Jinro America Inc. v. Secure Investments, Inc.
266 F.3d 993 (2001)
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Rule of Law:
Expert testimony that generalizes about the negative traits of a business or individual based on their ethnic or national identity is inadmissible because it is unreliable under Federal Rule of Evidence 702 and its probative value is substantially outweighed by the danger of unfair prejudice under Rule 403.
Facts:
- JR International Corp. ('Jinro'), a South Korean corporation, entered into a written 'Joint Program Agreement' (JPA) with companies formed by Brian Bishop for the international trade of frozen chicken.
- Under the JPA, Jinro agreed to finance the transactions and advanced $10 million to Bishop's company, Landmark Forwarding Company.
- As collateral for the advance, Landmark was required to place $10 million in U.S. Treasury securities into a blocked account under Jinro's name.
- For months, no chicken was ever bought or sold, with Bishop offering various excuses for the delays.
- Jinro eventually discovered that no Treasury securities had ever been placed in the collateral account.
- Bishop and his associates claimed the JPA was a sham, designed to cover up the parties' real agreement: a high-risk investment scheme called a 'roll program' intended to circumvent South Korean currency regulations.
Procedural Posture:
- Jinro sued Brian Bishop and his companies in U.S. District Court, alleging breach of contract, fraud, and racketeering.
- The defendants asserted as a defense that the contract was a sham intended to conceal an illegal transaction.
- The district court bifurcated the trial, ordering phase one to determine solely whether the parties' agreement was the written chicken contract or an oral investment scheme.
- Over Jinro's repeated objections, the court permitted defendants' expert, David Pelham, to testify about the alleged corrupt practices of Korean businesses.
- The jury returned a verdict for the defendants, finding the chicken contract was a sham.
- Based on the jury's verdict, the district court entered summary judgment against Jinro on all its claims.
- Jinro (Appellant) appealed the district court's judgment to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Does the admission of expert testimony that makes broad, negative generalizations about the business practices and ethics of a litigant's ethnic or national group constitute reversible error?
Opinions:
Majority - Judge Fisher
Yes, the admission of such testimony constitutes reversible error. The expert's testimony was unreliable under Rule 702 and unfairly prejudicial under Rule 403. The witness, David Pelham, lacked the qualifications of a cultural expert, and his opinions were based on a skewed sample of anecdotal investigative experiences, not reliable data or methodology. His testimony created an impermissible syllogism: (a) Korean businesses are generally corrupt; (b) Jinro is a Korean business; (c) therefore, Jinro is corrupt. This is ethnic stereotyping that invites the jury to decide the case based on bias and xenophobia rather than the specific facts, making its admission an abuse of discretion that requires reversal.
Concurring - Judge Wallace
Yes, the testimony was inadmissible and its admission was reversible error, but for a simpler reason. The majority's complex analysis of expert qualifications and ethnic bias is unnecessary because the testimony was simply not relevant under Rule 401. Evidence about the general behavior of Korean businesses has no tendency to prove how this specific company, Jinro, acted in this particular transaction. Because the testimony was irrelevant, it was inadmissible, and its admission was prejudicial enough to warrant reversal without needing to delve into the more sensitive and complex issues of Rule 702 reliability or Rule 403 ethnic stereotyping.
Analysis:
This case strongly reinforces the trial court's gatekeeping function under Daubert and Federal Rule of Evidence 403, particularly concerning testimony based on cultural or ethnic generalizations. It establishes a firm precedent in the Ninth Circuit against admitting expert testimony that promotes negative stereotypes as a form of propensity evidence. The decision clarifies that such testimony is highly susceptible to exclusion as both unreliable under Rule 702 and, more critically, as unfairly prejudicial under Rule 403, as it invites the jury to rely on bias rather than case-specific facts.
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