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United States v. 9.345 Acres of Land

United States District Court, M.D. Louisiana

April 3, 2017

UNITED STATES OF AMERICA
v.
9.345 ACRES OF LAND, MORE OR LESS, SITUATED IN IBERVILLE PARISH, STATE OF LOUISIANA, AND SIDNEY VINCENT ARBOUR, III, ET AL

          RULING

          JAMES J. BKADY UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Defendants' Rule 71.1(h) Motion to Exclude Certain Prejudicial Post Date of Taking Evidence (Doc. 366) brought by the Defendants. The Plaintiff, the Government, filed an Opposition (Doc. 378), and the Defendants filed a Reply (Doc. 383). Oral argument is unnecessary. The Court's jurisdiction exists pursuant to 28 U.S.C. § 1358. For the reasons stated herein, the Defendants' Motion is GRANTED.

         I. Background

         On November 30, 2011 (“the date of the taking” or “the taking date”), the United States acquired Cavern 102 of the Bayou Choctaw Salt Dome (“Salt Dome”), in Iberville Parish, for the Strategic Petroleum Reserve (“SPR”). The SPR maintains crude oil reserves for national emergencies and security.

         The United States acquired Cavern 102 to mitigate the loss of Salt Dome Cavern 20, which the Department of Energy had determined presented a risk of environmental harm if it remained in operation. On the date of the taking, Cavern 102 was owned by numerous individuals and leased to others (collectively, “Defendants”). The Department of Energy owns several of the caverns in the Salt Dome while the Defendants own and operate other caverns.

         This case is set to have a jury trial in late 2017. The sole issue for the jury to determine is the just compensation that must be paid to the Defendants for the condemnation of Cavern 102. The jury must award the Defendants the value of the property as of the date of the taking.[1] The value of the property can be determined by its market value-that is, what a willing buyer would have paid to a willing seller for the land as of the taking date.[2] “Just compensation is not limited to the value of the property as it is presently used, but includes any additional market value it may command because of prospects for developing it to the highest and best use for which it is suitable.”[3] Even when considering a non-existent, future highest and best use, a proper market valuation only considers what the reasonable buyer and seller would have considered on the date of the taking.[4]

         In this case, both of Defendants' valuation experts have asserted that the highest and best use for Cavern 102 is for natural gas storage even though Cavern 102 has never been used for natural gas storage.[5] Prior to the taking, Cavern 102 stored liquid ethane.[6] Now owned by the United States, Cavern 102 currently stores crude oil as part of the SPR.[7]

         Due to the fact that Defendants' experts, Boggs and Truax, seek to value Cavern 102 based on the hypothetical use as a natural gas storage area, evidence about the natural gas storage market is relevant to determining what a willing buyer would have paid a willing seller for Cavern 102 on the date of the taking for use of that cavern as a natural gas storage facility.

         During the course of discovery, the Defendants learned that the Government intends to rely on information about the natural gas storage market and the business decisions of the Defendants that occurred after the date of the taking.[8] The Defendants now move to exclude all of this post-taking evidence, arguing that what actually happened in the natural gas storage market and in the Defendants' business in the years after the date of the taking up to the time of trial, cannot and should not have any bearing on a proper market valuation in this case because they are not facts that a willing buyer and willing seller would have been able to know and consider on the date of the taking. The Government opposes this argument. Although the Government agrees that the property must be valued as of the date of the taking, it argues that this post-taking evidence is admissible to confirm one of their expert's primary arguments-that the market for natural gas storage fundamentally and negatively had changed prior to the date of the taking, and market participants expected this decline to continue for the long-term. In effect, the Government argues that it should be able to cross examine Defendants' experts about what actually occurred to show how those experts' forecasts about the natural gas storage market were unreasonable and highly speculative.

         II. Standard

         In eminent domain cases, a district court has a broader gatekeeping function than it does in other civil cases. Federal Rule of Civil Procedure 71.1 governs “proceedings to condemn real and personal property by eminent domain.” In a federal condemnation case tried to a jury, a court must decide “all issues” other than the amount of compensation to be awarded.[9] This Rule “discloses a clear intent to give the district judge a role in condemnation proceedings much broader than he occupies in a conventional jury trial.”[10]

         III. Law & Analysis

         This Motion asks the Court to answer the following question-is the fact that the natural gas storage market sharply declined after the date of the taking admissible to show that it was reasonable to believe beforehand that such a downturn was likely? Stated another way, should the Government be allowed to introduce evidence about a failing natural gas storage market after 2011 in order to corroborate their experts' opinions that prior to the date of the taking, November 30, 2011, market participants expected this decline to occur?

         For the reasons that follow, the Court finds that this evidence is relevant. The post-taking evidence has a tendency to make the Government's factual assertions-that market participants understood that there was a steep decline at the date of the taking in the gas storage market and that this decline would not reverse-more probable than they would be without this evidence. However, although relevant, the Court finds that this post-taking evidence is substantially more prejudicial than probative and therefore shall be excluded.

         A. Ruling on this Motion is Not Premature.

         As a preliminary matter, this Court first determines whether ruling on this Motion would be premature. In their Opposition, the Government argues that the Defendants have failed to provide the Court with any of the documents or deposition testimony they seek to exclude. The Government asserts that courts should not issue advisory Rule 403 opinions months before trial and before all of the evidence is known.

         The Motion is ripe for decision for two reasons. First, the Court has sufficient, specific examples of post-taking evidence to determine whether post-taking evidence should be excluded generally. Second, it is proper to determine this issue now as the Court has a broad gatekeeping function in condemnation cases.

         While the Government asserts that it does not have post-taking evidence from the Defendants after the date of the taking because Defendants refuse to produce this evidence, the Government provides the Court with publicly available information that it intends to rely on about events that occurred after the date of the taking. For example, the Government intends to rely on information that in 2014 the Defendants requested a minimum bid of $.02 for storage space in natural gas storage caverns at the Bayou Choctaw Salt Dome to rebut the Defendants' assertions that they could have filled Cavern 102 at $.171.[11] Another example of evidence that the Government intends to rely on is a Federal Energy Regulatory Commission filing from 2014 in which the Defendants told FERC they wanted to close one of their caverns because “[t]he capacity and deliverability associated with [this cavern] is no longer needed by the natural gas storage market [and] [d]emand for Gulf Coast natural gas storage capacity is not anticipated to change over the next several years.”[12]

         Second, cognizant of its broad gatekeeping role in a condemnation proceeding tried to a jury, the Court agrees with the Defendants and finds that this Motion is ripe for decision and will help focus the issues for a jury.[13] Despite the Government's arguments, this Court does not need to take a document by document analysis to determine whether the post-taking evidence is admissible. In fact, the available information supplied to the Court allows the Court to undertake the necessary analysis to determine whether it should exclude all post-taking evidence related to the gas storage market decline.

         B. The Post-Taking Evidence is Relevant.

         First, Defendants argue that exclusion of all post-taking evidence is appropriate because information concerning events that occurred after the condemnation could not have possibly influenced the conduct of a willing buyer and seller on the date of the taking, and thus, such post-taking events can never be logically nor legally relevant in determining the price that a willing buyer and seller would have agreed upon on the date of the taking. The Government opposes this argument, asserting that the Defendants' interpretation of legal relevance is much too narrow. The Government points to Federal Rule of Evidence 401 which states that evidence is “relevant” if it “has any tendency to make a fact more or less probable than it would be without the evidence.” The Government states that the post-taking evidence about a depressed natural gas storage market is relevant because it “has a tendency to make the United States' facts-including that market participants understood that there was a steep market decline at the date of the taking and that this decline would not reverse in the reasonably near future-more probable than they would be without the evidence.”[14]

         The Court finds the case Mich. Dept. of Transp. v. Haggerty Corridor Partners Ltd. P'ship, a case discussed by both parties, instructive on the issue of whether the post-taking evidence is relevant to a determination of just compensation.[15] In that case, the question before the Michigan Supreme Court was whether “evidence of rezoning after a taking is admissible to demonstrate that, when the taking occurred, a reasonable possibility of rezoning existed.”[16]

         Of the seven Justices on the Michigan Court, four Justices determined that evidence of the post-taking rezoning should have been excluded. Three of those Justices based their holding on the fact that such post-taking evidence was not relevant, while one of the Justices who voted to exclude the evidence, based her holding on a finding that the evidence was relevant but its probative value was substantially outweighed by its prejudicial effect. The other three found that the evidence was relevant and should have been admitted.

         For purposes of this Motion, the Court finds the dueling opinions of Justice Young and Justice Kelly helpful. In the lead opinion, Justice Young explained why post-taking ...


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