4th Circuit sets evidence procedure to be used in eminent domain cases

When considering evidence in an eminent domain case, the U.S. District Court should make determinations of admissibility using the standard Federal Rules of Evidence before trying non-compensation issues under Rule 71.1(h) and making findings of fact and conclusions of law on the record, the 4th U.S. Circuit Court of Appeals has ruled.

Mountain View Pipeline was granted an easement on a landowner’s property, leaving the question of just compensation to be determined.

The District Court excluded the landowner’s expert reports and awarded the amount suggested by Mountain View Pipeline. The landowner appealed.

“In eminent domain cases, district courts should first make threshold determinations of evidentiary admissibility under the standard Federal Rules of Evidence,” Judge James A. Wynn wrote on behalf of the panel. “The court should then consider all admissible evidence together at the Rule 71.1(h) stage and make findings of fact and conclusions of law as to non-compensation issues.”

The 19-page opinion is Mountain View Pipeline LLC v. 9.89 Acres of Land (VLW 025-2-029).

Henry Howell III, founder of the Eminent Domain Litigation Group in Chesapeake, called it “a wonderful decision for giving a roadmap to district courts for dealing with these cases,” offering direction on how to handle evidentiary issues in eminent domain disputes.

“The decision certainly helps landowners with regard to expert testimony on the question of just compensation, and it is very helpful in terms of appraisers,” he said. “As long as the appraiser is qualified and the methodology is appropriate, the opinion seems to indicate that there is a presumption that the report will be admitted.”

Wade W. Massie of Penn, Stuart & Eskridge in Abingdon represented MVP. He referred questions to the company, which did not respond to a request for comment.

Virginia Beach attorney Joseph V. Sherman of Poole, Brooke, Plumlee, who represented the landowner, also did not respond.

Condemnation action

Elizabeth Reynolds owns 109 acres of farmland in Roanoke County. In October 2017, MVP commenced a condemnation action under the Natural Gas Act for a 9.89-acre pipeline easement on the Reynolds property.

The District Court granted MVP partial summary judgment and a preliminary injunction granting immediate possession for construction.

The only issue remaining was the question of just compensation owed to Reynolds.

Courts should apply the Federal Rules of Evidence identically in eminent domain cases as in other cases. Rule 71.1(h) does not alter the Federal Rules of Evidence in eminent domain proceedings. Rather, the court must first apply those Rules to determine the universe of evidence that it will then use to ‘tr[y] all issues’ under Rule 71.1(h)(1).

— 4th Circuit Judge James A. Wynn

Reynolds submitted two expert reports on the issue. The first opined that the parcel was ripe for single-family residential development, while the second calculated the value of just compensation as $327,000 based on the first report.

MVP submitted its own expert reports that arrived at just compensation of $64,251 and $77,407.

When MVP moved to exclude Reynolds’ expert testimony, the District Court granted the motion, concluding that “[t]he gatekeeping role of the district court is particularly pronounced in condemnation proceedings under Rule 71.1.”

With no admissible evidence from Reynolds, the court granted MVP’s motion for summary judgment and granted just compensation of $82,346.

Reynolds appealed.

Procedures for eminent domain cases

The 4th Circuit found that the District Court erred when it acted under the assumption that Rule 71.1(h) required it to exercise greater discretion for excluding evidence than would normally be permitted under the rules.

“Courts should apply the Federal Rules of Evidence identically in eminent domain cases as in other cases,” Wynn wrote. “Rule 71.1(h) does not alter the Federal Rules of Evidence in eminent domain proceedings. Rather, the court must first apply those Rules to determine the universe of evidence that it will then use to ‘tr[y] all issues’ under Rule 71.1(h)(1).”

Once the District Court makes its initial evidentiary determination pursuant to the normal Rules of Evidence, it can proceed to the Rule 71.1(h) stage, at which point it must consider all admissible evidence together, the panel said.

Exactly what that consideration looks like is an issue of first impression, the panel noted, but district courts must make findings of fact and conclusions of law on the record, as they would in a bench trial.

The drafters of the Federal Rules of Civil Procedure took some contested factual issues from the jury and gave them to the judge in eminent domain cases using Rule 71.1(h), and the procedure is reminiscent of a bench trial, the panel stated.

Without findings of fact and conclusions of law on the record, it would be difficult for a reviewing court to do its job effectively, it added.

When a party has demanded a jury, however, district courts may not resolve the issue of compensation under Rule 71.1(h) – unless no genuine dispute of material fact exists and the District Court can grant summary judgment, the 4th Circuit said.

Summary judgment reversed

Turning to the case at bar, the 4th Circuit reversed summary judgment for MVP on the issue of just compensation.

The District Court had excluded Reynolds’ expert reports, in part by challenging the accuracy of the first report’s facts, rather than the methodology used or qualifications of the expert.

“[T]he court disagreed with the facts underlying [the expert’s] comparable sales,” Wynn wrote. “But this Court has repeatedly held (in unpublished cases) that Daubert challenges to the comparability of sales in a sales comparison analysis go to weight and not admissibility.”

Further, it wasn’t clear that the District Court decided the factual issues correctly, Wynn said, “thus illustrating the dangers of resolving factual disputes at the evidentiary stage.”

Similarly, the District Court erred when it excluded Reynolds’ second expert report, applying the wrong substantive legal standard and tacking on an additional requirement: that because the local zoning ordinance required additional public roads if a subdivision was built, Reynolds needed to make an independent showing that the state would be likely to accept those new roads.

The panel vacated and remanded to the District Court to apply the procedure established for evidentiary determinations in eminent domain cases.