FLST, Ltd et al v. Explorer Pipeline Company

Filing 38

ORDER AND OPINION ON DEFENDANT'S MOTION TO EXLCUDE PLAINTIFFS' EXPERT ANDREW J. MCROBERTS - The Court finds Defendants Motion to Exclude Plaintiff's Expert Andrew J. McRoberts (Dkt. 30 ) is GRANTED in PART and DENIED in PART. The Cour t finds Defendants motion to exclude Mr. McRoberts report and opinions as to measuring damages is GRANTED. However, the Court finds Mr. McRoberts report and opinions are allowed as to determine whether Plaintiffs mitigated their damages. Further, the Court finds Defendants motion to exclude Mr. McRoberts report and opinions based on reliability is DENIED. Plaintiffs are ORDERED to produce the case studies Mr. McRoberts relied upon in making his report to Defendant within five (5) business days o f the entering of this order. Further, the Court finds Defendants motion to exclude Mr. McRoberts opinion as to the 2001 Amendment is DENIED. Mr. McRoberts is directed to only make assumptions about the 2001 Amendment in order to support his ultimate opinion as to whether Plaintiffs failed to mitigate their damages. Further, the Court finds Defendants motion to exclude Mr. McRoberts purported inspection of the Property is DENIED. Mr. McRoberts report and opinions on the inspection of the Propert y may be used in order to support his opinions as to whether Plaintiffs mitigated their damages. Finally, Plaintiffs moved at the hearing for leave to amend Mr. McRoberts expert report. Plaintiffs shall file a motion for leave to amend Mr. McRoberts expert report within seven (7) days of the entering of this Order, if they wish to do so. Signed by Magistrate Judge Kimberly C Priest Johnson on 1/25/2017. (baf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
FLST, LTD, FLCT, LTD, AND FLSC, LTD,
Plaintiffs,
v.
EXPLORER PIPELINE COMPANY,
Defendant.

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CIVIL ACTION NO. 4:16-CV-00017-KPJ

ORDER AND OPINION ON DEFENDANT’S MOTION TO
EXCLUDE PLAINTIFFS’ EXPERT ANDREW J. MCROBERTS
Pending before the Court is Defendant Explorer Pipeline Company’s Motion to Exclude
Plaintiff’s Expert Andrew J. McRoberts (“Mr. McRoberts”) (Dkt. 30). Plaintiffs FLST, Ltd;
FLCT, Ltd; and FLSC, Ltd filed a Response (Dkt. 34). Defendant filed a Reply (Dkt. 35). The
Court held a hearing on Defendant’s motion on January 18, 2017 (Dkt. 37). After considering the
arguments and evidence presented at the hearing, the motion, responses, and relevant filings, the
Court finds Defendant’s motion (Dkt. 30) is GRANTED in PART and DENIED in PART.
FACTUAL AND PROCEDURAL BACKGROUND
This case arises out of Plaintiffs’ purchase and sale of a seventeen-acre tract of land in
Flower Mound, Texas (the “Property”) encumbered by a sixty-year-old interstate gas pipeline
(the “Pipeline”). See Dkt. 30 at 1. In the late 1940s, the owners of the Property granted Sinclair
Refining Company an easement to lay, maintain, and operate the Pipeline on the Property (the
“Easement”). Id. Both ownership of the Property and rights under the Easement passed to other
parties several times in the subsequent decades. See Dkt. 34 at 1. In 2001, an owner of the larger
tract of land on which the Property was located, and the holders of the Easement, entered into an

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agreement to amend the Easement that allegedly relocated the Easement to another portion of the
then-owner’s land (the “2001 Amendment”). See id. Plaintiffs purchased the Property in 2007,
the same year Defendant acquired the Pipeline and the Easement from CITGO Products Pipeline
Company. See id. at 2.
In or around 2014, Plaintiffs began negotiating with JGBL Chateau, LLC (“JBGL”) to
sell the Property. See id. Plaintiffs and JBGL agreed on a purchase price for the Property of
approximately $16.4 million, which was approximately $7.25 per square foot. See id. In August
2014, the parties learned from the purchaser’s engineers, who were performing development
analyses, that a pipeline may be located on the Property. See id. Plaintiffs confirmed with
Defendant that the Pipeline was located on the Property and demanded Defendant to remove the
Pipeline. See id. Defendant refused; thus, Plaintiffs and JGBL adjusted the purchase price of the
Property to account for its alleged diminished value. See id. As a result, Plaintiffs filed suit
against Defendant seeking damages incurred as a result of the adjusted purchase price of the
Property. See id. at 2-3.
Plaintiffs asserts damages against Defendant for permanent trespass. See Dkt. 26 at 3-4.
In support of their claim against Defendant, Plaintiffs retained and designated Mr. McRoberts as
one of their experts. See Dkt. 30-1 at 1. Mr. McRoberts opines that the decrease in the sales price
of the Property was reasonable given the presence of the Pipeline and the potential damage it
could cause, and he specifically states that his report “is not an appraisal and no opinion of
market value of the [Property] is being provided.” See Dkt. 30-2.
On December 2, 2016, Defendant filed a motion to strike Mr. McRoberts (Dkt. 30).
Plaintiffs filed a response (Dkt. 34). Defendant filed a reply (Dkt. 35). The Court held a hearing
on the motion on December 18, 2017 (Dkt. 37). At the hearing, Mr. McRoberts listed his

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qualifications and experience. Further, he explained that he was hired to determine whether the
price reduction was reasonable. He specifically stated at the hearing that although he is qualified
and can perform an appraisal of the Property to determine its market value, he did not do so. He
testified that although it was possible for him to perform a historical appraisal on the Property, he
believed his analysis was a more accurate way to determine damages.
LEGAL STANDARD
In Daubert v. Merrell Dow Pharm., Inc., the Supreme Court instructed district courts to
function as gatekeepers and determine whether expert testimony should be presented to the jury.
See 509 U.S. 579, 590-93 (1993). District courts must ensure that a proffered expert witness is
qualified to testify by virtue of his or her “knowledge, skill, experience, training, or education.”
See FED. R. EVID. 702. Moreover, in order to be admissible, expert testimony must be “not only
relevant, but reliable.” Daubert, 509 U.S. at 594. The Daubert analysis applies to all species of
expert testimony. See United States v. Tucker, 345 F.3d 320, 327 (5th Cir. 2003).
The expert testimony must be relevant, such that the expert’s proposed opinion would
assist the trier of fact to understand or determine a fact in issue. See Daubert, 509 U.S. at 591-92.
The expert testimony must also be reliable, meaning that the testimony is: (1) based upon
sufficient facts or data; (2) the product of reliable principles and methods; and (3) offered by a
witness who has applied the principles and methods reliably to the facts of the case. See FED. R.
EVID. 702.
Expert witnesses are not permitted to offer legal opinions under either Rule 702 or 704(a)
of the Federal Rules of Evidence. See Taylor Pipeline Constr., Inc. v. Directional Rd. Boring,
Inc., 438 F. Supp. 2d 696, 706 (E.D. Tex. 2006) (citing FED. R. EVID. 702, 704(a); C.P. Interests,
Inc. v. Cali. Pools, Inc., 238 F.3d 690, 697 (5th Cir. 2001); Owen v. Kerr-McGee Corp., 698

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F.2d 236, 240 (5th Cir. 1983)). It is the obligation of the court and the court alone to construe the
documents and their legal effect. See First Fed. Sav. & Loan Ass’n of Alexandria v. Botello, 725
F.2d 350, 354 n.3 (5th Cir. 1984).
The Daubert framework is a flexible one. See Daubert, 509 U.S. at 594. Accordingly, the
decision to allow or exclude experts from testifying under Daubert is committed to the sound
discretion of the district court. See St. Martin v. Mobil Exploration & Producing U.S., Inc., 224
F.3d 402, 405 (5th Cir. 2000).
ANALYSIS
Defendant argues the Court should exclude Mr. McRoberts’ testimony on four (4)
grounds: (1) his report and testimony are irrelevant to any issue before the Court; (2) his report is
not reliable; (3) he makes a legal opinion about the effect of the 2001 Amendment, which is
outside the scope of his expertise and not the proper subject of expert testimony; and (4) his
opinions based on the purported inspection of the Property on September 13, 2016, are irrelevant
to the issue of Plaintiff’s damages.
1. Relevancy
Defendant’s main argument, and the primary discussion at the hearing, is that Mr.
McRoberts’ testimony is not relevant and would not assist the trier of fact to understand or
determine a fact in issue. See Dkt. 30 at 4. Plaintiffs designated Mr. McRoberts to testify as to
Plaintiffs’ damages. See Dkt. 30-1 at 1. Specifically, Plaintiffs designated Mr. McRoberts to
opine on the reasonableness of the price reduction in the sales price after the parties discovered
the Pipeline’s presence on the Property. See Dkt. 30-2 at 1. Mr. McRoberts states in his report
that he did not do an appraisal and was giving no opinion of the market value of the Property.
See id. Further, at the hearing, Mr. McRoberts testified that although he is qualified and could

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have performed an appraisal on the Property to determine its market value, he did not do so, as
he was directed only to determine whether the price reduction in the sales agreement was
reasonable.
Plaintiffs’ cause of action is for permanent trespass under Texas law. See Dkt. 26 at 3-4.
Texas law is very clear that the proper measure of damages for permanent trespass is the
difference in the market value of the land immediately before and immediately after the trespass.
See Stevenson v. E.I. DuPont De Nemours & Co., 327 F.3d 400, 409 (5th Cir. 2003) (citing
Porras v. Craig, 675 S.W.2d 503, 504 (Tex. 1984)). Because Mr. McRoberts expressly states
that his report is “not an appraisal and no opinion of market value” of the Property, and he
testified that he did not perform the calculation articulated by the Texas Supreme Court, his
report is not relevant to the calculation of damages.
Plaintiffs argue that the correct measure of damages is the diminution in value of the
Property because of the trespass. See Dkt. 34 at 6 (citing Porras, 675 S.W.2d at 504, abrogated
in part on other grounds by Gilbert Wheeler, Inc. v. Enbridge Pipelines (E. Tex.), L.P., 449
S.W.3d 474 (Tex. 2014)). The Court disagrees. Despite Plaintiffs’ argument, in Porras, the
Texas Supreme Court was clear when it stated that the correct measure of damages for
permanent damage to land is the difference in market value immediately before and immediately
after the trespass. See Porras, 675 S.W.2d at 504. Further, in Gilbert Wheeler, the Texas
Supreme Court explained that a landowner may recover for the intrinsic value of trees on his
property, so long as the diminution in the fair market value of the land is essentially nominal. See
449 S.W.3d at 485 (emphasis added). The Texas Supreme Court expressly overruled opinions
that held otherwise. See id. Thus, Plaintiffs’ argument is meritless.

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Plaintiffs further argue the Court should follow a “more flexible” approach in
determining damages. See Dkt. 34 at 6. Specifically, Plaintiffs argue that the Texas Supreme
Court has allowed a more flexible analysis of damages when a plaintiff’s damages result not
from a single event, but from an ongoing condition. See Crosstex N. Tex. Pipeline, L.P. v.
Gardiner, 2016 WL 3483165, at *21 (Tex. June 24, 2016). However, the cases the Texas
Supreme Court refers to concern alleged damage caused by a public or private nuisance. See
Crosstex, 2016 WL 3483165 (permanent damage caused by continuous loud noise and
vibrations); Robinson Mach. Co. v. Davis, 689 S.W.2d 286 (Tex. App.—Waco 1985, writ ref’d
n.r.e.) (damage to a tractor due to metal chips in engine from defective repair); Sherman Gas &
Elec. Co. v. Belden, 123 S.W. 119 (Tex. 1909) (machinery from plant caused walls of plaintiffs’
home to shake and vibrate); Burns v. Lamb, 312 S.W.2d 730 (Tex. Civ. App.—Fort Worth 1958,
writ ref’d n.r.e.) (alleged damage caused by salt water escaping from oil lease adjacent to
plaintiff’s tract of land). Further, the Texas Supreme Court held the proper measure of damages
in these instances is the market value with and without the nuisance. See Crosstex, 2016 WL
3483165, at *21. Thus, Plaintiffs’ argument that the Court should follow a “more flexible”
approach in determining damages is misguided.
Plaintiffs finally argue Mr. McRoberts will also testify as to the reasonableness of the
decreased price, which is relevant to show that Plaintiffs did not fail to mitigate their damages.
See Dkt. 34 at 9. Defendant asserted that Plaintiffs failed to take reasonable steps and make
reasonable efforts to mitigate their damages, if any. See Dkt. 28 at 4. Thus, the Court finds Mr.
McRoberts’ report and opinions are relevant as to whether Plaintiffs failed to mitigate their
damages.

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Although Mr. McRoberts testified that the more accurate approach for analyzing damages
is to determine whether the diminution of the sales price between parties in an arms-length
transaction was reasonable, this is not the standard created by Texas law. Again, Texas courts are
clear that the proper determination for damages in a permanent trespass case is to analyze the
difference in market value in the property immediately before and after the injury. See Stevenson,
327 F.3d at 409 (citing Porras v. Craig, 675 S.W.2d 503, 504 (Tex. 1984)). Therefore, the Court
finds Mr. McRoberts’ report and opinions are not relevant as to the determination of damages.
However, the Court finds Mr. McRoberts’ report and opinions are relevant in the determination
of whether Plaintiffs mitigated their damages.
2. Reliability
Defendant argues Mr. McRoberts fails to meet the threshold level of reliability required
under Daubert. See Dkt. 30 at 6. Specifically, Defendant states Mr. McRoberts relies on case
studies performed by his firm, which were not provided to Defendant; therefore, Defendant
concludes Mr. McRoberts’ opinions and reports should be excluded because they are not based
on sufficient facts or data, not the product of reliable principles and methods, and he has not
applied his principles and methods to the facts of the case. See id. at 6-7. The Court questioned
the parties as to whether Plaintiffs have turned over the case studies to Defendant at the hearing.
Plaintiffs agreed to provide the case studies to Defendant; thus, the Court finds this issue is moot.
3. Legal Opinion of the 2001 Amendment
Defendant argues Mr. McRoberts improperly makes an opinion about the legal effect of
the 2001 Amendment because it is outside the scope of his expertise and not the subject of expert
testimony. See id. at 8. The Court finds Mr. McRoberts may not testify as to the legal effect of
the 2001 Amendment, but as his testimony requires, he may make assumptions about the 2001

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Amendment in order to support his ultimate opinion as to whether Plaintiffs failed to mitigate
their damages.
4. Inspection of the Property on September 13, 2016
Finally, Defendant argues Mr. McRoberts’ opinions based on a purported inspection of
the Property on September 13, 2016, are irrelevant. See id. at 9. Mr. McRoberts uses the
purported inspection of the Property to support his opinions in his report. See id. Because the
Court is allowing Mr. McRoberts’ report for the issue of mitigation of damages, the Court finds
Mr. McRoberts may use this opinion in support of his report. Thus, his opinions based on the
purported inspection of the Property on September 13, 2016, may be used to support his opinions
as to whether Plaintiffs mitigated their damages.
CONCLUSION
For the foregoing reasons, the Court finds Defendant’s motion (Dkt. 30) is GRANTED
in PART and DENIED in PART. The Court finds Defendant’s motion to exclude Mr.
McRoberts’ report and opinions as to measuring damages is GRANTED. However, the Court
finds Mr. McRoberts’ report and opinions are allowed as to determine whether Plaintiffs
mitigated their damages.
Further, the Court finds Defendant’s motion to exclude Mr. McRoberts’ report and
opinions based on reliability is DENIED. Plaintiffs are ORDERED to produce the case studies
Mr. McRoberts’ relied upon in making his report to Defendant within five (5) business days of
the entering of this order.
Further, the Court finds Defendant’s motion to exclude Mr. McRoberts’ opinion as to the
2001 Amendment is DENIED. Mr. McRoberts is directed to only make assumptions about the

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2001 Amendment in order to support his ultimate opinion as to whether Plaintiffs failed to
mitigate their damages.
Further, the Court finds Defendant’s motion to exclude Mr. McRoberts’ purported
inspection of the Property is DENIED. Mr. McRoberts’ report and opinions on the inspection of
the Property may be used in order to support his opinions as to whether Plaintiffs mitigated their
damages.
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Finally, Plaintiffs moved at the hearing for leave to amend Mr. McRoberts’ expert report.
Plaintiffs shall file a motion for leave to amend Mr. McRoberts’ expert report within seven (7)
days of the entering of this Order, if they wish to do so.
IT IS SO ORDERED.
SIGNED this 25th day of January, 2017.
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KIMBERLY C. PRIEST JOHNSON
UNITED STATES MAGISTRATE JUDGE

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