The Metro New Jersey Chapter of the Appraisal Institute www.ai - - PowerPoint PPT Presentation

The Metro New Jersey Chapter of the Appraisal Institute

www.ai‐newjersey.org 83rd Annual Princeton Conference April 5, 2019 Eminent Domain – A View of the Appraiser’s Role From Both Sides

Albert F. Chanese, MAI New Jersey Realty Advisory Group John J. Curley, Esq. John J. Curley, LLC, Jersey City, New Jersey Anthony F. DellaPelle, Esq., CRE McKirdy, Riskin, Olson & DellaPelle, P.C.

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Course Outline

• Appraisers as expert witnesses
• Admissibility and Net Opinions
• In re Acutane Litigation
• Litigating Highest and Best Use
• Implications for the future

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RETENTION AND WORKING RELATIONSHIP BETWEEN LAWYER AND EXPERTS

• A. Retention of the Experts

1) What information is shared with the potential expert witness? 2) What position has the expert taken in the past? 3) Other considerations a) Testifying v. Non-testifying b) Retained by client or lawyer? c) What work product will expert provide during the course of the case? d) What exhibits will be needed?

• B. The Relationship between Attorney and Expert(s)

1) The attorney is the quarterback of the client’s team. a) Coordinate meetings within client’s team b) Coordinate communications c) Review comparable sales information with experts

PREPARATION OF REPORTS

• A. Valuation Data
• B. Oral Review
• C. Draft Reports
• D. Report Communications
• E. Final Report
• F. Alternative Approaches
• G. Client “On Board”

PRIOR APPRAISALS

• A. Prior reports prepared by the expert who testifies are admissible for use or

impeachment.

• ARE DRAFTS PRIOR REPORTS??
• B. Produced for use on cross-examination?
• C. Cross-examination
• A. The rules of evidence allow a party to impeach the credibility of his adversary’s

witness through the use of prior inconsistent statements.

• B. Prior reports are to be produced after the expert testifies.

APPRAISER APPRAISERS AS AS EXPER EXPERT WI WITNES ESSES

In re Accutane Litigation 234 N.J. 340 (2018)

THE BEGINNING

• A methodology based approach to expert reliability began with the Supreme

Court decision Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993)

• Daubert provided a non-exhaustive list of factors to consider:
• (1) whether the scientific theory has been adequately tested;
• (2) whether it has been subjected to peer review and possibly publication;
• (3) whether standards exist for the maintenance or control of the review; and
• (4) whether the scientific theory is generally accepted in the scientific community.
• In 1991, New Jersey began its shift towards Daubert with Rubanick. v.

Witco Chem. Corp., 125 N.J. 421 (1991).

• Experts allowed to render opinions not commonly accepted as long as the expert

considered data that experts in the field generally rely on and that expert has the requisite background, training, experience and familiarity

• 25 years later, New Jersey completes march away from the “general

acceptance” test originally articulated in Frye v. United States, towards a methodology-based approach for expert reliability that began with Rubanick

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In re Accutane Litigation 234 N.J. 340 (2018)

FACTS AND HOLDING

• Plaintiff’s claimed use of Accutane caused Crohn’s disease
• Plaintiff’s experts relied on case reports and animal studies instead of

epidemiological studies

• Judge Johnson barred their testimony after Rule 104 hearing calling

the evidence “less reliable” and its use “flawed.”

• “Experts cannot selectively choose lower forms of evidence…”
• Appellate Division: reversed using a less deferential (relaxed) standard
• New Jersey Supreme Court reversed holding:
• 1) An appellate court MUST use an abuse of discretion standard when

determining whether expert testimony was appropriately admitted

• New Jersey trial courts should be guided by Daubert standards for admission of

expert testimony

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In re Accutane Litigation 234 N.J. 340 (2018)

REASONING AND AFTERMATH

• The court was persuaded that the Daubert factors should be incorporated

for use as the factors dovetail with the overall goals of our evidential standard and can help guide our courts when performing their gatekeeper role

• Gatekeeper role is to determine whether the pertinent scientific community would

accept the methodology employed by the experts and would use the underlying facts and data as did the experts

• The court stopped short of stating New Jersey adopted Daubert but said

to use the factors as a guide because methodology is the focus of the reliability assessment GOING FORWARD

• Counsel should assess their own experts’ methodology against

the Daubert factors to guard against the possibility that their experts’

• pinions will be excluded
• Attorney’s can use the Daubert factors as a roadmap in preparing to take

and defend expert depositions, as well as preparing arguments for Rule 104 hearings which evaluate the admissibility of expert testimony

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METHODOLOGY-BASED TEST FOR RELIABILITY IN TAX APPEAL CASES

• Alpine County Club v. Borough of Demarest, 354 N.J. Super. 387 (App. Div.

2002)

• The Appellate Division reversed the Tax Court’s decision to admit taxpayer’s fact

witness, an investor and attorney, based solely on his “rule of thumb” approach to determining fair market value.

• The municipality appropriately objected to the witness’ testimony based on lack
• f knowledge of the specific fact about the property, lack of foundation, and lack
• f expertise. Witness was not a real estate appraiser and never claimed his theory

was an accepted methodology relied upon by appraisers.

• Forest Hill Golf Club v. Township of Belleville, 2016 N.J. Tax Unpub. LEXIS 11

(T. Ct. 2016)

• The Tax Court held neither side’s expert provided reliable data for which a

determination of value could be made.

• Both experts utilized the income approach, both applications were flawed.

Plaintiff’s expert failed to provide reliable market data to support his conclusion and Defendant’s expert provided conclusions as to stabilized rounds of golf played and stabilized green fees without adequate foundation.

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HI HIGHE GHEST AND AND BE BEST ST USE USE

• Conclusion of the property’s Highest and Best Use

is critical, and determines the appraisal methodology utilized and the selection of market data (comparables) for analysis.

• Owner is not limited to value for the use to which

property is currently being put. Owner is entitled to value for highest and best use.

Case law State v. Caoili, 135 N.J. 252 (1994) State v. Gorga, 26 N.J. 113 (1958)

HI HIGHE GHEST AND AND BE BEST ST USE: USE: 50+ Years Of New Jersey Case Law

State by State Highway Comm’r v. Gorga 26 N.J. 113(1958)

• Partial taking of Fair Lawn property on Route 4 – zoned residential.

Owner suggested commercial value. State contended property was a “swamp” and had no development potential

• Fair Market Value (FMV) as of date of taking MAY be affected by

prospect of an amendment of the zoning ordinance

• Evidence of HBU value NOT restricted to current utilization of property
• 2 Step Process: 1) Judge screen evidence: is there reasonable

probability of change in near future 2) does record contain sufficient facts to evidence probability to warrant consideration by jury?

• Owner entitled to receive fair market value of property for its current

use or for any use which it has a commercial value in the reasonable anticipation in the near future

• Must be PROBABLE NOT JUST MERELY POSSIBLE
• Avoid “unbridled speculation”

Port of New York Auth. v. Howell 68 N.J. Super 559(App. Div. 1960)

• Plaintiff condemned a corner of Defendant’s residential property.
• Defendant’s expert’s testified the highest and best use of property

was to build a “four story office and basement building”.

• Trial Court rejected and App. Div. affirmed that the highest and best

use determination excludes speculative and possible use if improvements and changes are made.

• Collateral matters, such as calculation of costs and profits are too

remote.

State by Comm’r of Transp. v. Caoili 135 N.J. 252 (1994)

• Focused upon probability of subdivision and site plan approval for

residentially zoned property on a State highway.

• The reasonableness of a use of condemned property including its

HBU must be considered in light of any zoning restrictions that apply to the property.

• Holding consistent with Gorga that, in determining FMV, jury may

consider potential zoning change affecting the use of the property if court deems that such a change is reasonably probable.

1) Is evidence sufficient to allow jury to consider probability of a zoning change? If YES: 2) Jury permitted to assess amount based on subdivision/site plan/zoning change

State v. Hope Road Assoc. 136 N.J. 27(1994)

• State condemned 7 acres to build ramp near Route 36 and Garden

State Parkway – validity of prior site plan and access to parcel was at issue.

• State’s appraiser valued property for residential purposes and
• wner’s appraiser relied upon probability to value property for

commercial use

• The Court applied Gorga’s principles regarding zoning change and

subdivision approval to that of site plan approval.

• Trier of fact could receive evidence that a willing buyer could

recognize probability of site plan approval in the near future when determining market value, however, the site plan must be viable.

County of Monmouth v. Hilton 334 N.J. Super. 582 (App. Div. 2000)

• Large 5 family house in Long Branch
• Applied Gorga principles to probability of assemblage of property
• 2 step process:
• 1) was assemblage probable in near future from date of taking?
• 2) jury must be instructed to consider, in its determination of

FMV, the premium a willing buyer would pay for probability of a future assemblage over and above FMV as shown by existing use

• f property
• Court held testimony of property owner’s expert was speculative

because property valued as if assemblage already occurred

State v. Simon Family Enterprises, LLC 367 N.J. Super. 242 (App. Div. 2004)

• State took portion of property owner’s land. Property owner entered

land option purchase to sell remainder. This evidence was admissible.

• Property valued on density basis in reliance upon architectural plans

illustrating development potential in conformity with zoning.

• Caoili analysis not applicable to ALL expert opinions of HBU.
• No requirement for trial court to perform Caoili type gatekeeping

function as to conceptual development plan upon which highest and best use was premised beyond obligation to exclude speculative and unreliable evidence.

• AS LONG as opinions offered are NOT speculative, unreliable, and net
• pinions then OK to present to jury and cross examined

Union County Imp. Auth. v. Artaki 392 N.J. Super 141 (App. Div. 2007)

• When valuing adjacent properties condemning authority must

consider “unity of ownership” in a flexible way using “substantially identical ownership” test

• Plaintiff condemned multiple entire properties owned by different

defendants – all related family members; argued to consider property as 1 economic unit

• Since there was unity of ownership, matters consolidated and

valuation is HBU of assemblage

• Court held that admission of evidence of market value should be

done liberally

State ex rel. Com’r of Transp. v. 200 Route 17, LLC, 421 N.J. Super 168 (App. Div. 2011)

• Property taken improved by 31,775 sf building
• Evidence of HBU is limited to present condition of land.
• Speculation as to value if property were improved = INADMISSIBLE
• Here, Defendant says property should be valued as a renovated

commercial structure even though it is not renovated.

• Court rejects this because speculative improvements cannot be

considered, HOWEVER, reasonable renovations and approvals = Ok BUT must discount the risks and costs of said improvements

Borough of Saddle River v. East Allendale, LLC 216 N.J. 115 (2013)

• Plaintiff acquired 2 acre parcel from Def improved with gas station

and parking.

• HBU was agreed to be a bank and parking lot BUT dispute on size and

reasonable probability that a variance would be granted

• Competing experts may opine over likelihood of obtaining a zoning

change IF the court first determines there is a reasonable probability N.J.R.E. 104 Hearing

• Caoili’s gatekeeping function should be done prior to trial
• Reasonable Probability: based on standards, requirements and “all of

the criteria” that governs approval of bulk variance

NJ Transit Corp. v. Franco 447 N.J. Super 361 (App. Div. 2016)

• 3 parcels of land in 3 different municipalities
• Def. required to show a reasonable probability Weehawken would

either grant variance for a cul de sac or accept dedication as public street in order for Def.’s plan to work

• N.J.R.E. 104 held but Def’s experts erroneously permitted as Def’s

experts “did not cure the deficiency in the required analysis for reasonable probability”

• App. Div. reversed Trial Court because reasonable probability that

Town would have granted variance to build cul de sac not shown

Final Final Though Thoughts ts

Q&A? Thank you!

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