Free Motion in Limine - District Court of Arizona - Arizona

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PAUL K. CHARLTON United States Attorney District of Arizona SUE A. KLEIN Assistant U.S. Attorney Arizona State Bar No. 11253 Two Renaissance Square 40 North Central Ave., Ste. 1200 Phoenix, Arizona 85004-4408 Telephone: (602) 514-7500 E-mail: [email protected]

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA United States of America, Plaintiff, v. 192.019 Acres of Land, more or less, located in Yuma County, State of Arizona; Glen G. Curtis, Trustee of Curtis Family Trust; Sam Perricone, Trustee of Amended and Restated Declaration of Revocable Trust of Sam Perricone and Mary Louise Perricone; Earl O. Zion and Esther E. Zion; Yuma County Tax Assessor, Yuma Hospital District No. 1; Yuma County Citrus Pest Control District; Yuma County Pest Abatement District; Yuma County Flood Control District; Farm Credit Services Southwest; Intangible property rights, Yuma Mesa Irrigation and Drainage District; and Unknown Owners, Defendants. The plaintiff, United States of America, by and through undersigned counsel, CIV-03-2006-PHX-SRB

MOTION IN LIMINE TO EXCLUDE PORTION OF APPRAISAL REPORT OF JIM L. SANDERS

23 respectfully submits its Motion in Limine to preclude the introduction of a portion of the 24 appraisal of the subject property prepared by Jim L. Sanders and to preclude any testimony 25 whether by lay or expert witness which relies upon this part of the appraisal, dated February 26 7, 2005, with a date of valuation as of October 16, 2003. 27 28 . This Motion is supported by the attached Memorandum of Points and Authorities

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Respectfully submitted this 10th day of July 2006. PAUL CHARLTON United States Attorney District of Arizona s/Sue A. Klein _____________________________ SUE A. KLEIN Assistant U.S. Attorney MEMORANDUM OF POINTS AND AUTHORITIES INTRODUCTION I. This is an eminent domain case in which the United States condemned the subject property as part of the expansion of the Yuma Marine Corps Air Station. The United States filed it Notice of Condemnation and Declaration of Taking on October 16, 2003. The landowners' appraiser in this case, Jim L. Sanders, prepared a date of taking appraisal of the subject property. Mr. Sanders used a multiple regression model to analyze his sales data. The portion of his regression model which analyzes his industrial sales does not provide reliable data or statistics as, by Mr. Sanders own admissions, he does not have enough sales data to input into his model. In Daubert, the United States Supreme Court held that under Rule 702 of the Federal Rules of evidence, the trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable. Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579, 590-591 (1993). Further, the Court held that the trial judge has the responsibility of ensuring that an expert's testimony rests on a reliable foundation and is relevant to the task at hand. Id. at 597. Later, in Kumho, the Court found that the trial court's "gatekeeping" function applies to all types of expert evidence, and not just "scientific" testimony. Kumho Tire Co. LTD v.
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1 Carmichael, 526 U.S. 137, 147 (1999). The trial court is granted this gatekeeping 2 function in order to make sure that an expert's testimony, whether they are based 3 on professional studies or personal experience, uses a level of intellectual rigor that 4 characterizes the practice of an expert in that particular field. Id. at 152. 5 As the proponents of expert testimony, plaintiffs have the burden of proving

6 admissibility of Mr. Sanders' opinion. See Lust v. Merrell Dow Pharmaceuticals, Inc., 7 89 F.3d 594 (9th Cir. 1996); see also United States v. Rincon, 28 F.2d 921 (9th Cir.), 8 cert. denied, 115 S. Ct. 605, 130 L. Ed. 2d. 516 (1994), citing Daubert v. Merrell Dow 9 Pharmaceuticals, Inc., 509 U.S. 579, 593, n.10 113 S. Ct. 2786, 125 L. Ed. 2d. 469 10 (1993). To be admissible, expert testimony must be both relevant and reliable. 11 Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 597, 113 S. Ct. 2786 125 12 L. Ed. 2d 469 (1993). Under Daubert, the trial court must make a preliminary 13 assessment of whether proffered expert testimony's underlying reasoning or 14 methodology is scientifically valid and properly can be applied to the facts at issue. 15 Id. at 2796. This obligation applies to all types of expert testimony. Kumbo Tire 16 Co., 119 S. Ct. 1167; Fed. R. Evid. 702. 17 When the United States condemns a piece of property, the owners are entitled

18 to "just compensation" which is generally measured by the fair market value of the 19 property taken. United States v. 429.59 Acres of Land, 612 F.2d 459, 462 (9th Cir. 20 1980). The proper date to determine this value is the date the government takes the 21 property which in this case is October 16, 2003, the date of filing the Complaint in 22 Condemnation, Notice of Condemnation, Declaration of Taking and deposit of 23 estimated just compensation with the Court. United States v. Miller, 317 U.S. 369, 24 374 (1943); United States v. 100 Acres of Land, More or Less, in Marin County, State of 25 California, 468 F.2d 1261, 1267 (9th Cir. 1972). Market value is: 26 27 28 "the price which a reasonable seller who desires to sell but is not required to sell would demand for the property and the price which a reasonable
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buyer who desired to buy but was not required to buy would pay for the same, assuming a reasonable time for negotiations and explorations of alternatives." United States v. 429.59 Acres of Land, 612 F.2d 459, 462 (9th Cir. 1980); See United States v. Miller, 317 U.S. 369, 374-375 (1943); Olson v. United States, 292 U.S. 246, 257 (1934) When market value is determined, all factors that would normally influence a

6 purchase or sale must be considered. United States v. 429.59 Acres of Land, at 462; 7 8 fair market value standard does not compel consideration of all possible factors 9 which might enhance the value of the property condemned. United States v. 10 11 U.S. 488, 491 (1973); United States v. Miller, 317 U.S. 369, 374 (1943). The 12 landowner has the burden of establishing the value of property that is the subject of 13 14 1980). In order to establish this, a landowner may submit testimony of an expert 15 who is qualified to appraise the condemned property. Id. at 462. One such method 16 an expert may use in valuating property is by evaluating comparable sales. Id. 17 When sales of other property are used as the basis of an expert's opinion, the expert 18 must make careful inquiry into the facts of the other sales and his subsequent 19 opinion must be founded on this careful inquiry. Id. 20 In this case, a portion of Jim Sanders' appraisal is not reliable because Sanders 21 did not utilize sufficient data to reliably value the subject property for industrial 22 uses. 23 24 25 Potential future use of a condemned property should be considered not as a 26 present measure of value, but rather only to the extent that a demand for that use 27 28
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United States v. Weyerhaeuser Co., 538 F.2d 1363, 1366 (9th Cir., 1976). However, the

Weyerhaeuser Co., 538 F.2d 1363, 1366 (9th Cir. 1976); see United States v. Fuller, 409

condemnation. United States v. 429.59 Acres of Land, 612 F.2d 459, 462 (9th Cir.

II. A Portion of Jim Sanders' appraisal of the Subject Property should be excluded because his use of a multiple regression analysis to provide an opinion of value is unreliable.

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1 would have affected the price a willing buyer would have offered for the property 2 just prior to the taking. United States v. Benning, 330 F.2d 527, 532 (9th Cir. 1964); 3 see Olson v. United States, 292 U.S. 246, 255 (1934). In Benning, the government 4 argued that the condemned property was overvalued because the rural land at issue 5 was valued as though it were a residential subdivision. Benning at 531. The Ninth 6 Circuit found that a potential future use of a piece of property should not be 7 considered as the present measure of value, rather only to the extent that the 8 demand for such use would have affected the price a willing buyer would have 9 offered for the property just before the taking. Id. at 532. 10 Here, Sanders values the subject property as though it was used for industrial

11 purposes as of the date of taking. This is shown by the fact that the sales Sanders 12 used in his analysis were already used for industrial purposes. Additionally, in 13 three of the four industrial sales used by Sanders, a Curtis family member or entity 14 was the seller. (See Exhibit A, Sanders Appraisal, Sales Data Sheets). Also, while 15 the "comparable sales" ranged from $30,612 an acre to $33,117 an acre, Sanders 16 values the subject property at approximately $37,000 an acre. (See Exhibit B, 17 Sanders Deposition, August 31, 2005, 153-154, 168-169; Exhibit A, Sanders 18 Appraisal p. 102). Finally, the manner in which Sanders utilized the sales in his 19 regression model did not produce reliable results. 20 An appraiser must apply his method in a reliable way in order to provide

21 reliable information in determining the value of land. In a factually similar case, an 22 appraiser attempted to use the sales comparison approach in valuing a piece of 23 property, however, he did not properly apply this method and the court found the 24 appraiser's valuation did not meet the reliability standard set forth in Daubert. 25 Cayuga Indian Nation of New York v. Pataki, 83 F. Supp.2d 318, 323 (N.D. New York, 26 2000). The court evaluated some of the deficiencies in the appraiser's 27 28
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1 methodology and explained that to the extent the sales data used is inaccurate, all 2 subsequent calculations would be impacted. Id. at 323-24. 3 One of the reasons the court excluded the report was that the appraiser did not

4 follow his own procedures. Although he said he "typically" discarded the high and 5 low sales he admitted that he did not follow this procedure for the year of 1945 and 6 he did not eliminate the highest sales for the sales completed in the 1950's. Id. at 7 324. The court relied on this as one factor which made the appraiser's valuation of 8 the properties unreliable. 9 In this case, Sanders did not apply his valuation method in a reliable way.

10 First, he failed to follow his own standards. Sanders explained in his deposition 11 and appraisal that he did not consider six sales to be a large enough amount to 12 represent an appreciation in value. (See Exhibit B, Sanders Deposition p.159; 13 Exhibit A, Sanders Appraisal p.99). Sanders acknowledges he would have 14 preferred at least 10 sales. (See Exhibit B, Sanders Deposition, August 31, 2005, p. 15 159, l. 11-15). However, he then eliminates two of the six sales and relies on his 16 regression model to value the subject properties. (See Exhibit B, Sanders 17 Deposition, August 31, 2005, p. 160; Exhibit A, Sanders Appraisal, p. 100). 18 Sanders acknowledges that "four sales are not enough to provide a real reliable 19 indication for a rate of appreciation." (See Exhibit A, Sanders appraisal, p. 103). 20 Second, Sanders then puts the four sales he decides to use into his regression

21 model twice to show that the date recorded is statistically significant. (See Exhibit 22 C, Sanders Deposition, March 21, 2006, pp. 97-98). By discarding the two smaller 23 sales and putting his data set into the model twice, Sanders acknowledges that he 24 was able to derive a higher value per acre. (See Exhibit B, Sanders Deposition, 25 August 31, 2005, p. 161-165). Sanders goes on to agree that if there were only two 26 sales available and put them in four times then the model would generate the same 27 results as if there were four sales put in the model twice. (See Exhibit C, Sanders 28
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1 Deposition, March 21, 2006, p. 98). He goes a step further and says it would be the 2 same if you took one sale and entered it in the regression model eight times. Id. 3 However, one can see that using one sale would not be enough to reach a reliable 4 estimate of fair market value. Sanders attempts to explain this problem away by 5 stating he would like to have more independent sales, but he only has four sales 6 and therefore that is what he must work with. (See Sanders Deposition, March 21, 7 2006, p. 98). Yet, if one followed this rationale, if an appraiser truly only had one 8 sale it could be possible to use the one sale to determine a proper valuation of a 9 piece of property. Furthermore, merely placing the same numbers in twice 10 presupposes that any other sales will be in line with the four sales already recorded. 11 Third, when Sanders explained his method of valuation he described the four

12 industrial sales he used and explained that he "already knew . . . my [Sanders'] 13 price was somewhere between $30 and $35 thousand per acre." (See Exhibit B, 14 Sanders Deposition, August 31, 2005, p. 154). However, he later valued the 15 subject property at $37,000 an acre. This is clearly not within his own standards 16 because his valuation for the Bend is $3,883 more than the highest price industrial 17 sale. 18 Fourth, Sanders acknowledges that when analyzing as few as four sales, the

19 model is used in a different manner. When analyzing as few as four sales, "you 20 want to understand a relationship between these four sales, but you're not sitting 21 there trying to infer something about a more general market necessarily. But you 22 are analyzing those four sales relative to one another." (See Exhibit B, Sanders 23 Deposition, August 31, 2005, p. 45, l. 9-19). Analyzing four sales to determine 24 market value is precisely what Sanders did in this case. By his own analysis, his 25 method is unreliable. 26 Finally, in three of the four industrial sales Sanders utilized in his model, a

27 Curtis family member or entity was the seller. (See Exhibit A, Sanders Appraisal, 28
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1 Sales Data Sheet). Sanders failed to evaluate this important characteristic of the 2 sales he compared to the subject properties. Mr. Glen T. Curtis, the landowners' 3 representative in this case, acknowledged that "the owners help create the market 4 for industrial land," or at least "had some influence in the market on industrial 5 land." (See Exhibit D, Curtis deposition, p. 132, l. 3-11; Exhibit E, Curtis 6 Supplemental Disclosure). 7 8 CONCLUSION For the foregoing reasons the United States respectfully requests this Court to

9 preclude the defendants from admitting into evidence the portion of Jim Sanders 10 appraisal report regarding use of a regression model to determine the property's 11 value for industrial use. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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Respectfully submitted this 10th day of July, 2006. PAUL K. CHARLTON United States Attorney District of Arizona s/Sue A. Klein ____________________________ SUE A. KLEIN Assistant U.S. Attorney

CERTIFICATION

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1

I hereby certify that on July 10, 2006, I electronically transmitted the attached

2 document to the Clerk's Office using the CM/ECF System for filing and transmittal of a 3 Notice of Electronic Filing to the following CM/ECF registrants: 4 John A. Weil
Weil & Weil

5 Attorneys at Law
1600 S. Fourth Ave., Ste. C

6 Yuma, Arizona 85364 7
s/Nancy Stotler

8 _____________________ 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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