Steven Babitsky, Esq.

The U.S. District Court of Appeals (3rd Cir) dealt with a Daubert Challenge to expert testimony in a condemnation proceeding.

The court found that admitting the testimony was in error despite the fact that it was a bench trial.

The court found the testimony was unreliable and stated:

Take the reports. They lack any suggestion that the “damaged goods theory” has been subject to peer review or enjoys general acceptance. Nor do they contain any analysis of a known or potential rate of error. Or any standards controlling the theory’s application. Each, instead, comes from Shearer’s anecdotal experience in his grandfather’s appliance shop, where he worked as a sales representative during his high school and college years. There, Shearer “took part in many `scratch and dent’ sales” of goods that “had been slightly damaged” but were otherwise “as good as any other equal model that was not affected with any scratch or dent.” (App. at 113; accord App. at 689.) Drawing on this experience, Shearer observes that “the obvious appraisal question is, [d]id my grandfather get more, the same, or less for the `scratch and dent’ models than the undamaged models and items?” (App. at 114; accord App. at 689.) He concludes that “the answer is equally obvious. We all learn early on that consumers will automatically discount most if not all items and merchandise that is either damaged in some way or is `perceived’ to be damaged in some way.” (App. at 114; accord App. at 689.) All of which may be true. But “it is impossible to test a hypothesis generated by a subjective methodology because the only person capable of testing or falsifying the hypothesis is the creator of the methodology.” In re TMI Litig., 193 F.3d at 703 n.144.

Above all, it is the speculative and subjective nature of this testimony that severs the necessary relationship to “methods which have been established to be reliable.” In re Paoli, 35 F.3d at 742 n.8. Shearer blends his observations on consumer habits in the appliance market with far-flung examples of environmental accidents involving nuclear power and oil transportation. But the two principles— that consumers prefer undented appliances and property values declined near the Three Mile Island catastrophe—meet only by assumption. And it isn’t clear whether the theory rests on analogy to buying preferences generally, or in the real estate market specifically. Nor is it clear that Shearer’s conclusions that property value decreased near Three Mile Island and the Valdez spill trace to consumer perception rather than actual, irremediable harm, because Shearer presented no quantifiable data to explain or clarify his assumptions. But in any case, there is no data supporting the application of Shearer’s theory to the Landowners’ properties.

Instead, as Shearer explained, “I put this all in my little mixing bowl and I come up with what I thought was common sense reasonable[.]” (App. at 336.) His theories on the effect of stigma on value, he concedes, “can’t be proven. That’s the problem.” (App. at 985.) We agree that is the problem, and his testimony is unsupported by “good grounds.”

Whatever the relevance of Shearer’s theory generally, it does not fit the facts here. Consider a colloquy during the Pontius trial. Shearer agreed his report contained “no examples of properties whose value actually decreased after installation of a natural gas pipeline.” (App. at 820.) He agreed his findings relied partly on properties impacted by radiation leaks and oil spills, not the installation of a pipeline. He agreed that his report contains leaps of logic, elements of subjectivity, and even speculation.

Aptly, we considered similarly constructed expert testimony two decades ago in a case arising out of the actual Three Mile Island accident. There, we explained the “speculative character” of testimony based on “assumption” where the expert acknowledged, “I just don’t have enough of a database to prove details of this.” TMI Litig., 193 F.3d at 670 (emphasis omitted). Shearer’s testimony offers a familiar echo, explaining “Come back five years from now and I may not agree with my own opinion. If we find properties that sell with pipelines down the middle of a farm and sold for the same as an identical farm down the road, I’m wrong today. But we don’t have the data.” (App. at 332.) At best, Shearer offered “the beginning of a discussion and not the end.” TMI Litig., 193 F.3d at 670. His proposed testimony will not assist the trier of fact and does not fit the proceedings as the Federal Rules required.

Taken together, Shearer’s testimony lacked reliability and did not fit the case, contravening the mandatory requirements of Federal Rule of Evidence 702 applicable in both bench and jury trials. But here the District Court declined to analyze Shearer’s expert testimony for reliability or fit before or after trial. And the District Court relied on that mistakenly admitted evidence to UGI’s detriment in calculating the compensation owed to the Landowners.

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