California v. Kinder Morgan Energy Partners, L.P.

• Decision Date: 02 February 2016
• Docket Number: Case No.: 07cv1883–MMA (WVG)
• Citation: 159 F.Supp.3d 1182
• Court: U.S. District Court — Southern District of California
• Parties: People of the State of California, et al., Plaintiffs, v. Kinder Morgan Energy Partners, L.P., et al., Defendants.

159 F.Supp.3d 1182

People of the State of California, et al., Plaintiffs,

v.Kinder Morgan Energy Partners, L.P., et al., Defendants.

Case No.: 07cv1883–MMA (WVG)

United States District Court, S.D. California.

Signed February 2, 2016

Daniel F. Bamberg, Office of the City Attorney, San Diego, CA, Rene Pierre Tatro, Steven Russell Tekosky, Tatro Tekosky Sadwick LLP, Los Angeles, CA, for Plaintiffs.

M. Ray Hartman, III, Cooley LLP, Amber R. Holderness, Michael Sean Tracy, DLA Piper US LLP, Steven M. Strauss, Summer J. Wynn, Cooley Godward Kronish, San Diego, CA, Gregory T. Broderick, U.S. Attorney's Office, Eastern District of California, Steven H. Goldberg, Downey Brand, Sacramento, CA, for Defendants.

ORDER AFFIRMING TENTATIVE RULINGS RE: DEFENDANTS' DAUBERT MOTIONS AND MOTION FOR PARTIAL SUMMARY JUDGMENT

[Doc. Nos. 203, 204, 207, 318]

HON. MICHAEL M. ANELLO, United States District Judge

Plaintiffs People of the State of California and the City of San Diego (“the City”) and Defendants Kinder Morgan Energy Partners, L.P., et al. (“Kinder Morgan”) appeared before the Court on Monday, January 25, 2016 at 2:30 p.m. for a hearing on Kinder Morgan's motion for partial summary judgment and motions to exclude the opinions and testimony of four of the City's experts. See Doc. Nos. 203, 204, 207, 318. In anticipation of the hearing, the Court issued tentative rulings on the pending motions. For the reasons set forth below, the Court AFFIRMS its tentative rulings.

Introduction¹

On April 1, 2008, the City filed an amended complaint for remediation of the 166 acres underlying and surrounding Qualcomm Stadium and its adjoining parking lots (“the property”). The City brought a variety of claims against Kinder Morgan, the following which remain to be tried: (1) continuing public nuisance; (2) continuing private nuisance; and (3) continuing trespass. The City is seeking three categories of damages at trial based on its remaining claims, which the parties generally refer to as: (1) “water damages”—including the loss of use of the Mission Valley aquifer as a source of potable water and for underground water storage; (2) “real estate damages”—based on the property's fair rental value for redevelopment projects; and (3) “restoration damages”—to restore the property to its original, pre-contamination condition, i.e. “background.” Kinder Morgan moves for partial summary judgment on several grounds, and renews three previously filed Daubert motions.² In short, Kinder Morgan seeks to drastically limit the damages available to the City at trial, and to exclude the City's experts' opinions and testimony regarding those damages.

As a preliminary matter, the Court finds that resolution of the issues raised in Kinder Morgan's pending motions will not violate the law of the case as it now exists subsequent to appeal and remand. The Ninth Circuit's memorandum disposition reversing this Court's previous summary judgment ruling was silent on many of the issues raised by the parties on appeal. See California v. Kinder Morgan Energy Partners LP, 613 Fed.Appx. 561 (9th Cir.2015). “Lower courts are free to decide issues on remand so long as they were not ... decided explicitly or by necessary implication in [the] previous disposition.” Liberty Mut. Ins. Co. v. Equal Emp't Opportunity Comm'n, 691 F.2d 438, 441 (9th Cir.1982) (internal citations omitted). In this case, the circuit court's explicit legal rulings inform the Court's understanding of the issues currently in dispute, but do not prohibit a determination of those issues.

Kinder Morgan's Daubert Motions

Kinder Morgan seeks to exclude the opinions of four of the City's designated experts: (1) Dr. Steven Waters—an economist, whose opinion relates to the valuation of the Mission Valley aquifer as a source of water supply and storage; (2) Dr. David Huntley³ —rebuttal expert, whose opinion relates to the suitability of the Mission Valley aquifer as a source of drinking water and the safe yield of the Mission Valley aquifer; and (3) Randall Bell, MAI and David Davis, MAI—real estate appraisers who opine that the City could have redeveloped the property and realized rental profits of $120 million, but for the contamination.

1. Legal Standard

Rule 702 of the Federal Rules of Evidence provides that expert opinion evidence is admissible if: “(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.” Fed.R.Evid. 702. As the Ninth Circuit recently explained:

Under Daubert and its progeny, including Daubert II, a district court's inquiry into admissibility is a flexible one. Alaska Rent–A–Car, Inc. v. Avis Budget Grp., Inc., 738 F.3d 960, 969 (9th Cir.2013). In evaluating proffered expert testimony, the trial court is “a gatekeeper, not a fact finder.” Primiano v. Cook, 598 F.3d 558, 565 (9th Cir.2010) (citation and quotation marks omitted).

“[T]he trial court must assure that the expert testimony ‘both rests on a reliable foundation and is relevant to the task at hand.’ ” Id. at 564 (quoting Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 597, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) ). “Expert opinion testimony is relevant if the knowledge underlying it has a valid connection to the pertinent inquiry. And it is reliable if the knowledge underlying it has a reliable basis in the knowledge and experience of the relevant discipline.” Id. at 565 (citation and internal quotation marks omitted). “Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion.” Id. at 564 (citation omitted). The judge is “supposed to screen the jury from unreliable nonsense opinions, but not exclude opinions merely because they are impeachable.” Alaska Rent–A–Car, 738 F.3d at 969. Simply put, “[t]he district court is not tasked with deciding whether the expert is right or wrong, just whether his testimony has substance such that it would be helpful to a jury.” Id. at 969–70.

City of Pomona v. SQM N. Am. Corp. , 750 F.3d 1036, 1043 (9th Cir.2014). “Challenges that go to the weight of the evidence are within the province of a fact finder, not a trial court judge. A district court should not make credibility determinations that are reserved for the jury.” Id. at 1044.

2. Motion to Exclude Expert Opinion and Testimony of Dr. Steven Waters

On July 29, 2011, Dr. Steven Waters, an economic consultant, submitted an expert report in this case. The City hired Dr. Waters to establish a methodology for valuing the loss of use of the Mission Valley aquifer as a source of potable water supply and storage. Kinder Morgan moves to exclude Dr. Waters' opinion and testimony on a variety of grounds. Kinder Morgan argues that Dr. Waters' lack of experience with water supply or storage resulted in the use of an improper methodology that renders his opinion unreliable; Dr. Waters relied on faulty assumptions pulled from unreliable sources; and Dr. Waters' opinion is irrelevant because he does not (and cannot) provide an opinion on damages.

Kinder Morgan argues as a threshold matter that Dr. Waters is not qualified to provide an expert opinion on the method of valuing the supply and storage of water because he has never before done so. However, Rule 702 “contemplates a broad conception of expert qualifications” and “an expert may be qualified either by ‘knowledge, skill, experience, training, or education.’ ” Thomas v. Newton Int'l Enters., 42 F.3d 1266, 1269 (9th Cir.1994) (quoting Fed.R.Evid. 702 ). Dr. Waters is clearly qualified as an economist. He has provided market analyses in a wide variety of industries, and he does not need to be a water supply or storage expert in order to provide a reasoned opinion on the operation of the applicable market.

Kinder Morgan also argues that Dr. Waters' opinion is unreliable. Kinder Morgan primarily lays fault with the fact that Waters uses data and information from a 2004 Concept Study prepared by Dr. Michael Welch regarding the viability of the Mission Valley aquifer as a source of water supply, and a 2010 report prepared by the Equinox Center titled “San Diego's Water Sources: Assessing the Options,” to provide value for the variables in his formulas. According to Kinder Morgan, neither the concept study nor the Equinox report is reliable, therefore Waters' opinion is unreliable. However, Dr. Waters' methodology is not dependent on the particular data he uses to illustrate its application. “Under Rule 702 and Daubert, the proper analysis is not whether some of the inputs can be questioned, but whether [the expert's] testimony is relevant and reliable, and whether the methods and principles upon which [he] has relied in forming [his] opinion have a sound basis in science.” Abarca v. Franklin County Water Dist., 761 F.Supp.2d 1007, 1033 (E.D.Cal.2011). Furthermore, it will be for the jury to decide whether his “demand-side” methodology is the proper one to use when trying to place a value on the City's loss of use of the aquifer.

Kinder Morgan also argues that Waters' opinion and testimony are irrelevant because he was not hired to opine on damages and cannot do so. The City concedes that Waters has no damages opinion. As such, the Court GRANTS Kinder Morgan's motion in part and precludes Dr. Waters from offering any opinion regarding damages. However, this alone does not render Waters' opinion irrelevant. Waters' methodology is meant to assist the jury with its ultimate damages calculation, not advise the jury what the damages should be. Kinder Morgan maintains that Waters' opinion is irrelevant, regardless, because the City cannot offer admissible evidence for several of the inputs to Waters' methodology for...