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Gordon v. New England Central Railroad, Inc.

United States District Court, D. Vermont

August 27, 2019

CHARLES GORDON, ALICIA GORDON D.J. ENTERPRISES LLC, A.C. LAWN MOWING, DENIELLE GORDON, individually and doing business as DEN & COMPANY, Plaintiffs,
v.
NEW ENGLAND CENTRAL RAILROAD, INC., Defendant.

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION TO EXCLUDE EXPERT TESTIMONY OF DEFENDANT'S APPRAISER STEPHEN O'TOOLE (DOC. 134)

          CHRISTINA REISS, DISTRICT JUDGE.

         Plaintiffs, Charles, Alicia, and Denielle Gordon (the "Gordons"), D.J. Enterprises LLC, and A.C. Lawn Mowing, (collectively, "Plaintiffs") bring this action against Defendant New England Central Railroad, Inc. ("Defendant"), alleging that Defendant's failure to appropriately maintain track facilities caused a railroad embankment adjacent to the Gordons' land located at 68 Old River Road in Hartford, Vermont (the "Property") to collapse following a July 1, 2017 rain event. Plaintiffs further allege that Defendant's efforts to repair the embankment resulted in a trespass on the Property. The First Amended Complaint ("FAC") asserts the following claims against Defendant: trespass (Count I); negligence (Count II); unlawful mischief in violation of 13 V.S.A. § 3701 (Count III); and unjust enrichment (Count IV).

         Pending before the court is Plaintiffs' June 18, 2019 motion to exclude expert testimony of Defendant's appraiser Stephen O'Toole. (Doc. 134.) Defendant opposed the motion on July 2, 2019 and Plaintiffs replied on July 16, 2019, at which time the court took the pending motion under advisement.

         Plaintiffs are represented by R. Bradford Fawley, Esq., and Timothy C. Doherty, Jr., Esq. Defendant is represented by Michael B. Flynn, Esq., Matthew M. Cianflone, Esq., and Mark D. Oettinger, Esq.

         I. Factual and Procedural Background.

         The Gordons purchased the Property in 2009 for $150, 000. Three buildings are situated on the Property: (1) a 1, 120-square-foot, three-bay garage; (2) a 1, 500-square-foot, five-bay garage; and (3) a 6, 492-square-foot, mixed-use building. In 2017, tax assessment records indicate that the appraisal value for the Property was $ 189, 600 and the appraisal value of the mixed-use building on the Property was $112, 100. Prior to July 1, 2017, the mixed-use building was comprised of garage bays, warehouse storage space, a residential apartment, and commercial space that served as a day-care center and a beauty salon.

         The Property is situated directly adjacent to Defendant's mainline railroad tracks. On July 1, 2017, more than four inches of rain fell in a twelve-hour period in Hartford, Vermont. Following the July 1, 2017 rain event, the railroad embankment adjacent to the Property collapsed, causing rocks and debris to enter and damage the mixed-use building on the Property.

         Defendant's expert witness, Stephen O'Toole, is the owner of New England Commercial Realty Advisors, Inc. ("NECRA"), a commercial real estate appraisal and consulting firm that provides professional valuation services throughout the United States. Mr. O'Toole has a Bachelor of Arts degree in Business Management from Assumption College and has taken additional business and real estate courses at Worcester Polytechnic Institute, the Boston Architectural Center, and the Appraisal Institute. He has experience providing real estate valuations and appraisals in multiple states, including Vermont.

         Defendant contracted Mr. O'Toole to provide an "as is" appraisal of the Property using a "Sales Comparison Approach." Mr. O'Toole describes this approach as follows:

         "The sales comparison approach produces an estimated value for real estate by analyzing closed sales, listings or pending sales of properties that are similar to the subject property." (Doc. 134-1 at 33.) Defendant further directed Mr. O'Toole to prepare a "Restricted Appraisal Report" for client use only. Mr. O'Toole explains:

The rationale for .. . the opinions and conclusions set forth in this report may not be understood properly without additional information contained in the appraiser's work file. The contents of the work file include sufficient information indicating adherence to the requirements of Standard 7 of [Uniform Standards of Professional Appraisal Practice], and to be able to produce an Appraisal Report.

         Discussions with the client deemed a Restricted Appraisal Report was reasonable considering the following:

• The client is the only intended user of the appraiser's opinions and conclusions;
• The client understands the limited utility of this option;
• The client does not need the level of information required in an Appraisal Report.

(Doc. 134-1 at 18.)

         Mr. O'Toole selected three comparable properties in or near Hartford, Vermont and determined the price per square foot of gross building area for those properties. Using those comparison values, Mr. O'Toole found that, if the Property were in marketable condition, it would be valued at $45.00 per square foot of gross building area. He then multiplied $45.00 by the square footage of the mixed-use building at 6, 492 and opined that this resulted in a total value of $292, 140, which he rounded to $290, 000. Because the mixed-use building was damaged and was not in marketable condition, Mr. O'Toole deducted "costs to shore and repair the existing building in order to estimate an 'as is' value." (Doc. 134-1 at 44.) Mr. O'Toole obtained an estimate from GZA GeoEnvironmental, Inc. dated November 30, 2018 for "shoring/stabilization; design/permitting, [and] for construction that ranged from $100, 000 to $150, 000." Id. Based on this information, Mr. O'Toole found that "a projected estimate of costs to shore, stabilize, and repair the existing building of $120, 000 is reasonable[.]" Id. at 45. Mr. O'Toole therefore deducted $120, 000 from his estimate of $290, 000 to arrive at a final "as is" value of $170, 000 for the Property.

         At Mr. O'Toole's deposition, Plaintiffs' attorney questioned him regarding his decision to use a 6, 492-square-foot measurement to calculate the Property's gross building area:

Q. ... So, in order to conclude that the undamaged value of the property on November 27th 2018 is $290, 000, am I correct that you took 6, 492 square feet and multiplied it by $45 a square foot?
A. Correct.
Q. And what does the 6, 492 square feet reflect?
A. That's the gross building area of the property, the ...

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