In Re: Unisys

Opinions of the United

1999 Decisions States Court of Appeals

for the Third Circuit

3-22-1999

In Re: Unisys

Precedential or Non-Precedential:

Docket 98-1007

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Filed March 22, 1999

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 98-1007

IN RE: UNISYS SAVINGS PLAN LITIGATION

JOHN P. MEINHARDT, on behalf of himself and all others

similarly situated

v.

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-03067)

BERNARD MCDEVITT, on behalf of himself and all others

similarly situated

v.

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-03126)

PARKER C. KEAN, on behalf of himself and all others

similarly situated

v.

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-03164)

MICHAEL HECK; JOSEPH MCCARTHY; ANGELO

DEPIETRO, on behalf of themselves and all others

similarly situated

v.

UNISYS CORPORATION; THE ADMINISTRATIVE

COMMITTEE OF THE UNISYS SAVINGS PLAN; THE

INVESTMENT COMMITTEE OF THE UNISYS SAVINGS

PLAN; JACK A. BLAINE; JOHN J. LOUGHLIN; KENNETH

MILLER; DAVID A. WHITE; STEFAN RIESENFELD

(E.D. PA. Civil No. 91-cv-03276)

GARY VALA, individually and on behalf of all others

similarly situated

v.

JACK A. BLAINE; MICHAEL R. LOSEY; JOHN J.

LOUGHLIN; KENNETH L. MILLER; STEFAN C.

RIESENFELD; CURTIS A. HESSLER; DAVID A WHITE;

UNISYS CORPORATION; THE NORTHERN

TRUST COMPANY

(E.D. PA. Civil No. 91-cv-03278)

CAROLYN A. GOHLIKE, on behalf of herself and all others

similarly situated

v.

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-03321)

NADIA F. SOS; FAROUK M. SOS, individually and on

behalf of all others similarly situated

v.

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-03582)

KENNETH GOERS; JOHN J. CIESLICKI, on behalf of

themselves and all others similarly situated

v.

UNISYS CORPORATION; THE NORTHERN

TRUST COMPANY

(E.D. PA. Civil No. 91-cv-04678)

DENNIS C. STANGA; JAMES M. COLLINS, on behalf of

themselves and all others similarly situated

v.

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-04689)

JOHN H. BURGESS, JR., on behalf of himself and all

others similarly situated

v.

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-04696)

WILLIAM TORKILDSON

v.

2

UNISYS CORPORATION (E.D. PA. Civil No. 91-cv-04754)

John M. Meinhardt, Michael Heck, Joseph

McCarthy, Angelo DiPietro, Gary Vala, Carolyn

Gohlike, Dennis C. Stanga, James M. Collins,

John H. Burgess, Jr., Bernard McDevitt, Parker

Kean, Nadia F. Sos, Farouk M. Sos, Kenneth

Goers, John J. Cieslicki, and William

Torkildson, plaintiffs in the above-listed

actions, individually and on behalf of the class

certified by Order of the district court entered

on January 28, 1992 in Master File Civil

Action No. 91-3067,

Appellants

No. 98-1037

IN RE: UNISYS SAVINGS PLAN LITIGATION

JOHN P. MEINHARDT, on behalf of himself and all others

similarly situated

v.

UNISYS CORPORATION

(E.D. PA. Civil No. 91-cv-03067)

HENRY ZYLLA; RICHARD SILVER; RONALD GRIPPO;

EDWARD LAWLER; RICHARD ANDUJAR; CLARENCE

MULLER; CHARLES WAHLER; JAMES MCLAUGHLIN;

DONALD RADER; JOSEPH LAU; JAMES GANGALE;

ALFRED CONTARINO; JOHN MARCUCCI; JOSEPH A.

FIORE; RICHARD MASTRODOMENICO; NICK KLEMENZ;

PETER SZCZYBEK, on behalf of themselves and all others

similarly situated; ENGINEERS UNION LOCAL 444 OF

THE INTERNATIONAL UNION OF ELECTRONIC,

ELECTRICAL, SALARIED, MACHINE AND FURNITURE

WORKERS, A.F.L.-C.I.O.; LOCALS 445 OF THE

INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL,

SALARIED, MACHINE AND FURNITURE WORKERS,

A.F.L.-C.I.O.; LOCALS 450 OF THE INTERNATIONAL

3

UNION OF ELECTRONIC, ELECTRICAL, SALARIED,

MACHINE AND FURNITURE WORKERS, A.F.L.-C.I.O.;

LOCALS 470 OF THE INTERNATIONAL UNION OF

ELECTRONIC, ELECTRICAL, SALARIED, MACHINE AND

FURNITURE WORKERS, A.F.L.-C.I.O.; LOCALS 165 OF

THE INTERNATIONAL UNION OF ELECTRONIC,

ELECTRICAL, SALARIED, MACHINE AND FURNITURE

WORKERS, A.F.L.-C.I.O.; LOCAL 3, INTERNATIONAL

BROTHERHOOD OF ELECTRICAL WORKERS, A.F.L.-C.I.O.

v.

UNISYS CORPORATION; EDWIN P. GILBERT; JOHN J.

LOUGHLIN; THOMAS PENHALE, individually and in their

capacities as members of the Unisys Employee Benefits

Executive Committee and administrators of the Unisys

Retirement Investment Plan; RICHARD H. BIERLY, EDWIN

P. GILBERT; CURTIS A. HESSLER; LEON J. LEVEL;

KENNETH L. MILLER; DAVID A. WHITE; JACK A.

BLAINE; STEFAN C. RIESENFELD; GEORGE T. ROBSON,

individually and in their capacities as members of the

Investment Committee of the Unisys Retirement

Investment Plan

(E.D. PA. Civil No. 91-cv-03772)

Henry Zylla, Richard Silver, Ronald Grippo,

Edward Lawler, Richard Andujar, Clarence

Muller, Charles Wahler, James McLaughlin,

Donald Rader, Joseph Lau, James Gangale,

Alfred Contarino, Richard Colby, John

Marcucci, Joseph Fiore, Richard

Mastrodomenico, Nick Klemenz and Peter

Szczybek, plaintiffs in the above-listed actions,

individually and on behalf of the class certified

by Order of the district court entered on

January 28, 1992 in Master File Civil Action

No. 91-3067,

Appellants

4

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. No. 91-cv-03067)

District Judge: Honorable Herbert J. Hutton

Argued Friday, September 25, 1998

BEFORE: BECKER, Chief Judge,

WEIS and GARTH, Circuit Judges

(Opinion filed March 22, 1999)

James R. Malone, Jr. (Argued)

Michael E. Gottsch

Pamela Nicolaysen

Chimicles, Jacobsen & Tikellis

361 West Lancaster Avenue

One Haverford Centre

Haverford, PA 19041

Joel C. Meredith

Daniel B. Allanoff

Meredith Cohen Greenfogel &

Skirnick, P.C.

117 S. 17th Street

22nd Floor

Philadelphia, PA 19103

Attorneys for Appellants

Laurence Z. Shiekman (Argued)

Brian T. Ortelere

Pepper Hamilton LLP

3000 Two Logan Square

18th & Arch Streets

Philadelphia, PA 19103

5

John Teklits

Unisys Corporation

Township Line & Union Meeting

P.O. Box 500 C2NW14

Blue Bell, PA 19424-0001

Attorneys for Appellees

Marvin Krislov

Deputy Solicitor for

National Operations

Marc I. Machiz

Associate Solicitor

Karen L. Handorf

Counsel for Special Litigation

Paul C. Adair

Trial Attorney

U.S. Department of Labor

Office of the Solicitor

Plan Benefits Security Division

P.O. Box 1914

Washington, D.C. 20013

Attorneys for Secretary of Labor as

Amicus Curiae in Support of

Plaintiffs-Appellants

OPINION OF THE COURT

GARTH, Circuit Judge:

This action, brought by employees who had participated

in individual account pension plans maintained by their

employer Unisys Corporation ("Unisys"), charged essentially

that Unisys and the individual defendants1 had breached

their fiduciary duties prescribed by ERISA2 by investing in

_________________________________________________________________

1. Unisys is one of eleven defendants. Other defendants are the

Administrative Committee and the Investment Committee of the Plan and

those individuals involved in making decisions for the Plan. The

defendants will be referred to collectively as "Unisys."

2. Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C.

S 1001 et seq.

6

Executive Life Insurance Guaranteed Investment Contracts

("GICs"). After a bench trial, the District Court granted

judgment for all defendants, ruling in their favor on all

issues related to the breach of fiduciary duty claims, thus

denying all relief and damages to the plaintiff class of

Unisys employees.3

We have reviewed the trial record independently and

conclude that in all material respects, the District Court's

findings of fact were not clearly erroneous, the District

Court did not abuse its discretion in excluding Dr.

Gottheimer's testimony, and the District Court did not err

in making its conclusions of law. We also conclude that

while we do not agree with some of the holdings of the

District Court, those disagreements have no effect on the

District Court's overall holding of prudence, and that

therefore, the orders entered by the District Court on

November 24, 1997 and January 9, 1998 will be affirmed.

I.

This is the second appeal from the District Court's

rulings in this case. Initially, summary judgment was

entered in favor of Unisys, but on review, we remanded for

trial. In re Unisys Savings Plan Litig., 74 F.3d 420 (3d Cir.),

cert. denied, 117 S. Ct. 56 (1996) ("Unisys I"). Almost all of

_________________________________________________________________

3. Plaintiffs are a class of Unisys employees who will be referred to

throughout this Opinion as "Meinhardt." John P. Meinhardt had

originally brought this action as a class action on behalf of himself and

all others similarly situated. See In re Unisys Savings Plan Litig., 74

F.3d

420 (3d Cir.), cert. denied, 117 S. Ct. 56 (1996) ("Unisys I").

This is an appeal of two consolidated cases. In thefirst action, final

judgment was entered on November 24, 1997 in eleven related actions

after a bench trial. A timely notice of appeal wasfiled on December 18,

1997. We exercise appellate jurisdiction under 28 U.S.C. S 1291, as an

appeal from a final judgment.

The second appeal before this court involves the ERISA claims in a

twelfth related action, upon which final judgment has not been entered.

The District Court certified the ERISA claims in that action under Fed.

R. Civ. P. 54(b) on January 9, 1998; a notice of appeal was filed on

January 16, 1998. We exercise appellate jurisdiction for the second

appeal under Fed. R. Civ. P. 54(b) in tandem with 28 U.S.C. S 1291.

7

the background facts and details are found in our earlier

opinion and we refer here only to those matters particularly

relevant to the arguments made by the parties on appeal.

Now that the District Court has rendered its findings of

fact and conclusions of law in favor of the Unisys, 4

Meinhardt complains that the standard used by the District

Court was improper, that Meinhardt's expert's testimony

was improperly excluded, and that Meinhardt suffered

damages that were not recognized by the District Court. As

indicated above, we hold that the District Court's essential

factual findings were not clearly erroneous and that

measured by the appropriate prudence standard of ERISA,

the District Court properly concluded that Unisys did not

breach any fiduciary duty. This threshold holding makes it

unnecessary for us to discuss in detail the subsidiary

issues raised on appeal by Meinhardt.

At the outset we call attention to the fact that the

contours of the factual record have changed significantly

since we last addressed the GIC issue presented in this

case. At the earlier summary judgment stage, the prior

panel of this court was obliged to assume that various facts

presented by Meinhardt were true and that all inferences

had to be drawn in Meinhardt's favor. Moreover, we

assumed the report of Dr. Gottheimer, Meinhardt's

proposed expert witness, would be admitted into evidence.

As we discuss infra, the District Court properly excluded

Dr. Gottheimer from testifying under Fed. R. Evid. 702.

As we have mentioned, at the conclusion of a ten-day

bench trial, the District Court entered judgment for Unisys

and issued extensive findings of fact and conclusions of

law. We review the District Court's findings of facts for clear

error. Application of legal precepts to historical facts

receives plenary review. Feder v. Evans-Feder, 63 F.3d 217,

222 n.9 (3d Cir. 1995). The District Court's decision to

qualify an expert is reviewed for abuse of discretion.

_________________________________________________________________

4. The District Court's findings of fact and conclusions of law can be

found at In re Unisys Savings Plan Litig., No. 91-3067, 1997 WL 732473

(E.D. Pa. Nov. 24, 1997). For the sake of convenience, we will refer to

the

District Court's findings of fact as "FF P __," and to its conclusions of

law

as "CL P __."

8

General Elec. Co. v. Joiner, 118 S. Ct. 512 (1997); In re Paoli

R.R. Yard Litig., 35 F.3d 717, 741-46 (3d Cir. 1994) ("Paoli

II").

II.

Meinhardt participated in a 401(k) savings plan ("Plan")5

administered by Unisys. Two companies, Sperry and

Burroughs, had merged in 1986 to create Unisys, and thus

their retirement plans also merged. See Unisys I, 74 F.3d at

425-26. Meinhardt and the class he represents elected to

invest their money in two of the funds offered by the Plan,

the Fixed Income Fund ("FIF ") and the Insurance Contract

Fund ("ICF "). Investments in the FIF/ICF were exclusively

restricted to Guaranteed Investment Contracts ("GICs").6

For ease of reference throughout this Opinion we will refer

to the FIF/ICF as the "Fund."

Unisys described the Fund as one of the more

conservative funds that was intended to return principal

with interest.7 Plan participants could invest as much or as

little of their money as they desired. In order to prevent

interest rate arbitrage by the participants and in order to

receive a higher yield from the GICs, Fund assets could not

be transferred to the money market fund directly; Fund

assets had to be held for at least a year in one of the four

equity stock funds. In 1990, Unisys shortened this "equity

wash" to a period of six months after receiving approval

from Executive Life. App. 1702.

In 1987 and 1988, Unisys purchased three Executive Life

GICs as investments for the Fund. The Executive Life GICs

_________________________________________________________________

5. The Plan is actually three separate plans that make joint investments.

See Unisys I, 74 F.3d at 426-27 & 427 n.5.

6. A GIC is a contract under which the issuer is obligated to repay the

principal deposit at a designated future date and to pay interest at a

specified rate over the duration of the contract. Unisys I, 74 F.3d at

426.

7. The Plan offered five other investment funds: the Diversified Fund, the

Indexed Equity Fund, the Active Equity Fund, the Unisys Common Stock

Fund, and the Short Term Investment Fund ("money market fund"). The

money market fund invested in United States Treasury Bills, bank

obligations, and other short term investments.

9

themselves were comprised of assets that potentially had

high rates of return, some of which were high yield bonds,

or "junk bonds." The junk bonds did not fare well in the

late 1980's markets. In 1991, California regulators seized

Executive Life and temporarily froze all payments from the

Executive Life GICs. By 1996, however, the Fund

reimbursed the principal to Meinhardt and had paid some

interest, but at a lower rate than had been guaranteed.

FF P 80.

Meinhardt accuses Unisys of breaching its fiduciary

duties of prudence, diversification, and disclosure with

respect to the Executive Life contracts that had been

purchased for the Fund. ERISA prescribes that fiduciaries

must adhere to a standard of prudence. ERISA requires

that a fiduciary's duty shall be discharged:

with the care, skill, prudence, and diligence under the

circumstances then prevailing that a prudent man

acting in a like capacity and familiar with such matters

would use in the conduct of an enterprise with like

character and with like aims; . . . .

29 U.S.C. S 1104(a)(1)(B).

III.

To determine whether Unisys had satisfied the ERISA

standard of prudence, the district court found the following

facts from the evidence.

Unisys delegated the responsibility of investing for the

Fund to David White and Leon Level. White and Level have

educational and practical backgrounds in financial matters.

FF PP 17-18; App. 643-45, 1136-37. At the direction of

White and Level, Unisys purchased three Executive Life

GICs as investments for the Fund through bidding

processes in June 1987, December 1987 (both for the FIF),

and January 1988 (for the ICF). Of the many GICs

purchased for the Fund, only three were Executive Life

GICs, constituting between 15 and 20 percent of the Fund's

assets. FF PP 14-15; App. 4450. Unisys, through White and

Level, considered many firms through a process of

competitive bidding, and Unisys heard in-person

10

presentations from the insurance companies. FF P 20; App.

523, 1154.

Unisys presented evidence that for the first bid (June

1987), White and Level hired an experienced investment

consultant, Murray Becker, who evaluated many different

insurance firms.8 FF P 20. In evaluating potential insurance

companies from which to purchase GICs, Becker obtained

information and ratings from Standard and Poor's and A.M.

Best, ratings services that evaluate the stability and

potential profitability of various types of companies

including insurance companies. Both ratings services gave

Executive Life their highest rating.9 Becker and others

testified that the ratings services were quite thorough

because they analyzed raw data and interviewed investment

managers. App. 535. Becker testified that he and other

professionals had a high confidence in the thoroughness of

the ratings services, which led to their respective ratings.

FF P 21; App. 658-62, 702-03, 708-12, 1160-61. As detailed

in the District Court's findings of fact, Becker was very

familiar with how the ratings services evaluated the GICs.

Id.

Prior to the first bid, Unisys reviewed Becker's bid

specifications. FF P 20 n.2; App. 1267-68, 3659. White

testified that he carefully considered the use of high yield

bonds and knew the risks involved. The prevailing view in

the investment world at that time was that high yield

guaranteed insurance contracts were good risks. FF P 27;

App. 1038-39.

_________________________________________________________________

8. Becker had given Sperry advice about GICs through his firm, Johnson

& Higgins, before the Unisys merger. See Unisys I, 74 F.3d at 427.

Becker handled more than 500 such bids in his career. FF P 20; App.

522.

9. Standard and Poor's gave Executive Life an AAA rating, which was

reaffirmed on several occasions to meet questions concerning, inter alia,

the inclusion of high yield bonds in Executive Life's portfolio. FF P 23.

An

"AAA" rating means that an insurer offers"superior financial security on

both an absolute and relative basis." The insurer possesses "the highest

safety and [has] an overwhelming capacity to meet policyholder

obligations." FF P 24; App. 4279. A.M. Best also gave Executive Life its

highest rating, A+. FF P 24.

11

In addition to understanding the risks associated with

Executive Life GICs, White chose Executive Life GICs for

their other unique features. He selected the three Executive

Life GICs to balance other Fund investments -- the

Executive Life GICs had longer maturity dates, App. 656-

57, 692, and their portfolios lacked real estate mortgages or

derivatives and had a low proportion of commercial real

estate investments. App. 1010, 1156-58. Furthermore,

Executive Life used the "barbell" approach in making

investments for the GICs; that is, the higher risk associated

with the high yield bonds was balanced with low risk, lower

yield government bills. FF P 25; App. 1156-58.

For the second two bids and upon completion of the

merger between Burroughs and Sperry into Unisys, Unisys

decided not to utilize Becker's services. White, Level, and

three other employees under their direction had sufficient

professional experience to select GIC issuers. Moreover,

Becker had charged the Plan $25,000 per bid. FF P 31; App.

1162-65. White and Level expanded the list of potential

bidders for the second and third bids and maximized the

market information available to them. FF P 32; App. 1054-

55.

In the months between the bids, White and Level

"engaged in an ongoing process of reviewing and updating

the information on the potential bidders." FF P 33; App.

615-22. They testified that they also kept abreast of

developments in the GIC industry by reading trade

publications and journals. FF P 33 n.6; App. 617, 632. They

analyzed the portfolio and risk of the insurance carriers,

using the Standard and Poor's and A.M. Best ratings as a

source of information about both the insurance companies'

asset composition and their creditworthiness. FF P 35; App.

1056. They testified that they would not have been able to

replicate the analyses done by the ratings services in-

house. App. 711. They had available to them SEC forms

10K and 10Q to review prior to making their selection.

FF P 35; App. 1065-66, 631. They had also consulted with

a firm that Unisys had engaged to advise it on its defined

benefit pension plan. That firm advised Unisys on its

selection of issuers for the GIC funds. App. 608, 626-27.

12

In Unisys I, 74 F.3d at 436, we directed the District

Court to determine whether the ratings could be used

reliably by Unisys. As mentioned earlier, Level and White

both testified that the ratings services were respected for

their competence and thoroughness throughout the

investment and finance community. App. 1160-61, 658-

623, 702, 708-11. The District Court found that the ratings

services provided reliable information. FF P 21. We are

satisfied that this finding is not clearly erroneous. See also

Bussian v. RJR Nabisco, ___ F. Supp. 2d ___, No. Civ. A. H-

91-1533, 1998 WL 639320, at *7 (S.D. Tx. Sept. 2, 1998)

("Nabisco's use of the consultant and rating agencies [in

selecting an Executive Life annuity] does not demonstrate

imprudence.").

The District Court also resolved at trial four other issues

of fact that we identified in Unisys I. First, evidence in the

summary judgment record may have indicated that Becker

had recommended the purchase of a three-year GIC, rather

than a five-year GIC. Unisys I, 74 F.3d at 427. At trial,

however, Becker testified that he had not recommended the

shorter maturity (three-year) Executive Life GIC. Rather, his

discussion with Unisys officers about maturity dates was

very general, leading to the conclusion that the investment

in five-year GICs was appropriate. FF P 30; App. 555-558.

Second, at the summary judgment stage, the evidence

suggested that Becker told White that Executive Life would

lose its AAA rating from Standard & Poor if its investments

of junk bonds exceeded 35%, and White believed that 40-

50% of Executive Life's investments were junk bonds.

Unisys I, 74 F.3d at 427. At trial, Becker stated that it was

not his view that Executive Life would lose their Standard

and Poor's AAA rating if high yield bonds comprised more

than 35% of Executive Life's portfolio. Rather, he testified

that Executive Life thought its AAA rating might be in

jeopardy if their high yield bond holdings exceeded 35%.

However, Standard and Poor's had access to the actual

percentage of high yield bonds in Executive Life's portfolio,

and it still issued a AAA rating to Executive Life. Thus,

White's reliance on the AAA rating was neither

unreasonable nor imprudent. As discussed infra, even if

White had an erroneous view of the percentage of high yield

13

bonds in Executive Life's portfolio, a hypothetical prudent

fiduciary would have known that Executive Life's high yield

bond percentage was within an acceptable range in

Executive Life's and Standard and Poor's analyses. FF P 28;

App 501.10

Third, in Unisys I, we stated:

[A] reasonable factfinder could infer from this evidence

that Unisys failed to analyze the bases underlying

[Becker's] opinion of Executive Life's financial condition

and to determine for itself whether credible data

supported [Becker's] recommendation that Unisys

consider investing plan assets with the insurer. A

reasonable factfinder could also conclude that Unisys

passively accepted its consultant's positive appraisal of

Executive Life without conducting the independent

investigation that ERISA requires.

Unisys I, 74 F.3d at 435-36 (emphasis added). However,

after taking evidence at trial, the District Court did not find

that Unisys had failed to make its own evaluation of

Executive Life's financial condition, nor did itfind that

Unisys "passively" had accepted Becker's appraisal. On the

contrary, the District Court made numerous findings that

White and Level were aware of the composition of assets of

Executive Life GICs and that they understood the risks

associated with each of those assets. FF PP 25-27.

Fourth, in Unisys I, we advised the District Court that it

should determine the significance, if any, of Executive Life's

substantially higher interest rates. We suggested that

dramatically higher interest rates might have prompted

Unisys to conduct extra investigation into Executive Life's

creditworthiness. As stated earlier, at trial, White testified

that he carefully had considered the use of high yield bonds

and knew the risks involved. Unisys recognized that higher

rates could, over time, yield dramatic differences in income,

but that the trustees were "constrained by their standards

_________________________________________________________________

10. As counsel for Unisys pointed out at oral argument, if Executive Life

had 40% of its holdings in high yield bonds, and Executive Life GICs

constituted 15-20% of the Fund, White invested only 8% of the Fund

assets in high yield bonds.

14

of risk tolerance." FF P 25; App. 1250. The District Court

credited the testimony of the Unisys fiduciaries and was

satisfied and concluded that Unisys had made a reasonable

and thorough investigation of Executive Life GICs. CL P 3.

We will not disturb that holding here.11

IV.

The District Court's factual findings support its legal

conclusions that Unisys was prudent under the standard

articulated in ERISA and that a hypothetical prudent

investor would have purchased each of the three GICs. As

we stated in Unisys I, ERISA requires that afiduciary shall

discharge his duties

with the care, skill, prudence, and diligence under the

circumstances then prevailing that a prudent man

acting in a like capacity and familiar with such matters

would use in the conduct of an enterprise with like

character and with like aims; . . . .

_________________________________________________________________

11. Meinhardt contests three other alleged failures of the District Court

to follow this Court's mandate or to consider evidence in the record.

Each of these objections however, is without merit because Meinhardt

did not tender an expert to show how these facts supported the

conclusion that Unisys was imprudent.

First, the evidence revealed that Unisys did not have written

investment or diversification standards for the Fund, but that it had

guidelines for the money market fund. However, Meinhardt did not

present evidence that prudence required written fund guidelines and

Unisys testified that the unwritten guideline for investment diversity was

that no one investment should constitute more than 20% of a fund's

portfolio.

Second, some evidence suggested that Unisys spent less than twenty

minutes evaluating each bidder on bid day. Meinhardt presented no

evidence that more time should have been spent at bid day, and

considering this fact in isolation ignores evidence of Unisys's

investigation and consideration of each bidder prior to bid day.

Third, Unisys admitted at trial that the FIF bids had late maturity

dates, and thus Executive Life GICs would become larger percentages of

the FIF as time wore on. App. 1081. Again, Meinhardt did not

demonstrate that the percentages were ever beyond the norm. Moreover,

the FIF was phasing out in favor of the ICF.

15

Unisys I, 74 F.3d at 434 (quoting 29 U.S.C. S 1104(a)(1)(B)).

We also stated that the prudence requirement focuses on "a

fiduciary's conduct in arriving at an investment decision,

not on its results, and asking whether a fiduciary employed

the appropriate methods to investigate and determine the

merits of a particular investment." Id.

After taking evidence on the issue of Unisys's prudence,

the District Court held that the actions taken by the Fund's

trustees satisfied the prudence standard: "Based on the

evidence at trial I find that the Unisys fiduciaries undertook

adequate and reasonable steps before purchasing the three

Executive Life contracts." CL P 3. The District Court

concluded, "Measured by any standard, the Unisys

fiduciaries' actions are consistent with the prudence

requirements of ERISA." CL P 13. We hold that the District

Court's findings of fact support its conclusions of law that

Unisys was prudent in investing in Executive Life GICs, and

thus Meinhardt failed to prove an essential element of his

ERISA claim.

As an alternate theory for holding that Unisys was not

imprudent, the District Court considered the objective

prudence of Unisys investments in Executive Life GICs by

applying the "hypothetical prudent investor" test. Unisys I,

74 F.3d at 436 (citing Fink v. National Savings & Trust Co.,

772 F.2d 951, 962 (D.C. Cir. 1985) (Scalia, J., concurring

in part and dissenting in part) and Roth v. Sawyer-Cleator

Lumber Co., 16 F.3d 915, 919 (8th Cir. 1994)).

The District Court held that a hypothetical prudent

fiduciary would have invested in Executive Life GICs

because (1) Executive Life was qualified under federal

regulations as an insurance company authorized to provide

annuities to facilitate the termination of benefit pension

plans because it was state licensed, 46 Fed. Reg. 9532,

9534 (1981); (2) other judicial decisions endorsed the

purchase of Executive Life annuities, e.g., Riley v. Murdock,

890 F. Supp. 444, 458-60 (E.D.N.C. 1995);12 (3) Becker, the

adviser Unisys retained for the first bid, included Executive

_________________________________________________________________

12. See also Bussian v. RJR Nabisco, ___ F. Supp. 2d ___, No. Civ. A. H-

91-1533, 1998 WL 639320 (S.D. Tx. Sept. 2, 1998) (decided after the

District Court issued its findings of fact and conclusions of law).

16

Life on his approved list of GIC bidders until six months

after Unisys made its third and final purchase of Executive

Life, App. 559; and (4) other well-known pension plans

purchased Executive Life GICs. App. 559, 1742. The

District Court did not err in concluding that a hypothetical

prudent fiduciary would have made the same investments

in Executive Life GICs as the investments made by Unisys.

FF P 24 n.3; CL PP 8-10.

In sum, we are satisfied that the District Court's holdings

that Unisys was prudent, and in the alternative, that a

hypothetical prudent fiduciary would have made the same

investments, are supported by the evidence.

V.

In addition to holding that the trustees' actions satisfied

the standard of prudence required by ERISA, the District

Court went on to discuss why the trustees' actions were not

arbitrary and capricious. The District Court need not have

discussed application of an arbitrary and capricious

standard in this case. In light of the District Court's holding

of prudence and our affirmance of that holding, the District

Court's discussion of an arbitrary and capricious standard

cannot affect the judgment in favor of Unisys.

In Unisys I, we stated that fiduciaries of investment plans

had to satisfy the "prudent" legal standard specified in

ERISA, cited supra. We stated that one of ERISA's

underlying purposes was "to enforce strict fiduciary

standards." Unisys I, 74 F.3d at 434 (citing 29 U.S.C.

S 1001 and H.R. Rep. No. 93-533 (1974), reprinted in 1974

U.S.C.C.A.N. 4639, 4639-43).

In Struble v. New Jersey Brewery Employees' Welfare

Trust Fund, 732 F.2d 325 (3d Cir. 1984), we held

specifically that the duties of loyalty and prudence

demanded by ERISA should not be reviewed through an

"arbitrary and capricious" lens. We held that the "standards

set forth explicitly in ERISA" should be used to evaluate the

trustees' conduct. Id. at 333-34 (finding support in cases

from the Second, Fifth, and Eleventh Circuits). Struble

governs the question of Unisys's duty of prudence under

ERISA.

17

The District Court should have applied only the standard

of "prudence under the circumstances" as required by the

statute. Only the standard found in ERISA, 29 U.S.C.

S 1104(a)(1)(B); Unisys I, 74 F.3d at 434, should have been

applied to determine whether Unisys's investment methods

were prudent.

As authority for an arbitrary and capricious standard,

the District Court cited Varity Corp. v. Howe, 516 U.S. 489

(1996), Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101

(1989), and Moench v. Robertson, 62 F.3d 553 (3d Cir.

1995), cert. denied, 516 U.S. 1115 (1996). These cases,

however, involved situations not relevant to the present

claims asserted against Unisys.

In the context of a case challenging a denial of benefits

under 29 U.S.C. S 1332(a)(1)(B) -- and not challenging the

prudence of investment decisions -- the Supreme Court

held that the "inherently discretionary" nature of fiduciary

functions does not necessarily require a deferential

standard of review. Firestone Tire & Rubber Co. v. Bruch,

489 U.S. 101, 112 (1989). Under ERISA, the standard of

review over a trustee's decision to deny benefits or the

interpretation of the plan is de novo as a general rule; only

when the plan gives the trustee discretion to deny benefits

or construe the terms of the plan should a court employ the

arbitrary and capricious standard. As the instant case does

not concern a denial of benefits under 29 U.S.C.

S 1332(a)(1)(B) or an interpretation of Unisys's Plan,

Firestone's standard is inapplicable. Nor did Varity Corp. v.

Howe, 516 U.S. 489 (1996), involve a claim that a trustee's

investments were imprudent -- the claim that Meinhardt

makes here.

In Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995), cert.

denied, 516 U.S. 1115 (1996), we did apply a deferent

arbitrary and capricious standard of review to a claim by a

plan's participants that the fiduciary was imprudent. We

were careful to point out in Moench, however, that our

holding was limited to the specific type of plan involved in

that case, an Employee Stock Ownership Plan ("ESOP").

Here, of course, the Unisys Plan was not an Employee

Stock Ownership Plan. Furthermore, Moench specifically

held its analysis was in "complete harmony with the

18

prudent man standard of care obligations imposed by 29

U.S.C. S 1104 on fiduciaries, as our holding implicates only

the standard of review of the conduct of a fiduciary and not

the standards governing that conduct," Moench, 62 F.3d at

566 n.3 (emphasis added), as is the case here.

In sum, Unisys's methods of making that decision must

be evaluated using the ERISA standard mandated by

Unisys I and in accordance with Struble. The District Court

did not err in concluding that Unisys did not breach its

duty of prudence.

For these reasons, the District Court's discussion of an

arbitrary and capricious standard was superfluous and

constitutes no more than harmless error. Fed. R. Civ. P. 61.

The District Court's statements that Unisys's actions were

not arbitrary and capricious do not negate its otherwise

correct holding that Unisys satisfied the ERISA prudence

standard.

VI.

Meinhardt also argues that the District Court abused its

discretion when it decided to exclude the testimony of Dr.

George M. Gottheimer, one of Meinhardt's two proposed

expert witnesses.13 Meinhardt offered Dr. Gottheimer to

testify on the subject of "the customary methods of

investigating the financial condition and creditworthiness of

insurance companies."

To qualify as an expert under Fed. R. Evid. 702, a

witness must have sufficient qualifications in the form of

knowledge, skills, and training. Additionally, the court must

find that the testimony of the expert will be reliable and

that the testimony will "fit," that is, assist the trier of fact.

In re Paoli R.R. Yard Litig., 35 F.3d 717, 741-43 (3d Cir.

1994). While it may be arguable that the "fit" prescribed in

_________________________________________________________________

13. Meinhardt's expert Tsetsekos was qualified to testify and did testify

on the issue of damages caused by Unisys's alleged breaches of its

duties of diversification and disclosure. However, the District Court held

that his testimony was insufficient to prove that any alleged failure to

diversify or disclose information caused Meinhardt and the other class

plaintiffs to suffer losses. We agree. See infra Parts VII and VIII.

19

In re Paoli is a "fit" reflecting on the substance of the

witness' testimony, we think it just as relevant to the "fit"

reflecting on the witness' credibility. Indeed, in the recent

Supreme Court decision discussing the standard of review

applicable to the admission and exclusion of expert

evidence, the Supreme Court refers to the District Court's

"gatekeeper" role of screening such evidence to ensure that

it is not only relevant but reliable. The Court goes on to

write, "A court of appeals applying `abuse of discretion'

review to [expert testimony] rulings may not categorically

distinguish between rulings allowing expert testimony and

rulings which disallow it." General Elec. Co. v. Joiner, 118

S. Ct. 512, 517 (1997). Thus in our view, the Court's

emphasis on reliability as well as on relevancy embraces

within its standard the credibility of the witness proffering

expert opinion. This is particularly true where, as here, it is

the district court judge sitting as a finder of fact who must

rule on issues of evidence. See Goodman v. Highlands Ins.

Co., 607 F.2d 665, 668 (5th Cir. 1979) ("[A] trial judge

sitting without a jury is entitled to even greater latitude

concerning the admission or exclusion of evidence.").

While we could understand issue being taken with the

Goodman precept, it appears to us after Joiner that the

Goodman standard has been given increased viability.

Although Joiner was a summary judgment decision, it

nevertheless emphasized that Daubert did not alter the

general rule announced in Spring Co. v. Edgar, 99 U.S. 645

(1978). In Edgar, the Court stated, " `cases arise where it is

very much a matter of discretion with the court whether to

receive or exclude the evidence; but the appellate court will

not reverse in such a case, unless the ruling is manifestly

erroneous.' " Joiner, 118 S. Ct. at 517 (quoting Edgar, 99

U.S. at 658). After so stating, the Court rejected any

alteration of this rule and in the context of expert testimony

said, "But Daubert [v. Merrell Dow Pharmaceuticals, Inc.,

509 U.S. 579 (1993)] did not address the standard of

appellate review for evidentiary rulings at all. . .." Id. The

Court then repeated that under Daubert " `the trial judge

must ensure that any and all scientific testimony or

evidence admitted is not only relevant, but reliable.' " Id.

(quoting Daubert, 509 U.S. at 589).

20

The Court went on to hold in Joiner that the Eleventh

Circuit had erred in reviewing the exclusion of Joiner's

experts' testimony because it failed to give the trial court

the deference that is the hallmark of abuse of discretion

review. Id. (citing Koon v. United States, 518 U.S. 81, 97-99

(1996)). The Court further held that the studies upon which

Joiner's experts relied were not sufficient whether

individually or in combination, to support their conclusions

that Joiner's exposure to PCBs contributed to Joiner's

cancer, and that the District Court therefore did not abuse

its discretion in excluding their testimony.14

In the instant case, the District Court ruled that Dr.

Gottheimer's testimony would not be admissible for three

reasons. First, the court found that Dr. Gottheimer's

educational credentials were not of the highest caliber.15

Second, during Dr. Gottheimer's voir dire, the District Court

found Dr. Gottheimer not to be credible because he had

made statements about his credentials that were

inconsistent with his deposition testimony. Finally, the

District Court found that Dr. Gottheimer's expertise was in

property casualty insurance, not life insurance, and that

Gottheimer had admitted in his deposition that there are

"fundamental" differences in evaluating the two types of

insurance. FF PP 101-05; CL PP 17-19.

These three reasons coincide with the three requirements

articulated in Paoli II: qualifications, reliability, and fit. The

record discloses that Dr. Gottheimer's qualifications were

less than stellar. Because he had testified untruthfully at

voir dire, his testimony could well have been held

unreliable. Finally, Dr. Gottheimer's alleged expertise,

limited in any event to methods of investing with respect to

property casualty insurance, did not fit with or meet the

need of the District Court for expert testimony in life

insurance investing. See Surace v. Caterpillar, Inc., 111

F.3d 1039, 1055-56 (3d Cir. 1997). The District Court

determined that Dr. Gottheimer could not be a credible

_________________________________________________________________

14. Ultimately, the Court, on another issue, reversed the judgment and

remanded the proceedings as to whether a material dispute of fact

existed as to Joiner's alleged exposure to other elements.

15. Dr. Gottheimer received his Ph. D. from a correspondence school.

21

witness based on admissions secured through the use of

his prior sworn testimony. See FF PP 102-104. Because the

District Court, as fact-finder, listened to the testimony and

assessed the credibility of the witness, these findings are

entitled to great deference by this Court. See Anderson v.

City of Bessemer City, N.C., 470 U.S. 564 (1985).

Judge Becker, in his thoughtful and comprehensive

dissent, while focusing almost exclusively on the standards

for admissibility of scientific expert testimony, nevertheless

acknowledges that "the factfinder is ordinarily the arbiter of

general credibility," Dissent at 40, and that "the power to

evaluate the credibility of witnesses and give testimony its

proper weight primarily resides with the trier of fact."

Dissent at 41. He also properly acknowledges that the

decision to admit or to exclude expert testimony is reviewed

for abuse of discretion.

Judge Becker, however, fails to recognize or credit in his

dissent two significant and controlling issues. First, Dr.

Gottheimer's testimony does not fall within the scope of

scientific testimony, and accordingly, it should not be tested

by the particular standards required for testimony based on

a particular scientific ethic.16 See Carmichael v. Samyang

Tire, Inc., 131 F.3d 1433 (11th Cir. 1997), cert. granted sub

nom. Kumho Tire Co. v. Carmichael, 118 S. Ct. 2339 (1998).

It is true of course that we have referred to the Paoli

requirements of qualifications, reliability and fit -- but we

have done so only to emphasize that, measured by any

standard, scientific or non-scientific, the District Court did

not abuse its discretion in excluding Dr. Gottheimer's

testimony.

Second, and more important, the dissent, while

acknowledging that it is the fact finder that determines

weight and credibility of an expert's testimony, apparently

overlooks the distinguishing circumstance here: the fact

finder was the District Court judge himself, and not a jury.

Judge Hutton made the critical credibility determination

that he could not believe the testimony of Dr. Gottheimer,

and that being so, no reason has been put forward as to

_________________________________________________________________

16. See Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993); In re

Paoli R.R. Yard Litig., 35 F.3d 717, 741-43 (3d Cir. 1994).

22

why we should not credit and defer to the District Court's

finding. Even if we might have made a different

determination regarding Dr. Gottheimer's credibility, we are

not at liberty to impose our opinion on the District Court.17

We would be hard pressed to require a District Court

judge sitting in a non-jury case who credibly and with

reason found that he could not believe a witness to

nevertheless hear the witness's direct examination, cross-

examination, and rebuttal examination in an extended trial

when he knew that he would only reject it as unbelievable.

All the instances and cases cited by the dissent, see, e.g.,

Dissent at 32 n.1, 46 n.13, are those in which it was for the

jury as fact finder to determine credibility and weight of the

expert testimony. Thus, those cases are wholly inapplicable

to the facts of this case. When the role of the gatekeeper to

admit or exclude evidence (the judge) and the role of the

factfinder to assess and weigh the evidence that was

admitted (the jury) are one and the same, the judge who

becomes the factfinder as well as the gatekeeper must be

given great deference by this Court, and, as we note below,

should not be required to waste judicial time. See Fed. R.

Evid. 403. Therefore, we cannot say on this record that it

was an abuse of the District Court's discretion to exclude

Dr. Gottheimer's testimony.

Even if the District Court had abused its discretion, and

we hold that it did not, the error must be deemed harmless

in light of the District Court's finding that Dr. Gottheimer

was not credible. The District Court concluded, "If given the

chance to testify, I could not find [Dr. Gottheimer] to be a

_________________________________________________________________

17. As the Supreme Court of Maine stated:

We have previously stated that the determination of the

qualifications of expert witnesses is reserved to the sound

discretion

of the trial judge. It follows, therefore, that appellate decisions

affirming the trial court do not necessarily stand for the

proposition

that the opposite ruling would constitute error.

Hanson v. Baker, 534 A.2d 665, 667 (Me. 1987) (citation omitted); see

also Seese v. Volkswagenwerk A.G., 648 F.2d 833, 844 (3d Cir. 1981)

("[W]e recognize that the admission of expert testimony rests within the

sound discretion of the district court and that the district court will be

reversed only for an abuse of that discretion.").

23

credible witness given his evasiveness, if not his propensity

to state falsehoods." CL P 18. Obviously, hearing testimony

from a witness who was given no credence at all by the

District Court judge presiding at a bench trial would have

resulted in the "waste of time" proscribed by Federal Rule

of Evidence 403, particularly where the false statements

identified by the judge were material to the purported

expert's qualifications.

VII.

ERISA requires a fiduciary to "diversify[ ] the investments

of the plan so as to minimize the risk of large losses, unless

under the circumstances it is clearly not prudent to do so."

29 U.S.C. S 1104(a)(1)(C). Meinhardt complains that Unisys

invested an excessive amount of Fund investments in

Executive Life GICs. As discussed in Unisys I, Congress did

not try to quantify diversity with percentages, leaving that

determination to the facts and circumstances as found by

the courts. Unisys I, 74 F.3d at 438-40.

The District Court determined that Meinhardt had not

introduced evidence by way of expert testimony as to what

would have constituted a properly diversified fund. At the

time Executive Life went into receivership, the Fund had

20% of its assets in Executive Life investments, and the

court held this level of diversification to be proper.18

CL PP 32-33.

Nor did Meinhardt prove his case with respect to the duty

to diversity because he did not show that the Fund suffered

"large losses" as a result of any failure to diversify. This was

an issue that the Court of Appeals specifically held was not

known at the summary judgment stage. See Unisys I, 74

F.3d at 440. Meinhardt presented no evidence of

investments that would have constituted proper

diversification in order to prove that Unisys did not properly

_________________________________________________________________

18. The District Court combined the FIF and the ICF for purposes of

diversification because the funds "worked together;" that is, the FIF was

being phased out in favor of the ICF. Proceeds from matured FIF

contracts were invested in the ICF, and no new investments were made

in the FIF. FF P 79; App. 1510-12, 4450.

24

diversify the investments in the Fund or to enable the

District Court to assess losses, if any, to Meinhardt for the

difference. FF P 90.

The duty to diversify and resulting damages from a

breach of that duty could not be determined from the

summary judgment record in Unisys I. Now that the trial

has concluded, it is evident to us, as it was to the District

Court, that Meinhardt's failure of proof did not lead to any

determination that Unisys breached its duty to diversify or

that damages resulted.

VIII.

Meinhardt claims that Unisys did not fulfill its obligation

of making necessary disclosures under ERISA.

In Unisys I, we stated that "a fiduciary may not materially

mislead those to which section 1104(a)'s duties of loyalty

and prudence are owed." Unisys I, 74 F.3d at 440-41. A

fiduciary must make disclosures if silence would be

harmful. Bixler v. Central Pa. Teamsters Health & Welfare

Fund, 12 F.3d 1292, 1300 (3d Cir. 1993). ERISA also

requires plaintiffs to prove losses for any breach of fiduciary

duty claim:

Any person who is a fiduciary with respect to a plan

who breaches any of the responsibilities, obligations, or

duties imposed upon fiduciaries by this subchapter

shall be personally liable to make good to such plan

any losses to the plan resulting from each such

breach.

29 U.S.C. S 1109(a) (emphasis added). As Meinhardt and

the other class plaintiffs were seeking individual relief

under 29 U.S.C. S 1132(a)(3) (in contrast to S 1132(a)(2),

which only allows relief on behalf of the Plan), Meinhardt

was required to prove individual losses. Varity Corp. v.

Howe, 516 U.S. 489, 507-15 (1996).

Although the District Court's discussion of Meinhardt's

claims that Unisys breached its duty to disclose

information about Executive Life spans 18 pages, we can

dispose of this issue on appeal briefly. Essentially,

Meinhardt complains that Unisys received reports about

25

Executive Life's financial troubles in early 1990. Meinhardt

claims that Unisys (1) did not warn the Fund participants,

(2) drafted misleading letters in order to dispel participants'

concern, (3) did not disclose the fact that a high-level

Unisys executive had purged his own portfolio of Executive

Life securities, and (4) entered into an agreement with

Executive Life not to disclose information to participants

that would cause participants to change their investments.19

The District Court held that Meinhardt did not prove that

the alleged failures to disclose were material. CL PP 22-23.

We need not address the question of whether the alleged

nondisclosures were material, however, because it is clear

that Meinhardt did not prove that any alleged failures to

disclose caused the participants to suffer damages.

CL PP 29-30. The District Court found that Meinhardt and

the other class plaintiffs (1) already had actual knowledge

of much of the information it is claimed that Unisys failed

to disclose, (2) did not read the Plan documents, and (3)

testified that they would not have withdrawn or transferred

their money from the Fund even if they had known about

Executive Life's problems. FF PP 70-71; CL P 28; App. 1681-

82, 1688-89.

Moreover, Meinhardt's expert, Tsetsekos, offered

testimony on losses suffered as a result of the alleged

failures to disclose, but referred only to those losses

incurred by the Fund and not to any losses incurred by

individual participants named as plaintiffs. FF PP 76-77;

CL PP 29-31. Meinhardt also failed to prove individual

damages suffered by each participant as ERISA requires. 29

U.S.C. S 1132(a)(3).

We hold that these factual findings of the District Court

are not clearly erroneous and that they support the

conclusion reached by the District Court that Meinhardt

failed to prove his claim that Unisys breached its duty of

disclosure.

_________________________________________________________________

19. The agreement did not prevent Unisys from disclosing information

required by law. App. 1702.

26

IX.

A final word should be said about Meinhardt's claim for

damages. First and foremost, in the absence of proof of a

breach of fiduciary duty, no relief in the way of damages or

losses could accrue to Meinhardt. We have held that Unisys

satisfied ERISA's prudence standard and that accordingly,

no breach of fiduciary duty occurred. This being so, no

claim for increased interest, i.e., the promised interest

minus the actual amount of interest received, or any other

damages, can be sustained. As we have noted earlier,

Meinhardt had received the return of the entire principal

invested as well as some interest.20

It is therefore irrelevant as to whether any losses

sustained by the Fund from GIC investments could have

been offset by any gains derived from other Fund

investments. While we acknowledge that a trustee, when he

is imprudent and breaches his trust, is liable for all gains

and may not offset losses against them,21 in the instant

case, the Unisys fiduciaries were neither imprudent nor did

they breach their fiduciary duties.22

Additionally, Meinhardt and the Department of Labor as

amicus also argued that the burden of proving causation of

damages shifts to the defendant after the plaintiff has

proved that the defendant breached a fiduciary duty. Here,

the District Court assigned the burden of proof to the

plaintiff Meinhardt. Because we have held that Unisys did

not breach its fiduciary duties, we have no need to address

the issue of which party bears the burden of proving

causation of damages resulting from a breach offiduciary

duty. While we recognize that our sister circuits have

_________________________________________________________________

20. Even without offsetting the losses with the gains, the three contracts

each returned principal with minimal (3-5%) interest. FF P 80.

21. See Donovan v. Bierwirth, 754 F.2d 1049, 1056 (2d Cir. 1985);

Restatement (Second) of Trusts S 213.

22. In light of our decision in favor of Unisys, we have no need to

address Unisys's affirmative defense under 29 U.S.C. S 1104(c), which

relieves a trustee of liability if the loss results from the participant's

exercise of control.

27

divided in deciding this question,23 we have yet to express

ourselves on this issue.24

X.

In sum, we have held that:

(1) The District Court's findings of fact issued after

hearing evidence on Meinhardt's ERISA claims will be

affirmed as not clearly erroneous.

(2) The District Court's conclusions of law that the Unisys

fiduciaries were prudent, and in the alternative, that a

hypothetical prudent fiduciary would have made the

same investments in Executive Life GICs, also will be

affirmed.

(3) Although we do not agree with the District Court's

additional discussion of an arbitrary and capricious

standard in reviewing the investments made by the

ERISA fiduciaries, this discussion was superfluous,

constitutes no more than harmless error, and does not

affect our judgment.

(4) The District Court did not abuse its discretion in

excluding the testimony of Meinhardt's proposed expert

witness on the issue of Unisys's prudence, and in any

event, that action was harmless in light of the District

Court's finding that the expert was not credible.

_________________________________________________________________

23. Compare Silverman v. Mutual Benefit Life Ins. Co., 138 F.3d 98, 105-

06 (2d Cir. 1998), cert. denied, ___ S. Ct. ___, 1998 WL 440027 (Oct. 5,

1998) and Kuper v. Iovenko, 66 F.3d 1447, 1459-60 (6th Cir. 1995)

(burden of proof on plaintiff) with McDonald v. Provident Indemnity Life

Ins. Co., 60 F.3d 234, 237 (5th Cir. 1995); Roth v. Sawyer-Cleator

Lumber Co., 16 F.3d 915, 917 (8th Cir. 1994) (burden of proof on

fiduciary defendant).

24. Cf. Kemmerer v. ICI Americas, Inc., 70 F.3d 281, 290 (3d Cir. 1995)

(citing Roth for the proposition that burden of disproving damages shifts

to the trustee, but finding no need to shift the burden because the case

before the court did not involve a situation where plaintiff had proved a

breach of duty and a definite loss); Nedd v. United Mine Workers of Am.,

556 F.2d 190, 211 (3d Cir. 1977) (holding that shifting the burden of

causation to the fiduciary is an appropriate rule in an LMRA case).

28

(5) The District Court did not err in denying relief to

Meinhardt inasmuch as no losses or damages could be

sustained. As a consequence, we have found it

unnecessary to address the disputed issue of which

party bears the burden of proving causation of

damages that result from a breach of fiduciary duty.

(6) The District Court did not err in holding that

Meinhardt's other ERISA claims, failure to diversify

and failure to disclose information, were not proved.

Thus, we will affirm the District Court's orders of November

24, 1997, and January 9, 1998, in favor of Unisys and

against Meinhardt.

Each party shall bear its own costs.

29

BECKER, Chief Judge, dissenting

Although I join in Parts I through V and VII through IX

of the majority's opinion, I believe that the majority has

made a significant error regarding expert testimony, and I

dissent on this point. Because I believe that this error is

not harmless, I believe we should vacate the judgment and

remand this case for a new trial.

In concluding that the District Court properly excluded

the testimony of Dr. Gottheimer, the majority seriously

misconceives the proper approach to the admission of

expert opinion testimony under Federal Rule of Evidence

702. As an initial point, the majority overstates the degree

to which we owe deference to the District Court's decision

in a case, such as this, tried to the court. The District

Court's decision deserves no additional deference simply

because the court sat as both evidentiary gate-keeper and

fact-finder. If anything, the practicalities of the matter

suggest that the trial court in such a situation should be

more reluctant than usual to exclude evidence, although I

do not suggest that we should apply a correspondingly

more stringent standard of review.

The District Court and the majority also make three

important errors in analyzing the substantive requirements

of Rule 702. First, the majority confuses the reliability of an

expert witness -- a matter for the jury -- with the reliability

of his or her methodology -- a matter initially for the trial

judge -- and therefore erroneously concludes that

questions about an expert witness's general credibility are

a proper basis for excluding his or her testimony. The

question for the judge under Rule 702 is not whether the

witness is reliable but whether the methodology the expert

uses in reaching his conclusions is reliable. As to this latter

point, the witness's general credibility is simply irrelevant;

the relevant issues in determining the reliability of an

expert's principles and methods are of the sort set forth

with respect to scientific testimony in Daubert v. Merrell

Dow Pharms., Inc., 509 U.S. 579, 593-95 (1993).

Second, the majority misconstrues the nature of the

requirement of "fit" between the expert's testimony and the

facts at issue. The majority concludes that the District

30

Court correctly found that no fit exists in this case because

Dr. Gottheimer's experience, in the area of property-

casualty insurance, on which his testimony is based, is not

in the specific area -- life insurance -- with which the facts

in this case deal. But the majority's focus on the connection

between Dr. Gottheimer's claimed basis for being an expert

and the facts at issue, as opposed to the connection

between the substance of his testimony and the facts, is

irrelevant to the question of fit. Their concern about his

background should more appropriately be directed at Dr.

Gottheimer's qualifications, not the fit between his

testimony and the facts.

Third, the majority permits the District Court to set the

qualifications bar for expert testimony too high. It approves

the District Court's rejection of the expert's testimony

simply because his qualifications are not of the"highest

caliber." This conclusion is inconsistent with our

longstanding liberal approach to the matter of expert

witness qualifications. Also, the connection between Dr.

Gottheimer's expertise and the issues in this case-- which

the majority discusses in the context of fit -- are not too

remote for him to qualify as an expert under Rule 702.

Finally, I think that the majority wrongly concludes that

any error in the exclusion of Dr. Gottheimer's testimony

was harmless. While improper admission of evidence is

usually harmless error in a bench trial, the improper

exclusion of an expert witness who would have offered a

party's sole expert testimony on an element of its case

ordinarily is not harmless. The fact that the District Court

found some inconsistencies in Dr. Gottheimer's voir dire

testimony was not a sufficient basis for changing the

ordinary rule. Such inconsistencies are not enough to

convince me that it is highly probable that Dr. Gottheimer's

testimony, if admitted, would not have changed the

outcome. This is especially true in light of the fact that the

inconsistencies the District Court discusses were at worst

minor.

I. Overview of Rule 702

Under Rule 702, "[i]f scientific, technical, or other

31

specialized knowledge will assist the trier of fact to

understand the evidence or to determine a fact in issue, a

witness qualified as an expert by knowledge, skill,

experience, training, or education, may testify thereto in the

form of an opinion or otherwise." Fed. R. Evid. 702. The

Supreme Court has recognized that Rule 702 , although it

limits the scope of permissible evidence, is part of "the

`liberal thrust' of the Federal Rules and their `general

approach of relaxing the traditional barriers to "opinion"

testimony.' " Daubert, 509 U.S. at 588 (quoting Beech

Aircraft Corp. v. Rainey, 488 U.S. 153, 169 (1988)). We have

recognized that this "principle of liberal admission of expert

testimony is found in Rule 702 itself, in the advisory

committee note to the rule, and in our case law."1

To these ends, Rule 702 embodies three distinct

substantive restrictions on the admission of expert

testimony: qualifications, reliability and fit. See In re Paoli

R.R. Yard PCB Litig. ("Paoli II"), 35 F.3d 717, 741-43 (3d

Cir. 1994). First, an expert witness must be qualified by

virtue of specialized expertise. See Fed. R. Evid. 702

(permitting expert testimony of a witness "qualified as an

expert by knowledge, skill, experience, training, or

education"); Paoli II, 35 F.3d at 741. Second, "an expert's

testimony is admissible so long as the process or technique

the expert used in formulating the opinion is reliable." Paoli

II, 35 F.3d at 742 (citing Daubert, 509 U.S. at 589-90).

Third, "[e]xpert testimony which does not relate to any

issue in the case is not relevant and, ergo, non-helpful."

Daubert, 509 U.S. at 591 (citations omitted).2

_________________________________________________________________

1. Habecker v. Copperloy Corp., 893 F.2d 49, 51 (3d Cir. 1990); accord

Waldorf v. Shuta, 142 F.3d 601, 625 (3d Cir. 1998) (citing the "policy of

liberal admissibility of expert testimony"); Holbrook v. Lykes Bros. S.S.

Co., 80 F.3d 777, 782 (3d Cir. 1996) (citing"our liberal approach to

admitting expert testimony"); United States v. Downing, 753 F.2d 1224,

1230 (3d Cir. 1985) (citing "the liberal standard of admissibility

mandated by Rule 702"); Knight v. Otis Elevator Co., 596 F.2d 84, 88 (3d

Cir. 1979).

2. It is not a settled question in this Circuit whether the Daubert

requirements apply to nonscientific testimony such as may be at issue

here. See Lauria v. National R.R. Passenger Corp., 145 F.3d 593, 599 n.7

(3d Cir. 1998) (questioning, but not resolving, whether Daubert analysis

32

II. Standard of Review

As an initial matter, I think the majority errs in its

analysis of the applicable standard of review and the extent

to which we owe deference to the District Court's decision.

Of course, the decision whether to admit or exclude expert

testimony is largely within the hands of the trial judge. We

review such a decision for abuse of discretion. See General

Elec. Co. v. Joiner, 118 S. Ct. 512, 517 (1997) ("We have

held that abuse of discretion is the proper standard of

review of a district court's evidentiary rulings." (citations

omitted)); In re Paoli R.R. Yard PCB Litig. ("Paoli I"), 916

F.2d 829, 856 & n.33 (3d Cir. 1990). The standard does not

change when we are reviewing a court's decision to exclude,

as opposed to admit, expert testimony, in spite of the liberal

_________________________________________________________________

should apply to testimony of expert in train track maintenance); United

States v. Velasquez, 64 F.3d 844, 850 (3d Cir. 1995) (questioning the

propriety of applying Daubert to handwriting analysis, but applying it in

an exercise of caution). This question is currently before the Supreme

Court. See Carmichael v. Samyang Tire, Inc., 131 F.3d 1433 (11th Cir.

1997), cert. granted sub nom. Kumho Tire Co. v. Carmichael, 118 S. Ct.

2339 (1998). The current proposed amendment to Rule 702 would apply

a distillation of the Daubert analysis to all expert testimony. See Fed.

R.

Evid. 702 (proposed amendment 1998) (further limiting admissibility of

expert testimony to where "(1) the testimony is sufficiently based upon

reliable facts or data, (2) the testimony is the product of reliable

principles and methods, and (3) the witness has applied the principles

and methods reliably to the facts").

The majority contends that I have erred by focusing on Daubert

analysis in a case in which it might not apply. See Slip Op. at 23. But

even to the extent the majority turns out to be correct that a strict

Daubert analysis does not apply, my conclusions would not change.

First, I do not believe that the result would be any different if we were

to apply the principles of Rule 702 sans Daubert. In fact, since Daubert

imposes additional requirements for scientific testimony beyond the

usual requirements for expert testimony, not applying Daubert would

provide even greater reason to believe that Dr. Gottheimer's testimony

should have been admitted. Thus, the majority's criticism supports my

contention. Second, even if the Supreme Court in Kumho decides that

strict Daubert analysis should not apply to non-scientific testimony, I

still think that the basic principles of reliability and fit would be

relevant

in determining the admissibility of expert testimony under Rule 702.

33

standard for the admission of such testimony. See Joiner,

118 S. Ct. at 517.

Even though we apply an abuse of discretion standard of

review, however, "to the extent the district court's ruling

turns on an interpretation of a Federal Rule of Evidence our

review is plenary."3 Furthermore, although our review is

highly deferential, it is not a complete bar to reversing a

district court's decision even where the court does not

commit purely legal error. See, e.g., Paoli I, 916 F.2d at

855-56 (rejecting as an abuse of discretion the trial court's

insistence on certain credentials as expert qualifications); 4

Weinstein's Federal Evidence S 702.02(2) n.9 (2d ed. Nov.

1998) (collecting cases).

The majority concludes that the fact that this case

involved a bench trial requires additional deference to the

District Court's evidentiary exclusion decision. In reaching

this conclusion, the majority relies on Goodman v.

Highlands Insurance Co., 607 F.2d 665 (5th Cir. 1979),

which states that "a trial judge sitting without a jury is

entitled to even greater latitude concerning the admission

or exclusion of evidence." Goodman, 607 F.2d at 668. The

majority asserts that, after Joiner -- in which the Supreme

Court held that the same abuse of discretion standard of

review applies to an evidentiary ruling on expert testimony

regardless of whether the trial court admits or excludes the

evidence -- the "Goodman" rule "has been given increased

viability." Slip Op. at 20. For a variety of reasons, I cannot

agree with the majority's conclusion that our review is

affected by the fact that this case was tried to the court.

As an initial matter, Goodman does not support the

meaning the majority draws from it. The statement in

Goodman upon which the majority relies refers not to the

trial court's decision on admissibility but to whether the

trial court's decision, if erroneous, was a harmless error.

_________________________________________________________________

3. DeLuca v. Merrell Dow Pharms., Inc., 911 F.2d 941, 944 (3d Cir. 1990)

(citing In re Japanese Elec. Prods. Antitrust Litig., 723 F.2d 238, 277 &

n.43 (3d Cir. 1983), revd. on other grounds sub. nom. Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986)); accord Barker v.

Deere & Co., 60 F.3d 158, 161 (3d Cir. 1995).

34

This reading is made manifest by an examination of the

sentence following that quoted above:

In a non-jury case, the admission of incompetent

evidence will not warrant reversal unless all of the

competent evidence is insufficient to support the

judgment, or unless it affirmatively appears that the

incompetent evidence induced the court to make an

essential finding which would otherwise not have been

made.

Goodman, 607 F.2d at 668 (citations omitted). This is

simply a restatement of the familiar harmless error test for

review of decisions admitting evidence in bench trials.4 It is,

however, irrelevant to our determination of whether the

district court's decision to exclude expert testimony from

evidence is reversible error.5

Furthermore, even assuming the majority correctly states

the Fifth Circuit's Goodman rule, I think that rule is not a

proper one and would not follow it. The Federal Rules of

Evidence apply with full force to bench trials. See Fed. R.

Evid. 1101(b); 9 Charles Alan Wright & Arthur R. Miller,

_________________________________________________________________

4. As we have stated:

[I]t is well settled that in a nonjury case, an appellate court

will not

reverse on the basis of an erroneous admission of evidence unless

(1) there is insufficient evidence other than the challenged

evidence

to support the district court's conclusion, or (2) the district

court is

induced by the challenged evidence to make an essential finding

that it would not have made otherwise.

United States v. Local 560, Intl. Bhd. of Teamsters, 780 F.2d 267, 278

(3d Cir. 1985) (alteration in original) (quoting De Laval Turbine, Inc. v.

West India Indus., Inc., 502 F.2d 259, 263-64 (3d Cir. 1974)); accord 12

Rya W. Zobel, Moore's Federal Practice S 61.06(2) (3d ed. 1998). This is

a sensible rule based on the assumption that judges are more capable

of ignoring prejudicial or irrelevant evidence than juries. See 1

Weinstein's, supra, S 103.41(4)(a) ("At one end of the scale is the non-

jury trial in which the judge is often assumed, even in a criminal case,

to have disregarded inadmissible evidence in arriving at a decision.").

5. Recent cases from the same court reveal that the quoted portion of

Goodman in fact refers to harmless error analysis. See, e.g., Southern

Pac. Transp. Co. v. Chabert, 973 F.2d 441, 448 (5th Cir. 1992) (quoting

Goodman and citing it in support of the harmless error standard).

35

Federal Practice & Procedure S 2411, at 587 (2d ed. 1995)

("In theory, the Federal Rules of Evidence apply equally in

court trials and jury trials."). After all, a trial is a trial. To

me, the proposition that we owe more deference to trial

court decisions excluding evidence in bench trials is

inconsistent with the Federal Rules and encourages sloppy

district court decisionmaking.6

If anything, trial courts should be more chary of

excluding evidence in bench trials than in jury trials. See

Builders Steel Co. v. Commissioner, 179 F.2d 377, 379 (8th

Cir. 1950) ("[A] trial judge who, in the trial of a nonjury

case, attempts to make strict rulings on the admissibility of

evidence, can easily get his decision reversed by excluding

evidence which is objected to, but which, on review, the

appellate court believes should have been admitted."),

quoted in 9 Wright & Miller, supra, S 2411, at 587. The

better course is to admit the evidence and then take factors

that otherwise might affect its admissibility into

consideration in determining its weight, rather than waste

time debating the propriety of admitting the evidence.7 I

_________________________________________________________________

6. The majority suggests that I have failed to recognize the critical fact

in

this case: that the judge was the fact-finder as well as the Rule 702

gatekeeper. The majority is incorrect. Of course I recognize this fact,

but

think that it should make no difference in our analysis. The majority

essentially contends that, once the trial judge in a bench trial makes up

his or her mind during an in limine hearing that a witness is not

credible, that decision is cast in concrete and the judge will close his

or

her ears to any further (trial) testimony from the witness. Concomitantly,

the majority suggests that, with any witness, the court proceeding to a

bench trial may exclude a prospective witness's testimony based not on

its admissibility but on the witness's credibility. See Slip Op. at 23

("We

would be hard pressed to require a District Court judge sitting in a non-

jury case who credibly and with reason found that he could not believe

a witness to nevertheless hear the witness's direct examination, cross-

examination, and rebuttal examination in an extended trial when he

knew that he would only reject it as unbelievable."). I, to the contrary,

think it would be preferable for the trial judge to listen to the witness

and keep his or her mind open to the possibility that the entirety of the

witness's trial testimony could change his or her view of the witness's

credibility. Listening, after all, is a major part of the judge's job.

7. See Builders Steel, 179 F.2d at 379 (quoting Donnelly Garment Co. v.

NLRB, 123 F.2d 215, 224 (8th Cir. 1941)). In Donnelly Garment, the

court noted that it is usually more efficient in a bench trial for the

court

to simply admit questionable evidence, and then take such questions

into consideration in determining the weight it should be given. See 123

F.2d at 224.

36

believe the majority's approach grants undue deference to

trial court's decisions excluding evidence in bench trials.

III. Rule 702 Requirements

I now turn to the substantive requirements of Rule 702.

Under Rule 702, expert testimony is admissible only if it

meets the requirements of Rule 702: qualifications,

reliability and fit. The majority concludes that the District

Court properly found that Dr. Gottheimer's testimony met

none of these requirements. I disagree, and discuss each of

these factors, although not in the usual order.

A. Reliability

The majority begins with the indisputable premise that

reliability is a key factor in determining the admissibility of

expert testimony. "[U]nder the Rules the trial judge must

ensure that any and all scientific testimony or evidence

admitted is not only relevant, but reliable." Joiner, 118 S.

Ct. at 517 (quoting Daubert, 509 U.S. at 589). From this,

the majority concludes that, as part of the reliability

analysis, a trial court may consider the general credibility

of a witness in determining whether his or her testimony is

appropriately admitted as expert witness testimony. See

Slip Op. at 20 ("Thus in our view, the Court's emphasis on

reliability as well as on relevancy embraces within its

standard the credibility of the witness proffering expert

opinion."). Accordingly, the majority holds that, since the

District Court found that Dr. Gottheimer was not a credible

witness it could properly exclude his expert testimony

under Rule 702. The majority misconceives the

fundamental nature of the reliability inquiry under Daubert.

The reliability inquiry focuses not on the witness's

reliability in an evidentiary sense, but on the reliability of

the methodology that the expert applies in arriving at an

opinion.

[I]n order to qualify as "scientific knowledge," an

inference or assertion must be derived by the scientific

method. Proposed testimony must be supported by

appropriate validation -- i.e., "good grounds," based on

what is known. In short, the requirement that an

37

expert's testimony pertain to "scientific knowledge"

establishes a standard of evidentiary reliability.

Daubert, 509 U.S. at 590 (footnote omitted). This inquiry

focuses on the expert's principles and methodology, not his

results.

The inquiry envisioned by Rule 702 is, we emphasize,

a flexible one. Its overarching subject is the scientific

validity -- and thus the evidentiary relevance and

reliability -- of the principles that underlie the

proposed submission. The focus, of course, must be

solely on principles and methodology, not on the

conclusions that they generate.

Daubert, 509 U.S. at 594-95. Under Rule 702, the trial

court's preliminary reliability analysis in making an

admissibility determination must focus on the witness's

methods, not his or her testimony as a whole.8 A current

proposed amendment to Rule 702 reemphasizes this focus

on the reliability of the methodology, as opposed to the

witness.9

_________________________________________________________________

8. Even the broadest understandings of the Daubert reliability inquiry

recognize that such reliability determinations are limited to the

witness's

methods and related matters. "The broadest reading of Daubert is that it

applies to all reliability issues presented by all expert testimony. Under

this interpretation, all reliability issues raised by an expert's

application,

methodology, reasoning, or underlying theories are admissibility

questions to be resolved by the gatekeeper-judge." 29 Charles Alan

Wright & Victor James Gold, Federal Practice & Procedure S 6266, at 290

(1997).

9. The Judicial Conference of the United States's Standing Committee on

Rules of Practice and Procedure is currently considering an amendment

to Rule 702 proposed by its Advisory Committee on Rules of Evidence

that would permit the admission of expert testimony if "(1) the testimony

is sufficiently based upon reliable facts or data, (2) the testimony is

the

product of reliable principles and methods, and (3) the witness has

applied the principles and methods reliably to the facts." Fed. R. Evid.

702 (proposed amendment 1998). Under the proposed rule, the trial

judge must determine whether the proposed testimony"is properly

grounded, well-reasoned and not speculative before it can be admitted."

Fed. R. Evid. 702 advisory committee's note (proposed amendment

1998). "If there is a well-accepted body of learning and experience in the

expert's field, then the expert's testimony must be grounded in that

learning and experience to be reliable, and the expert must explain how

the conclusion is so grounded." Id.

38

Credibility plays no appropriate part in the analysis of

the reliability of a proposed expert's methodology. The

Court in Daubert recognized a number of factors pertinent

to the reliability inquiry, including testability, peer review or

publication, potential rate of error, existence of standards

and controls, and general acceptance. See 509 U.S. at 593-

94. We, as well as others, have suggested numerous

additional factors relevant to reliability as set forth in the

margin.10 The key point is that none of these factors

requires consideration of the proffered expert's credibility in

general. "[E]valuating the reliability of scientific

methodologies and data does not generally involve

assessing the truthfulness of the expert witnesses . . . ."

Paoli II, 35 F.3d at 749.11 Of course, a particular witness

_________________________________________________________________

10. See, e.g., Downing, 753 F.2d at 1238-39 (listing additional factors:

novelty, specialized literature, and non-judicial uses of techniques);

Joiner, 118 S. Ct. at 519 (whether the expert has unjustifiably

extrapolated from an accepted premise to an unfounded conclusion);

Sheehan v. Daily Racing Form, Inc., 104 F.3d 940, 942 (7th Cir.)

(whether "the expert is being as careful as he would be in his regular

professional work outside his paid litigation consulting"), cert. denied,

117 S. Ct. 2480 (1997); Daubert v. Merrell Dow Pharms., Inc., 43 F.3d

1311, 1317 (9th Cir. 1995) ("whether the experts are proposing to testify

about matters growing naturally and directly out of research they have

conducted independent of the litigation, or whether they have developed

their opinions expressly for purposes of testifying"); Claar v. Burlington

N.R.R. Co., 29 F.3d 499, 502 (9th Cir. 1994) (whether the expert has

adequately accounted for obvious alternative explanations).

11. Courts have held in numerous other cases that credibility is

irrelevant to determining whether a proposed expert witness's testimony

is admissible under Rule 702, and particularly whether it is based on

reliable methodology. See, e.g., Breidor v. Sears, Roebuck & Co., 722

F.2d 1134, 1138-39 (3d Cir. 1983) ("Where there is a logical basis for an

expert's opinion testimony, the credibility and weight of that testimony

is

to be determined by the jury, not the trial judge."); see also Kannankeril

v. Terminix Intl., Inc., 128 F.3d 802, 809 (3d Cir. 1997) ("If the expert

meets liberal minimum qualifications [under Rule 702], then the level of

the expert's expertise goes to credibility and weight, not

admissibility.").

For example, expert witnesses cannot be excluded on the basis of bias.

See, e.g., Marshall v. Perez Arzuaga, 828 F.2d 845, 851-52 (1st Cir.

1987); Gideon v. Johns-Manville Sales Corp., 761 F.2d 1129, 1135-36

(5th Cir. 1985). Similarly, factual errors in a witness's testimony are

not

grounds for excluding the witness from testifying as an expert. See Paoli

II, 35 F.3d at 753-54. Finally, general attacks on credibility based on a

lack of personal knowledge are not a proper basis for excluding expert

testimony. See Dixon v. International Harvester Co., 754 F.2d 573, 580

(5th Cir. 1985).

39

can lie about whether one of the factors mentioned above is

present. But the witness's general credibility -- i.e.,

credibility based on matters not directly related to these

factors, such as bias or unrelated prior inconsistent

statements -- is not relevant to a trial court's preliminary

determination that these factors are present. These factors

are relatively objective matters that the court can generally

analyze independent of the witness's testimony about them.

For example, a court is fully capable of determining

whether a theory or method is testable.

Furthermore, permitting the trial court to consider the

general credibility of an expert witness in its analysis of the

reliability of proposed expert opinion testimony improperly

trenches on the province of the fact-finder. The fact-finder

is ordinarily the arbiter of general credibility. Rule 702 is

intended not to impinge on the authority of the fact-finder

in making credibility determinations, but rather to ensure

that the fact-finders' ability to find facts independently is

not overwhelmed by complex and authoritative-seeming

expert testimony. See 29 Wright & Gold , supra, S 6262, at

179 ("If the trier of fact is unable or disinclined to question

the expert's opinion, it surrenders its central function to an

expert whose testimony may be unreliable."). In order to

avoid this eventuality, Rule 702 provides for a preliminary

inquiry into whether proposed expert testimony is the kind

that is appropriately admitted into evidence, i.e., that the

method is reliable and based on expertise. See id. at 183-

84. But this inquiry cannot extend into matters that are the

proper province of the fact-finder, such as general

credibility. See id. at 184 ("Importantly, however, Rule 702

on its face creates no general power in the trial judge to

exclude expert testimony on the grounds that it is

unreliable.").

This limitation on the power of the trial court to admit

and exclude expert testimony rests on sound policy

considerations. First, it is emblematic of the Rules'

generally liberal approach to the admissibility of evidence,

discussed above. See supra Part I. Second, it reflects the

fact that the power to evaluate witness's credibility lies

traditionally with the fact-finder, not the trial court making

evidentiary rulings. See 29 Wright & Gold, supra, S 6262, at

40

185 ("[T]he power to evaluate the credibility of witnesses

and give testimony its proper weight primarily resides with

the trier of fact.").

Finally, it rests on the general assumption underlying the

Federal Rules of Evidence as a whole: the fact-finder is best

situated to determine the credibility of witnesses. See id. at

185 ("[J]uries generally have the ability to accurately weight

and evaluate witness credibility."). "Accordingly, the most

common judicial response to attacks on the reliability of

expert testimony is that such matters go to weight, not

admissibility." Id. at 185-86. The Court in Daubert

recognized the importance of leaving such matters to the

fact-finder, and not determining them on evidentiary

grounds:

Respondent expresses apprehension that abandonment

of "general acceptance" as the exclusive requirement

for admission will result in a "free-for-all" in which

befuddled juries are confounded by absurd and

irrational pseudoscientific assertions. In this regard

respondent seems to us to be overly pessimistic about

the capabilities of the jury and of the adversary system

generally. Vigorous cross-examination, presentation of

contrary evidence, and careful instruction on the burden

of proof are the traditional and appropriate means of

attacking shaky but admissible evidence.

Daubert, 509 U.S. at 595-96 (citation omitted; emphasis

added).

Accordingly, I conclude that the District Court erred to

the extent that it considered Dr. Gottheimer's general

credibility as a factor in determining whether the principles

and methodology underlying his proposed expert testimony

were reliable under Rule 702. This result is unaffected by

the fact that the District Court -- post hoc -- went ahead

and made credibility findings that arguably would have

resulted in his rejection of Dr. Gottheimer's testimony in its

role as fact-finder. I deal with this aspect of the matter in

my discussion of harmless error. See infra Part IV.

Questions about Dr. Gottheimer's credibility should have

been left for substantive fact-finding, not evidentiary

rulings. Since the District Court and Unisys suggest no

41

other concerns about the reliability requirement, I would

conclude that Dr. Gottheimer's proposed testimony satisfies

it.

B. Fit

The majority also concludes that the District Court

properly found that Dr. Gottheimer's testimony did not fit

with the question in issue at the trial. In particular, the

majority concludes that Dr. Gottheimer's experience and

knowledge lay in a field not sufficiently connected with the

question at issue to meet the requirement of fit."Dr.

Gottheimer's alleged expertise, limited in any event to

methods of investing with respect to property casualty

insurance, did not fit with or meet the need of the District

Court for expert testimony in life insurance investing." Slip

Op. at 21. The majority misconceives the requirement of fit

under Rule 702.

The requirement of fit is essentially a relevance

requirement. Under Rule 702, expert testimony is

admissible if it "will assist the trier of fact." Fed. R. Evid.

702. "This condition goes primarily to relevance." Daubert,

509 U.S. at 591. "[A]dmission depends upon the `fit,' i.e.,

upon a specific proffer showing that scientific research has

established" some point relevant to the facts of the case.

United States v. Downing, 753 F.2d 1224, 1226 (3d Cir.

1985). We have further clarified this point:

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 of the case that it will aid the jury in resolving a

factual dispute. In this regard, we hold that a

defendant who seeks the admission of expert testimony

must make an on-the-record detailed proffer to the

court, including an explanation of precisely how the

expert's testimony is relevant to the [factual issue]

under consideration. The offer of proof should establish

the presence of factors . . . which have been found by

researchers to [provide a basis for the proffered

opinion]. Failure to make such a detailed proffer is

sufficient grounds to exclude the expert's testimony.

42

753 F.2d at 1242 (citations omitted); see also Lauria v.

National R.R. Passenger Corp., 145 F.3d 593, 600 (3d Cir.

1998); United States v. Velasquez, 64 F.3d 844, 850 (3d Cir.

1995).

The majority errs in concluding that Dr. Gottheimer's

field of expertise has any relevance to the fit inquiry. As the

foregoing discussion of the fit requirement shows, it is

satisfied if the proffered expert opinion is relevant to a

factual issue before the fact-finder. The expert'sfield of

expertise is irrelevant to an inquiry into the connection

between the opinion itself and the issues in the case. A

simple example shows this. In Lauria, a railroad worker

slipped and was injured when he stepped on a loose

railroad tie that was sitting between some tracks. "The

primary issue [was] whether Amtrak was negligent in failing

to remove a [railroad] tie from Lauria's workplace." Lauria,

145 F.3d at 600. An expert opinion "that the tie was a

dangerous obstruction that should have been discovered

and removed and, . . . that Amtrak's negligence made the

workplace unsafe" clearly satisfies the requirement of fit.

145 F.3d at 600.

But the expertise of the proponent of the opinion is

irrelevant to this inquiry. This is true even if the witness

proposing to testify to the above opinion is a medical doctor

who has no experience with train tracks. Under the

majority's reasoning, however, the doctor's testimony would

not meet the fit requirement. Clearly, a medical doctor with

no experience working with train tracks has no expertise

with regard to the placement of loose railroad ties. If Dr.

Gottheimer's testimony would not meet the fit requirement

because his expertise lay in a different field of insurance

than that in issue in the case, clearly the hypothetical

doctor cannot provide testimony that meets the fit

requirement. But the doctor's testimony should be excluded

because of his lack of qualifications, not because of a

supposed lack of fit. The proposed expert's expertise is

simply irrelevant to determining whether the proffered

expert opinion is relevant to issues in the case.

As this example shows, the majority's and the District

Court's concerns about the connection between Dr.

Gottheimer's expertise and the issues in the case are

43

actually relevant to the step of the Rule 702 inquiry which

I consider infra: qualifications. Under Rule 702, a witness

can offer an expert opinion if he or she is "qualified as an

expert by knowledge, skill, experience, training, or

education." Fed. R. Evid. 702. The nature of a witness's

specific field of expertise is part of the expert's background

that is considered in determining whether a witness is

qualified. See Paoli II, 35 F.3d at 741. 12

I think a proper fit inquiry would show that Dr.

Gottheimer's testimony meets the fit requirement. Plaintiffs'

counsel said that Dr. Gottheimer would have testified that

certain standard tests exist in the insurance industry to

analyze the financial condition of insurance companies, and

that he was familiar with those tests. He would have

further testified that he performed these tests on Executive

Life data, and concluded "that the tests set up certain red

flags that should have caused a person familiar with the

tests and performing the tests, to ask further questions

about the solvency and the credit worthiness of Executive

Life." I think this is the kind of "on-the-record detailed

proffer" that we required in Downing, "including an

explanation of precisely how the expert's testimony is

relevant to" determining whether Unisys acted prudently.

Downing, 753 F.2d at 1242. Accordingly, I would conclude

that Dr. Gottheimer's proposed testimony meets thefit

requirement. The nature of Dr. Gottheimer's expertise, and

its connection with the factual issues in this case, are

relevant only to the Rule 702 inquiry into qualifications, to

which I now turn.

_________________________________________________________________

12. In fact, the case the majority cites in support of its conclusion that

Dr. Gottheimer's testimony does not meet the fit requirement involved an

inquiry into the witness's qualifications, not thefit between his proposed

testimony and the issues in that case. See Surace v. Caterpillar, Inc.,

111

F.3d 1039 (3d Cir. 1997). In Surace, the plaintiff offered the testimony

of

an electromechanical engineer concerning workers' habituation to

auditory warning devices. The district court excluded Brink's testimony

and we affirmed, noting that the expert's experience was limited to

mechanical, as opposed to human, factors in design, and he therefore

was not qualified to testify about the latter. See 111 F.3d at 1055-56.

44

C. Qualifications

The majority also concludes that the District Court

properly excluded Dr. Gottheimer's testimony because he

was not qualified as an expert with respect to the issues in

this case. Specifically, the majority adopts the District

Court's conclusion that Dr. Gottheimer was not qualified

because his "qualifications were less than stellar." Slip Op.

at 21. The District Court noted that "Dr. Gottheimer claims

a doctoral degree from a correspondence school, an

additional ground for my refusal to qualify him as an

expert." In re Unisys Sav. Plan Litig., No. 91-3067, 1997 WL

732473, at *26 (E.D. Pa. Nov. 24, 1997). In addition, as

discussed above, see supra section III.B, the majority

concludes that the District Court properly rejected Dr.

Gottheimer's testimony because his field of expertise was

not sufficiently connected to the issues in the case. "Dr.

Gottheimer's experience in the insurance area was limited

to property casualty insurance and not life insurance."

Unisys, 1997 WL 732473, at *22. Neither of these are

appropriate grounds for excluding an expert witness for

lack of qualifications.

The requirement that an expert witness be qualified is

well established. A witness may only provide expert

testimony to the extent that he or she is "qualified as an

expert by knowledge, skill, experience, training, or

education." Fed. R. Evid. 702. The bases for concluding

that a witness is qualified are flexible. "[I]nsistence on a

certain kind of degree or background is inconsistent with

our jurisprudence in this area." Paoli I, 916 F.2d at 855;

accord Waldorf v. Shuta, 142 F.3d 601, 626 (3d Cir. 1998)

("[I]n considering the qualification of witnesses as experts,

we stress that ordinarily an otherwise qualified witness is

not disqualified merely because of a lack of academic

training."); Paoli II, 35 F.3d at 741 ("We have eschewed

imposing overly rigorous requirements of expertise and

have been satisfied with more generalized qualifications.").

A particular educational background is unnecessary;

practical experience is sufficient to conclude that a witness

is qualified as an expert. See Lauria, 145 F.3d at 599 (citing

American Tech. Resources v. United States, 893 F.2d 651,

656 (3d Cir. 1990)). "Following this logic, it is an abuse of

45

discretion to exclude testimony simply because the trial

court does not deem the proposed expert to be the best

qualified or because the proposed expert does not have the

specialization that the court considers most appropriate."13

Although, as always with evidentiary questions, we apply

a deferential standard of review to a trial court's

determination of whether a proposed expert is qualified, we

have on numerous occasions found that a district court

abused its discretion in excluding a proffered expert

because of his or her qualifications. Some of these cases

are summarized in the margin.14

_________________________________________________________________

13. Holbrook, 80 F.3d at 782 (citing Paoli I, 916 F.2d at 856); accord

Kannankeril, 128 F.3d at 809 ("Whether the appellants' expert might

have done a better job is not the test."); Paoli II, 35 F.3d at 741

("[E]xclusion was not the proper remedy `simply because the experts did

not have the degree or training which the district court apparently

thought would be most appropriate.' " (quoting Paoli I, 916 F.2d at 856)).

14. See Lauria, 145 F.3d at 599 ("Slavin's twenty years of experience

with track equipment, maintenance, and safety procedures qualified him

as an expert who could testify as to Amtrak's responsibility to inspect

and maintain the track in a safe condition," even though he did not have

particularized training other than that which anyone who had done such

work for twenty years would have); Holbrook, 80 F.3d at 781-82

(reversing exclusion of treating physician's testimony as to whether

plaintiff 's cancer was mesothelioma; district court had reasoned that

doctor was not qualified because he was not an oncologist; stating that

trial court erroneously "restricted Dr. Carpenter's testimony based on a

requirement that the witness practice a particular specialty to testify

concerning certain matters"); Paoli I, 916 F.2d at 856 (district court

excluded witnesses who would have testified about gas chromatography

tests and differential diagnoses, because they lacked degrees in

chemistry and medicine respectively: "In light of the liberal Rule 702

expert qualification standard, we hold that the district court abused its

discretion in excluding portions of [the experts'] testimony simply

because the experts did not have the degree or training which the

district court apparently thought would be most appropriate." (footnote

omitted)); Habecker, 893 F.2d at 52-53 (concluding that district court

abused its discretion when it excluded expert testimony concerning

connection between lack of operator restraints and plaintiff's injury,

where plaintiff was injured when he was thrown from the cab of a fork-

lift; district court's sole reason for finding expert was not qualified

was

because he lacked an engineering degree); Knight, 596 F.2d at 88

46

Supported by these cases, I believe that Dr. Gottheimer

was in fact qualified to offer the expert testimony proffered,

and that the District Court's conclusion to the contrary was

an abuse of discretion. The District Court found that Dr.

Gottheimer was not qualified on two grounds: the nature of

his educational credentials and the distinction between his

experience in property-casualty insurance companies and

the issues in the case involving life insurance companies. In

light of the case law discussed in the margin above, both of

these findings are inconsistent with the exercise of sound

discretion.

The District Court concluded that Dr. Gottheimer could

not be qualified because his doctorate was awarded by a

correspondence school. If this were plaintiffs' sole basis for

claiming that Dr. Gottheimer was qualified, I would

probably agree with the District Court. It was not, however.

Rather, the record discloses numerous grounds on which to

conclude that Dr. Gottheimer was qualified as an expert.

Dr. Gottheimer's resume demonstrates his expertise

through three distinct areas: experience, education and

teaching. First, he has worked for a dozen years as a

consultant in the insurance industry, following thirty years

of employment by various insurance companies. His

consulting work has included analyses of both property-

casualty and life insurance companies.15 Second, he has

_________________________________________________________________

(finding error in district court's exclusion of expert testimony

concerning

whether unguarded elevator control buttons were a design defect

"because it believed that such expertise would require some background

in the design and manufacture of elevators," which proposed expert

lacked; noting our "reluctance to require highly particularized, sub-

specialization on the part of experts").

15. The District Court held that Dr. Gottheimer was not qualified

because his experience lay largely in the area of property-casualty

insurance, not life insurance, noting that Dr. Gottheimer testified that

there were "fundamental differences" between the two. See 1997 WL

732473, at *22. This conclusion contradicts our holdings in Knight and

Holbrook, in which we reversed district courts' exclusions of experts

whose expertise the trial courts concluded was not sufficiently

specialized. As we emphasized in those cases, we are reluctant "to

require highly particularized, sub-specialization on the part of experts."

Knight, 596 F.2d at 88; accord Holbrook, 80 F.3d at 782. Any differences

between the two areas "should go to the weight, and not the

admissibility, of [the expert's] opinion." Knight, 596 F.2d at 88.

47

bachelor's and master's degrees in insurance-relatedfields,

as well as the a doctorate from a correspondence school.16

He also possesses several professional affiliations in

insurance professionals' organizations. Finally, Dr.

Gottheimer has taught for over twenty-five years at the

College of Insurance. The College of Insurance is an

accredited, industry-sponsored school that offers classes in

all aspects of insurance business. He is now on the full-

time faculty there, and has taught courses in a variety of

fields, including insurance company management.

In light of these extensive qualifications, I have no doubt

that Dr. Gottheimer was qualified and should have been

permitted to testify as an expert under Rule 702. The

District Court's decision to the contrary was an abuse of

discretion. As the majority points out, the District Court

refused to qualify Dr. Gottheimer because his qualifications

"were not of the highest caliber." Slip Op. at 21. But in light

of our longstanding jurisprudence, this is not an

appropriate basis for excluding a proffered expert witness.

See Kannankeril v. Terminix Intl., Inc., 128 F.3d 802, 809

(3d Cir. 1997); Holbrook, 80 F.3d at 782; Paoli II, 35 F.3d

at 741. Accordingly, I must conclude that the District Court

abused its discretion in excluding his testimony on this

basis.

_________________________________________________________________

16. The District Court's focus on the nature of Dr. Gottheimer's doctorate

and its consequent implicit dismissal of his other qualifications is also

inconsistent with the exercise of sound discretion. If the district courts

abused their discretion in Habecker, Paoli I and Lauria by insisting that

the expert have a particular type of degree, the District Court in this

case erred in insisting that the expert have not just a particular degree,

but a degree from a particular kind of school. Cf. Lauria, 145 F.3d at

599; Paoli I, 916 F.2d at 856.

Furthermore, the District Court's reliance on Van Blargan v. Williams

Hospitality Corp., 754 F. Supp. 246 (D.P.R. 1991), in discounting Dr.

Gottheimer's degree is misplaced. In that case, the district court

excluded an expert because, in addition to discounting his doctorate

from a correspondence school, the court found that he had no other

satisfactory qualifications. See Van Blargan, 754 F. Supp. at 248-49.

Here, by contrast, Dr. Gottheimer has numerous other qualifications in

addition to his doctorate.

48

For all these reasons, I think that Dr. Gottheimer should

have been permitted to testify as an expert witness under

Rule 702. As discussed above, Dr. Gottheimer fully met all

three of the Rule 702 requirements: qualifications,

reliability and fit. The only remaining question is whether

that error was reversible or harmless error.

IV. Harmless Error

In the closing paragraph of its discussion of the Rule 702

evidentiary issue, the majority concludes that, even if the

District Court did commit an error in excluding Dr.

Gottheimer's testimony, the error was harmless. In

reaching this conclusion, it relies on the District Court's

statement that it "could not find [Dr. Gottheimer] to be a

credible witness given his evasiveness if not his propensity

to state falsehoods." 1997 WL 732473, at * 26. The District

Court pointed to a few alleged inconsistencies in Dr.

Gottheimer's deposition and trial testimony in support of

this conclusion. The majority concludes that, since the

District Court would not have believed Dr. Gottheimer's

testimony, his testimony could not have been given any

weight if admitted. Thus its exclusion did not have a

substantial effect on the outcome and any error in

excluding it was harmless. Once again, I must disagree.

Under the Federal Rules of Evidence, an evidentiary error

to which a party has raised a proper objection is not a

grounds for reversal "unless a substantial right of the party

is affected." Fed. R. Evid. 103(a); see also 28 U.S.C. S 2111;

Fed. R. Civ. P. 61. An error is harmless, i.e., it does not

affect a substantial right, only if "it is highly probable that

the error did not contribute to the judgment." Murray v.

United of Omaha Life Ins. Co., 145 F.3d 143, 156 (3d Cir.

1998) (citing McQueeney v. Wilmington Trust Co., 779 F.2d

916, 923-27 (3d Cir. 1985)). Although, as discussed above,

the improper admission of evidence is usually harmless

error in a bench trial, see supra Part II, the erroneous

exclusion of evidence in a bench trial can be reversible error

just as in a jury trial. See 11 Charles Alan Wright et al.,

Federal Practice & Procedure S 2885, at 454 (2d ed. 1995)

("In nonjury cases the district court can commit reversible

error by excluding evidence but it is almost impossible for

49

it to do so by admitting evidence." (footnote omitted)). Error

is especially likely not to be harmless where the excluded

expert was the only one a party offered to prove an

essential element of its case.17

In this case, Dr. Gottheimer was the only expert witness

plaintiffs offered to prove that Unisys acted imprudently.

His proffered testimony, set forth in the margin, was strong.18

By excluding Dr. Gottheimer's testimony, the District Court

deprived plaintiffs of their best evidence that Unisys

breached its duty of prudence, a key element of his case. In

light of our conclusion in Lauria and Holbrook, I cannot say

that it is highly probable that the exclusion of Dr.

Gottheimer did not affect the outcome of the trial. This is

especially true in light of the other evidence admitted at

_________________________________________________________________

17. See Lauria, 145 F.3d at 600 ("Finally, we note that because Slavin

was the only witness originally offered to prove Amtrak's negligence with

respect to the base tie, his exclusion from the trial did not constitute

harmless error."); Holbrook, 80 F.3d at 787 (finding that the error in

excluding plaintiff 's two doctors who were his only evidence regarding

the type of cancer from which he suffered was not harmless); see also

Habecker, 893 F.2d at 53 (finding that the error in excluding one of

plaintiff 's two expert witnesses was not harmless where defendant

proffered three experts on the same point).

18. In particular, plaintiffs' attorney stated that, if he had been

permitted

to testify, Dr. Gottheimer's testimony would have been as follows:

We have offered [Dr. Gottheimer's] testimony to establish . . .

that

in the insurance industry, there are some standard tools of tests

that are performed in conducting an analysis of thefinancial

condition of insurance companies, both life and health, and

property

and casualty, in terms of ratios that are generated from the annual

statement, tests prescribed by the National Association of

Insurance

Commissioners, and the Best leverage and liquidity and

profitability

ratios.

The witness has performed these tests in his own capacity in the

past. He has performed them with respect to Executive Life, based

upon information that was available prior to the time of the three

bids in question. He is able to interpret the tests. He is familiar

with

the tests. And his testimony would establish that the tests set up

certain red flags that should have caused a person familiar with

the

tests and performing the tests to ask further questions about the

solvency and the credit worthiness of Executive Life.

50

trial, set forth in the margin.19 The District Court essentially

decided all questions the evidence raised in favor of Unisys

and concluded that Unisys acted prudently. Although I

agree with the majority that, based on the admitted

evidence, this conclusion was not clearly erroneous, this is

to me an exceedingly close question. Accordingly, Dr.

Gottheimer's testimony, if admitted, stood a good chance of

changing this balance and consequently changing the

decision of the District Court.

That the District Court had questions about Dr.

Gottheimer's credibility should not affect our harmless

error analysis. The District Court's conclusion that it would

not have found Dr. Gottheimer's testimony credible, based

only on his voir dire testimony, is not sufficient grounds for

concluding that exclusion of his testimony was harmless. I

believe that there is a reasonable chance that, if the District

Court had given Dr. Gottheimer the opportunity to present

his testimony in full, it would have found him to be a

credible witness.

Our decisions in Lauria and Holbrook at least implicitly

support this conclusion. In each of those cases, we reversed

a district court decision excluding expert testimony on the

grounds that the expert witness lacked the necessary

qualifications. Such evidence goes to the weight, not the

admissibility, of the expert testimony. See Kannankeril, 128

_________________________________________________________________

19. The evidence on Unisys's prudence admitted at trial included

primarily the testimony of White and Level, two Unisys executives

charged with responsibility for the Funds, and Becker, an advisor whose

services White and Level engaged. The evidence before the District Court

concerned several questions which, although the court decided them in

Unisys's favor, raised serious questions about Unisys's prudence. (1)

Whether Unisys conducted an adequate independent investigation into

Becker's recommendation? (2) Whether Unisys conducted an adequate

investigation of its own after it ceased use of Becker's services? (3)

Whether credit ratings were sufficient to prove that Unisys acted

prudently? (4) Whether the Unisys trustees adequately considered and

debated the advantages and disadvantages of the Executive Life GICs?

(5) Whether the fact that the Executive Life GICs bore a higher interest

rate was sufficient to suggest that they were not prudent investments?

(6) Whether it was imprudent for Unisys not to maintain written

investment guidelines?

51

F.3d at 809. In neither Lauria nor Holbrook did the effect of

the expert's particular qualifications on the weight properly

accorded to his testimony play any part in our harmless

error analysis. See Lauria, 145 F.3d at 600 (discussing

harmless error without mentioning the quality of the

improperly excluded expert's qualifications); Holbrook, 80

F.3d at 787 (same). Similarly, the impact of questions about

Dr. Gottheimer's credibility on the weight due his testimony

should not play a part in our harmless error analysis in

this case.

I find further support for this conclusion in an

examination of what the District Court identified as

"impeachment" of Dr. Gottheimer. The District Court stated

that "Dr. Gottheimer was impeached no fewer than four

times on the relatively straight forward questions on his

qualifications." 1997 WL 732473, at *26; see also 1997 WL

732473, at *21-*22. But this so-called "impeachment"

involved at most minor inconsistencies. First, Dr.

Gottheimer testified at trial that he could not recall having

testified in court in a case involving a life insurance

company, although he stated at his deposition three years

earlier that twenty-four out of the twenty-five times he had

testified in court involved property-casualty insurance

companies. See 1997 WL 732473, at *21. Second, although

at his deposition he could not recall having done consulting

work involving life insurance company solvency, he testified

that he had been retained once before his deposition and

several times after his deposition to do such consulting. See

1997 WL 732473, at *21-*22. Third, while he testified at

trial that there were "some differences and there are also

some similarities in the way" one analyzes life insurance as

opposed to property-casualty insurance company solvency,

in his deposition he agreed with Unisys's attorney that

there were "fundamental differences." See 1997 WL 732473,

at *22.

I cannot see how these answers, under any reasonable

reading, suggest that Dr. Gottheimer is a completely

incredible witness. At most, they suggest that he could

remember some things at his deposition that he could not

at trial, and vice versa. Certainly, Dr. Gottheimer's

statements at trial were not directly inconsistent with those

52

in his deposition. A comparison of the statements does not

raise an inference that Dr. Gottheimer was being evasive,

let alone lying. Thus, I cannot agree with the majority that

the at worst minor inconsistencies in Dr. Gottheimer's

testimony make it highly probable that his testimony would

not have affected the District Court's judgment.

Accordingly, I do not think that the District Court's

erroneous exclusion of Dr. Gottheimer's expert witness

testimony was harmless. Therefore, I would remand this

case for a new trial in which Dr. Gottheimer's testimony

could be presented; hence, I dissent.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

53