3600 Mich. Co v. Infra-metals
| Decision Date | 03 January 2011 |
| Docket Number | No. 2:07-CV-367-PPS,2:07-CV-367-PPS |
| Parties | 3600 MICHIGAN CO., LTD., Plaintiff, v. INFRA-METALS, CO. f/k/a PREUSSAG INTERNATIONAL STEEL CORPORATION, Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
This is a commercial dispute about the lease of an industrial property in East Chicago, Indiana. Defendant Infra-Metals seeks to exclude the testimony of Jeffrey Vale, plaintiff 3600 Michigan's expert appraiser [DE 58]. An evidentiary hearing was held that explored Vale's qualifications, the nature of his expertise, and the bases for his proposed testimony. For the reasons discussed below, Infra's motion is GRANTED in part and DENIED in part.
BACKGROUND
This dispute concerns an industrial property in Northwest Indiana, located at 3600 Michigan Road, East Chicago, Indiana, where the parties and their respective predecessors jointly operated a steel processing facility from 1992 to 1997 [DE 1]. In 1997, Infra agreed to terminate the joint venture with 3600; transfer ownership of the property to 3600, and lease it back from 3600 for a ten-year period, from 1997 to 2007 [Id.].
Six years into the lease, Infra notified 3600 of its decision to vacate the property and cease making further rental payments [DE 2-2]. As a result, the parties negotiated a 2003 amendment to the lease, which progressively reduced Infra's rent over the four years remainingin the lease period. The idea was that the parties were to cooperate with one another and use reasonable efforts to locate a new tenant for the four-year period remaining on Infra's lease [DE 1 & 1-4]. Unfortunately for Infra, no new tenant was found so Infra continued to pay the rent on a property it did not even occupy, albeit at the lower rate negotiated in the lease amendment.
Shortly after the July 2007 termination of the lease, 3600 sued Infra for breach of the lease and the amendment, including for Infra's alleged failure to fulfill certain obligations under those agreements [DE 1]. Infra counterclaimed, alleging that 3600 had breached its duty under the lease amendment to use reasonable efforts to locate a new tenant [DE 2-2]. Infra points to the fact that 3600 managed to secure a new tenant, oil giant BP, roughly six months after the July 2007 termination of Infra's lease. According to Infra, this was no coincidence. Infra says that 3600 simply sat back and happily collected rental payments while Infra was still on the hook and only sought to re-lease the property after the proverbial golden goose died. These are the allegations, anyway.
3600 claims that it acted in good faith and made reasonable efforts to find a replacement tenant but the market was simply in the tank and no one could be found. To support this defense, 3600 hired expert appraiser Jeffrey Vale to opine in part about the difficult market conditions in the industrial real estate market during the relevant period of time. In particular 3600 proffered Vale to give opinion testimony on (1) the condition of the industrial real estate market in East Chicago, Indiana for the 2003-07 time period; and (2) the reasonableness of 3600's asking price for the subject property during this period. 3600 also seeks to introduce Vale's lay testimony as to the condition of the subject property during this same period.
Infra moved to exclude Vale's opinion and lay opinion testimony in its entirety onseveral grounds, including that the proposed opinion testimony is deficient under Daubert and Rule 702's relevance and reliability standards [DE 58 & 59]. Infra later withdrew Vale's proposed opinion testimony as to the reasonableness of 3600's asking price [DE 60], leaving only the issues of Vale's proposed opinion testimony on market conditions, and his proposed lay opinion testimony, to be resolved in the present motion.
DISCUSSION
The admissibility of expert testimony is governed by Federal Rule of Evidence 702 and the Supreme Court's opinion in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 (1993). See Lewis v. Citgo Petroleum Corp, 561 F.3d 698, 705 (7th Cir. 2009). Rule 702 provides, in relevant part, that "[i]f scientific, technical or other specialized knowledge will assist the trier of fact[,]... a witness qualified as an expert by knowledge, skill, experience, training or education, may testify thereto in the form of an opinion...." Fed. R. Evid. 702. The Rule "also requires that: (1) the testimony must be based upon sufficient facts or data; (2) it must be the product of reliable principles and methods; and (3) the witness must have applied the principles and methods reliably to the facts of the case." Happel v. Walmart Stores, Inc., 602 F.3d 820, 824 (7th Cir. 2010).
Under this framework, this Court must act as a gatekeeper for expert testimony, determining prior to admission whether the testimony is both relevant and reliable. U.S. v. Pansier, 576 F.3d 726, 737 (7th Cir. 2009); U.S. v. Parra, 402 F.3d 752, 758 (7th Cir. 2005); Dhillon v. Crown Controls Corp., 269 F.3d 865, 869 (7th Cir. 2001). In conducting this inquiry, I must focus solely on principles and methodology, not on the conclusions they generate. Winters v. Fru-Con Inc., 498 F.3d 734, 742 (7th Cir. 2007); Chapman v. Maytag Corp., 297 F.3d 682, 687 (7th Cir. 2002). "The goal of Daubert is to assure that experts employ the same 'intellectual rigor' in their courtroom testimony as would be employed by an expert in the relevant field." Jenkins v. Bartlett, 487 F.3d 482, 489 (7th Cir. 2007) (quoting Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999)).
To assess reliability, the Court must determine whether the expert is qualified in the relevant field, and whether his reasoning or methodology is valid. Smith v. Ford Motor Co., 215 F.3d 713, 718 (7th Cir. 2000) (citing Kumho, 526 U.S. at 153); see also Parra, 402 F.3d at 758.
An expert may be qualified to render opinions based on experience alone. See Kumho Tire Co., 526 U.S. at 156; Walker v. Soo Line R.R. Co., 208 F.3d 581, 591 (7th Cir. 2000). Indeed, "[i]n certain fields, experience is the predominant, if not the sole basis for a great deal of reliable expert testimony." Advisory Committee Notes to Rule 702. As the Seventh Circuit has emphasized, "genuine expertise may be based on experience or training." U.S. v. Conn, 297 F.3d 548, 556 (7th Cir. 2002) (quoting Tyus v. Urban Search Mgmt, 102 F. 3d 256, 263 (7th Cir. 1996)); Trustees of Chicago Painters & Decorators Pension, Health & Welfare, & Deferred Sav. Plan Trust Funds v. Royal Intern. Drywall & Decorating, Inc., 493 F.3d 782, 787-88 (7th Cir. 2007). Accordingly, a court should consider a proposed expert's full range of practical experience when determining whether the expert is qualified to render an opinion in a given area. See, e.g., Smith, 215 F.3d at 718.
But whether a witness is qualified as an expert depends on whether his area of expertise extends to the subject matter of his proposed testimony. See Carroll v. Otis Elevator Co, 896 F.2d 210, 212 (7th Cir. 1990). As the Seventh Circuit has explained, even "[a] supremely qualified expert cannot waltz into the courtroom and render opinions unless those opinions are.. . reliable and relevant under the test set forth by the Supreme Court in Daubert'" Clark v. Takata Corp., 192 F.3d 750, 759 n.5 (7th Cir. 1999).
In determining the relevance of the proposed testimony, the court "must consider whether the testimony will assist the trier of fact with its analysis of any of the issues involved in the case." Smith, 215 F.3d at 719. To satisfy this requirement, the expert need not have an opinion on the ultimate question to be resolved by the trier of fact. See Walker, 208 F.3d at 587. Rather, "[a]nyone with relevant expertise enabling him to offer responsible opinion testimony helpful to judge or jury may qualify as an expert witness." Tuf Racing Prods. v. Am. Suzuki Motor Corp., 223 F.3d 585, 593 (7th Cir. 2000).
Infra challenges both the reliability and relevance of Vale's proposed testimony on market conditions. Specifically, Infra argues that this testimony is unreliable because (1) it is not based on sufficient data; and (2) it fails to comply with the Uniform Standards of Professional Appraisal Practice (USPAP), which is evidently the Bible in the appraiser business [DE 59]. Infra further argues that the proposed testimony is irrelevant because it consists of information that is both publicly available and well-known to residents of East Chicago [DE 62 at 7-8].
The first question is whether Vale is qualified to be an expert in this case. He plainly is. Vale has been a licensed general appraiser in Indiana since 1991-the year licensing for appraisers came into effect in Indiana-a licensed certified appraiser since 1992, and a practicing appraiser for 21 years [DE 59-2 at 8-9]. He is also an independent broker licensed in Indiana, and a Member of the Appraisal Institute (MAI) in Chicago, Illinois [Id.]. He has been qualifiedas an expert in approximately 20 cases involving real estate appraisal issues [Id.].
Vale testified that he has performed thousands of appraisals of commercial and industrial properties over the course of his 21-year career. He focuses his practice in the appraisal of commercial and industrial properties. He estimated that, of the thousands of appraisals that he has done over the years, about 75-80% have been for industrial and commercial properties. And Vale's appraisal practice specializes in the Northwest Indiana real estate market, which includes East Chicago where the subject property is located. Vale testified that, as an appraiser of industrial and commercial properties, he has a general familiarity with the process of marketing such properties, including how long such properties tend to remain on the market before they are sold or leased.
Infra does not seriously challenge Vale's qualifications, and nor could they. I therefore...
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