On August 16, 2021 (“Vesting Date”), the Plaintiff, the National Railroad Passenger Corporation (“Amtrak”), acquired the property at 260-270 Twelfth Avenue, New York, New York (New York County Block 675, Lot 1), through its power of eminent domain, as codified in 49 U.S.C. § 24311(a)(1), from the Defendant, 260 Twelfth Avenue Holdings, LLC. The acquisition was deemed necessary for Amtrak’s Hudson Tunnel Project, a part of the Gateway Project, involving the construction of two new rail tunnels under the Hudson River from New Jersey to New York.
Amtrak claimed that it had already paid the Defendant $363,000,000 in principal as just compensation for the Property, representing the fair market value of the Property on the Vesting Date. This value was determined based on what a willing buyer would pay a willing seller at the time of the taking, taking into account the impact of the Covid-19 pandemic on the New York City real estate market. Amtrak, having made the just compensation payment, believed that the Defendant was not entitled to any additional compensation.
On the other hand, the Defendant sought just compensation for Amtrak’s eminent domain taking of the property on August 16, 2021, in accordance with the Fifth Amendment to the United States Constitution, 49 U.S.C. § 24311, and the New York Constitution, N.Y. Const. art. I § 7. Specifically, the Defendant sought $247,000,000, representing the difference between the value of the Property on August 16, 2021, excluding the negative impact of the COVID-19 pandemic ($610,000,000), and the amount Amtrak had paid the Defendant for the Property to date ($363,000,000), excluding interest.
To sum it up, the parties disputed whether the calculation of just compensation should consider the effect of the COVID-19 pandemic on the New York real estate market as of the Vesting Date. Amtrak urged the Court to restrict its analysis to the market value on the Vesting Date, while Defendants (“260 Twelfth Avenue”) contended that just compensation requires valuing the Property excluding the effect of the pandemic on market value.
Plaintiff filed a motion to exclude any evidence or argument concerning the value of the condemned property (“Property”) on any date other than the date of taking (“Vesting Date”), and to preclude Defendants’ appraiser, Marc Nakleh from providing his opinion of the market value of the Property on any date other than the Vesting Date.
Real Estate Appraisal Expert Witness
Marc Nakleh started his real estate career in 2003 working as a residential sales agent focusing on investors looking to purchase property adjacent to the University of Florida. After two years, Nakleh made the switch from residential real estate to commercial real estate. He received his Master of Science in Real Estate degree at the University of Florida in 2006.
Nakleh joined Cushman & Wakefield in September 2006. He was promoted to Associate Director in April 2009, Director in July 2010, Senior Director in April 2013, and further promoted to Executive Director in April 2018. Appraisal assignments have included office buildings, ground leases, vacant land, self-storage facilities, shopping centers, apartments, leaseholds, industrial properties and easement valuations. Nakleh’ s practice focuses on arbitration, litigation, and other complex assignments.
Discussion by the Court
The Court determined that in accordance with both federal and state law, it was mandated to establish the award of just compensation for the Property’s market value solely based on the Vesting Date. Any evidence regarding the property’s value on any other date was deemed irrelevant, and even if minimally relevant, the Court concluded that such information would be outweighed by the risk of causing unnecessary delays. It is black letter law that just compensation is “what a willing buyer would pay in cash to a willing seller at the time of the taking.” The Fifth Amendment to the United States Constitution precludes the taking of private property “without just compensation.” Accordingly, the Court must determine an amount of compensation that is “‘just’ both to an owner whose property is taken and to the public that must” foot the bill.
The Court examined the principle that deviation from market value at the time of taking to determine just compensation is permissible only in specific circumstances, such as when market value is challenging to ascertain or would result in manifest injustice to the owner or the public. In the case of 260 Twelfth Avenue, the argument was made that valuing the property at a time when the pandemic had reduced the value of real estate in New York City allowed Amtrak to unfairly benefit at the property owner’s expense.
The Court emphasized that the risk of “manifest injustice” would justify departing from the market value on the Vesting Date only if the owner demonstrated special conditions and hardships directly applicable to it. Despite the shocks experienced by the New York real estate market due to the pandemic, 260 Twelfth Avenue failed to show that it bore an unfair and disproportionate burden of the pandemic’s effects.
The Court highlighted that market value, defined as the price at which property would change hands between a willing buyer and a willing seller, considering relevant facts, must be the primary measure of just compensation at the time of taking. The impact of the COVID-19 pandemic was deemed a relevant factor, and the Court acknowledged that market fluctuations, whether overcorrections or undercorrections, are inherent in the functioning of an efficient market.
Addressing 260 Twelfth Avenue’s reliance on Great Depression-era cases, the Court deemed them irrelevant as the New York real estate market did not collapse entirely during the pandemic, making market value at the time of taking ascertainable. Additionally, the absence of a legislative directive from the New York state legislature to depart from the general rule further distinguished the current situation from the circumstances during the Great Depression. Ultimately, the Court concluded that 260 Twelfth Avenue did not suffer manifest injustice and had no basis to deviate from the established principles regarding just compensation.
As for Amtrak’s Daubert motion directed toward the portions of Nakleh’s opinion relating to the value of the Property on a date other than the Vesting Date, the Court found that evidence regarding the Property’s value on a date other than the Vesting Date was irrelevant, expert testimony regarding the same was inadmissible pursuant to Federal Rule of Evidence 702.
Held
The Court granted Amtrak’s motion in limine to exclude evidence, testimony, or argument concerning the Property’s value on any date other than the Vesting Date, and its Daubert motion directed to Nakleh’s opinion regarding the same.
The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways:
The Court, guided by federal and state law, insisted on determining just compensation for the property solely based on the Vesting Date, deeming evidence of the property’s value on other dates irrelevant. Market value, defined as the price at the time of taking between a willing buyer and seller, was established as the primary measure of just compensation. While acknowledging the impact of the COVID-19 pandemic on market value, the Court emphasized that the property owner failed to show an unfair burden due to the pandemic. Arguments relying on Great Depression-era cases were dismissed as irrelevant, and a legislative directive to deviate from market value was absent. In response to Amtrak’s Daubert motion filed against Marc Nakleh, the Court found evidence regarding the property’s value on dates other than the Vesting Date irrelevant and thus inadmissible, granting the Daubert motion against those portions of Nakleh’s testimony which covered the Property’s value on any date other than the Vesting Date.
Case Details
| Case Caption | National Railroad Passenger Corporation (Amtrak) V. 78,441 Square Feet More Or Less Of Land And Improvements |
| Docket Number | 1:21cv5810 |
| Court | United States District Court, New York Southern |
| Citation | 2024 U.S. Dist. LEXIS 17915 |
| Order Date | February 1, 2024 |
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