Opinion
DOCKET NO. 007484-2008 DOCKET NO. 009250-2009 DOCKET NO. 006062-2010 DOCKET NO. 007488-2008 DOCKET NO. 011548-2009 DOCKET NO. 005934-2010 DOCKET NO. 007574-2008 DOCKET NO. 010192-2009 DOCKET NO. 005943-2010
03-30-2012
TRUMP MARINA ASSOCIATES, LLC, Plaintiff, v. CITY OF ATLANTIC CITY, Defendant. TRUMP PLAZA ASSOCIATES, LLC, Plaintiff, v. CITY OF ATLANTIC CITY, Defendant. TRUMP TAJ MAHAL ASSOCIATES, LLC, Plaintiff, v. CITY OF ATLANTIC CITY, Defendant.
Michael D. Sklar, Esq., for plaintiffs (Levine, Staller, Sklar, Chan, Brown & Donnelly, P.A., attorneys) James L. Esposito, Esq. and Michael J. Ash, Esq., for defendant (DeCotiis, Fitzpatrick & Cole, LLP, attorneys, Megan E. Sassaman, Esq., on the briefs) Richard M. Conley, Esq. for defendant (Law Office of Richard M. Conley, attorneys)
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS
Michael D. Sklar, Esq., for plaintiffs (Levine, Staller, Sklar,
Chan, Brown & Donnelly, P.A., attorneys)
James L. Esposito, Esq. and Michael J. Ash, Esq., for defendant
(DeCotiis, Fitzpatrick & Cole, LLP, attorneys, Megan E.
Sassaman, Esq., on the briefs)
Richard M. Conley, Esq. for defendant (Law Office of Richard M.
Conley, attorneys)
DeALMEIDA, P.J.T.C.
This opinion sets forth the court's findings of fact and conclusions of law on the parties' pretrial and in limine motions in the above-captioned matters, which have been consolidated for trial beginning on April 2, 2012. R. 1:6-2(f). The court's findings of fact are based on the certifications and exhibits submitted by the parties on the motions.
Plaintiffs are related companies that each own and operate a casino hotel in Atlantic City. They challenge the assessments placed on the casino hotel properties by the municipal tax assessor for local property tax purposes for tax years 2008, 2009 and 2010. During the years in question, plaintiff Trump Marina Associates, LLC owned and operated the Trump Marina Hotel Casino, plaintiff Trump Plaza Associates, LLC owned and operated the Trump Plaza Hotel and Casino, and plaintiff Trump Taj Mahal Associates, LLC owned and operated the Trump Taj Mahal Casino Resort. A brief description of the assessment history of the properties is necessary for an analysis of the parties' motions.
Atlantic City's tax assessor implemented a revaluation of all real property in the municipality effective for tax year 2008. The assessor was assisted in the revaluation by a third-party valuation firm. The valuation firm used an income approach to determine the true market value of the properties on the valuation date. The assessor adopted the recommendations of the revaluation company, which plaintiffs claim had never previously valued a casino hotel, without modification.
For tax year 2008, the properties were assessed as detailed below. Although each casino hotel may span multiple parcels of real property with separately designated blocks and lots and individual assessments, the court will refer to the aggregate assessment for each casino hotel. All assessments are rounded to the nearest million:
+-----------------------------------------+ ¦Trump Marina¦Trump Plaza ¦Trump Tai Mahal¦ +------------+------------+---------------¦ ¦$653,000,000¦$725,000,000¦$1,650,000,000 ¦ +-----------------------------------------+
The assessments were carried forward unchanged for tax years 2009 and 2010. The Chapter 123 ratio for tax year 2008, the revaluation year, is 100%. The Chapter 123 ratio for tax year 2009 was 100.46% and the ratio for tax year 2010 was 102.16%.
Each plaintiff filed Complaints in this court challenging the assessments on their property for tax years 2008, 2009 and 2010. Atlantic City filed counterclaims in each year seeking an increase in the assessments.
Pursuant to a Case Management Order, the parties exchanged expert appraisal reports on December 30, 2011. The following chart sets forth the values offered in the reports of the parties' experts. Although the reports have not been introduced into evidence, and defendant may elect to rest on the presumption of correctness attached to the assessments and not introduce expert testimony, the values offered in the parties' experts report are critical to the analysis of the pretrial motions.
+------------------------------------------------------------+ ¦ ¦Trump Marina¦Trump Plaza ¦Trump Tai Mahal¦ +------------------+------------+------------+---------------¦ ¦2008 Assessment ¦$653,000,000¦$725,000,000¦$1,655,000,000 ¦ +------------------+------------+------------+---------------¦ ¦Plaintiff's Expert¦$ 50,000.000¦$100,000,000¦$ 410,000,000 ¦ +------------------+------------+------------+---------------¦ ¦Defendant's Expert¦$593,000,000¦$599,000,000¦$1,343,000,000 ¦ +------------------+------------+------------+---------------¦ ¦ ¦Trump Marina¦Trump Plaza ¦Trump Tai Mahal¦ +------------------+------------+------------+---------------¦ ¦2009 Assessment ¦$653,000,000¦$725,000,000¦$1,655,000,000 ¦ +------------------+------------+------------+---------------¦ ¦Plaintiff's Expert¦$ 30,000.000¦$ 70,000,000¦$ 280,000,000 ¦ +------------------+------------+------------+---------------¦ ¦Defendant's Expert¦$534,000,000¦$605,000,000¦$1,472,000,000 ¦ +------------------------------------------------------------+
+------------------------------------------------------------+ ¦ ¦Trump Marina¦Trump Plaza ¦Trump Taj Mahal¦ +------------------+------------+------------+---------------¦ ¦2010 Assessment ¦$653,000,000¦$725,000,000¦$1,655,000,000 ¦ +------------------+------------+------------+---------------¦ ¦Plaintiff's Expert¦$ 5,000.000 ¦$ 16,000,000¦$ 240,000,000 ¦ +------------------+------------+------------+---------------¦ ¦Defendant's Expert¦$449,000,000¦$496,000,000¦$1,273,000,000 ¦ +------------------------------------------------------------+
The parties are in agreement that if plaintiff overcomes the presumption of correctness attached to the assessments and the court adopts the opinions of value of either plaintiffs' expert or defendant's expert, the assessments on all three casino hotels would be reduced and plaintiffs would be entitled to significant refunds.
On March 7, 2012, Atlantic City moved for the following relief:
(1) An Order that plaintiffs are judicially estopped from asserting fair market values for the three casino hotels that cannot be reconciled with the values asserted in a July 16, 2010 Fresh Start Accounting produced for plaintiffs' parent company as part of a 2009 bankruptcy proceeding; and
(2) An Order barring plaintiffs' appraisal expert from participating in these proceedings because he solicited plaintiffs' business, was engaged by plaintiffs, and inspected the subject properties while not licensed as an appraiser in New Jersey; and
(3) An Order barring three other experts plaintiffs intend to offer on the grounds that the proffered witnesses will not be helpful to the court, do not intend to offer an opinion in a recognized area of scientific inquiry, lack sufficient experience and knowledge to qualify as experts, and intend to offer net opinions; and
(4) An Order barring one expert plaintiffs intend to offer because the record demonstrates that the expert did not draft his report and is merely offering the report and opinion of another person as his own.
On March 8, 2012, plaintiffs moved for the following relief:
(1) An Order declaring that the presumption of correctness attached to the assessments on the subject properties does not apply; and
(2) An Order declaring that plaintiffs are entitled to a presumption of competent management of their casino hotels in the event the court decided to use the income approach to determining the value of the subject properties.
In subsequent written submissions, plaintiffs opposed the relief sought by defendant and defendant opposed the relief sought by plaintiffs.
On March 23, 2012, the court heard oral argument from counsel on the parties' motions. The various requests for relief are discussed in turn below
III. Conclusions of Law
A. Defendant's Motion to Apply Judicial Estoppel
Judicial estoppel bars a litigant from asserting a position in a legal proceeding that is inconsistent with one previously successfully asserted by the litigant before a judicial or adjudicative administrative tribunal. Cummings v. Bahr, 295 N.J. Super. 374, 385 (App. Div. 1996). The doctrine "'is designed to prevent litigants from 'playing fast and loose with the courts.'" Id. at 387 (quoting Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 358 (3d Cir. 1996)). As our Supreme Court explained, "[i]t is also generally recognized that judicial estoppel is an extraordinary remedy, which should be invoked only when a party's inconsistent behavior will otherwise result in a miscarriage of justice." Ali v. Rutgers, the State University, 166 N.J. 280, 288 (2000)(quoting Kimball Int'l, Inc. v. Northfield Metal Prods., 334 N.J. Super. 596, 608 (App. Div. 2000), certif. denied, 167 N.J. 88 (2001)(internal quotations omitted)). "If a court has not accepted a litigant's prior position, there is no threat to the integrity of the judicial system in allowing the litigant to maintain an inconsistent position in subsequent litigation . . . and thus the doctrine of judicial estoppel does not apply." Kimball, supra, 334 N.J. Super. at 609-610. In Ali, the Court cited with approval the holding in Teledyne Indus., Inc. v. NLRB, 911 F.2d 1214, 1218 (6th Cir. 1990) that "[j]udicial estoppel is applied with caution to avoid impinging on the truth-seeking function of the court because the doctrine precludes a contradictory position without examining the truth of either statement." The doctrine had been extended to quasi-judicial, administrative settings. See Bray v. Cape May City Zoning Bd. of Adjustment, 378 N.J. Super. 160, 166 (App. Div. 2005) and cases cited therein.
Defendant's request for application of judicial estoppel is based on a submission made in connection with the bankruptcy of plaintiffs' parent company. During the relevant tax years, plaintiffs were wholly-owned subsidiaries of Trump Entertainment Resorts Holdings, L.P., which was, in turn, owned by Trump Entertainment Resorts, Incorporated ("TER"), Donald J. Trump, ACE Entertainment Holdings, Incorporated and TCI 2 Holdings, LLC.
On February 17, 2009, TER and its affiliated companies filed for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey. See In re: TCI 2 Holdings, LLC, et al. Debtors. (Case No. 09-13654/JHW). On May 7, 2010, the Bankruptcy Court entered an Order confirming TER's Plan for Reorganization (the "Plan"). On July 16, 2010, the Plan was deemed effective by the Bankruptcy Court. On January 10, 2012, the court entered a final decree closing the bankruptcy case.
After confirmation of the Plan, TER and plaintiffs were required by federal law to complete a revaluation of their assets and liabilities through a financial advisor company, a submission commonly referred to as a Fresh Start Accounting. Fresh Start Accounting rules and procedures were developed by the Financial Accounting Standards Board ("FASB"). There is no discretion afforded to the reorganized company or accounting/valuation firm to disregard Fresh Start Accounting procedures during the bankruptcy process.
The starting point for Fresh Start Accounting is the reorganization value of the company emerging from bankruptcy. The reorganized value is determined either by agreement of the creditors and debtors or by the Bankruptcy Court. See FSAB Accounting Standards Codification 852-05-10. In this case, the Bankruptcy Court, after consideration of expert testimony and reports, found that the total enterprise value of TER was $459 million. In re: TCI 2 Holdings, LLC, 428 B.R. 117, 161 (Bankr. N.J. 2010). Because the company was emerging from bankruptcy, the reorganized value reflects the fair value of the going concern, including the value of all real, personal and intangible property. FSAB Accounting Standards Codification 852-05-10. Once the reorganized value is established, the company, upon emerging from bankruptcy, was required to allocate or "push down" the reorganized value to the company's underlying operating units or entities and then to their respective assets and liabilities.
TER selected Deloitte Financial Advisory Services, LLP ("Deloitte"), the firm that was retained to complete plaintiffs' expert appraisal report in these matters, to complete the Fresh Start Accounting. On November 23, 2011, Deloitte provided TER with a complete revaluation of TER's assets and liabilities as of July 16, 2010, the effective date of the Plan. The report was completed by the same Deloitte representative who completed the appraisal report on which plaintiffs will rely in the above-captioned appeals.
According to Atlantic City, the Fresh Start Accounting reported a replacement cost new, less depreciation for the three casino hotels as follows:
+-----------------------------------------+ ¦Trump Marina¦Trump Plaza ¦Trump Taj Mahal¦ +------------+------------+---------------¦ ¦$282,010,310¦$340,357,980¦$1,224,394,510 ¦ +-----------------------------------------+ These amounts are significantly higher than the values offered in plaintiffs' expert appraisal report for the three properties on each of the three valuation dates. Defendant argued that judicial estoppel should be applied to bar plaintiffs from asserting that the subject properties have values inconsistent with the values noted above.
Plaintiffs convincingly established, however, that the values in the Fresh Start Accounting on which defendant bases its request for judicial estoppel are values prior to deductions for functional obsolescence and economic obsolescence. Functional obsolescence and economic obsolescence accounted for significant reductions in the values in the Fresh Start Accounting. In fact, the final values allocated to the real property of the three casino hotels in the Fresh Start Accounting were as follows:
+----------------------------------------+ ¦Trump Marina¦Trump Plaza¦Trump Taj Mahal¦ +------------+-----------+---------------¦ ¦$32,155,950 ¦$59,688,720¦$342,172,640 ¦ +----------------------------------------+ These values are consistent with those offered by plaintiffs' expert for the three casino hotels on at least two of the valuation dates.
The court concludes that the values for the subject properties expressed in the Fresh Start Accounting and the values for those properties that plaintiffs' expert intends to offer at trial are not inconsistent. As a threshold matter, the values expressed in the Fresh Start Accounting are values as of July 16, 2010. The relevant valuation dates before the court are October 1, 2007, October 1, 2008 and October 1, 2009. The two Deloitte reports, therefore, do not concern precisely the same subject. In addition, the values allocated to the three casino hotels in the Fresh Start Accounting are not so far a field from those contained in plaintiffs' expert appraisal report as to warrant application of judicial estoppel. While the values in the two reports are not precisely the same, the differences are not so extreme as to render the two reports inconsistent.
More importantly, plaintiffs established that the Fresh Start Accounting was never filed in a judicial or quasi-judicial, administrative proceeding. Defendant produced no evidence that the Fresh Start Accounting was filed with the Bankruptcy Court or some other judicial or quasi-judicial tribunal. A necessary predicate for judicial estoppel, therefore, was not established in the moving papers. The integrity of the judicial system, this tribunal or a prior tribunal would not therefore be adversely affected by plaintiffs' reliance on the values expressed in their expert's report. Plaintiffs are not, the court concludes, playing fast and loose with the courts. Their reliance on the values expressed in their expert appraiser's report will not contradict any prior successful assertion by plaintiffs' in another adjudicative forum.
In its reply papers, defendant backs away from its judicial estoppel argument, characterizing its request for relief as falling within the court's general, equitable authority to estop a party from repudiating a position when another party has relied on that position to its detriment. In support of this argument, defendant focuses primarily on the fact that the values attributed to the subject properties in the Fresh Start Accounting were included in TER's annual 10K report filed with the Securities and Exchange Commission for 2010. According to defendant, the SEC and investing public likely relied on the values expressed in the Fresh Start Accounting and the court should not permit plaintiffs to advance contradictory values in order to obtain a reduction in the assessments on the subject properties.
Defendant, however, has offered no evidence of reliance on the Fresh Start Accounting by the SEC, the investing public or any party. Defendant's argument in this regard is purely speculative. At oral argument on the motions, plaintiffs' counsel represented to the court that plaintiffs were not publicly traded entities at the time that the Fresh Start Accounting and 10K report were issued. The investing public, therefore, would not have relied on the TER 10K at the time it was filed. There is simply no evidence of untoward behavior by plaintiffs or reliance by any party that would justify estopping plaintiffs from relying on the values for the subject properties expressed in their expert's report. Defendant's motion to apply judicial estoppel and any other form of estoppel is denied. Of course, defendant is free during the cross-examination of plaintiffs' appraisal expert to explore any differences between the methodology and value conclusions in the Fresh Start Accounting and the methodology and value conclusions in the report offered at trial. B. Defendant's Motion to Suppress Plaintiffs' Appraisal Expert's Report and Testimony.
"[N]o person other than a State licensed real estate appraiser, a State certified real estate appraiser, or a person who assists in the preparation of an appraisal under the direct supervision of a State licensed or certified appraiser shall perform or offer to perform an appraisal assignment in regard to real estate located in this State including, but not limited to, any transaction involving a third party, person, government or quasi-government body, court, quasi-judicial body or financial institution." N.J.S.A. 45:14F-21. Violation of the Uniform Enforcement Act, which includes violation of the laws governing real estate appraisers is a misdemeanor. N.J.S.A. 45:1-11. Civil enforcement of real estate appraiser licensing was assigned by the Legislature to the State Real Estate Appraiser Board, which is part of the Division of Consumer Affairs in the Department of Law and Public Safety. N.J.S.A. 45:1-2.1; N.J.S.A. 45:1-18.1; N.J.S.A. 45:14F-1, et seq. Enforcement of statutory provisions providing for criminal sanctions, including misdemeanors, is assigned to law enforcement authorities in the Executive Branch of government.
Defendant argues that plaintiffs' appraisal expert violated New Jersey's real estate appraiser licensing laws, and potentially committed a misdemeanor, in the course of his appraisal of the subject properties. Plaintiffs' appraisal expert obtained his New Jersey real estate appraisal license on June 14, 2011. He did, however, hold a real estate appraisal license from another State prior to obtaining his New Jersey license.
On April 27, 2011, plaintiffs and their appraisal expert executed an engagement letter to complete the appraisals in this matter. On that date, plaintiffs' expert did not hold a New Jersey real estate appraisal license but was a licensed real estate appraiser in another State. In addition, on May 27, 2011, also before his obtained a New Jersey real estate appraisal license, plaintiffs' expert inspected the subject properties for the purpose of preparing his appraisal report in this matter. Plaintiffs' expert obtained his New Jersey real estate appraiser license prior to the issuance of his expert appraisal report with respect to the subject properties.
Defendant argues these acts by plaintiffs' appraisal expert constitute a violation of law, potentially amount to a misdemeanor, and violate the Uniform Standards of Professional Appraisal Practice ("USPAP") promulgated by the Appraisal Standards Board of the Appraisal Foundation, an appraisal industry group. The City urges the court to bar the report and testimony of plaintiffs' expert because permitting his testimony would amount to judicial sanctioning of illegal behavior, promote violation of the State's licensing laws and encourage unethical behavior by real estate appraisers.
Plaintiffs oppose defendant's motion, arguing that the City's interpretation of the real estate appraisal licensing laws is erroneous. Plaintiffs point out that N.J.S.A. 45:14F-12 to -15 allows persons, such as plaintiffs' expert, who hold a real estate appraisal license or certification from another State to seek reciprocity with New Jersey and obtain either a temporary license or a New Jersey issued license or certificate. At oral argument, plaintiffs' counsel asserted its expert, acting on advice from the Division of Consumer Affairs, believed he acted in compliance with New Jersey at all times prior to obtaining his New Jersey real estate appraisal license.
The rules of evidence provide clear instruction with respect to the qualification of expert witnesses:
If scientific, technical or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise.In New Jersey, there are three basic requirements for the admission of expert testimony:
[N.J.R.E. 702.]
(1) the intended testimony must concern a subject matter that is beyond the ken of the average juror; (2) the field testified to must be at a state of the art that such an expert's testimony could be sufficiently reliable; and (3) the witness must have sufficient expertise to offer the intended testimony.[State v. Kelly, 97 N.J. 178, 208 (1984).]
An expert must "be suitably qualified and possessed of sufficient specialized knowledge to be able to express [an opinion] and to explain the basis of that opinion." State v. Moore, 122 N.J. 420, 458-59 (1991)(internal quotations omitted). When the subject matter of expert testimony "falls discretely within the province of a particular profession, the witness should generally be a licensed member of that profession." State v. Frost, 242 N.J. Super. 601, 615 (App. Div.), certif. denied, 127 N.J. 321 (1990). A professional license, however, is not always required. See e.g., Alliance v. Continental Prop., 371 N.J. Super. 398, 406 (App. Div. 2004), aff'd o.b., 185 N.J. 339 (2005). Sufficient expertise within the meaning of N.J.R.E. 702 may be obtained from occupational experience. Correa v. Maggiore, 196 N.J. Super. 273, 282 (App. Div. 1984). Ultimately, the qualification of an expert is within the discretion of the trial court, which acts as a gatekeeper for all witnesses and evidence. State v. Torres, 183 N.J. 554, 572 (2005); State v. Krivacska, 341 N.J. Super. 1, 32-33 (App. Div.), certif. denied, 170 N.J. 206 (2001).
The determination of whether plaintiffs' appraisal expert possesses sufficient knowledge, training or experience to qualify as a real estate appraisal expert does not depend on whether he complied with New Jersey real estate appraisal licensing laws prior to June 14, 2011, the date on which he obtained a New Jersey real estate appraisal license. The determination of whether a witness is qualified to offer an expert opinion falls within the discretion of this court, which can consider any relevant factors to decide whether that witness possesses the skills, knowledge and experience to offer an opinion during trial. Compliance with the State licensing statutes, while a relevant factor in the court's consideration, is not determinative. There is no statute or evidence rule limiting this court's discretion to accept as an expert witness someone who does not possess a license in the field in which they intend to offer an opinion. See N.J.S.A. 2A:83-1 (not requiring real estate appraisal license when establishing standards with respect to testimony regarding comparable sales for purposes of valuing real property). It is the court's responsibility, after reviewing the background, training and experience of the expert to determine if he satisfies N.J.R.E. 702 and may offer opinion testimony.
The record establishes that plaintiffs' expert was at all relevant times a licensed real estate appraiser in another State. In addition, plaintiffs' counsel has represented to the court that its expert, acting on advice, believed he acted in compliance with New Jersey law in the period leading to the issuance of his license. In addition, it is not disputed that plaintiffs' expert held a New Jersey real estate appraisal license when he issued his report in this matter and will, absent unexpected developments, hold that license when he testifies at trial. The court is satisfied that these circumstances outweigh any technical violation of the real estate appraiser licensing laws as alleged by defendant in the context of a motion to exclude the witness prior to trial. The licensing question and any other fact of the witness's training, knowledge and experience may be explored by defendant at trial to assist the court in making the determination of whether the witness may offer expert testimony.
Nor is the court persuaded by defendant's argument that denial of its motion will amount to judicial sanctioning of illegal behavior and will encourage violation of the State's licensing laws. Enforcement of the real estate appraising licensing statutes is assigned to an Executive Branch agency with the expertise and experience necessary for that task. The threat of enforcement of those laws by the Executive Branch should be sufficient to deter bad behavior by real estate appraisers. If defendant wishes to pursue an administrative complaint against plaintiffs' expert with the State Real Estate Appraiser Board it is certainly free to do so. At oral argument, defendant's counsel declined an invitation to take that action. This court is not charged with ensuring strict compliance with licensing laws.
The same rationale applies to defendant's argument that plaintiffs' witness violated USPAP standards. Appraisal industry standards, while useful guidelines for the court's determination of whether an appraisal expert's opinion is credible, are not binding on the court. It would be an abrogation of this court's responsibility to hold that a USPAP violation automatically bars qualification of an expert witness. It is the application of the evidence rules, judicial precedents, and the court's evaluation of evidence adduced at trial that will determine whether plaintiffs' appraisal expert satisfied the requirements of N.J.R.E. 702.
Defendant's motion to bar the report and testimony of plaintiffs' appraisal expert is denied. C. Defendant's Motion to Suppress the Reports and Testimony of Lawrence Klatzkin, Frank Fantini and James Hurley.
Defendant seeks to bar the reports and testimony of three non-appraisal experts to be offered by plaintiffs, Lawrence Klatzkin, Frank Fantini and James Hurley. Atlantic City alleges that the three proposed witnesses lack a sufficient background in a recognized discipline to qualify as experts. In addition, defendant argues that the reports proffered by each of the witnesses are wholly unsubstantiated and amount to inadmissible net opinions. The proposed experts are discussed in turn below:
1. Lawrence Klatzkin.
Lawrence Klatzkin has over twenty-six years experience as a "gaming industry analyst for Wall Street investment banks." His responsibility is to "research and evaluate gaming market conditions, including the Atlantic City market, identify future trends, analyze financial data, interview senior management at gaming companies and then make investment recommendations to clients." He has never been recognized by any court as an expert nor provided expert testimony before any judicial or quasi-judicial body. He drafted an expert report for use in the Tax Court tax appeal of the Tropicana Casino Resort but was not called to testify in that case.
Mr. Klatzkin intends to offer an opinion on the following topics: (1) the economic condition of the Atlantic City casino market during the period October 1, 2007 through October 1, 2009; (2) the competency of management of the casino hotels at issue in this matter; and (3) the market-based earnings of the casino hotels on the relevant valuation dates. His testimony is based on the knowledge he gained through his close monitoring of the gaming industry for the purposes of providing investment advice.
Defendant contends that Mr. Klatzkin's testimony will fall outside a recognized scientific discipline. According to the City, Mr. Klatzkin's experience is limited to the collection and analysis of public financial information about casino gaming in order to form recommendations for investors. Atlantic City argues that Mr. Klatzkin, merely accumulates, collects and assembles data relevant to the gaming industry for interested investors and is more akin to a reporter than a scientist. In addition, defendant argues that the court does not require expert testimony to examine statistics on gaming revenue and other factors affecting casino revenues, such as the expansion of casino gaming, the rise in gasoline prices and the enacting of an indoor smoking ban in Atlantic City. Finally, defendant argues that Mr. Klatzkin intends to offer nothing more than personal opinion unsupported by scientific methodology.
2. Frank Fantini.
Frank Fantini has thirty years of experience publishing various publications focused on the gaming industry. The publications are distributed to subscribers interested in the industry, including the Atlantic City casino market. Mr. Fantini has never been certified as an expert in a court or quasi-judicial tribunal. He intends to offer opinions regarding: (1) the factors that adversely affected the Atlantic City gaming market and the three Atlantic City Trump casino hotels from 2007-2009; and (2) the reputation of the management of those casino hotels during that period.
3. James Hurley.
Plaintiff also intends to offer James Hurley, a former Commissioner on the New Jersey Casino Control Commission ("CCC"), as an expert witness. He intends to offer an opinion on (1) the role of the CCC in the licensing of casinos and associated key employees; (2) the reputation of the management of the Trump casino hotels; and (3) the affect of bankruptcy proceedings on the operations of New Jersey casino hotels.
The City argues that Mr. Hurley's tenure on the CCC from 1990 to 2002 predates the relevant time periods and that, as a result, he lacks personal knowledge of the licensing of the Trump casino hotels or the competency of the management of those operations. In addition, defendant argues that the opinions Hurley offers are not based on scientific data, merely summary New Jersey law with respect to the responsibilities of the CCC and are net opinions.
Defendant also argues that the Hurley report raises serious questions regarding its authorship. On December 9, 2011, Bradford Smith, another former Commissioner on the CCC, issued an expert report at plaintiffs' request. That report was produced in discovery. Because of a conflict, Mr. Smith determined that he was unable to serve as an expert witness before this court. Plaintiffs set about to retain a replacement expert, ultimately settling on Mr. Hurley. On January 26, 2012, Mr. Hurley's report was produced by plaintiffs as a substitute for the Smith report. According to defendant, the Smith report and the Hurley report are nearly identical.
Atlantic City argues that Mr. Hurley's report amounts to his adoption of the expert opinion of Mr. Smith and that the report does not contain Mr. Hurley's opinions or analysis. The contention is contradicted by the deposition testimony of Mr. Hurley in which he stated that his report represents his work product, that he did not collaborate with anyone in writing the report, and that he had no contact with Mr. Smith during the preparation of the report. Defendant argues that this testimony calls into question Mr. Hurley's credibility because the reports' similarities belie the assertion that Mr. Hurley is the author of the report bearing his name.
As noted above, N.J.R.E. 702 and State v. Kelly set for the standards for the admissibility of expert testimony. Only that opinion testimony which will assist the trier of fact to understand the evidence or determine a fact in issue and which is offered by a party with sufficient scientific, technical or specialized knowledge is permitted. The trial court's role is to act as a gatekeeper with respect to the admissibility of expert testimony.
New Jersey courts have adopted a liberal approach when assessing an expert witness's qualification. State v. Jenewicz, 193 N.J. 440, 454 (2008). The guiding principles "tilt in favor of the admissibility of expert testimony." State v. Rosales, 202 N.J. 549, 562 (2010). "The modern tendency is to permit expert testimony whenever it would help the [fact finder] decide the ultimate issue of the case." State v. Chatman, 156 N.J. Super. 35, 41 (App. Div.), certif. denied, 79 N.J. 467 (1978); see also Jobes v. Evangelista, 369 N.J. Super. 384, 399 (App. Div.), certif. denied, 180 N.J. 457 (2004). Any deficiencies in the qualifications of an expert or in the testimony offered are subject to testing during cross-examination. Frost, supra, 242 N.J. Super. at 615; State v. Simon Family Enterp., 367 N.J. Super. 242, 255 (App. Div. 2004). A lack of experience, unfamiliarity with the data underlying an opinion, or a suggestion that an expert offers an opinion that is not truly his own all may affect the credibility of the expert's testimony and the weight, if any, that the court will give to the opinion offered by the expert.
The court is not convinced that plaintiffs' proposed experts are so lacking in scientific, technical or other specialized knowledge or that their reports are so lacking in foundation that they should be barred as expert witnesses prior to trial. All three proposed experts have experience that is arguably relevant to disputed issues before the court. Mr. Klatzkin and Mr. Fantini have closely followed the gaming industry for many years. While they may not have been directly involved in operating a casino, Mr. Klatzkin's analysis of gaming trends and Mr. Fantiti's publications regarding the industry apparently have value in the marketplace. Investors and others pay for Mr. Klatzkin's advice and Mr. Fantiti's publications regarding the Atlantic City gaming industry. It may be true that some of the opinions that these witnesses propose to offer will be unsupported by scientific methodology. The court can easily disregard such testimony. However, both witnesses appear to have knowledge of gaming industry trends which they have analyzed and compiled and which may be helpful to the court's understanding of the issues presented by these appeals. At the very least, plaintiffs should be permitted to put these witnesses on the stand, subject to cross-examination, to permit the court to evaluate their testimony, determine their credibility and assign the weight to be given to their testimony.
The same is true for Mr. Hurley. As a former Commissioner on the CCC, Mr. Hurley arguably will be helpful to the court in understanding the New Jersey casino licensing process, which is relevant to plaintiffs' contention that the casino hotels were well managed. The court, of course, is the expert on New Jersey law. To the extent that Mr. Hurley will offer a summary of the CCC's statutory authority and practical information regarding the Commission's implementation of its statutory mandate, his testimony may well be helpful to the court. The court is less certain of the usefulness of Mr. Hurley's proposed testimony regarding the reputation of the Trump management team. Plaintiffs, however, should be given an opportunity to explore that topic at trial, subject to defendant's cross-examination.
Defendant has pointed out several areas of inquiry that may be fertile ground for an effective cross-examination of Mr. Hurley, particularly with respect to whether his report represents his opinion or merely parrots the opinion of Mr. Smith. Defendant is free to explore that topic at trial and renew its motion once the court has had the opportunity to assess Mr. Hurley's credibility and demeanor.
Defendant's motion to exclude the reports and testimony of Mr. Klatzkin, Mr. Fantini and Mr. Hurley is denied. D. Plaintiffs' Motion for an Order Declaring that the Presumption of Correctness of the Assessments Does not Apply.
"Original assessments and judgments of county boards of taxation are entitled to a presumption of validity." MSGW Real Estate Fund, LLC v. Borough of Mountain Lakes, 18 N.J. Tax 364, 373 (Tax 1998). As Judge Kuskin explained, our Supreme Court has defined the parameters of the presumption as follows:
The presumption attaches to the quantum of the tax assessment. Based on this presumption the appealing taxpayer has the burden of proving that the assessment is erroneous. The presumption in favor of the taxing authority can be rebutted only by cogent evidence, a proposition that has long been settled. The strength of the presumption is exemplified by the nature of the evidence that is required to overcome it. That evidence must be "definite, positive and certain in quality and quantity to overcome the presumption."Ibid. (quoting Pantasote Co. v. City of Passaic, 100 N.J. 408, 413 (1985)(citations omitted)).
The presumption of correctness arises from the view "that in tax matters it is to be presumed that governmental authority has been exercised correctly and in accordance with law." Pantasote, supra, 100 N.J. at 413 (citing Powder Mill, I Assocs. v. Township of Hamilton, 3 N.J. Tax 439 (Tax 1981)); see also Byram Twp. v. Western World, Inc., 111 N.J. 222 (1988). The presumption remains "in place even if the municipality utilized a flawed valuation methodology, so long as the quantum of the assessment is not so far removed from the true value of the property or the method of assessment itself is so patently defective as to justify removal of the presumption of validity." Transcontinental Gas Pipe Line Corp. v. Township of Bernards, 111 N.J. 507, 517 (1988)(citation omitted).
"In the absence of a R. 4:37-2(b) motion . . . the presumption of validity remains in the case through the close of all proofs." MSGW Real Estate Fund, LLC, supra, 18 N.J. Tax at 377. In making the determination of whether the presumption has been overcome, the court should weigh and analyze the evidence "as if a motion for judgment at the close of all the evidence had been made pursuant to R. 4:40-1 (whether or not the defendant or plaintiff actually so moves), employing the evidentiary standard applicable to such a motion." Ibid. The court must accept as true the proofs of the party challenging the assessment and accord that party all legitimate favorable inferences from that evidence. Id. at 376 (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 535 (1995)). In order to overcome the presumption, the evidence "must be 'sufficient to determine the value of the property under appeal, thereby establishing the existence of a debatable question as to the correctness of the assessment.'" West Colonial Enters, LLC v. City of East Orange, 20 N.J. Tax 576, 579 (Tax 2003)(quoting Lenal Props., Inc. v. City of Jersey City, 18 N.J. Tax 405, 408 (Tax 1999), aff'd, 18 N.J. Tax 658 (App. Div.), certif. denied, 165 N.J. 488 (2000)).
Only after the presumption is overcome with sufficient evidence at the close of trial must the court "appraise the testimony, make a determination of true value and fix the assessment." Rodwood Gardens, Inc. v. City of Summit, 188 N.J. Super. 34, 38-39 (App. Div. 1982)(citations omitted). If the court determines that sufficient evidence to overcome the presumption has not been produced, the assessment shall be affirmed and the court need not proceed to making an independent determination of value. Ford Motor Co. v. Township of Edison, 127 N.J. 290, 312 (1992); Global Terminal & Container Serv. v. City of Jersey City, 15 N.J. Tax 698, 703-704 (App. Div. 1996).
Plaintiffs' motion is predicated on their argument that the assessments set for the subject properties during the 2008 revaluation were flawed and that those assessments were carried forward for several years without change despite significant developments that negatively affected the value of the subject properties. Furthermore, plaintiffs argues that comparable sales demonstrate that the assessments are excessive.
As noted above, Atlantic City's tax assessor implemented a revaluation of all real property in the municipality effective for tax year 2008. The assessor was assisted in the revaluation by a third-party valuation firm. The valuation firm, which plaintiffs contend had never previously valued a casino hotel, used an income approach to determine the true market value of the properties on the valuation date. The 25-page appraisal reports of that firm, which do not include a representation that the firm spoke with a casino executive, analyst or other casino expert, contained a one-page income approach summary table with no analysis or discussion. The revaluation company did not utilize a cost approach or a sales comparison approach. The assessor adopted the recommendations of the revaluation company for tax year 2008 without modification. The assessments were then carried forward without modification by the tax assessor for tax years 2009 and 2009.
Plaintiffs contend the since October 1, 2007, the Atlantic City casino market has been severely negatively affected by, among other things: (a) the worse economic recession since the Great Depression; (b) a substantial country-wide diminution in real property values; and (c) new casino competition in Pennsylvania, New York, Maryland, Delaware and other regional venues. As a result of these factors, plaintiffs argue, each of plaintiffs' casino hotels have experienced a decrease in gaming revenue and earnings before interest, depreciation, taxes and amortization ("EBIDTA"), a standard used in the gaming industry to determine the value of casinos and casino operations. According to plaintiffs, the sum of the local property taxes assessed against the subject properties for tax year 2010 was $56 million dollars. In that same year, the combined EBIDTA of the subject properties was $1 million. Thus, according to plaintiffs, the local property taxes on the subject properties exceeded the combined EBIDTA of the casino operations by 5,500%.
In June 2009, the Tropicana Casino Resort, a casino hotel in Atlantic City, including its real property, personal property and business operation, was sold for $200 million, an amount a Bankruptcy Court Judge determined to be "reasonably equivalent value and fair consideration" for the property. In December 2010, Resorts International Casino Hotel, a casino hotel in Atlantic City, including its real property, personal property and business operation, sold for approximately $31.5 million. On May 24, 2011, the Trump Marina, one of the casino hotels at issue in these appeals, sold as a going concern, including real property and personal property, for $38 million.
Plaintiffs argue that the initial valuation of the property was unreliable and that the assessor's "blind reliance" on the values in that report warrant abrogation of the presumption of validity. In addition, plaintiffs contend that the assessor's failure to consider the negative changes in the gaming market during 2008 and 2009, and the 2009 comparable sale when she decided to carry the 2008 assessments forward without change amounted to a manifestly arbitrary and patently defective assessment process rendering the presumption of correctness inapplicable.
The 2010 and 2011 comparable sales proffered by plaintiffs took place after the assessments for 2009 and 2010 were set by the assessor.
The court is not convinced that the Atlantic City tax assessor acted in a patently defective or manifestly arbitrary manner when she set the assessments on the subject properties in 2008, 2009 and 2010. Reliance on the expert report of the company that assisted in the revaluation was not arbitrary. While plaintiffs may during trial illustrate flaws in the valuation process employed by the experts who assisted the tax assessor during the revaluation, her reliance on the opinion of an expert real estate appraiser to set an assessment on the subject properties falls within the scope of objectively reasonable assessing practices. The appraisal report upon which the assessor relied to set the 2008 assessments is not so facially defective in its analysis to justify a conclusion that reliance on the report was plainly unreasonable or motivated by an improper purpose. See Transcontinental, supra, 111 N.J. at 538-39 (presumption overcome where assessment set without regard to true value, but for the purpose of ensuring that tax revenue from the property would be maintained).
Nor was the assessor's decision not to modify the assessment for the 2009 and 2010 tax years patently defective or manifestly arbitrary. It may well be true that negative developments in the gaming industry resulted in a diminution of revenue at the casino hotels. The assessor, however, could reasonably have determined that changes in the industry were temporary downturns or affected only the value of the casino businesses, but not the real property on which the casinos are located. To apply the presumption of correctness the court need not conclude that those assumptions by the assessor were correct, but only that the rationale for no change in the assessments reflected a reasonable approach to determining the value of the subject properties.
With respect to the 2009 sale of the Tropicana Resort Casino, which arose for a bankruptcy, the assessor may reasonably have determined that the sale was an unreliable indicator of value for the subject properties or that a single sale was an insufficient basis on which to reduce the assessments. Again, at trial plaintiffs may be able to establish that the 2009 sale is reliable and should be used by the court to determine the value of the subject properties. The assessor's failure to reduce the assessments as a result of that sale, even when considered in conjunction with negative developments in the gaming market, is not sufficient to support a finding that the presumption of correctness does not apply.
The fact that defendant's appraisal expert's report indicates values for the subject properties that would, if adopted by the court, result in reductions in the assessments, is not a "per se admission that the assessment is incorrect . . . ." Gale & Kitson Fredon Golf, LLC v. Township of Fredon, _ N.J. Tax _, 2011 N.J. Tax Lexis 16 (Tax 2012).
--------
Plaintiffs' motion with respect to the presumption of correctness is denied without prejudice. Plaintiffs may renew their motion at trial based on the evidence adduced during their case-in-chief. E. Plaintiffs' Motion for an Order Declaring that the Presumption of Good Management Applies.
Plaintiffs argue that in the event the court takes the income approach to determining the value of the subject properties, they are entitled, in the absence of convincing evidence to the contrary, to a presumption that the Trump casino hotels were well managed during the years in question. Plaintiffs' argument is predicated on the Supreme Court's holding in Parkview Village Assocs. v. Borough of Collingwood, 62 N.J. 21 (1972), which established a presumption in appeals of local property assessments that apartment houses are well managed. The holding in Parkview was extended to the operations of hotels in Glen Pointe Assocs. v. Township of Teaneck, 10 N.J. Tax 380 (1989), aff'd, 12 N.J. Tax 118 (App. Div.), certif. denied, 122 N.J. 391 (1990).
In Parkview, the taxpayers challenged the assessments on four apartment buildings. All experts agreed that the income approach to valuation was the appropriate method for determining the true market value of the properties. The parties' experts offered competing views of the fair rental value, or economic rent, for the property and whether actual rents at the properties represented economic rents. After consideration of the competing evidence, the court established a general rule for determining economic rent:
In the absence of convincing evidence to the contrary the current ongoing income scale of a large, well-managed apartment project like this, functioning as customary with leases of relatively short length, should be deemed prima facie to represent its fair rental value for purposes of the capitalized income method of property valuation. A court or taxing agency should be most hesitant to find that the tenants of a residential property being operated commercially are being charged inadequate rent. That approach, we believe, conduces to the objective of relative stability of assessments which we have heretofore held to be basic to sound tax assessment policy. Readily to be distinguished is the case of a taxpayer owning commercial property tied to a long term lease made long before the current assessing date, where the present rent may well be out of line with current fair rental value.[62 N.J. at 34-35 (citations omitted).]
The Parkview presumption was reaffirmed by the Supreme Court in Parkway Village Apartments Co. v. Township of Cranford, 108 N.J. 266 (1987). In that case, the owner of a large, well-managed apartment complex with one-year leases challenged the assessment on the property. The income approach was used to determine true market value. The taxpayer's expert, relying in the holding in Parkview testified that the actual rent charged for the apartments should be accepted as economic rent. The municipality's expert imputed to all apartments on the property the most recent rent charged for an apartment of that type. The most recent rent for each apartment type was higher than the actual rent for some apartments. Id. at 269.
The Court explained that its holding in Parkview "was based on the belief that landlords of well-managed apartment complexes maximize their profits and minimize their expenses." Id. at 271. The court also noted that the holding in Parkview had "been consistently followed." Ibid. (citing Glen Wall Assocs. v. Township of Wall, 99 N.J. 265, 275-76 (1985)). After reviewing several opinions in which the Parkview holding had been applied, the Court held that "[w]e reaffirm the Parkview rule that in the absence of convincing evidence to the contrary, the actual rent of a well-managed apartment complex functioning with customary leases of relatively short length is prima facie representative of economic rent for the purpose of capitalized income of property valuation." Id. at 276.
The Parkview rule was extended to hotel properties in Glen Pointe, supra. In that case, the owner of a full-service, luxury hotel challenged the assessment on its property. This court took the income approach to determine true market value. The taxpayer's expert relied on the hotel's actual income as economic income, without making a comparison to the income derived from other hotel properties. The township urged the court to reject the expert's opinion because the "the labor-intensive retail business aspects of a hotel and the degree of management expertise required in a hotel operation make the presumption of Parkview Village inapposite" when valuing a hotel and a determination of economic income from the market was necessary. 10 N.J. Tax at 390.
Judge Crabtree rejected the township's argument. Noting that the hotel at issue was "managed pursuant to an arms'-length management contract, the provision of which provided incentives to management to maximize revenues" and that the manager of the hotel was experienced, the court held that the "principles of Parkview Village are thus applicable to the tax valuation of a hotel." Id. at 390-391. He continued, "I conclude that the operating revenues of the subject hotel, as stabilized by plaintiff's expert for all tax years under revenue (sic), are prima facie of economic rent, subject to adjustments for business value and the value of personal property." Ibid.
In City of Atlantic City v. Ace Gaming, LLC, 23 N.J. Tax 70 (Tax 2006), the only published opinion in New Jersey in which the true market value of a casino hotel was determined for local property tax purposes, Judge Bianco addressed the applicability of the presumption of good management, and thus economic income, to casino hotels. In that case, the parties stipulated that they would not rely on the cost approach to determine the value of the casino hotel, a decision that did not secure judicial sanction. As Judge Bianco stated "the court cannot and will not accept by stipulation of otherwise, that the cost approach to value is inapplicable in this case or any other tax appeal involving casino hotel property." Id. at 97-98. Judge Bianco observed that, given the nature of the casino hotels, the lack of precedents in New Jersey and the existence of published opinions in other states using the cost approach to value casino hotels, "this court is not certain why counsel would agree not to use the cost approach to value in this matter, and why both expert appraisers would acquiesce in that agreement." Id. at 99. "With respect to the cost approach to value in the present matters, this court is only willing to accept that neither party ultimately opted to utilize that approach." Id. at 98.
It is not at all clear if the income approach, which is generally limited to properties that generate rental income, including hotel properties, is the best approach to determining the value of the subject properties. While all three plaintiffs operate hotels as well as casinos at the subject properties, the parties agree with the proposition that casino hotels are not operated in the same manner as conventional hotels. Room rentals, occupancy and other factors associated with the hotel are closely associated with gaming operations at the subject property. Moreover, one significant difference between casino hotels and conventional hotels is that casino hotel operators frequently offer gaming patrons free rooms in order to encourage continued gaming, the revenue from which will likely cover the cost of the room. Conventional hotels have little incentive to give customers free rooms. It appears that the parties' appraisal experts in these cases will offer opinions based on the cost approach, comparable sales and the income approach. Thus, it is not certain that the presumption of good management, which is relevant only to the income approach, will even factor into the court's ultimate determination of value. Plaintiffs, however, request guidance from the court at the outset of the trial to assist in determining the evidence plaintiffs will produce in their case-in-chief.
The decision in Ace Gaming does not resolve the question of whether the presumption of good management applies to hotel casinos. In that case, the casino owner "simply assume[d] the presumption applies to casino hotels but fail[ed] to establish that it does, or offer an argument why it should." Id. at 117. The court also noted that "neither party provided the court with enough of a basis to conclude whether or not the presumption applies to casino hotels. Accordingly, the court declines to make that determination here . . . ." Id. at 118. Judge Bianco nevertheless assumed arguendo that the presumption applied and concluded that the trial record contained "convincing evidence that the presumption had been overcome" in that case. Id. at 125.
The Trump casino hotels argue that a presumption of good management should apply for a variety of reasons. First, plaintiffs argue that the casino hotels are regulated by the CCC, which found during the casino licensing process by clear and convincing evidence that the Trump casino hotels possess sufficient business ability and casino experience as to establish the likelihood of creation and maintenance of a successful, efficient casino operation and financial stability, integrity and responsibility to hold a casino license. See N.J.S.A. 5:12-84. Second, plaintiffs point to the deposition testimony of Mark Julian, the CEO of TER and General Managers of the Trump Taj Mahal, in which he established that he received a base salary with an incentive bonus tied to the company's profitability. Third, plaintiffs argue that the owners of casino hotels, like the owners of apartment buildings and hotels, have a natural incentive to maximize income and minimize expenses and no meaningful basis exists to distinguish among those property owners with respect to the presumption of good management.
The City counters that a casino hotel is not similar to a conventional hotel because room rentals are closely tied to gaming and revenues and profits are more volatile, given the influences of luck, seasonality and the sheer magnitude of the dollars involved. According to defendant, there "are too many variables that contribute to the success or failure of a casino to presume the competency of management." Atlantic City also argues that the issuance of a license by the CCC is not a sufficient basis to apply a presumption of competent management. The City notes that the casino before the court in Ace Gaming was licensed by the CCC during the relevant tax years but was also found by the court not to have been well managed during that time. Moreover, gaming licenses are renewed by the Commission every five years, which defendant argues is too infrequent to serve as a basis for application of the presumption to each of the tax years at issue.
The court perceives no principled reason to distinguish casino hotels from apartment buildings or conventional hotels with respect to the application of the presumption of good management. As noted above, it is entirely possible that the court will conclude that the income approach is not the best method for determining the value of a casino hotel. Precedents from other States, and Judge Bianco's opinion in Ace Gaming suggest that comparable sales and the cost approach might be better vehicles for determining the value of the subject properties.
If the court, however, resorts to the income approach, the factors that supported the application of the presumption of good management in Parkview, Parkway and Glen Pointe are present here. During the relevant tax years, the subject properties were managed by executives operating under a contract that provided financial incentives tied to the casino hotel's profitability. The casino hotel operations were regulated by the CCC, which made findings regarding the experience and ability of the management of the casino hotels. In addition, plaintiffs, like the owners of any income producing property, had every incentive to maximize profits and minimize expenses. The court can identify no reason why, absent compelling evidence to the contrary, the court should not proceed on the assumption that the Trump casino hotels were well managed. The volatility of the gaming industry, the complexity of operating a casino hotel and the sheer number of the dollars involved in Atlantic City gaming operations are not, in and of themselves, sufficient grounds to assume that casino hotels are not competently managed. If, as the City contends, the subject properties were poorly managed during the years in question, evidence to that effect can be produced at trial.
Plaintiffs' motion with respect to the presumption of good management is granted.