Experts excluded from condemnation case

In a takings case involving the Mountain Valley Pipeline, or MVP, a federal court has excluded a landowner’s experts who sought to establish the fair market value of her condemned land and the expected depreciation of her remaining land.

Judge Elizabeth K. Dillon of the Western District of Virginia found the experts’ evidence to be either unreliable or unsupported by data, but she didn’t exclude the landowner’s testimony about her personal knowledge of the land prior to the taking.

“Because [the landowner’s] testimony regarding a percentage diminution in value and the value of the property post-take, is inadmissible, it will be excluded. She will, however, be entitled to testify about her property and the valuation of the property pre-take,” Dillon held.

The judge also granted MVP partial summary judgment on the value of a temporary access easement and awarded the landowner $55 as just compensation.

The Sept. 7 opinion is Mountain Valley Pipeline LLC v. 0.32 Acres of land owned by Grace Minor Terry, (VLW 022-3-392).

The takings

Grace Terry owns a 15.336-acre tract of vacant, unimproved land in Roanoke County.

Mountain Valley Pipeline sought to condemn 0.32 acres for temporary and permanent access easements on numerous properties, including property owned by Terry, to build and service a pipeline on an adjoining tract.

MVP commenced a condemnation action and the court granted it immediate possession in early 2018. For larger parcel purposes, MVP included Terry’s land in a 558-acre tract of vacant, unimproved land.

The larger tract had steep topography and was already subject to a high voltage transmission line easement, as well as a conservation easement which limited its development to one residence.

MVP’s access easement followed an old logging road on the larger tract and ran along an existing roadway. None of the pipeline would be constructed on the tract.

Valuation evidence

To establish just compensation for the taking, Terry relied on her own personal knowledge, as well as testimony from three real estate experts — an appraiser, a broker and a high-end residential developer.

The appraiser opined in a report that the pre-taking value of the 558-acre tract was $865,000, and that MVP’s easements would cause a loss of 35% of its value, resulting in just compensation of $305,000.

According to the appraiser, the property would be damaged because residential buyers wouldn’t be interested in land with a pipeline as part of the “view vista.” Additionally, he warned of noise, erosion and soil disruption due to use of the access easement.

Although the appraiser considered the conservation and utility easements, he didn’t mention the effect of the pre-existing road or the old logging road on the value of the land.

Having found no suitable location for residential development on the larger tract, the appraiser determined the property’s value after the taking based on sales of large parcels that weren’t marketable for residential uses.

Only one of the appraisal’s comparator properties was subject to a conservation easement, while another had road frontage and could be developed. Another had an existing pipeline easement, and one involved a governmental sale. None involved an access road easement.

The real estate broker provided a letter which said the pipeline would reduce the property’s marketability, desirability and the ability to sell for the highest gain, but didn’t provide any supporting market data.

The developer intended to testify about the reasonable probability of rural residential subdivision, the highest and best use of mountainside property, market demand and the effect of lost privacy and views caused by access easements.

The developer didn’t submit a report, disclose his actual opinions or provide supporting facts and data.

Terry planned to testify that the property was worth $1 million before the taking. In addition to other property sales, she relied on an appraisal which found that the conservation easement devalued the large tract by one-third to determine that her property would be equally devalued.

MVP moved to exclude testimony from Terry and her three experts.

Unreliable expert testimony

MVP argued that the experts’ testimony was unreliable and unsupported.

Dillon agreed, noting that the appraiser’s “report contains no opinion as to effect of the existing road on the pre-take value of the larger parcel.” 

The judge also found that the “evaluation of the properties to which he compares the larger parcel for a pre-take value does not include an analysis of the effects of this existing logging road or information as to why such an analysis is not required.”

Dillon pointed out that only one comparator property was subject to a conservation easement, while the others either could be developed, had an existing pipeline easement or involved a governmental sale “which requires extensive verification before use as a comparator.”

The judge said the appraiser’s analysis of damage to vista views caused by the pipeline was flawed because “‘[d]iminution in value of a landowner’s remainder caused by the United States’ use of other lands is not compensable and cannot be considered in valuations for just compensation purposes.’”

The judge rejected the appraiser’s opinion of the easement’s effect on development of the large tract because he failed to acknowledge the effects of existing roads, the pre-taking development restrictions, the steep topography or high voltage lines.

Finally, Dillon said the appraiser erred by assuming that the entire width of MVP’s access easement was permanent and overcalculating just compensation based upon that assumption.

Because of the errors and omissions, the judge excluded the appraiser’s opinion as unreliable.

The judge then excluded testimony from the broker and the developer because neither provided supporting data and because the developer’s actual opinions weren’t disclosed.

‘No rational basis’

Dillon acknowledged the general principle that landowners facing condemnation may testify about the value of their property based on their familiarity with the land, rather than specialized or technical knowledge.

However, she cautioned that “the owner’s ‘qualification to testify does not change the ‘market value’ concept and permit him to substitute a ‘value to me’ standard.’”

The judge then found “no rational basis for Terry’s opinion that the conservation easement and MVP’s access easement affect the property equally.”

She pointed out that the conservation easement restricted development on land previously suitable for residential subdivision, and that MVP’s access easement didn’t change the highest and best use of the property as a single residential home site.

The judge further held that Terry’s alternate post-taking valuation based on other sales was unreliable because the sales occurred without the influence of MVP’s taking and because they involved pipeline easements, not access easements.

But Dillon concluded that Terry could testify to the extent of her personal knowledge about the property and its pre-takings value.

Because the landowner could testify, the judge found there was an issue of fact regarding just compensation for the permanent access easement and partially denied MVP’s motion for summary judgment.

Because Terry offered no valuation evidence for the temporary access road easement, however, the judge relied on a valuation report from MVP’s appraiser, who opined that the temporary easement contained 0.085 acres.

MVP’s appraiser also calculated three-, four- and five-year fair market rental values of the temporary easement.

Based on that evidence, Dillon granted summary judgment to MVP on that issue and awarded Terry $55, based on the five-year market rent amount calculated by MVP’s appraiser.

Unrealistically high standard

Charles M. Lollar, of Lollar Law in Norfolk, represents landowners facing condemnation. He said he didn’t understand why the landowner’s appraiser here wouldn’t still be able to testify at trial “so long as he makes no mention of fear, stigma, danger, other appraisals or the other things the court found speculative or unreliable.”

Henry Howell, III, founder of the Eminent Domain Litigation Group in Chesapeake, agreed that landowners should be able to present their expert evidence to a jury subject to cross-examination and limiting instructions.

Howell decried the recent shift to litigating condemnations at the federal level using more uniform rules rather than at the state level, where Virginia’s rules are more permissive.

“Under Virginia’s statute, anything which affects market value is admissible, but the federal court has applied their evidentiary rules to create an unrealistically high standard for landowner experts,” he said.