Real Estate Expert Witness Evaluates Impact of Farm Odor on Property Value

CASE:Powell v. Tosh, 942 F. Supp. 2d 678 (W.D. Ky. 2013)

BACKGROUND:

Plaintiffs alleged they began suffering from “recurring intolerable noxious odors emanating from the Defendants’ swine waste facilities constituting a nuisance, increasing the probability of a rodent infestation in surrounding homes, and decreasing the value of their residence and real property” soon after Defendants opened a swine barn in the spring of 2007. The majority of Plaintiffs documented their experiences with the odors in odor logs, which they kept until the discovery deadline in this case. Plaintiffs asserted they did not experience any odor events until Defendant built the barns. Subsequent to the barns’ construction, Plaintiffs frequently began to smell hog odors at their homes. Plaintiffs described the hog odors as sickening, gagging and nauseating, pungent and terrible, overwhelming, oppressive, “knock you in the face bad,” “the raunchiest smell I ever smelled,” a rotting cow carcass, and “feces and raw urine.” As a result of these odors, Plaintiffs variously testified that they no longer host friends and family members at their homes, their children are unable to play outside as frequently, they do not use their homes’ swimming pools or patios, and they are unable to open their windows. They sued to recover the lost value of their properties.

EXPERT WITNESS:

Plaintiffs identified Mary Clay, a real estate appraiser, as an expert witness. Ms. Clay has been a self-employed appraiser since 1985, performing commercial, industrial, and farm valuations in Kentucky.

DAUBERT CHALLENGE:

The Defendants moved to exclude the opinions of Clay and preclude her from testifying at trial. The Defendants raised arguments that Clay’s testimony should be excluded because: (1) Clay had insufficient experience with Western Kentucky real estate and the effects of agricultural operations to testify as an expert in this matter; and (2) Clay’s analysis, methodology, and data were flawed and, thus, unreliable.

CONCLUSION:

The Court began its evaluation with Defendant’s argument that Clay did not possess the necessary expertise to render an expert appraisal opinion as to real property in Western Kentucky. According to the Defendants, Clay did not satisfy the competency standards set out in the Uniform Standards of Professional Appraisal Practice (USPAP) because (1) she was unfamiliar with the relevant geographic market and with the effects had on residential real property by the construction and operation of hog barns; and (2) although Clay was assisted by Ricky Spann, a local appraiser, Spann’s involvement was insufficient to cure the deficiencies in Clay’s competency.

The Court believed that Clay’s lack of familiarity or experience appraising properties in Marshall County or in Western Kentucky did not necessarily make her unqualified to offer an expert opinion, nor did it necessarily render her opinion unreliable. The USPAP, which represents the prevailing professional standards for real property appraisal, provides: “Competency can be acquired in various ways, including, but not limited to . . . association with an appraiser reasonably believed to have the necessary knowledge and/or experience, or retention of others who possess the necessary knowledge and/or experience.” Clay did just that by hiring Spann, a local residential real estate appraiser. Furthermore, Clay familiarized herself with the market by reviewing relevant data across a seven-year span between 2004 and 2011, which included more than 5,000 sales between 2006 and 2011 in the relevant Marshall County agricultural sector.

The Defendants were also critical of what they characterize as Clay’s unfamiliarity with the valuation of property impacted by environmental damage—specifically, they argued that she was unfamiliar with “the impacts on the value of residential real property based on odors from agricultural operations.” But the argument that Clay was unfamiliar with the effects of agricultural odors missed the point, according to the Court. First of all, Clay represented herself as having “25 years’ experience performing damage studies,” noting that she was appointed to a committee of the Appraisal Institute that developed the first seminar on the appraisal of environmentally-contaminated property. But, more importantly, she expressly disclaimed her process for performing a damage study based on before-and-after values as not dependent on the particular source of the harm: “The relevant damage study is a reflection of market response, and is based on real estate market data, rather than the particular source of the harmful effects.”

Therefore, the Court was unpersuaded by the Defendants’ argument that Clay’s opinions must be excluded because of insufficient experience with either Western Kentucky real estate or the effects of agricultural operations. The Court believed these argument should go more to the weight of Clay’s testimony and were proper matters for cross-examination; they did not render Clay unqualified or her testimony unreliable.

Second, the Defendants argued that Clay’s analysis, methodology, and data were unreliable and should have been excluded. In this regard, the Defendants challenged the admissibility of Clay’s opinions on multiple grounds, arguing: (1) Clay “cherry-picked” data that supported the Plaintiffs’ goal of maximizing damages; and (2) the 1.25 mile circle employed by Clay to delineate the affected area was arbitrarily drawn.

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In support of their first point—that Clay selectively chose data that would support the Plaintiffs’ desired conclusion—the Defendants pointed to the sale of a specific property that was located one-half mile or less from the barns. According to the Defendants, Clay’s conclusion that the properties within one-half mile from the hog barns suffered a 50% diminution in value was disproven by the fact that the property sold in two separate parcels for a total price within approximately 5% of those parcels’ total unimpaired value. The Plaintiffs refuted this, arguing that the effective sale price, after seller concessions, showed an almost 11% diminution in value. Plaintiffs further pointed to the sale of another property as showing a diminution of approximately 23%, which confirmed the accuracy of Clay’s 25% diminution estimate for that property.

Regardless, the Defendants’ challenge sought to disprove Clay’s conclusions and thereby show that her methodology in reaching those conclusions must necessarily be flawed. But the Court’s role here was not to determine the correctness of Clay’s opinion but instead simply whether it was based upon a reliable foundation. Therefore, the Court thought this challenge went more appropriately to the weight of Clay’s testimony, which is a matter for cross-examination, and did not render her opinions unreliable.

On the second point the Defendants argued that the 1.25 mile circle Clay drew to delineate the boundary for diminution in value was arbitrary and undercut the reliability of her data. But Clay explained that the 1.25 mile radius was based on her review of relevant sales data and the evidence she found of diminution in market values. Ultimately, Clay’s decision to draw a circle with a 1.25 mile radius was an issue for cross-examination and not a proper basis for excluding her testimony.

Third, the Defendants argued that Clay’s opinions should be excluded because the data she used was so fundamentally flawed that her ultimate opinion should be rendered unreliable. In this regard, the Defendants take issue with Clay’s use of sales data acquired from the county property valuation administrator (PVA), which they characterize as “hopelessly ambiguous.” The Court was again unpersuaded. The issue of Clay selecting this data was, at best, one for challenging her testimony on cross-examination; it did not sway the Court to exclude her expert opinion on the basis of reliability.

For these reasons, the Court found exclusion of Mary Clay’s expert testimony not warranted under Fed. R. Evid. 702 and Daubert. Therefore, the Court denied Defendants’ Motion to Exclude.