Relying on testimony by Brattle principal Professor Daniel McFadden, New York Federal District Judge Shira Scheindlin recently granted in part a Daubert motion to exclude the class certification testimony of Plaintiffs’ expert in an antitrust class action against the MLB and NHL professional sports leagues. As a result of this decision, class certification with respect to past damages was denied.
In the litigation, two classes of Plaintiffs challenged league rules that establish exclusive market territories for television broadcasting of live games (Southern District of NY 12-cv-1817(SAS) and 12-cv-3704 (SAS)). For a fan who lives outside a team’s territory to watch all the team’s games, a league-wide subscription package would be required. Plaintiffs claimed that these fans were damaged as a result of paying for subscriptions containing all games, whereas they may prefer a telecast from a single team. Professor Roger Noll of Stanford University provided testimony to support class certification that included a method to estimate the overcharges suffered by class members as a result of the territorial restrictions.
The Defendants contended that Professor Noll’s testimony failed to appropriately characterize consumer preferences and behavior, known as the demand side of the market, and that Professor Noll overly simplified the pricing and negotiation behavior of the leagues and the teams, the supply side of the market. Working on behalf of the Defendants, Professor McFadden, co-recipient of the 2000 Nobel Prize for Economic Sciences, opined on the flaws of Professor Noll’s demand analysis.
Based on Professor McFadden’s testimony, Judge Scheindlin granted the Defendants’ Daubert motion with respect to Professor Noll’s demand analysis, concluding that:
“Dr. McFadden offers a number of criticisms of Dr. Noll’s model, ultimately characterizing it as ‘junk science.’ All of the independent, perceived flaws that inform Dr. McFadden’s conclusion fit one common theme: the Demand Side relies too heavily on mathematical assumptions and random error, and too little on actual data about consumers and their preferences.”
The work for which Professor McFadden was awarded the Nobel Prize was central to his analysis and is the forerunner for the antitrust models at issue in this proceeding. The team working with Professor McFadden included principals Dr. Armando Levy and Dr. Michael Cragg, and associate Dr. Charles Gibbons.