factual basis of their guilty pleas, that they intended for the cost reports [they had] submitted to Medicare to contain illegitimate costs for the construction of their home." 398 F. Supp. 2d at 849. "Since they intended the false claims to be submitted," section 3729(a)(1)'s scienter element was satisfied, and the court estopped them from denying liability. Id.

Here, in the Rule 11 memorandum accompanying its plea agreement, Bilhar acknowledged that it "and its co-conspirators did those things that they . . . conspired to do" -- most saliently, that bids were submitted on Contracts 20A, 29, and 07 "pursuant to the terms of the bid-rigging conspiracy" and that the co-conspirators thereafter performed the contracts.*fn13

(Ex. B to Pl.'s Mot. [558] at 5.) As Bilhar rightly points out, a Sherman Act conspiracy need not involve an overt act. (Motion Six at 4 (citing Nash v. United States, 229 U.S. 373 (1913)).) Yet the overt acts Bilhar admitted in the Rule 11 memorandum were nonetheless "essential to [its] plea" because they supplied a factual basis, without which the criminal court, under Rule 11, could not accept Bilhar's plea.*fn14

Hence, the Court did not err in precluding Bilhar from contesting its liability for conspiracy and on Contracts 20A and 29.

2. Admission of Bilhar's Guilty Plea

Under our Federal Rules of Evidence, relevance is a threshold requirement for admissibility -- evidence must have some tendency to make the existence of any material fact either more or less probable. Fed. R. Evid. 401, 402. Even relevant evidence may be excluded, however, "if its probative value is substantially outweighed by the danger of unfair prejudice." Fed. R. Evid. 403. Defendants contend that Bilhar's plea agreement and Rule 11 memorandum lacked any probative value -- as to Bilhar or any other defendant -- or alternatively, that the danger of unfair prejudice substantially outweighed any probative value these documents might have had. (See Motion Five at 6-10; Motion Eight at 5-9.) Both arguments fail.

First, although Bilhar's liability had been conclusively established, it remained free to contest causation and damages. (Mem. Op. & Order of Mar. 14, 2007 [713] at 6.) The plea agreement and Rule 11 memorandum had "probative value over and beyond the preclusive effect" given to the underlying plea, (Mem. Op. & Order of Mar. 20, 2007 [738] at 2), in that they tended to show how Bilhar and its co-conspirators pursued and accomplished their objectives.*fn15 These factual details were relevant to whether Bilhar caused damages to the United States. For example, the Rule 11 memorandum states that the conspirators met and agreed "to increase the price level of bids on USAID-funded Contracts 20A, 29, and 07." (Ex. B to Pl.'s Mot. [558] at 5.) While not conclusive, this statement tends to make it more likely that the United States paid more on these contracts than it otherwise would have, absent any collusion -- a decidedly material issue.

Even more rudimentary logic demonstrates these documents' probative value as to the other defendants' liability. To meet its burden as to the conspiracy charge, the government had to prove by a preponderance of the evidence that, inter alia, a conspiracy to get a false or fraudulent claim allowed or paid by the U.S. existed, and these defendants were participants therein. See 31 U.S.C. § 3129(a)(3) (2008). The facts recited in the plea agreement and Rule 11 memorandum tend to prove that a conspiracy of the type alleged by the government existed.*fn16

Hence, they held significant probative value as to Bilhar's co-defendants.

Second, any danger of unfair prejudice these documents may have posed to these co-defendants*fn17 was substantially diminished by their redaction and by the limiting instructions given to the jury both immediately after the documents were introduced into evidence,*fn18 (Apr. 10, 2007 PM Tr. at 100), and again in the Court's final instructions, (May 4, 2007 AM Tr. at 44-45).

As this Court acknowledged in its original ruling on this issue, the plea agreement and Rule 11 memorandum "pose[d] certain problems" -- "[w]ithout guidance, the jury could become confused and assume that unrelated references in those documents to defendants in this case must mean that they were the others with whom Bilhar conspired" -- and accordingly, all reference to these defendants was redacted before the documents' admission. (Mem. Op. & Order of Mar. 16, 2007 [722] at 3.) Nonetheless, defendants contend the documents' generic references to "co-conspirators" and their "conspicuous redactions" spawned the same confusion.*fn19 (Motion Five at 9; Motion Eight at 8.) The identified language could have occasioned no prejudice.*fn20 Even absent any reference to "co-conspirators" in the documents, a reasonable juror -- particularly one instructed on the definition of conspiracy, as the jury was here -- would assume that Bilhar could not have entered into the pleaded conspiracy alone.

Yet defendants insist the jury must have "substitute[d] the prior criminal proceeding for its own judgment of the facts." (Motion Six at 9.) Introduction of another fact-finder's conclusions may create a risk that the jury will abdicate its duty to make an independent appraisal, but the gravity of this risk depends on the surrounding circumstances.*fn21 Moreover, this Court places greater faith in the presumption -- elemental to our justice system -- that a properly instructed jury will follow the law.*fn22 Here, this Court twice instructed the jury as follows:

The fact that Bilhar pleaded guilty may not in any respect be considered against any other defendants, nor may any inference be drawn against them by reason of Bilhar's plea of guilty. The guilty plea was the personal plea of [Bilhar] and was binding only upon it. Guilt is personal. The verdict as to each defendant before you must be considered separately with respect to that defendant solely upon the evidence against that defendant or the lack of such evidence. (Apr. 10, 2007 PM Tr. at 100; May 4, 2007 AM Tr. at 44-45.) In light of the thorough precautionary measures undertaken here, the Court concludes any danger of unfair prejudice was effectively mitigated*fn23 and did not substantially outweigh the documents' high probative value.

The plea agreement and Rule 11 memorandum were also hearsay, however, and even relevant hearsay evidence is inadmissible. Fed. R. Evid. 802. As in other areas of the law, myriad exceptions to this general rule exist, and this Court originally admitted these hearsay documents under one such exception, codified in Federal Rule of Evidence 803(22). (Mem. Op. & Order of Mar. 16, 2007 [722] at 3.) Defendants now attack this ruling on three, interrelated grounds.

First, they insist that one defendant's guilty plea may never be admitted against co-defendants in a subsequent civil trial. (Motion Five at 7-8; Reply Five at 6-7.) Yet Rule 803(22) itself expressly contemplates this scenario: it expressly does not reach "judgments against persons other than the accused," but only when they are "offered by the Government in a criminal prosecution for purposes other than impeachment." Fed. R. Evid. 803(22). Defendants' reading of the Rule entirely ignores this qualifying clause. Moreover, various precedents support the admission of co-defendants' guilty pleas against civil defendants. See, e.g., Scholes v. Lehmann, 56 F.3d 750, 762 (7th Cir. 1995) (one defendant's plea agreement was admissible under Rule 803(22) and established other defendants' liability); Guillermety v. Gonzalez, 491 F. Supp. 2d 199, 201 (D.P.R. 2006) (one defendant's guilty plea was admissible under Rule 803(22) to establish all defendants' liability).*fn24

Second, defendants observe that Rule 803(22) permits introduction of a guilty plea only "to prove [] fact[s] essential to sustain the judgment," Fed. R. Evid. 803(22), and they suggest that Bilhar's admissions in the plea documents exceeded this scope.*fn25 (See Motion Eight at 6; Reply Eight at 2.) As explained above, however, because Federal Rule of Criminal Procedure 11 demands that a court assure itself of a factual basis for any guilty plea, Fed. R. Crim. P. 11(f), the admissions in these documents were essential to Bilhar's plea.*fn26 See supra part II.A.1.

Third and finally, citing the Advisory Committee's Note, defendants contend that Rule 803(22) provides for two, incompatible alternatives: a court may give preclusive effect to a prior conviction, or it may admit evidence of that conviction "for what it is worth." (Motion Eight at 6-7; Reply Eight at 2-3; Reply Five at 6.) If the former, defendants argue, then the evidence becomes devoid of probative value and consequently inadmissible. (Motion Eight at 6.) Assuming, without deciding, that defendants have accurately interpreted the Note, giving preclusive effect to Bilhar's guilty plea would only render the plea documents irrelevant to Bilhar's liability. It would in no way diminish their probative value -- discussed above -- as to the other defendants' liability. And even if the Court erred in admitting the documents against Bilhar under Rule 803(22), they were nonetheless admissible against Bilhar as non-hearsay under Rule 801(d)(2)(A).*fn27

Accordingly, the Court concludes its admission of Bilhar's plea documents was proper.

B. Hearsay Testimony

Defendants next take issue with the Court's admission of certain testimony under Federal Rule of Evidence 801(d)(2)(E) and United States v. Gewin, 471 F.3d 197 (D.C. Cir. 2006).*fn28

(See Mem. Op. & Order of Apr. 27, 2007 [821] at 1-2.) They contend this testimony was inadmissible hearsay because the statements were not made in furtherance of a conspiracy or joint venture.*fn29 (Motion Five at 21-23.)

1. Richard Miller

First, defendants point to several statements by relator Richard Miller. (Motion Five at 22.) Miller testified that in 1990, after a meeting in Cairo on Contract 20A, John Ollis told him of a conversation with defendant Anderson, in which Anderson "told him that every U.S. contractor that was prequalified to do USAID work in Cairo was a member of a club that had been set up and met in Frankfurt to essentially setup or rig the bids." (Mar. 28, 2007 PM Tr. at 90-91, 102-03.) Defendants challenge only the second level in this double hearsay statement, Ollis's statement to Miller. (Motion Five at 22.) Yet because plaintiffs did not offer this statement for its truth, but rather for its effect on the hearer -- Ollis's statement explained Miller's motivation for raising concerns about the 20A project to his superiors at J.A. Jones, (Mar. 28, 2007 PM Tr. at 103-05) -- it was not hearsay, see Fed. R. Evid. 801(c). Moreover, given that Ollis had related Anderson's statement directly to the jury the previous day, (Mar. 27, 2007 PM Tr. at 41-42), Miller's repetition of the statement could hardly have prejudiced the defendants.

Miller also testified to statements by Jones President Charles Davidson. (Mar. 28, 2007 PM Tr. at 104-05.) After Miller shared what Ollis had told him in Cairo, Davidson advised Miller that he would inform Johnie Jones, CEO of parent company J.A. Jones, Inc. (Id.) Defendants insist this statement advanced only Jones's interests, not those of the joint venture,*fn30

(Reply Five at 11-12), but this myopic argument ignores the obvious benefit the joint venture would derive from uncovering any illegality among its activities. Miller and Davidson were then unaware whether and to what extent Anderson's statement might be true, and if it were, who in the joint venture partners' corporate hierarchies might be in on the scheme. By warning one partner's CEO that some illegality might be afoot, Davidson would help to ensure that joint venture decision-makers could evaluate, and if necessary, act on, this potentially damaging information. Cf. United States v. Walls, 70 F.3d 1323, 1327 (D.C. Cir. 1995) (warning that another co-conspirator could not be trusted furthered the conspiracy's objectives). By sharing his intent to do so with Miller, he kept another joint venturer informed. See United States v. Snider, 720 F.2d 985, 993 (8th Cir. 1983) (statements ensuring co-conspirator's "informed participation" advanced the conspiracy). Moreover, even had Davidson's statement not been made in furtherance of the joint venture, defendants do not explain how its admission prejudiced them.*fn31

(See Reply Five at 10-11.)

Finally, defendants assert that Miller testified to statements by Fritz Biesecker in authenticating Plaintiffs' Exhibit 202. (Motion Five at 22.) Miller stated that he initially learned of this document when Biesecker showed it to him, and that Biesecker "discussed" it with him. (Mar. 29, 2007 AM Tr. at 45-46.) But contrary to defendants' assertion, (Reply Five at 12), it is not clear which of Miller's statements concerning the document, if any, simply parroted Biesecker, and defendants make no effort to distinguish among them. Hence, the Court cannot conclude these statements were inadmissible hearsay.

2. John Ollis

Second, defendants challenge certain statements related by John Ollis during his testimony. (Motion Five at 22-23.) They first cite Davidson's advice to Ollis and Miller that they retain personal attorneys, (Mar. 27, 2007 PM Tr. at 50-51), which plaintiffs claim was offered merely for its effect on the listeners, "who subsequently sought legal counsel," (Opposition Five at 19). Yet Ollis testified he consulted private counsel a full six to eight months later, a delay that belies plaintiffs' argument. (Mar. 27, 2007 PM Tr. at 54-55.) Plaintiffs' perfunctory assertion that this statement falls within 801(d)(2)(E)'s exemption likewise fails, as they do not explain how advice that Ollis and Miller seek personal legal counsel would further the joint venture's interests. (See Opposition Five at 19.) Nonetheless, considered in context, this statement's admission did not comprise "a clear miscarriage of justice" that would prompt this Court to order a new trial. See Wild v. Alster, 377 F. Supp. 2d 186, 189 (D.D.C. 2005) (Walton, J.). Ollis testified only that during a meeting after Anderson's Cairo disclosure, Davidson proposed that Miller and Ollis seek legal advice, "[b]ecause of possible legal implication[s]." (Mar. 27, 2007 PM Tr. at 50-51.) The jury may have interpreted this statement as reflecting consciousness of wrongdoing. But Ollis's next comments -- that Davidson also asked him to brief a Jones corporate attorney, to whom Ollis related his conversation with Anderson, and who then conducted an investigation, (id. at 51-54) -- thoroughly eclipsed his earlier statement in terms of prejudicial effect and value to plaintiffs' case. Hence, while its admission may have been error, a new trial is unwarranted.

Ollis also related a double hearsay statement: Manfred Pietchottka told Ollis he had overheard Gunter Niebergall speaking to an unknown listener over the telephone. (Mar. 27, 2007 PM Tr. at 60-61.) The second link in this chain -- from Pietchottka to Ollis -- falls under Rule 801(d)(2)(E). Pietchottka, a Jones employee, repeated Niebergall's statements about paying other contractors to refrain from bidding in response to his supervisor's (Ollis) query about a large and seemingly inexplicable payment to Holzmann. (Id. at 57-62.) This statement advanced the joint venture's interests in that Pietchottka -- a joint venture partner employee -- provided his boss with "important background information" that Ollis requested while "carry[ing] out his duties" as Vice President of one joint venture partner. See United States v. Tarantino, 846 F.2d 1384, 1413 (D.C. Cir. 1988).

The first link is more problematic. Because plaintiffs cannot identify the person to whom Niebergall spoke, defendants contend his statements cannot possibly have been in furtherance of the bid-rigging conspiracy.*fn32 (Reply Five at 12-13.) This threshold admissibility issue was one for the Court to determine by a preponderance of the evidence, Bourjaily v. United States, 483 U.S. 171, 175 (1987), and several elements of Ollis's testimony convince it that plaintiffs met their burden. First, Pietchottka indicated that he heard Niebergall, a Holzmann employee, "talking to one of the other contractors" about a payment for not bidding on a contract. (Mar. 27, 2007 PM Tr. at 62.) Given plaintiffs' other evidence that the instant bid-rigging conspiracy involved such payments among construction contractors, it would be reasonable to infer that Niebergall was speaking to a co-conspirator about a promised payment. A second fact bolsters this inference: Pietchottka told Ollis that the conversation escalated into a "heated argument." (Id.) Finally, Niebergall ultimately directed the other party to talk to "PS," or Pieter Schmidt,. (Id.) That Niebergall referred the other party to Schmidt, a pivotal figure in the overall conspiracy, and that the other party was familiar enough with Schmidt to associate these initials specifically with him, further suggest the mystery caller was a fellow conspirator. Thus, it appears more likely than not Niebergall's statements to the unknown caller were made in furtherance of the conspiracy. Accordingly, having reevaluated Ollis's statements' admissibility, the Court again concludes they were non-hearsay under Rule 801(d)(2)(E).

Finally, Ollis repeated Niebergall's statement that "he could bid the work for [Jones] in Egypt, because he knew all the prices before they were submitted." (Mar. 27, 2007 PM Tr. at 63.) Defendants characterize Niebergall's statement as "spilling the beans" and therefore outside the scope of Rule 801(d)(2)(E). (Motion Five at 22-23 (citing City of Tuscaloosa v. Harcros Chems., 158 F.3d 548, 559 (11th Cir. 1998)).) Plaintiffs, however, insist "Niebergall was essentially attempting to recruit Ollis into the bid-rigging conspiracy by offering to handle Jones' bidding process for them," (Opposition Five at 20), which would have furthered the conspiracy's interests, see City of Tuscaloosa, 158 F.3d at 559. Considered in context, the latter reading is more plausible. At a dinner meeting between executives from Jones and Holzmann, during a discussion of Jones's international various projects, Niebergall, who represented Holzmann's International Division, offered to bid work for Jones on an international project.*fn33 (See Mar. 27, 2007 PM Tr. at 62, 63.) Rather than mere bragging or boasting,*fn34 Niebergall offered -- at a business meeting between corporate executives -- to share the bid-rigging conspiracy's benefits with Jones. Hence, the Court concludes this statement was intended to advance the conspiracy's objectives and was properly admitted under Rule 801(d)(2)(E).

3. Ernest Teal

Third, defendants protest Ernest Teal's relation of double hearsay. (Motion Five at 23; Motion Eight at 10.) Teal testified that Jurgen Schoenwasser told him Pieter Schmidt and Johnie Jones had ordered Schoenwasser to cancel a scheduled audit of Contract 20A. (Mar. 28, 2007 AM Tr. at 49.) As plaintiffs explain, (Opposition Five at 20 n.24), Schoenwasser's statement to Teal was not hearsay because plaintiffs offered it for its effect on Teal -- to show why he did not audit Contract 20A. (Mar. 28, 2007 AM Tr. at 47-53.) And considering that Schmidt was a key player in the bid-rigging conspiracy, plaintiffs' proffered explanation -- that Schmidt and Jones ordered the audit cancelled "to conceal facts pertinent to the conspiracy and [] to the diversion of profits," (Opposition Five at 21) -- is wholly reasonable.*fn35 Accordingly, Schmidt and Jones's directions to Schoenwasser were likewise non-hearsay (under Rule 801(d)(2)(E)), and the Court did not err in admitting Teal's testimony.

In sum, of defendants' myriad complaints concerning hearsay evidence, only one rings true. Ollis' recounting of Davidson's advice to Ollis and Miller that they retain personal attorneys, (Mar. 27, 2007 PM Tr. at 50-51), was not properly admissible either for its effect on the hearer or as a joint venturer's statement. Nonetheless, this statement's admission did not comprise "a clear miscarriage of justice" that would prompt this Court to order a new trial. See Wild, 377 F. Supp. 2d at 189.

C. McAfee Testimony

Over defendants' repeated and strenuous objections, this Court permitted Professor R. Preston McAfee to testify as an expert in the field of economics on plaintiffs' behalf. (Order of Apr. 4, 2007 [760]; Apr. 5, 2007 PM Tr. at 49, 58, 72-73.) Specifically, McAfee "was asked to explain how auctions and bidding work, how collusion in auctions work[s], and the incentives that are created for seeking cost-reducing technologies." (Id. at 75.) Defendants opposed -- and still oppose -- his testimony as an expert on these subjects. (See Motion Five at 37-44; Motion Eight at 18-25.)

Federal Rule of Evidence 702 principally governs admission of expert testimony. The party seeking to present the expert's testimony must convince the Court of its admissibility by a preponderance of the evidence. Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 592 & n.10 (1993). In all instances, the proffered expert must be qualified "by knowledge, skill, experience, training, or education," and his testimony must be helpful to the trier of fact. Fed. R. Evid. 702. Generally, his testimony must be "based upon sufficient facts or data" and must also be "the product of reliable principles and methods," applied "reliably to the facts of the case." Id.

Evidently relying on this last phrase, defendants protest that McAfee's testimony was "completely unmoored from the facts of this case." (Motion Eight at 19.)*fn36 Yet courts routinely permit experts to "explain principles without applying them or offering an opinion on the ultimate issue." See, e.g., Erickson v. Baxter Healthcare, Inc., 151 F. Supp. 2d 952, 968 (N.D. Ill. 2001).*fn37 As the Advisory Committee's Note to Rule 702 recognizes, it might [] be important in some cases for an expert to educate the factfinder about general principles, without ever attempting to apply these principles to the specific facts of the case . . . . The [2000] amendment does not alter the venerable practice of using expert testimony to educate the factfinder on general principles.

Fed. R. Evid. 702 Advisory Committee's Note (emphasis added).*fn38 Thus, while an expert may base his opinion on "facts or data in the particular case . . . perceived by or made known to the expert at or before the hearing," he may alternatively rely on facts or data "of a type reasonably relied upon by experts in the particular field," whether admissible or not. Fed. R. Evid. 703. Hence, so long as McAfee's testimony satisfied Rule 702's other requirements, it was properly admitted regardless of whether he reviewed facts particular to this case or applied the economic principles he explicated to them.

When an expert testifies "to educate the factfinder on general principles,"*fn39 Rule 702 requires that: (1) the expert be qualified;*fn40 (2) the testimony address a subject matter on which the factfinder can be assisted by an expert; (3) the testimony "fit" the facts of the case, and (4) the testimony be reliable. Fed. R. Evid. 702 Advisory Committee's Note. The latter three criteria follow directly from the Supreme Court's landmark decision on Rule 702 in Daubert. There, the Court directed district courts evaluating proffered experts to conduct a "preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts in issue." Daubert, 509 U.S. at 592-93. This assessment's objective is two-pronged: it "ensure[s] the reliability and relevancy of expert testimony." Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999). Consequently, reliability is among the Advisory Committee's four criteria. Fed. R. Evid. 702 Advisory Committee's Note. Its second criterion -- "that the evidence or testimony 'assist the trier of fact to understand the evidence or to determine a fact in issue'" -- "goes primarily to relevance." Daubert, 509 U.S. at 591. And its third criterion, "fit," simply restates this relevancy consideration. Id. See also United States v. Downing, 753 F.2d 1224, 1242 (3d Cir. 1986) ("An additional consideration under Rule 702 -- and another aspect of relevancy -- is whether expert testimony proffered in the case is sufficiently tied to the facts . . . that it will aid the jury in resolving a factual dispute.").

1. Relevancy

Addressing the helpfulness requirement, defendants contend McAfee testified only "to matters of 'common sense,' which [are] not the proper subject of expert testimony." (Reply Eight at 12.) A review of his direct examination reveals that defendants have committed a frequent error of non-economists: confusing correlation with causation. McAfee's conclusions may, to some degree, have accorded with "common sense" notions, but this coincidence does not necessarily imply that his conclusions derived from "common sense." McAfee explained to the jury, inter alia, the U.S. federal government's standard procurement process, (Apr. 5, 2007 PM Tr. at 76-77), auction bidders' incentives to discover cost-reducing technology, both before and after bids are submitted, in competitive and collusive processes, (id. at 84-87, 93-94), and the typical equilibrium points for winning bids in oral and sealed-bid auctions, (id. at 104-06). These are precisely the sort of specialized, technical matters concerning which a lay jury may benefit from a qualified expert's tutelage.*fn41 McAfee distilled complex economic concepts into language that would be comprehensible to the jury. While this may have enhanced his testimony's persuasive value, it did not render that testimony inadmissible.*fn42

Continuing with the subject of relevancy, defendants offer several arguments which the Court construes as attacking McAfee's testimony's "fit" with the facts of this case. They focus predominantly on McAfee's reliance on a set of assumptions in articulating his model of cartel behavior. (Motion Five at 39, 41; Motion Eight at 19-21.)

As set forth in McAfee's testimony, several assumptions underpinned his analytic model:

(1) the government procurement process begins with a need; (2) "there is a qualification stage for potential suppliers" of that need; (3) the government issues a sealed-bid tender, or request for supply, to the qualified bidders; (4) interested, qualified bidders respond by submitting sealed bids; and (5) the government "either picks the lowest priced supplier or [] negotiates with that supplier." (Apr. 5, 2007 PM Tr. at 76-77.) He then explained how, under this set of assumptions, a prospective bidder would select his bid price in a competitive auction, (id. at 78-90), and how he would do so in a cartel situation, (id. at 90-104).

As defendants correctly point out, an expert may rely on assumptions, but those assumptions must be "based on fact." Three Crown Ltd. P'ship v. Salomon Bros., 906 F. Supp. 876, 893-94 (S.D.N.Y. 1995) (excluding damages expert's testimony where he assumed, inter alia, that one of plaintiff's investment groups -- "which, by its own admission, conducted highly leveraged discretionary trading which frequently had to be adjusted to keep pace with the rapidly changing market and that mandates ever evolving opportunities for profit and loss" -- would have entered a particular future line of trades). See also Joy v. Bell Helicopter Textron, Inc., 999 F.2d 549, 569 (D.C. Cir. 1993) (holding damages expert's testimony should have been excluded where he assumed that decedent would have entered a wholly new line of work).

According to the defendants, "several of McAfee's key assumptions proved to be either demonstrably wrong or contrary to the testimonial record." (Motion Five at 41.) First, they cite his "assumption" that this case involved U.S. government procurement, explaining that Egyptian authorities managed the bidding on the contracts at issue here. (Id.) Yet the record reflects no such assumption. McAfee merely analogized the auctions in the instant case to the typical government procurement process:

Q: What is your understanding of how the procurement process that you just described generally compares to the process that took place on the contracts at issue in this case?

A: Well, my general understanding is that it's similar, it's the same, that is to say, there were announced needs, there were requests for bids, the bids were submitted. In one case there was negotiation that followed. My understanding is that it matches quite well. (Apr. 5, 2007 PM Tr. at 78.) Defendants were free to query McAfee about this analogy on cross-examination and to argue any dissimilarities to the jury.*fn43

Defendants save their harshest criticism for McAfee's assumption "that a cartel in fact existed amongst all the bidders on the USAID contracts," (Motion Five at 39; see also Motion Eight at 20), but yet again, meticulous examination of the record reveals no such assumption. McAfee never assumed that a cartel existed in this case.*fn44 (See,e.g., Apr. 5, 2007 PM Tr. at 78 ("Q. And I think it was correctly pointed out before the break that you're not making a determination . . . here about whether there was a cartel or not, correct? A. That's correct."); id. at 127 ("Q. -- but you haven't made any determination whether there is a cartel in this case. A. I have not.").) Rather, he contrasted how a procurement auction would operate under competitive conditions with how it would operate under collusive conditions, (see id. at 78-104), leaving the jury to determine which scenario best "fit" the facts in this case.

Hence, the Court concludes McAfee's testimony as a "teaching witness" educated the jury about theoretical characteristics of collusive behavior in an auction setting and assisted them in determining whether events in this case bore the hallmarks of such collusion.*fn45 While McAfee's model may not have mimicked the facts herein in every minute detail, it was "sufficiently tied to the facts of the case . . . [to] aid the jury in resolving [this] factual dispute." See United States v. Downing, 753 F.2d 1224, 1242 (3d Cir. 1986).

2. Reliability

"[T]he test of reliability is 'flexible,' . . . [and] the law grants a district court the same broad latitude when it decides how to determine reliability as it enjoys in respect to its ultimate reliability determination." Kumho, 526 U.S. at141-42. Defendants nonetheless contend the Court exceeded this broad latitude in admitting McAfee's testimony, which they claim was not "the product of reliable principles and methods" as required by Rule 702.*fn46 (Motion Eight at 21- 23, 24-25.)

Though "[m]any factors will bear on the [reliability] inquiry," in Daubert, the Supreme Court offered "some general observations" on the subject. 509 U.S. at 593. Whether a theory or technique has been tested, whether it has been subjected to peer review and publication, its potential rate of error, and its "general acceptance" may all bear on its reliability. Id. at 593-94. As the Court emphasized in Kumho, however, a trial court has "considerable leeway in deciding in a particular case how to go about determining whether particular expert testimony is reliable," and in doing so, it may consider any "reasonable measures" of that testimony's reliability. 526 U.S. at 152.

Because McAfee confined his testimony to general economic theory -- in defense counsel's words, "vanilla economics," (Apr. 5, 2007 PM Tr. at 125) -- the Court believes two factors discussed in Daubert are particularly "reasonable measures" by which to evaluate his testimony's reliability, see 526 U.S. at 152. First, according to McAfee's unrebutted statements, his theories on auctions have formed the subject of over twenty peer-reviewed articles and numerous other publications. (Apr. 5, 2007 PM Tr. at 52-54.) Second, though he did not specifically describe the provenance of each portion of his testimony, it avowedly embodied basic principles taught in undergraduate economics courses, which indicates the theories he expounded are generally accepted in the field of economics. (See id. at 125.) Indeed, McAfee's credentials rendered him supremely well-qualified to testify on generally-accepted economic principles: he holds a Ph.D. and has taught at Purdue University, the University of Western Ontario, the University of Texas, and the California Institute of Technology, where he currently heads the economics department. (Id. at 50-51.) In light of these circumstances, the Court finds McAfee's testimony was reliable, as required by Daubert and Rule 702.*fn47

Because McAfee's testimony as a "teaching witness" satisfied both Rule 702's criteria and Daubert's reliability and relevancy ...

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