UGI Sunbury LLC v. A Permanent Easement for 1.7575 Acres
| Decision Date | 11 February 2020 |
| Docket Number | Nos. 18-3126,18-3127,s. 18-3126 |
| Citation | 949 F.3d 825 |
| Parties | UGI SUNBURY LLC, Appellant v. A PERMANENT EASEMENT FOR 1.7575 ACRES, and Temporary Construction and Access Easement for 2.956 Acres in Limestone Township, Montour County, Pennsylvania Tax Parcel No. 5-10-19; David W. Beachel, Jr.; Joy L. Beachel; The Turbotville National Bank ; Montour County Tax Claim Bureau; Commonwealth of Pennsylvania, Department of Highways, PA Department of Transportation; Pennsylvania Department of Revenue, Bureau of Compliance; All Unknown Owners UGI Sunbury LLC, Appellant v. A Permanent Easement for 0.4308 Acres, and Temporary Construction and Access Easement for 0.4577 Acres in the Borough of Shamokin Dam, Snyder County, Pennsylvania Tax Parcel No. 16-04-059; Donald D. Pontius, Co-Trustees of the Donald D. and Georgia A. Pontius Living Trust; Georgia A. Pontius, Co-Trustees of the Donald D. and Georgia A. Pontius Living Trust; Borough of Shamokin Dam; Commonwealth of Pennsylvania, Department of Transportation; All Unknown Owners |
| Court | U.S. Court of Appeals — Third Circuit |
Paige Macdonald-Matthes, Obermayer Rebmann Maxwell & Hippel, 200 Locust Street, Suite 400, Harrisburg, Pennsylvania 17101
Alexander V. Batoff, Obermayer Rebmann Maxwell & Hippel, 1500 Market Street Center Square West, 34th Floor, Philadelphia, Pennsylvania 19102
James C. Martin (Argued), Devin M. Misour, Reed Smith LLP, 225 Fifth Avenue, Pittsburgh, Pennsylvania 15222, Counsel for Appellant UGI Sunbury, LLC
Peter J. Carfly, Stephen B. Edwards (Argued), Laverly Law, 225 Market Street, Suite 304, P.O. Box 1245, Harrisburg, Pennsylvania 17108, Counsel for Appellees David W. Beachel, Jr., Permanent Easement For 1.7575 Acres and Temporary Construction and Access Easement for 2.956 Acres in Limestone Township Montour County Pennsylvania Tax Parcel No. 5-10-19, and Joy L. Beachel
Michael F. Faherty (Argued), Anthony M. Corby, Tara B. Hovarth, Faherty Law Firm, 75 Cedar Avenue, Hershey, Pennsylvania 17033, Counsel for Appellees Donald D. and Georgia A. Pontius, Trustees of the Donald D. and Georgia A. Pontius Living Trust
Stephanie E. DiVittore, Barley Snyder, 213 Market Street, 12th Floor, Harrisburg, Pennsylvania 17101, Counsel for Turbotville National Bank
Brian J. Clark, Buchanan Ingersoll & Rooney, 409 North Second Street, Suite 500, Harrisburg, Pennsylvania 17101
Victoria B. Kush, Stanley Yorsz, Buchanan Ingersoll & Rooney, 301 Grant Street, One Oxford Centre, 20th Floor, Pittsburgh, Pennsylvania 15219, Counsel for Amicus Curiae Marcellus Shale Coalition
Lela Hollabaugh, Bradley Arant Boult Cummings, 1600 Division Street, Suite 700, Nashville, Tennessee 37203, Anna M. Manasco, Bradley Arant Boult Cummings, 1819 Fifth Avenue North, One Federal Place, Birmingham, Alabama 35203, Counsel for Amicus Curiae Interstate Natural Gas Association of America
Robert H. Thomas, Damon Key Leong Kupchak Hastert, 1003 Bishop Street, Suite 1600, Honolulu, Hawaii 96813, Counsel for Amicus Curiae Owners Counsel of America
Before: KRAUSE, MATEY, Circuit Judges, and QUIÑONES ALEJANDRO,* District Judge.
"An intelligent evaluation of facts is often difficult or impossible without the application of some scientific, technical, or other specialized knowledge." Fed. R. Evid. 702 advisory committee’s note to 1972 proposed rules. But not all specialized knowledge can claim the label of reliable science. So trial courts must guard against "expertise that is fausse and science that is junky." Kumho Tire Co. v. Carmichael , 526 U.S. 137, 159, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999) (Scalia, J., concurring). And for more than twenty-five years, federal courts have looked to the familiar framework of Federal Rule of Evidence 702 to fulfill their "responsibility of acting as gatekeepers to exclude unreliable expert testimony." Fed. R. Evid. 702 advisory committee’s note to 2000 amendments.
Despite the complex factual and procedural setting of this consolidated appeal, this matter turns on a simple question: what is the standard for the admissibility of expert testimony in a condemnation proceeding under the Natural Gas Act? Rule 702 supplies the answer and requires reliable expert testimony that fits the proceedings. That standard recognizes that "[t]he more tightly law is bound to good science, the more orderly and predictable the legal process will become." Peter W. Huber, Galileo’s Revenge: Junk Science in the Courtroom 215 (1991). By contrast, the expert testimony presented here is bound only to speculation and conjecture, not good science or other "good grounds." Karlo v. Pittsburgh Glass Works, LLC , 849 F.3d 61, 81 (3d Cir. 2017) (quoting In re TMI Litig. , 193 F.3d 613, 665 (3d Cir. 1999) ). So we will vacate the District Court’s judgments and remand these cases for new valuation proceedings.
UGI Sunbury, LLC builds natural gas pipelines. In accordance with the Natural Gas Act, 15 U.S.C. §§ 717 et seq ., it obtained authorization to construct and operate an underground pipeline along a 34.4-mile stretch of land in Pennsylvania. The pipeline crosses underneath properties owned by David W. Beachel, Jr. and Donald D. and Georgia A. Pontius.1 The Landowners rejected UGI’s offers of compensation for rights of way, so UGI filed complaints seeking orders of condemnation. UGI prevailed, winning temporary and permanent easements over the Landowners’ properties to construct the pipeline.2
With the easements awarded, only the amount of compensation remained. To aid the District Court’s calculation, UGI and the Landowners retained valuation experts. The Landowners both offered Don Paul Shearer who produced reports on the effect of the easements.3 Shearer estimated the before-taking value of the land by comparing properties in the area and opining on what each is worth relative to the market. UGI does not challenge this approach.
As for the post-taking property values, Shearer’s reports rely on his own "damaged goods theory," drawing on his experience working in his grandfather’s appliance shop. Shearer rounded out this model by studying the impact on real estate values from the Three Mile Island nuclear incident in 1979, the Exxon Valdez Alaskan oil spill in 1989, and assorted leaking underground storage tanks. Not only do Shearer’s reports contain only passing reference to these studies, they include no data relating to those incidents. Indeed, he did not attach his prior studies to his reports.
As applied, Shearer’s "damaged goods theory" holds that markets treat real estate near actual, or even perceived environmental contamination, as a damaged good. Shearer opined that "based on public perception of natural gas pipelines that are in close proximity to any real estate, the subject property does and will continue to have some long-term stigma on the overall marketability and market value." (App. at 132; accord App. at 702.) As a result, it "will be treated as damaged goods now and in the permanent future." (App. at 132; accord App. at 702.) Shearer further offered that "any serious potential purchaser is going to discount the price(s) offered for the property based on the stigma and damaged goods aspects of the property after the taking and existence of the natural gas pipeline[.]" (App. at 132; accord 702.) Using this theory, Shearer concluded that the total compensation for the taking was $386,000 for the Beachel property (a 40 percent reduction in value) and $456,000 for the Pontius property (a 60 percent reduction in value).
UGI moved in limine to exclude Shearer’s testimony for failure to meet the standards required by Rule 702. The District Court recognized Rule 702 ’s parameters but noted its "wide discretion when deciding whether those requirements have been met." (App. at 150–51; accord App. at 795.) The District Court added that "[b]ecause the upcoming trial is a bench—not jury—trial, because there is a ‘strong preference for admission’ of expert testimony, and because this Court believes that ‘hearing the expert’s testimony and assessing its flaws [is] an important part of assessing what conclusion [is] correct,’ this Court will admit the testimony of both parties’ experts." (App. at 151 (internal footnotes and citations omitted); accord App. at 795–96.)
Shearer’s trial testimony did not expand on his theory or offer other supporting data. For example, during the Beachel trial, when asked whether there was "data either way to say that a pipeline across the property diminishes the property or has no effect [on] the property," Shearer responded, (App. at 333.) When asked "where in [his] report is [any] support that the entire property ... [is] a high consequence area?," Shearer stated, "It’s not in my report." (App. at 385.) And when pressed to explain how he valued the depreciation using his "damaged goods theory[,]" Shearer replied that the pipeline necessarily attaches a stigma so future buyers are simply (App. at 332.)
Likewise, during the Pontius trial, Shearer agreed with the District Court’s characterization that "there is at least some leap of logic" necessary to correlate the incident at Three Mile Island or an ocean oil spill to the UGI easements. (App. at 821.) Ever candid, Shearer agreed "that there is an element of subjectivity or even speculation in [his] approach." (Id. ) The Pontius trial also incorporated testimony Shearer provided at a previous valuation hearing involving UGI and another landowner. There he explained his methodology: (App. at 1040.)
The District Court found this compelling, stating that it was "inclined to agree with Mr. Shearer that some form of ‘stigma’...
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