Plaintiff Old Gate Partners, LLC (“Old Gate”) alleged that Paddock is liable for contamination of a property (“the Property”) currently owned by Old Gate. Paddock retained Michael P. Hedden to provide valuation opinions of the Property’s “highest and best use and market value.”
As a part of his analysis, he utilized an appraisal technique known as the sales comparison approach. Based on this approach, Hedden concluded that the Property’s market value was not less than $9 million as of May 2017 and not less than $10.37 million as of April 2023.
Old Gate sought to exclude Hedden’s testimony on the grounds the he is unqualified
On November 29, 2023, Old Gate filed its first motion to preclude Hedden’s testimony. Old Gate sought to exclude Hedden’s testimony on the grounds the he is unqualified, that certain of his proffered opinions are irrelevant, and that his analysis is unreliable.
The Court granted the motion in part and denied it in part. Specifically, the Court rejected challenges to Hedden’s qualifications, and it excluded as irrelevant his opinions about Milford’s zoning intentions and entrepreneurial profit.
The Court also excluded as unreliable Hedden’s valuation opinions of the Property. The Court concluded that his sales comparison analysis relied on “unclear, unsupported rationales”, and that Hedden failed to disclose “underlying data sufficient to replicate his analysis”.
Hedden’s report provided “no discernable methodology” sufficient for the Court to understand how Hedden determined adjusted sale prices
Further, the Court also found that Hedden had categorized certain adjustment factors using qualitative descriptors like “superior” or “inferior”, without ascribing quantitative dollar amounts or percentage adjustments. As a result, the Court reasoned, Hedden’s report provided “no discernable methodology” sufficient for the Court to understand how Hedden determined adjusted sale prices, and, ultimately, his 2017 and 2023 valuations.
However, because Hedden could potentially clarify his methodology, the Court granted the Motion as to the valuation opinions without prejudice to Hedden filing an amended report that corrects the shortcomings identified by the Court.
On June 19, 2024, Paddock filed an expert report supplement from Hedden. On August 13, 2024, Old Gate filed its second motion to exclude Hedden’s testimony.
Old Gate argued that the supplement is insufficient to correct the infirmities identified by the Court in its prior Ruling, and that Hedden’s 2017 and 2023 valuation opinions should remain excluded.
Real Estate Appraisal Expert Witness
Michael P. Hedden has over 43 years of real estate appraisal, valuation and consulting experience. Hedden is a Managing Director and, in this role, specializes in providing valuation, litigation support, and expert testimony services as a knowledgeable real estate professional in all aspects of market analysis and valuation of real property. Michael has experience in the appraisal of industrial, commercial, residential, and special purpose property including hospitality, hospital, and healthcare facilities.
Discussion by the Court
In its prior Ruling, the Court provided leave for Hedden to file an amended report that explained, “with reasonable clarity and precision, the methodology that he used when he made his adjustments.” In his expert report supplement, Hedden included updated sales adjustment grids for his 2017 and 2023 valuations. Under the heading of “Cumulative Adjusted Price,” these grids replace the prior “Superior” and “Inferior” designations of the original report with percentage value adjustments. It appears to the Court that these percentage value adjustments are only at intervals of 5 percent, either 5 percent, 10 percent, 15 percent, or a dash, indicating no adjustment. In his narrative explanations for how he arrived at these intervals, Hedden largely relied on “his experience and professional judgment.”
The Plaintiff has raised concerns about this disclosed methodology. The Court shares these concerns about whether Hedden’s selected numerical adjustments are “based on sufficient facts or data,” or whether these adjustments are subjective, speculative, or arbitrary.
In the Court’s view, this raises serious concerns about whether Hedden’s experience and professional judgment can fill the gap between qualitative observations and quantitative adjustments to property valuations.
However, because the parties are scheduled for a bench trial, the Court “has considerable discretion in admitting the proffered testimony.”
The Court chooses to exercise that discretion here and will admit Hedden’s valuation opinions. In the Court’s view, Hedden’s supplemental report is sufficient to render his methodology discernable and understandable to the Court.
Held
The Court denied the Plaintiff’s second motion to preclude the testimony of Michael P. Hedden.
Key Takeaway:
Rather than delaying the case through a detailed scrutiny of Hedden’s property comparison adjustments, the Court will reserve judgment and decide “after the evidence is presented whether it deserves to be credited by meeting the requirements of Daubert and its progeny.”
Old Gate is free to vigorously cross examine Hedden on the reliability of his valuations. Additionally, Old Gate may raise arguments at a later stage that Hedden’s testimony should be disregarded by the trier of fact because it fails to meet the threshold for admissibility under Daubert.
Case Details:
| Case Caption: | Old Gate Partners, Llc V. Paddock Enterprises, LLC |
| Docket Number: | 3:18cv1657 |
| Court: | United States District Court for the District of Connecticut |
| Order Date: | November 22, 2024 |
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