Justices will weigh if judges may assess expert’s data in admission ruling

The Maryland Supreme Court will consider whether judges in civil cases may bar an expert from testifying when they disagree not with the expert’s underlying scientific methodology – the cause and effect – but with the data points they used.

The justices last month agreed to review a lower court ruling that the judge’s “gatekeeping” role in admitting expert testimony is limited to ensuring the methodology is reliable. The Appellate Court said the validity of the data an expert used in reaching their conclusion must be left to the jury to weigh after the information has been challenged by cross-examination and an opposing expert.

The high court, in hearing the appeal this May, will weigh the breadth of judicial discretion under the Daubert-Rochkind standard for determining the admissibility of expert testimony that the justices adopted in 2020. That standard focuses on the reliability of the expert’s methodology.

The controversy began when Howard County Circuit Judge Richard S. Bernhardt excluded an accounting expert from a financial mismanagement trial despite concluding that the expert’s methodology of contrasting a medical practice’s profits before with losses after a difficult year was sound.

Bernhardt then dismissed the practice’s lawsuit against its accounting firm for lack of expert testimony.

But the Appellate Court revived the lawsuit, saying Bernhardt had erroneously barred the testimony because he disagreed with the expert’s determination of the appropriate year.

“The (trial) court, acting as gatekeeper, acts outside of its role when it second guesses the expert’s choice of data to rely on when applying the indisputably legitimate choice of methodology – the before-and-after method,” the Appellate Court stated in its reported decision last year. “When a trial court usurps the role of the jury, it makes an error of evidentiary law and abuses its discretion.”

In its successful petition for Supreme Court review, the sued accounting firm said trial judges must review not just the expert’s methodology but the factors that objectively “render the testimony unreliable and/or speculative,” such as an erroneous data point.

“In holding that the trial court abused its discretion in every respect, the (Appellate Court) undermined trial judges’ discretion,” wrote Steven M. Klepper, counsel for the firm, Katz, Abosch, Windesheim, Gershman & Freedman PA.

“A trial judge could reasonably conclude from this opinion that the appellate courts will scrutinize rulings excluding experts more closely than rulings admitting experts,” added Klepper, of Kramon & Graham PA in Baltimore. “If so, judges will not be exercising true discretion.”

The medical practice, in its failed request that the justices deny review, said trial judges may not “hyper-scrutinize the quality of the data” used but must admit the expert testimony if the methodology is sound.

“While some (judicial) scrutiny is permitted, a court may not exclude a damages expert based upon their conclusions or the reliability of the underlying data and assumptions in applying an accepted methodology, unless the assumptions are wholly speculative and not supported by the record,” wrote Michelle J. Dickinson and Robert D. Schulte, counsel for Parkway Neuroscience & Spine Institute LLC.

“Judgment calls regarding the use of variables in an accepted methodology, like the ‘before and after’ approach, should be explored in cross-examination and decided by the jury,” added Dickinson, of Dickinson Law in Columbia, and Schulte, of Schulte Booth PC in Easton.

In the lawsuit, PNSI claims Katz Abosch provided bad advice regarding the distribution of the more than $400,000 the medical practice received through a Medicare and Medicaid incentive program and the accounting firm’s establishment of an egalitarian compensation model for the doctors regardless of their specialty.

Hagerstown-based PNSI alleges it was driven into debt when it had to repay the incentive program funds and that the compensation model failed to consider the disparate income the doctors brought into the practice, driving many of them to leave.

PNSI retained Meghan Cardell, a certified public accountant with the consulting firm Alvarez & Marsal in Washington, as an expert to testify regarding the cause of the practice’s damages and lost profits.

In a pre-trial proceeding, Cardell said she applied the before-and-after methodology and set 2015 as the dividing year because it is when the doctors left the practice. The judge, however, refused to admit her testimony at trial, saying the choice of 2015 was “speculative” and based on data PNSI supplied rather than independent sources.

In the absence of expert testimony, the judge granted summary judgment to the Columbia accounting firm. PNSI then appealed to the Appellate Court.

The Supreme Court is expected to render its decision by Aug. 31 in the case, Katz, Abosch, Windesheim, Gershman & Freedman PA v. Parkway Neuroscience & Spine Institute LLC, No. 30 September Term 2022.