UNITED STATES OF AMERICA v. 275.81 ACRES OF LAND, MORE OR LESS, SITUATED IN STONYCREEK TOWNSHIP, SOMERSET COUNTY COMMONWEALTH OF PENNSYLVANIA
Filing
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ORDER adopting 189 Report of Commission; overruling Defendant's Objections 200 and Plaintiff's Objections 201 to the Report; denying 200 Motion to Modify; denying as moot in part and denying in part 201 Motion to Modify. Signed by Judge Donetta W. Ambrose on 3/26/2014. (sps)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
United States of America,
Plaintiff,
vs.
275.81 Acres of Land, More or Less,
Situated in Stonycreek Township,
Somerset County, Commonwealth of
Pennsylvania, and Svonavec, Inc.
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Civil Action No. 09-233
Defendant.
AMBROSE, Senior District Judge
OPINION
AND
ORDER OF COURT
I. BACKGROUND
The factual and procedural details of this condemnation action are well known to the
parties and I need not repeat them in detail here. In short, the United States of America filed a
Complaint for Condemnation on September 1, 2009, for the taking of property under the power
of eminent domain and for the ascertainment and award of just compensation to the owners and
parties in interest. (Docket No. 1). The subject property consists of 275.81 acres of land owned
at the time of taking by Defendant, Svonavec, Inc., and located in Stonycreek Township,
Somerset County, Pennsylvania. This site includes approximately six acres of land on which
United Airlines Flight 93 crashed on September 11, 2001. The United States acquired a fee
simple estate in the 275.81 acres, including oil and gas rights and eight acres of coal, subject to
existing easements and certain rights of third parties. See Docket No. 1. The public use for
which the property was taken was for the administration, preservation, and development of a
Flight 93 National Memorial. Id.
The parties in this case agreed that the issue of just compensation for the taking of the
land involved should be determined by a commission, and I found that the appointment of such
a commission was appropriate under Federal Rule of Civil Procedure 71.1(h)(2)(A) for just
reasons, including the complex appraisal methodologies and valuation issues involved. See
Docket Nos. 137, 144. Accordingly, On July 9, 2013, I appointed an impartial three-person
commission pursuant to Rule 71.1(h) to determine just compensation to be paid to Defendant by
the United States. See Docket No. 144. The Commission was comprised of two real estate
appraisers and one real estate attorney. See id.
A trial on just compensation was held before the Commission on October 7-11, 2013.
On December 9, 2013, the Commission issued a 72-page report concluding that the “just
compensation” for the 275.81 acres of land in fee simple, including oil and gas rights and eight
acres of coal, acquired by the United States under its power of eminent domain on September
2, 2009, is $1,535,000. (Docket No. 189).
Pending are the United States’ Motion to Adopt in Part and Modify in Part Certain
Findings of the Report of the Commission and Objections to the Report of the Commission
(Docket No. 201) and Defendant’s Objections to and Motion to Modify the Report of the
Commission.
(Docket No. 200).
Each party opposes the other’s Motion and Objections.
(Docket Nos. 205, 206, 211, 214). The matter is now ripe for my review.
II. ANALYSIS
A. Standard of Review
Federal Rule of Civil Procedure 71.1(h) permits the Court to appoint a three-person
commission to determine compensation because of the character, location, or quantity of the
property to be condemned, or for other just reasons. Fed. R. Civ. P. 71.1(h)(A). Pursuant to
this Rule, the Commission has the powers of a master under Rule 53(c). Fed. R. Civ. P.
71.1(h)(D). Rule 53(d), (e), and (f) applies to the Commission’s action and report. Id.
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Rule 53(f)(3) requires that the Court decide de novo all objections to the Commission’s
findings of fact, unless the parties, with the Court’s approval, stipulate that the findings will be
reviewed for clear error. Fed. R. Civ. P. 53(f)(3). The parties in this case did not stipulate to a
clear error review.
Thus, I must apply the de novo standard to all objections to the
Commission’s factual findings. Rule 53(f) also requires me to decide de novo all objections to
the Commission’s conclusions of law, and to review any rulings on procedural matters under an
abuse of discretion standard. Fed. R. Civ. P. 53(f)(4), (5).
In United States v. Merz, 376 U.S. 192 (1964), the United States Supreme Court
provided guidelines regarding the sufficiency of a commission’s report. Specifically, the Court
held that although “commissioners need not make detailed findings such as judges do who try a
case without a jury,” they must “reveal the reasoning they use in deciding on a particular award,
what standard they try to follow, . . . and so on.” Id. at 198-99. Conclusory findings alone are
not enough. Id. at 198. “The path followed by the commissioners in reaching the amount of the
award [should] be distinctly marked” so that the Court knows “what path the commissioners took
through the maze of conflicting evidence.” Id. at 198-99 (reasoning that commissioners “will
give more careful consideration to the problem if they are required to state not only the end
result of their inquiry, but the process by which they reached it”).
As set forth above, the Commission in this case filed a comprehensive 72-page report
setting forth the path it took in reaching its valuation conclusion, the reasoning it employed, and
the record evidence on which it based its decision. (Docket No. 189). This report more than
satisfies the requirements set forth in Merz and has allowed me to undertake an informed and
meaningful review.
After careful consideration of the Report, the parties’ submissions, the
record, and applicable law, and for the reasons set forth below, I adopt the Commissioners’
Report and the findings contained therein.
B. Eminent Domain – Just Compensation
As I instructed the Commission prior to trial, the United States has the authority to take
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private property for use by eminent domain, provided that it satisfies its Fifth Amendment
obligation to provide “just compensation” to the owner thereof. United States v. 6.45 Acres of
Land, 409 F.3d 139, 145 (3d Cir. 2005) (quoting Kirby v. Forest Indus., Inc., 467 U.S. 1, 9
(1984)). “In general, ‘just compensation’ means ‘the fair market value of the property on the
date it is appropriated.’” Id. “The guiding principle of just compensation . . . is that the owner of
the condemned property must be made whole but is not entitled to more.” Id. at 145 n.11
(quoting United States v. 564.54 Acres of Land, 441 U.S. 506, 516 (1979) (emphasis in
original)). It is the landowner’s burden to establish just compensation. Id.
Fair market value is determined by considering the subject property’s “highest and best
use.” Specifically, the just compensation clause requires that “condemnees receive the value of
the highest and best use for which the property is adaptable in the reasonably near future from
the vantage point of the date of the taking.” United States v. 68.94 Acres of Land, 918 F.2d
389, 393 (3d Cir. 1990) (citing Olson v. United States, 292 U.S. 246, 255 (1934)). Although the
factfinder should not entertain mere speculative uses of the property, “evidence of a potential
use should not be excluded merely because it depends upon the existence of extrinsic
conditions.” Id.
C.
Defendant’s Objections and Motion to Modify the Report of the Commission
Pending are Defendant’s Objections to and Motion to Modify the Commission’s Report.
(Docket No. 200).
Primarily, Defendant complains that the Commission erred in finding that
the highest and best use of the property was a private memorial only, and not a private
memorial and related museum/visitor’s center as advocated by Defendant’s appraisal expert,
Randall Bell. This objection is without merit.
As carefully outlined in the Report, the Commissioners considered a museum/visitor’s
center as a potential use but rejected that use because, unlike a private memorial only, it could
not conclude on the basis of the evidence presented that such a use was financially feasible.
Report at 46-47. In explaining this conclusion, the Commission stated that Mr. Bell failed to
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support his analysis with a marketability study from a qualified provider or other credible
evidence showing and evaluating the costs, expenses, and risks of constructing and operating a
museum/visitor’s center on the site. Id. at 46. This lack of evidence left the Commission
uncertain as to the design of the museum, its suitability for the site and market, and the contents
of the museum. Id. As such, it could not accept Bell’s projected numbers as plausible. Id. The
Commission acknowledged that Mr. Bell, Mr. Svonavec, and, to some degree the United States’
expert Gregory Jones, provided testimony on this topic at trial, but found that these experts
lacked the expertise or experience to assess the feasibility of a planned museum and that none
of the witnesses supported their reasons sufficiently for the Commission to accept their
conclusions. Id. at 46-47.
Although Defendant protests that Dr. Bell “is the foremost authority in the realm of real
estate appraisals of this magnitude,” and, therefore, that “common sense dictates that it is his
unrivaled credibility that should determine the outcome of this matter” (Docket No. 214, at 4),
such conclusions are not for Defendant to make. Rather, as the instructions in this case made
clear, the Commission was the sole judge of the credibility and reliability of the witnesses at trial.
As set forth in the Report, the Commission rejected the portion of Bell’s testimony at issue
(including admission rates, concession figures, net operating income, capitalization rates, etc.)
for numerous appropriate reasons, including, inter alia, that Bell’s testimony was vague,
improperly conflated business and land value, and/or failed to reflect the risks involved with an
unconstructed museum/visitor’s center operation on the property. Report at 49-52. I have
carefully reviewed the Commission’s credibility determinations under the appropriate standard
and, based on the record evidence and my own observations at trial, find them to be accurate
and well-supported.
Defendant’s reliance on United States v. 6.45 Acres of Land, 409 F.3d 139 (3d Cir.
2005) (the “Gettysburg Tower case”), as support for its position that the highest and best use of
the Property is necessarily a private memorial and a related museum/visitor’s center is likewise
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without merit. As the United States correctly explains in its Response, the Gettysburg Tower
case is inapposite for numerous reasons. (Docket No. 205, at 5-7). Not least of these reasons
is the fact that, at the time of the taking in the Gettysburg Tower case, the condemned land
contained improvements, including a decades-old operating business, a 307-foot observation
tower completed in 1974; and a gift shop, restaurant, and parking lot, operating in conjunction
with the tower. 409 F.3d at 142. Because the business and structures predated the taking, the
Gettysburg Tower appraiser had the benefit of actual operating figures and business data with
which to work. Nothing in the Gettysburg Tower case supports Defendant’s argument that the
Commission was required to value the subject land based on Bell’s vague and speculative
testimony regarding a hypothetical, future museum and visitor’s center.1
Although most of Defendant’s objections relate to the Commission’s rejection of portions
of Dr. Bell’s and/or Mr. Svonavec’s testimony as explained above, several additional points
merit brief discussion here.
First, Defendant unpersuasively argues that the Commission
erroneously applied the “scope of the project” rule to reject projected annual visitation number of
230,000 set forth in a report authored for the National Park Service by Bruce E. Lord of
Pennsylvania State University. As I instructed the Commission at trial and in response to the
Commission’s post-trial questions, the “scope of the project” rule prohibits awarding
compensation based on any enhancement or reduction in value attributable to the project for
which the Government condemned the property; here, the United States’ development of the
public Flight 93 National Memorial.
Thus, the Commission was not permitted to rely on
information related to the United States’ use and creation of a public memorial on the property
to determine highest and best use and/or fair market value, because to do so would violate the
scope of the project rule.
The Commission was permitted, however, to consider relevant
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The appraiser at issue in the Gettysburg Tower case, David Lenhoff, also served as the United States’
rebuttal expert in this case. To the extent Defendant cites Mr. Lenhoff’s testimony and/or methodology in
the Gettysburg Tower case in support of Mr. Bell’s methodology here, such comparisons are inapposite
for the same reasons set forth above.
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information, if any, contained in the evidence that is general to the market, such as generic
information about the market area, existing infrastructure on the property, physical aspects of
the subject property, the availability of artifacts, and other considerations that any private
developer would consider in assessing the demand for and/or viability of a private memorial on
the subject property.
Here, the Commission appropriately found that the 230,000 visitation number contained
in the Lord Report fell within scope of the project rule because it was not generic to the market,
but was projected solely for a fully-developed public museum and visitor’s center operated by
the National Park Service. Report at 50. Even if I agreed that the Commission erred in this
regard – which I do not – it alternatively rejected the 230,000 visitation number because there
was no evidence that 230,000 or more people visited the site prior to the date of taking and the
projection was based on an assumption that people would come to the site in higher numbers
as the result of improvements being added to the property after the date of taking. Such posttaking improvements included content that would be part of a business operation and not fairly
attributable to the land. Id. at 50-51.
Second, Defendant argues that the Commission had no basis to assess environmental
cleanup costs to the property because those costs would be paid for by a responsible third-party
or that the separate cost of a parking lot would remedy the environmental contamination.
Docket No. 200, at 22. Although the Commission recognized that the ultimate responsibility for
these remediation costs might rest with a third party, it appropriately concluded that given the
uncertainties of recovery from other parties and the prospect of delay in pursuing those parties,
that a reasonably knowledgeable buyer would include remediation costs in determining price.
Report at 67.
Third, Defendant argues that the Commission failed to account for the contributory value
of the condemned oil and gas interests after the parties stipulated that the value of those
interests was $105,000. Docket No. 200, at 21. This argument likewise is without merit. After
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trial, the Commission was properly instructed that if the condemned land contains a mineral
deposit, it is proper to consider this fact in determining the market value of the land as a whole,
but it is not permissible to determine the market value of the land as a whole simply by adding
the individual value of the mineral deposit to the value of the land as a unit. Docket No. 188, at
2 (explaining the “unit rule”).
In accordance with these instructions, the Commission did not
simply add the $105,000 to a calculated land value. The Commission, however, appropriately
accounted for the contributory value of the oil and gas interests when it applied less of a
discount adjustment than that applicable to land development properties where such oil and gas
value is not present.
Report at 69-70.
Although Defendant separately challenges the
Commission’s use of any discount rate in its valuation, I find that the Commission’s discountrate analysis is reasonable and well-supported by the record evidence. Report at 68-71.
Finally, Defendant ends by presenting an alternate calculation of just compensation in
the amount of $5,745,600. Docket No. 200, at 24-25. This never-before-presented number is a
far cry from the $23,300,000 valuation figure that Dr. Bell advocated at trial and that Defendant
has urged throughout this case.
Defendant contends the purpose of this calculation is to
demonstrate that “even adopting the most conservative, yet adequately supported figures in this
case, the Subject Property value is far greater than that found by the Commission.” Docket No.
200, at 24-25. As Plaintiff aptly explains in its Response, Defendant appears to have reached
this new figure by picking and choosing numbers from sources unrelated to the subject matter
and presenting misleading comparisons to other data. Docket No. 205, at 1-2. Defendant has
failed to demonstrate that these new numbers are appropriate, timely, reasonable, or relevant to
the subject property. Accordingly, I do not consider them here.
In short, I have reviewed all of Defendant’s objections and found them to be without
merit. For the reasons set forth above, the objections are overruled and Defendant’s Motion to
Modify is denied.
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D.
Plaintiff’s Objections and Motion to Adopt in Part and Modify in Part
the Report of the Commission
Plaintiff also objects to and seeks modification of portions of the Commission’s Report.
(Docket No. 201). Like Defendant, but for different reasons, Plaintiff focuses its attack on the
Commission’s highest and best use finding.
Plaintiff agrees that the Commission correctly
rejected a private museum/visitor’s center as the highest and best use. Unsurprisingly, Plaintiff
also agrees with the Commission’s acceptance of the testimony of its own appraisal expert,
Gregory Jones, who concluded that open space/recreational use was physically possible,
legally permissible, and financially feasible and that the property’s value based on this use on
the date of taking was $610,000. Id. at 1-2. Plaintiff disagrees, however, with the Commission’s
finding that the highest and best use of the property was as a private memorial. Id. at 1-4.
Plaintiff portrays the private memorial as a third use proposed by neither party and unsupported
by the record evidence.
Plaintiff contends that once the Commission rejected a private
museum/visitor’s center as the highest and best use, it should have, by default, accepted open
space/recreation as the only use that met the highest and best use criteria, and Mr. Jones’
$610,000 valuation as the only valuation supported by the record evidence. Id. I disagree.
As an initial matter, I disagree with Plaintiff that the Commission went “beyond the
evidence” and applied its own expertise to reach a highest and best use conclusion lacking
evidentiary support.
Although the instructions prohibited the Commissioners from basing any
opinions on their own expertise in lieu of the record evidence, the instructions expressly
permitted them to draw reasonable inferences from the evidence that they felt were justified by
common sense and, similarly, to draw, from the facts found to have been proved, such
inferences as seem justified in the light of their own experience. Docket No. 192 (10/7/13 Tr.),
at 5, 8.
Moreover, nothing in the instructions required the Commission to accept or reject any
one expert’s testimony in toto.
Rather, the instructions correctly explained that the
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Commissioners were the sole judges of a witness’s credibility and reliability and of the weight to
be given to the testimony of each witness. Id. at 8-9.2
After careful review of the Commission’s Report and the record evidence in this case, I
find that, while the Commission may at times have drawn reasonable inferences from the
evidence justified in light of their own experience and common sense, at no time did the
Commission go beyond the record and reach a conclusion unsupported by the evidence.
Rather, the Commission carefully supported each element of its highest and best use and
valuation analyses with citation to the evidence it considered.
This evidence includes, inter
alia, testimony and documentation that the use of the property as of the date of the taking was a
memorial; evidence regarding annual visitation to the site prior to the taking; evidence regarding
the topography and desirability of the land as a viewing site; testimony regarding admission
rates, including Mr. Bell’s “kiosk” testimony; the LECG appraisal; landowner testimony regarding
expenses; and testimony and industry publications regarding capitalization and discount rates.
Moreover, the distinction between Defendant’s proposed highest and best use (private
memorial and museum/visitor’s center) and the highest and best use found by the Commission
(private memorial) is not as sharp as Plaintiff attempts to portray.
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Throughout this case,
As I instructed the Commission, the Supreme Court in Merz cautioned that:
[T]here is danger that commissioners, unlike juries, may use their own expertise and not
act as a deliberative body applying constitutional standards. A jury, until it retires, sits
under the direct supervision of the judge, who rules on the admissibility of evidence, who
sees that witnesses are properly qualified as experts, and who polices the entire hearing,
keeping it within bounds. Then in due course the judge instructs the jury on the law,
answering any inquiries its members may have on the law. The jury is under surveillance
from start to finish and subject to judicial control. Hence its general verdict that the land
is worth so many dollars is not overturned for lack of particularized findings. The judge
who uses commissioners, however, establishes a tribunal that may become freewheeling, taking the law from itself, unless subject to close supervision.
376 U.S. at 197. Here, however, the Commission was under my direct supervision until it began
deliberations. Not only was I present in the courtroom throughout the proceedings, but also, at the
Commissioners’ request, I made all evidentiary rulings, ruled on objections, and oversaw the qualification
of expert witnesses. Thus, the concerns voiced by the Supreme Court were not present in this case. My
personal supervision of the trial proceedings coupled with the Commission’s comprehensive report and
particularized findings, convince me that the Commissioners did not act as a free-wheeling body of
experts, but, rather, carefully applied the law and based their findings on the record evidence as
instructed.
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Defendant has argued that the use of the property at the time of the taking was a private
memorial. Although Dr. Bell valued a museum and visitor’s center as part of his proposed
highest and best use, the museum and visitor’s center was always a component of a larger
private memorial. In its Report, the Commission, as instructed, carefully rejected any evidence
based on speculation and conjecture or that attempted to value a business as opposed to the
land. In so doing, the Commission properly rejected a private memorial with a museum/visitor’s
center as the highest and best use. The record evidence that remained, however, fully supports
the Commission’s further conclusion that a private memorial alone met the highest and best use
criteria.
Plaintiff additionally argues that the Commission erred in applying the income approach
to value the property as a private memorial because it unreasonably assumed that no
comparable sales of private memorials exist. (Docket No. 201, at 17-18). This argument is
without merit. As I instructed the Commission, although evidence of comparable sales normally
offers the best evidence of fair market value, the law is not wedded to any particular formula or
any particular method for determining fair market value as the measure of just compensation.
When evidence of comparable sales is unavailable, other methods of valuation such as the
income capitalization approach may be appropriate to determine market value. Here, the
Commission rightfully found that the events of September 11, 2001, rendered the subject
property unique, and, thus, that comparable sales are not available. This finding holds true
whether the property is valued as a private museum/visitor’s center or a private memorial alone.
For all of these reasons, I reject Plaintiff’s argument that the Commission went beyond
the record and relied on its own expertise to value the property.
Plaintiff’s objections are
overruled and its Motion to Modify is denied.
III. CONCLUSION
In sum, I agree with the Commission in this case that the crash of Flight 93 on
September 11, 2001, undeniably imbued the subject property with a national significance and
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intrinsic value that is neither transferable nor comparable to otherwise similar parcels.
Faced
with this unique valuation scenario, the Commission fairly and admirably analyzed and weighed
the record evidence and correctly applied the relevant law to determine just compensation in
this case. After careful consideration of the Commissioner’s Report, the record evidence, the
parties’ objections, and applicable law, I agree that $1,535,000 represents the “fair market
value” of the property – i.e., the amount for which in all probability the property would have sold
on the date of the taking, after a reasonable exposure time on the open competitive market,
from a willing and reasonably knowledgeable seller to a willing and reasonably knowledgeable
buyer, with neither acting under any compulsion to buy or sell, giving due consideration to all
available economic uses of the property at the time of the taking.
For these and all of the
reasons set forth herein, the parties’ objections to the Report are overruled, and I hereby adopt
the Report in its entirety.
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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
United States of America,
Plaintiff,
vs.
275.81 Acres of Land, More or Less,
Situated in Stonycreek Township,
Somerset County, Commonwealth of
Pennsylvania, and Svonavec, Inc.
)
)
)
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)
)
)
)
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Civil Action No. 09-233
Defendant.
AMBROSE, Senior District Judge
ORDER
AND NOW, this 26th day of March, 2014, it is hereby ORDERED that the Report of the
Commission dated December 9, 2013 in the above-captioned case (Docket No. 189) is hereby
adopted in its entirety. Just compensation the fee simple estate in the 275.81 acres of land
owned by Defendant, Svonavec, Inc., and located in Stonycreek Township, Somerset County,
Pennsylvania, including oil and gas rights and eight acres of coal, is set at $1,535,000.
Defendant’s Objections (Docket No. 200) and Plaintiff’s Objections (Docket No. 201) are
overruled. Plaintiff’s Motion to Adopt in Part Certain Findings of the Report of the Commission
(Docket No. 201) is denied as moot, and Plaintiff’s Motion to Modify in Part Certain Findings of
the Report of the Commission (Docket No. 201) is denied. Defendant’s Motion to Modify the
Report of the Commission (Docket No. 200) is denied.
BY THE COURT:
/s/Donetta W. Ambrose
Donetta W. Ambrose
Senior Judge, U.S. District Court
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