Direct Examination Of The Valuation Witness (With Model Examination) James D. Masterman Fair market value isn t a marketplace fact it s an opinion. To establish it, you need to conduct a rigorous examination of your expert witness. James D. Masterman a partner with Greenberg Traurig in Boston, has a broad range of experience in eminent domain and real estate valuation litigation, including tax proceedings and lease arbitrations, and in the litigation of land use and property rights issues. Jim served as Chair of the American Bar Association s Committee of Condemnation, Zoning and Land Use Litigation and is a frequent lecturer and writer on eminent domain and valuation, his articles appearing in many legal and trade publications. He can be reached at mastermanj@gtlaw.com. The author wishes to thank Warren C. Herlong, Jr., a partner with Helmsing Leach Herlong Newman & Rouse PC, in Moblie, Alabama, for his insights, encouragement, suggestions, and guidance in developing the content for this article. The author also wishes to thank J. Casey Pipes, a partner with Helmsing Leach Herlong Newman & Rouse PC, and Russell P. Plato, an associate with Greenberg Traurig in Boston, for their invaluable assistance in the preparation of this article. EVIDENCE RELATING TO fair market value comes only from several basic sources. Because a sale, a lease, actual cost, existing zoning are all facts in the marketplace that can be proved without a witness, documentary evidence relating to value (e.g., deeds, plans, public records, completed contracts for the purchase of the property, etc.) is common in eminent domain litigation. In states where a view of the property is permitted, the view itself may be evidence of value or it may be taken into consideration by the jury in weighing other evidence of value. Predicate witnesses, both lay and opinion, often are instrumental to a persuasive proof of value. (The term predicate witness refers to those witnesses called to form part of the foundation for a testimonial opinion of value, usually an appraiser s. The most common predicate witnesses are engineers, architects, land planners, cost estimators and the like.) Each is an integral part of the comprehensive direct case. The Practical Real Estate Lawyer 29
30 The Practical Real Estate Lawyer March 2013 Fair market value, however, is not a fact in the marketplace. It cannot be proved by a document. Fair market value is an opinion. In virtually every eminent domain case, therefore, effective proof of value requires the introduction of testimonial opinion of value. Whether the proponent of value is the taking authority or the owner, the foundation of every successful verdict is the direct case and the bedrock of every effective direct is the testimonial opinion of value. This article explores the presentation of testimonial opinion of value. Additionally, it should also serve as a guide to preparation of both the value opinion witness and to the trial lawyer as well. A prepared lawyer is the key to a prepared witness; one without the other is the recipe for a disappointing result. As was said by a prominent forensic expert witness, The witness is like a musician in the orchestra and the trial lawyer, the conductor. No matter how talented a virtuoso, it is the lawyer s responsibility to ensure that the musician plays well. The Goals and Objectives of Valuation Opinion Testimony The goal of the lawyer is to have every witness present testimony in a clear, concise, and effective manner. In order to ensure that goal is met, effective direct testimony requires the witness to have answered six fundamental questions by its conclusion. These fundamental six are not to be asked of the witness, but they frame the purpose of the direct and what the direct is expected to achieve. If the proponent of value fails to elicit from the witness an answer to any one of them effectively, the entire direct case is weakened. Presented here with reference to the expert appraiser, the following essential questions apply to every witness expected to testify as to value: What opinions has the appraiser formed? What did the appraiser do to form and develop the opinions expressed? Why did the appraiser decide to use the methodology employed? How did the appraiser conduct the analysis in developing the opinion? What are the results of the analysis (e.g., information, calculations, and adjustments)? How does the analysis done by the appraiser support the opinion? With a thorough presentation of the opinion and the basis for that opinion on direct, the crossexamination has less ammunition, is more constrained, and may be left only with offering alternative theories rather than correcting errors and pointing out critical, underpinning omissions. A goal of direct examination is to mitigate exposure to destructive cross-examination. A thorough direct also minimizes the necessity for extensive redirect in order to rehabilitate a flailing witness. There is no better redirect than no questions, as if the cross had no or little material, negative impact. ESTABLISHING THE QUALIFICATIONS OF THE VALUATION WITNESS The first objective of direct examination is establishing the witness s qualifications to testify to value. See Fed. R. Evid. 702 and Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993). Often trivialized and seldom more than a limited preface to the real story, qualifications are a critical foundation for effective direct testimony and persuasive opinion. Because few jurors may have ever heard of a real estate appraiser, or be familiar with real estate valuation, a quick narration of qualifications will do little to teach the jury that certain individuals have dedicated their professional lives to understanding the dynamics of the real estate market. In presenting the qualifications, therefore, resist the offer, albeit likely presented in a gracious manner, by the opposing party to stipulate to your expert s qualifications. Also, resist the urge either your own or the presiding judge s to have the qualifications stated, as one trial judge required, compendiously,
Direct Examination 31 meaning a recitation of qualifications by the witness without being prompted by a direct examination. Treat qualifications as an opportunity not only to teach the jury about appraisers and appraising but also to introduce your expert witness to the jury as someone who is trustworthy. Artful presentation of the experienced individual or appraiser s qualifications answers the question asked by all finders of fact: Why should I listen and believe what this person has to say? With respect to experts in a jury trial, the judge is the gatekeeper of the evidence and must make a threshold determination whether the proffered witness will be permitted to offer an opinion. Experts are subject to voir dire on their qualifications alone so a thorough presentation of the witness s qualifications is not only instrumental to a persuasive proof of value; it is an evidentiary predicate to admissibility. The trial judge has wide discretion on whether a witness is sufficiently qualified to offer an opinion, discretion which is seldom disturbed. As has been frequently held, there is no prescribed formula for the admission of expert testimony. All that is necessary is that the subject matter be one about which special knowledge beyond that possessed by the ordinary juror will aid the jury in their deliberations, and that a person possessing such knowledge will give opinions pertinent to the issues of the case founded upon facts which either are uncontested or could reasonably be found upon other evidence. It is sufficient that the witness whose opinion is being offered has the requisite specialized knowledge (whether from education, training, practical experience, or some combination) to apply to the particular facts of the case and sufficient knowledge of the particular facts, through personal investigation or a hypothetical question, to bring his or her specialized knowledge to bear. In the federal court, 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. The Advisory Committee to Federal Rule 702, noted: The [new Federal] Rule is broadly phrased. The fields of knowledge which may be drawn upon are not limited merely to be scientific and technical but extend to all specialized knowledge. Similarly, the expert is viewed, not in a narrow sense, but as a person qualified by knowledge, skill, experience, training, or education. Thus within the scope of the rule are not only experts in the strictest sense of the word, e.g., physicians, physicists, and architects, but also the large group sometimes called skilled witnesses, such as bankers or land owners testifying to land values. Practice Tip When questioning the expert about his or her training and education, be sure to elicit all of the relevant information and detail to demonstrate the depth of the expert s background. For example, interchanges like the following are common: Q: What kind of training or education have you had? A: After college, I completed all of the required courses offered by the Appraisal Institute and earned the designation MAI. Although the question is broad and the answer is accurate, the jury is left without the information it would need to understand what the Appraisal Institute is and how significant the membership, MAI designation is in the industry. To avoid this gap, use this as another opportunity to amplify the credentialed expert:
32 The Practical Real Estate Lawyer March 2013 What is the Appraisal Institute? What are the designations in the industry? What does it mean to hold a particular designation? Are designations different from state licensure? What is the process to earn a designation from the Appraisal Institute? Who are the clients that require a designation? What are the courses? How many weeks are these courses? Do the courses require a written exam to pass? Where is the main office? Are there chapters? How many appraisers in the local chapter? What does the local chapter do (e.g. continuing education, etc.)? Has the appraiser held a position in the local chapter? Nationally? Qualification Checklist Although questioning regarding qualifications must be tailored to the specific case and expert, below is a sample list of areas of inquiry: Address of every office and affiliated office of the appraiser; Number of employees who are appraisers or doing appraisal work; Non-appraisal education, including degrees earned; Appraisal education; designation(s) earned; current status of designation(s); Last appraisal course taken (where? when?); Current licensing; reprimands, and censures; Number of years in appraisal or real estate profession; jobs and positions held; Prior occupations; Other professional memberships or affiliations; Real estate brokerage; Membership of a Board of Trustees or Directors (e.g., banks); Honors received, fellowships earned; Books, articles, and other publications authored or contributed to; Appraisal courses taught; lectures; continuing education; Reported decisions in which appraiser s name is mentioned; Other cases in which expert has testified; Newspaper stories in which appraiser s name is mentioned; Types of property appraised; Experience in appraising all types of property; Experience in appraising the type of property subject of the litigation; List of clients: corporate, individual, government, conservation groups, high profile clients, clients with multiple appraisal assignments, banks, developers; Appraisal assignments for condemning authorities; Projects worked for condemning authorities and projects for which bids were submitted to do work, but were rejected or job not awarded; Appraisal assignments for condemnees; Appraisal assignments for taxing authorities/ taxpayers; Appraisals in same city/town as the subject property; Prior appraisals of the subject property; Previously qualified to give expert testimony: state trial court, U.S. District Court, agencies, boards, commissions;
Direct Examination 33 Transcripts of prior testimony, including deposition transcripts, particularly for assignments in same city or town, on the same project, contemporaneous with date of value, or of similar properties; Prior and existing ownership of real estate, individually and in trust; Ownership of property in area of subject; Descriptions of practice and experience contained in internal brochures and on the appraiser s website. USPAP Though fair market value is an opinion, and if qualified, any witness can offer an opinion, when working with an appraiser, an explanation of USPAP should be a part of the direct. The Uniform Standards of Professional Appraisal Practice ( USPAP ), differentiate the appraiser from the lay witness. Adherence to USPAP also may distinguish your appraiser s opinion of value from that being offered by the other side and open a fertile area for cross should an opinion deviate from what is accepted as a professional standard. The problem with USPAP is like every other regulatory scheme: you and the appraiser will know that USPAP are the profession s standards, how they work and are applied to the property and assignment at issue, but a judge may not, and a jury likely will not. The appraiser and counsel must decide, in each case, whether to introduce testimony regarding USPAP, and if so, to what extent. If it is decided that USPAP is a part of the direct, counsel must understand the relevant USPAP standards and that the expert s work product is compliant with them. A brief but targeted series of questions explaining USPAP, its use, the nature of the standards and the reason for them, casts the appraisal opinion in a more, albeit inexact, scientific realm. One approach to introducing USPAP is a line of questions regarding reporting of appraisal opinion. Because reporting of appraisal opinion is integral to the appraisal profession, when establishing qualifications you may also want to ask the expert a series of questions about reporting, what an appraisal report is and how it is used. This leads seamlessly into a USPAP discussion: What is an appraisal or an appraisal report? What does it include? Are there any requirements for an appraisal report? Are there standards of appraisal reporting? What is USPAP? Do you have a copy of the applicable standards with you today? Are there different types of reporting appraisal opinions? Did you prepare an appraisal report for this assignment? Does the report prepared comply with USPAP? Did you review the report in preparation for your testimony? To whom was the report submitted? Will you be referring to the report during your testimony? Did you sign the report? Did you include a certification of value? What does that mean? APPRAISAL ASSIGNMENT After establishing the witness s qualifications, a brief discussion of