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A-W Land Co., LLC v. Anadarko E&P Company LP

United States District Court, D. Colorado

September 20, 2017

A-W LAND CO., LLC; VERNON JESSER; MARY JESSER; KENT J. McDANIEL; DEANNA R. McDANIEL; and MARVIN BAY and MILDRED BAY, Co-Trustees of the Bay Family Trust, Plaintiffs,
v.
ANADARKO E&P COMPANY LP f/k/a RME PETROLEUM COMPANY; and ANADARKO LAND CORPORATION f/k/a RME LAND CORP., Defendants.

          OPINION AND ORDER REGARDING ADMISSIBILITY OF RULE 702 OPINIONS

          Marcia S. Krieger, Chief United States District Judge.

         THIS MATTER comes before the Court pursuant to the parties' Joint Motion for Rule 702 Hearing (# 413), and the parties' evidentiary presentation and arguments at a Rule 702 Hearing conducted on September 19, 2017.

         BACKGROUND

         For purposes of the instant motion, the Plaintiffs are Marvin and Mildred Bay (“the Bays”). They are the owners of the surface estate in of two parcels of land in Weld County, Colorado, described as the “North Farm” and “South Farm.” The Bays use the property primarily for agricultural purposes, although they also have a residence on the property.

         The Defendants (“Anadarko”) hold the subsurface mineral estate underlying the property. Between 2006 and 2011, Anadarko[1] drilled a total of seven vertical gas wells on the Bays' property and installed roads, flow lines, and other appurtenances on the property in furtherance of those wells. The Bays acknowledge that Anadarko's possession of the mineral estate gives it some right to occupy the surface estate with the wells and associated structures, and concede that Anadarko was within its rights to drill two wells. But they contend that, by choosing to drill seven vertical wells instead of two multi-directional horizontal wells, Anadarko exceeded the scope of its rights to reasonably occupy the surface estate. As a consequence, the Bays allege that five of Anadarko's wells (and associated structures) trespass on the property under Colorado law. The Bays' claim will be proceeding to trial before a jury later this month.

         Consonant with this Court's instructions, the parties raised objections to certain anticipated expert testimony under Fed.R.Evid. 702 by means of a joint motion (# 413). In that motion, Anadarko challenged the adequacy of the foundation for 6 opinions as to the calculation of damages proffered by the Bays' expert witness, Charles Hegarty. The Bays objected to the sufficiency of the foundation for 3 opinions proffered by Anadarko's damages expert, David Hall.[2]

         On September 19, 2017, the Court held an evidentiary hearing on the Rule 702 motion. Before receiving evidence, the Court had colloquy with counsel about the issues to be addressed. They indicated that they wished to make argument and have the Court consider caselaw as to the appropriate measure of loss/damages in Colorado. This, the Court understood to raise a question of law -- ultimately how the jury would be instructed as to the measure of loss and calculation of a damage award for which the parties had submitted conflicting proposed instructions. The Court reasoned that the legal standard specifying how losses are measured and damages are calculated for trespass could impact whether a proffered opinion is relevant under Rule 702 as well as Rules 401 and 403. Thus, although the 702 Motion, itself, did not address relevance challenges, the Court advised the parties that relevance under Rule 702 as well as Rules 401 and 403 would be considered and the parties presented arguments as to both issues.

         On Anadarko's challenge to Mr. Hegarty's opinions, the Bays called Mr. Hegarty to testify, and Anadarko cross-examined him, but neither the Bays nor Anadarko presented any other witness or evidence with regard to the challenges made. As to the Bays' challenge to Mr. Hall, Anadarko presented Mr. Hall's testimony and the Bays' counsel cross-examined him, but again neither side presented any other evidence as to the challenge.

         Having now heard the evidence and considered the governing law, the Court rules as follows.

         ANALYSIS

         A. Rule 702

         Fed. R. Evid. 702 prescribes four foundational requirements for the admission of expert opinions: that the expert have sufficient qualifications to render the opinion, that the expert employ reliable principles and methodologies to formulate the opinion, that the expert obtain sufficient facts and data, and that the expert reliably apply the methodology to the facts and data. At a Rule 702 hearing, the proponent of expert testimony bears the burden of proving the foundational requirements of Rule 702 by a preponderance of the evidence. See United States v. Nacchio, 555 F.3d 1234 (10th Cir. 2009); Ralston v. Smith & Nephew Richards, Inc., 275 F.3d 965, 970 n.4 (10th Cir. 2001); Daubert v. Merrell Dow Pharma., 509 U.S. 579, 592 n.10 (1993); Fed.R.Evid. 702 advisory committee's note. The proponent of the opinion need not prove that the expert is undisputably correct, only that the conclusion reached by the witness is scientifically sound and that the opinion is based on facts which sufficiently satisfy Rule 702's reliability requirements. Mitchell v. Gencorp Inc., 165 F.3d 778, 781 (10th Cir. 1999). Thus, the Court's focus is generally not on the precise conclusions reached by the expert, but instead upon the expert's qualifications, information relied upon and the methodology employed in reaching those conclusions. See Daubert, 509 U.S. at 595; see also Dodge v. Cotter Corp., 328 F.3d 1212, 1222 (10th Cir. 2003).

         Generally speaking, a successful Rule 702 challenge requires the party asserting it - the party opposing the admission of the opinion - to support the challenge with evidence obtained from someone other than the challenged expert. This is because few proffered experts will take the stand and admit, even under the most withering of cross-examination, that their methodologies are unreliable, that they are not qualified to render the opinion offered, that they did not reliably follow the methodology that they endorse, or that they did not consider the sufficient facts and data. Usually, it is necessary for the opponent of the opinion to call its own witness to establish, for example, that the proponent's methodology is not generally recognized in the field, that it has inherent flaws, that it was not properly applied, etc.[3]

         Here, neither side called a witness to contradict the other sides' proffered expert's testimony, leaving assertions by the witness offering the opinion unrebutted. Because the party who objected to the foundation of particular opinions offered no evidence, the preponderance of the evidence (indeed the only evidence) is found in the testimony of the witness who offered the opinion. As to all but one of the proffered opinions, the preponderance of the evidence supports a finding of adequate foundation, and consequently the objections are overruled.

         Nevertheless, to the extent more detailed factual findings are necessary, the Court finds as follows:

• Mr. Hegarty's Opinion 1 was: “The value of the Plaintiff's properties as of July 21, 2017 is $11, 000 per acre or $2, 954, 000.” The objection was that Mr. Hegarty did not reliably apply an otherwise reliable methodology. Mr. Hegarty derived this opinion be performing a typical real estate appraisal, based on 5 comparable sales. Although there was cross-examination as to differences between the parcels reflected in the comparable sales and the Bays' property, the only evidence as to what adjustments should have been made to account for such differences came from Mr. Hegarty, who claimed that he made all appropriate adjustments. There was no evidence from a witness skilled in application of the comparable sale methodology that Mr. Hegarty had not applied it correctly. As a result, the objection is overruled. This does not mean that the critique apparent in the cross-examination would not be appropriate if the opinion were admitted at trial, but in that context it goes to weight, not admissibility.
• Mr. Hegarty's Opinion 2 was: “Based on the estimated value of a temporary easement over the entirety of the Plaintiff's properties, the resulting loss is $1, 440, 000.” The objections were that the opinion was not based on sufficient facts and data and the opinion was not a product of a reliable methodology. The temporary easement calculation was one of three methodologies used by Mr. Hegarty to quantify the Bays' loss of use of property as a measure of damages. Mr. Hegarty testified that he used this methodology because it was akin to what he used in inverse condemnation cases - to reflect the value of the Bays not being able to use their land due to the presence of 5 wells and support structures. Mr. Hegarty's contention that the use of an inverse condemnation model was an appropriate one to use in this case was unrebutted. There is, at least conceptually, similarities between the instant case and inverse condemnation cases, such that the Court cannot say that an inverse condemnation valuation model is fundamentally inappropriate here. Although Anadarko had criticisms of certain findings and assumptions Mr. Hegarty made in implementing the model, those criticisms go to the weight that the factfinder should give that opinion, not to its admissibility. As to Anadarko's challenge to sufficiency of facts and data, that objection refers to a quantum of facts, not the quality of facts. See U.S. v. Lauder, 409 F.3d 1254, 1264 n.5 (10th Cir 2005). Anadarko presented no evidence of how many facts should be considered in applying an inverse condemnation model. Thus, both objections are overruled.
• Mr. Hegarty's Opinion 3 was: “Based on the amount operators pay to landowners for permission to construct horizontal drilling pads and related production facilities, the resulting loss is $554, 750.” This was Mr. Hegarty's second method for quantifying the Bays' loss of use due to the 5 trespassing wells. The challenges were lack of a reliable methodology and insufficient facts and data. With regard to this methodology, Mr. Hegarty chose approximately 22 acres as the affected property, based on having walked the property, observing structures created by Anadarko, and taking measurements. He called upon his knowledge of what other oil and gas developers paid to other landowners in the region. And he used a series of calculations to convert those payments to a per-acre value that he applied to his computation of the affected area here. As with the prior opinions, cross examination was vigorous focusing on the viability of horizontal drilling, the improper inclusion of both permitted and trespassing wells and the like, but no evidence was presented that the use of a comparable rental rate was not a reliable methodology nor that there was an amount of facts and data that should have been considered but was not. Accordingly, the objections are overruled.
• Mr. Hegarty's Opinion 4 was: “Applying the compensation paid by Saddlehorn Pipeline Company to the Bays for a right of way and easement for a pipeline in 2016 to the 22 impacted acres, the reasonable rental rate would be $605, 000.” Again the objections were insufficient facts and data and lack of a reliable methodology. Mr. Hegarty explained that he viewed the pipeline lease between the Bays and Saddlehorn, derived a per-acre value of that lease, and applied it to the 22 acres impacted by the wells. The cross-examination overlapped that for opinion #3, with the same result. Absent evidence showing that the methodology used (application of a pipeline lease rental rate to ...

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