Opinion
No. 220-2012-CV-100
03-12-2018
New England Telephone Operations, LLC d/b/a FairPoint Communications NNE v. Town of Acworth, et al
ORDER
These consolidated cases are set to be tried during the week of April 23, 2018. The Plaintiff, New England Telephone Operations, LLC, d/b/a FairPoint Communications NNE ("FairPoint") has filed a Motion in Limine to Preclude Purported Geology Opinions of Towns' Specially Retained Appraisers. The Defendant Towns of Durham, Belmont and Hanover (the "Towns") have objected. For the reasons stated in this Order, the Motion is DENIED.
I
These consolidated actions concern taxation of poles, conduits and other similar personal property located throughout municipalities in New Hampshire. As a provider of telecommunication services, FairPoint owns poles, conduit, and other related personal property located within each of the named municipalities. The municipalities are permitted to assess two types of ad valorem property tax on FairPoint's property: (1) a tax measured by the value of FairPoint's use and occupation of the public rights-of-way assessed pursuant to RSA 72:6; and (2) a value tax measured by the value of FairPoint's poles and conduit assessed pursuant to RSA 72:8-a. Essentially, the litigation involves the methodology for taxation of FairPoint by all of the municipalities and towns in New Hampshire in which it owns property.
In 2012, FairPoint brought suit against all of the municipalities in the State in which it owns property challenging taxation of its property. All of the cases were transferred to this Court by the Chief Justice of the Superior Court. All of them raise similar, but not identical claims. Over the course of the litigation, the Court has made a number of administrative orders in order to expedite the litigation. In April 2013, this Court entered a management order, in substance requiring defense counsel to coordinate their filing to reduce expense and streamline handling of the case. The parties drafted a Joint Litigation Schedule which the Court approved. By Order dated May 12, 2014, the Court consolidated the actions into a "test case" structure in which certain municipalities would act as representative municipalities to allow an order on the claims made by FairPoint to be entered which would be applicable to all of the municipalities.
Since the initial actions were transferred to this Court, each subsequent year's cases have been either transferred to this Court or administratively stayed by the Chief Justice of the Superior Court.
Eventually, the parties cross moved for summary judgment and this Court entered an Order dated December 14, 2015 granting and denying the various motions in part. The parties then decided to select certain cases for trial which raised all of the various factual scenarios in the litigation, so that following this Court's final Order, the other cases can be settled or these cases can be appealed to the New Hampshire Supreme Court. Discovery on the merits has proceeded, and the cases involving the selected Towns, Durham, Belmont and Hanover, appear to be ready for trial. Counsel have advised the Court that the only issue to be litigated will be the value of FairPoint's property, and that both sides are expecting to present their case through one expert witness each, an appraiser. FairPoint has moved in limine to exclude opinions of the Towns' expert, George E. Sansoucy, P.E.
II
A hearing was held on the FairPoint's Motion on March 5, 2018. The parties advised the Court that since FairPoint's equipment does not produce income and is not salable, the only method of appraisal used by either expert to value the property will be the replacement cost method. FairPoint asserts that Sansoucy should not be allowed to testify because he "purports to offer expert opinions about and based upon subsurface geological conditions, but lacks the expertise to do so . . . ." (FairPoint's Mot. in Limine, ¶ 1.) FairPoint argues that Sansoucy explains that the installation cost of the pole is a significant consideration for purposes of valuing the poles, and if ledge boring is required because the poles are being placed in bedrock, that is often one of the largest cost components of a pole installation. (Id. ¶ 6.) Sansoucy asserts in his expert report that approximately 10% of the poles in Durham, Hanover, and Belmont would require a ledge boring machine to drill a hole before a pole could be installed because of the existence of subsurface ledge. (Id. ¶¶ 10, 11.) According to FairPoint, this testimony is so unreliable that it should be excluded from trial. The Towns object.
A
The parties have not addressed the standard the Court should use in making a pretrial determination of expert appraisal testimony at length. FairPoint argues that an expert must be qualified by knowledge, skill, experience, training, or education, in accordance with New Hampshire Rule of Evidence 702. (Id. ¶ 18.) FairPoint argues that expert opinions are admissible "only after it is has been shown to the satisfaction of the court that the testimony is based upon sufficient facts or data; is the product of reliable principles and methods; the witness's applied the principles and methodology liability to the facts of the case." (Id. ¶ 20.) FairPoint argues that "the New Hampshire Supreme Court, adopting the flexible test set forth in Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993), has directed trial courts to 'place special emphasis on 4 factors: (1) whether a theory or technique can be (and has been) tested; (2) whether the theory or technique has been subjected to peer review and publication; (3) the known or potential rate of error of a particular technique; and (4) the Frye general acceptance test . . . See also RSA 516:29-a.'" (Id. ¶ 20 n.1.)
The Towns also assert that the analysis the Court must undertake is that set forth by Daubert: "The New Hampshire Supreme Court has been clear in ruling on Daubert motions that '[t]he trial court functions only as a gatekeeper, ensuring a methodology's reliability before permitting the fact-finder to determine the weight and credibility to be afforded an expert's testimony.' Baxter v. Temple, 157 N.H. 280, 284 (2008)." (Towns' Obj. to Mot. in Limine ¶ 12.)
The New Hampshire Supreme Court has suggested that RSA 516:29-a is applicable to an appraiser's testimony. See Gray v. Commonwealth Land Title Ins. Co., 162 N.H. 71, 77 (2011). RSA 516:29-a provides in relevant part that:
Courts which, like New Hampshire, have enacted statutes that incorporate the principles of Daubert to the admission of all expert testimony, not just testimony based on science generally applies principles to testimony of real estate appraisers. See, e.g., Westmark v. Gardens at Swan Creek Condo. Owners Ass'n, Inc., 377 Wis. 2d 729, 902 N.W.2d 809 (Wis. Ct. App. 2017); see also Banco Popular North Am. v. Du'Glace, LLC, 79 A.3d 123, 128 (Conn. App. 2013) (declining to undertake a Daubert analysis of a real estate appraisal because the Connecticut Supreme Court has not adopted the Daubert analysis to the admission of all expert testimony but only testimony based in science).
I. A witness shall not be allowed to offer expert testimony unless the court finds:
(a) Such testimony is based upon sufficient facts or data;
(b) Such testimony is the product of reliable principles and methods; and
(c) The witness has applied the principles and methods reliably to the facts of the case.
II. (a) In evaluating the basis for proffered expert testimony, the court shall consider, if appropriate to the circumstances, whether the expert's opinions were supported by theories or techniques that:
(1) Have been or can be tested;
(2) Have been subjected to peer review and publication;
(3) Have a known or potential rate of error; and
(4) Are generally accepted in the appropriate scientific literature.
(b) In making its findings, the court may consider other factors specific to the proffered testimony.
RSA 516:29-a essentially incorporates Daubert's standards. Baxter, 157 N.H. at 284, 298; see also Baker Valley Lumber v. Ingersoll-Rand, 148 N.H. 609, 614 (2002) (applying the Daubert framework to evaluate the reliability of expert testimony under N.H. R. Ev. 702); Osman v. Lin, 169 N.H. 329, 335 (2016) (noting that "[p]ortions of RSA 516:29-a codify principles outlined by the Supreme Court in Daubert"). In State v. Langill, 157 N.H. 77, 85 (2008), the Supreme Court stated that section II of the statute "unambiguously codifies the four Daubert factors we applied in Baker Valley, 148 N.H. at 614, 616, and section I (b) codifies Daubert's requirement that the court preliminarily assess 'whether the reasoning or methodology underlying the testimony is scientifically valid.'" Noting that it was not clear that section I(c) also merely codifies principles outlined in Daubert, the Court held that it would follow the Eighth Circuit's approach and require trial courts to determine whether the witness has applied the principles and methods reliably to the facts of the case. Id. at 87 (citing United States v. Gipson, 33 F.3d 689, 697 (8th Cir. 2004). Therefore, the standards a trial court must apply in determining whether or not expert testimony should be considered by the trier of fact is clear. But neither the Towns nor FairPoint address how the Court should address the Daubert and RSA 516:29-a requirements in a bench trial.
B
At first blush, it might be thought that the Daubert principles expressed by Rule of Evidence 702 and RSA 516:29-a are inapplicable to bench trials, because the purpose of the principles is to avoid dumping questionable scientific evidence on a jury which may not be able to assess it. Courts have recognized that a trial court's "gatekeeping function" under Daubert ensures that expert evidence "submitted to the jury" is sufficiently relevant and reliable, Bonner v. ISP Techs., Inc., 259 F.3d 924, 929 (8th Cir. 2001) (emphasis added), but "[t]here is less need for the gatekeeper to keep the gate when the gatekeeper is keeping the gate only for himself," United States v. Brown, 415 F.3d 1257, 1269 (11th Cir. 2005). These principles support a less stringent application of Daubert in bench trials. See Charles Allan Wright and Victor James Gold, 29 Fed. Prac. & Proc. Evid. § 6270, n.26 (2nd ed. 2017), and cases cited. The "usual concerns of the [Daubert] rule—keeping unreliable expert testimony from the jury—are not present in such a setting." In re Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d 604, 613 (8th Cir. 2011).
However, a number of federal courts hold that even in a bench trial, the requirements of reliability and relevancy set forth in Daubert, (and accordingly, RSA 516:29-a and New Hampshire Rule of Evidence 702) still apply in a bench trial, and, therefore, a determination of relevancy and reliability must be made at some point. Atty. Gen. of Oklahoma v. Tyson Foods, Inc., 565 F.3d 769, 779 (10th Cir. 2009); Seaboard Lumber Co v. United States, 308 F.3d 1283, 1302 (Fed. Cir. 2002). Courts reason that the purpose of requiring an explicit Daubert analysis in a bench trial is to allow an appellate court to see that the trial court conducted an appropriate Daubert analysis rather than merely providing conclusory statements of admissibility or inadmissibility. Metavante Corp. v. Emigrant Sav. Bank, 619 F.3d 748, 760 (7th Cir.2010). In light of the pleadings and the evidence presented by the parties, the issue of admissibility under RSA 516:29-a is ripe for decision.
III
Under RSA 516:29-and New Hampshire Rule of Evidence 702, a trial court has broad discretion in determining whether to admit expert testimony. Goudreau v. Kleeman, 158 N.H. 236, 245 (2009). There is authority for the proposition that the court's discretion is significantly broader when the case will be tried to the court rather than a jury. Perez v. Henneberry, 2011 WL 1743734, *1 (D. Colo. May 5, 2011). This is so because a judge in a bench trial "maintains greater leeway in admitting questionable evidence, weighing its persuasive value upon presentation." Tyson Foods, Inc., 565 F.3d at 780. Moreover, the fact that evidence is admitted by a judge in a bench trial after conducting a Daubert analysis does not mean that the judge may not, after hearing all of the evidence, reject it at trial. Id. at 780.
The inquiry into whether expert testimony is inadmissible is a flexible one, and the focus must be solely on the principles and methodology, not on the conclusions that they generate. Baxter, 157 N.H. at 284. The list of Daubert factors are meant to be helpful not definitive, and "those factors do not all necessarily apply even in every instance in which the reliability of scientific testimony is challenged." Id. (citing Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 151 (1999)). "When the application of a scientific methodology is challenged as unreliable, outright exclusion of the evidence is warranted only if the methodology was so altered by a deficient application as to skew the methodology itself." Osman, 169 N.H. at 336.
The dispute in this case involves FairPoint's objection to the Towns' appraiser expressing an opinion about the percentage of telephone poles and conduit owned by FairPoint which rest in bedrock. There appears to be no dispute that installing poles or conduit in bedrock requires drilling which raises installation cost, because boring equipment must be used in order to place a pole or conduit in bedrock. FairPoint does not challenge Sansoucy's s qualifications as an appraiser other than objecting to his purported opinions on geology. It also appears that the opinions the appraiser purports to give are well within his area of expertise as a civil engineer and an appraiser; that is, the value of telephone poles and conduit placed within bedrock. Sansoucy opines in his report that if a specific pole location has surface or near-surface bedrock, the process of installing that pole requires either ledge boring or some form of rock removal process that is over and above the normal earth boring required for non-bedrock locations. The cost of the alleged boring for a pole installation in bedrock is often one of the largest cost components of a pole installation. (Sansoucy Report, at 26.) FairPoint does not challenge this opinion. Since the parties represented at oral argument that the analysis of value will be based on replacement cost analysis, the percentage of poles in bedrock is obviously significant.
The real dispute in this case is not Sansoucy's opinion of the value of poles placed in bedrock, but FairPoint's objection to the manner in which Sansoucy came to the conclusion that approximately 10% of the poles in the three Towns at issue would likely be in bedrock between 6 and 10 feet deep, which would require boring for installation. To determine the likelihood that a pole or conduit installed in the Towns would encounter surface or near-surface bedrock, relying upon the States DES's bedrock mapping system. (Sansoucy Report, at 26.) Of the three Defendant Towns, Durham, Hanover, and Belmont, the only completely or nearly completely mapped town is Durham. The State DES map establishes the areas of bedrock in Durham that are between zero and 10 feet below the surface as approximately 37% of the land area. (Sansoucy Report, at 28.) Sansoucy extrapolates from that finding:
Given that the NH DES bedrock mapping covers surface to 10-feet below surface, we conservatively estimate that 75% of the bedrock in 8.28 measured square miles of Durham is more than six-feet below the surface. Based on this assumption, bedrock could be present between the surface and six-feet down in 25% of the 8.28 square miles. In other words, this calculation results in an estimate that bedrock from the surface to six-feet below the surface exists in about 2.1 square miles in Durham. Therefore, approximately 10% (2.1 square miles ÷ by 22.8 total square miles) of the town's surface area has bedrock between the surface and six-feet deep in Durham. Based on this result, we assume that approximately 10% of all poles in Durham, and by implication, Belmont and Hanover, require some sort of ledge boring to set the poles.(Sansoucy Report, at 73.) His report contains a footnote which provides that "[t]his estimate is consistent with estimates made by the manager of Littleton Water and Light, who said that about 1 in 10 poles requires some rock, or ledge removal." (Sansoucy Report, at 73, n.27.)
FairPoint argues that Sansoucy's methodology of extrapolating likely geologic (sub-surface) conditions falls well short of the threshold of reliability. However, it produced no testimony of its own regarding how a reasonable appraiser would determine what percentage of poles have been placed in bedrock. The Towns assert that Sansoucy's opinion regarding sub-surface bedrock is appropriate, because the opinion regarding the existence of bedrock constitutes an extraordinary assumption, recognized in the Uniform Standards of Professional Appraisal Practice ("USPAP"). Under USPAP, an extraordinary assumption is a defined term:
FairPoint also argues that Sansoucy is expressing geologic opinions, but that is not the case; he is testifying to only matters within an appraiser's expertise, the cost of installation of utility poles in rock. Moreover, Sansoucy is a licensed civil engineer, and testified credibly to his expertise in engineering projects involving the earth.
As owner of the poles, that information should be in FairPoint's possession. It stated in oral argument because the poles useful life is some 50 years, the information simply does not exist. --------
EXTRAORDINARY ASSUMPTION: an assumption, directly related to a specific assignment, as of the effective date of the appraisal result, which, if found to be false, could alter the appraiser's opinions or conclusions.USPAP, at 3.
Comment: Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.
FairPoint does not challenge the use of USPAP as an appropriate methodology for an appraiser to use. More importantly, the Towns do not claim that Sansoucy is contending that his calculations result in a factual determination of the amount of bedrock in Hanover, Belmont or Durham which exists below 6 to 10 feet; the Towns specifically state that Sansoucy "clearly identified [his estimates] as extraordinary assumptions which were required due to the lack of complete data regarding the actual amount of bedrock in Belmont and Hanover, and the total lack of any information as to the number of FairPoint's poles and conduit in each town which had been installed in bedrock." (Towns' Obj. ¶ 4 (emphasis in original).) The Towns' position is straightforward:
FairPoint chose not to provide the Court with the portions of the Sansoucy appraisal which unambiguously explain that Mr. Sansoucy's calculation of the scope of bedrock does not present an opinion of fact as to the actual amount of bedrock but instead identifies a necessary assumption of those facts made in the process of valuing the cost to install telephone poles and conduit. This distinction is critical in appraising property; the material facts upon which an opinion of value is based constitute the appraiser's representation that those stated facts are true and accurate unless they are identified as an extraordinary assumption. The identification of a basis of an opinion as an extraordinary assumption notifies the reader that the appraiser is assuming those specific facts for purposes of the appraisal, and is an acknowledgment that the facts are material to the resulting opinion of value.(Obj. ¶ 5 (emphasis in original).)
An expert may rely on inadmissible evidence, Figlioli v. R.J. Moreau Cos., 151 N.H. 618, 626 (2005), but an expert's reliance on inadmissible evidence does not make that evidence fact. The Towns have established that Sansoucy is a qualified expert, that his opinion of value is based upon sufficient facts and data and that his testimony is the product of reliable principles and methods, principally the USPAP, and that he has applied those principles and methods in rendering an opinion in this case. His testimony of value is therefore admissible under RSA 516:29-8 and New Hampshire Rule of Evidence 702. The evidentiary weight to be given to his opinion will rest in large part upon the validity of the extraordinary assumption he makes about the amount of bedrock in the three defendant Towns, which must be the subject of factual non-expert testimony.
It follows that the Motion to exclude Sansoucy's testimony must be DENIED.
SO ORDERED
3/12/18
DATE
s/Richard B . McNamara
Richard B. McNamara,
Presiding Justice RBM/