Jinro America, Inc. v. Secure Investments, Inc.

United States Court of Appeals for the Ninth Circuit · 2001 · Evidence

EvidenceRule 702Rule 403expert testimonyDaubertKumho Tireethnic biasstereotyping

Facts

Jinro claimed it entered a written joint program agreement for international frozen-chicken trading and advanced $10 million under that agreement, secured by Treasury collateral that later proved nonexistent. Defendants contended the written contract was only a cover for a risky 'roll program' investment designed to evade Korean currency regulations. At trial, defendants presented David Herbert Pelham as an expert on Korean law and Korean business practices. Pelham had no formal training in business, law, or cultural expertise, had not investigated Jinro, and testified in broad terms that corruption and fraud were prevalent in the Korean business community and that Korean businesses used phony contracts to evade currency laws.

Issue

Did the district court abuse its discretion by admitting Pelham's expert testimony about Korean businesses and culture, where the testimony rested on unreliable qualifications and methods and invited the jury to draw adverse inferences from Jinro's Korean identity? Also, were the district court's rulings on bifurcation, parol evidence, and foreign-law instructions erroneous?

Rule

Under Rule 702, expert testimony based on technical or other specialized knowledge is admissible only if it has a reliable basis in the knowledge and experience of the relevant discipline. Even if expert testimony is otherwise admissible, Rule 403 requires exclusion when its probative value is substantially outweighed by the danger of unfair prejudice, including ethnic or cultural stereotyping that invites the jury to infer a party acted wrongfully because of its nationality or ethnicity.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In a fraud suit in federal court in Los Angeles, Redwood Meridian Trading accuses Osaka Harbor Foods, a Japanese-owned importer, of using sham invoices. The defense offers Nolan Price, a former loss-prevention manager who spent six years investigating suspicious transactions in Japan, to testify that Japanese import firms commonly disguise unlawful transfers through false paperwork; he has no training in law, accounting, anthropology, or economics and never examined Osaka Harbor Foods itself.

Should the court admit Nolan's testimony as expert testimony on Japanese business practices?

Explanation. Rule 702 requires more than subjective belief or unsupported speculation. A witness offering technical or other specialized knowledge must have a reliable basis in the knowledge and experience of the relevant discipline. Here, the witness resembles the unreliable expert condemned in the case: he has only a skewed investigative background, no formal training in the relevant disciplines, and no reliable methodology supporting sweeping claims about an entire national business community. The case does not hold that all foreign-business-practice testimony is inadmissible, so D is too broad.