VANCE WILHITE, ET AL. v. ROCKWELL INTERNATIONAL CORPORATION
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2000-SC-0142-D
VANCE WILHITE, ET AL.
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APPELLANT
V
V.
ON REVIEW FROM THE COURT OF APPEALS
1997-CA-000188-MR
LOGAN COURT NO. 93-Cl-000158
ROCKWELL INTERNATIONAL CORPORATION
APPELLEES
OPINION OF THE COURT BY CHIEF JUSTICE LAMBERT
AFFIRMING IN PART. REVERSING IN PART, AND REMANDING
Evidence presented at trial established that Rockwell negligently or
intentionally permitted the escape of PCBs into Town Branch which flowed into Mud
River and thereby caused low level contamination of Appellants’ real properties. At
trial, Appellants sought compensation for the fair market value of their properties due to
PCB contamination and the jury awarded compensation based on total destruction of
the properties. The Court of Appeals determined, and we agree, that the testimony of
Appellants’ principal damage witness, Mr. Snyder, failed to satisfy the requirements of
Dauber-t v. Merrell Dow Pharmaceuticals, Inc.,’ Kumho Tire Co. v. Carmichael’ and
’ 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993).
* 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999).
Goodvear Tire and Rubber Co. v. Thompson3 and that it should have been excluded.
The Court of Appeals determined that exclusion of Snyder’s testimony required entry of
judgment for Rockwell, believing that the landowners had simply failed to prove by
competent evidence that their property was rendered worthless. While we agree that
the evidence of total destruction was erroneously admitted, there was evidence that
PCBs were deposited on some or all of the landowners’ properties by Rockwell and
other evidence indicated some diminution of its value. We must determine, therefore,
whether this failure of proof of worthlessness requires dismissal as Rockwell contends,
or whether the landowners are entitled to a new trial without the inadmissible evidence.
Appellants, a group of landowners owning land adjacent to the Town
Branch Creek and Mud River, filed suit against Appellee, Rockwell International,
alleging negligence, nuisance and trespass. From 1956 to 1989, Rockwell operated a
die cast plant in Russellville. In 1956, when the plant opened, it began using Pydraul, a
hydraulic fluid containing polychlorinated biphenyls, (PCBS).~ Some of this fluid reached
Town Branch Creek and Mud River. Over time, periodic floods deposited PCBs onto the
floodplains of these waterways, Appellants’ real properties. It is for this PCB
contamination that Appellants sought compensation.
In the trial court, the jury rendered a verdict for Appellants awarding them
$7,566,118.00 in compensatory damages, the exact amount proven to be the
unimpaired fair market value of their properties. The jury also awarded $210 million in
3 Ky., 11 S.W.3d 575 (2000).
4 PCBs have been designated by Congress and the state of Kentucky as
hazardous substances. They are potential carcinogens although there is no conclusive
evidence of their carcinogenic effects. Since 1976, the manufacture and use of PCBs
has been heavily regulated and restricted by the federal government.
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punitive damages, the exact amount Appellants’ counsel argued to be the cost to
remediate the land. Judgment in accordance with the jury verdict was duly entered.
Rockwell’s motion for judgment notwithstanding the verdict and a new trial
was denied by the trial court. The trial court held, after hearing oral arguments on the
motion, that there were reasonable inferences available to support the award of
compensatory and punitive damages.
Rockwell appealed to the Court of Appeals arguing, among other things,
that Appellants had failed to show damage to their properties and that Appellants’
principal expert’s testimony should not have been admitted. The Court of Appeals held
that Appellants’ expert witness, Charles G. Snyder, should not have been permitted to
testify in various respects. Judge Huddleston’s opinion for the Court of Appeals
comprehensively analyzed the Snyder testimony and we quote liberally from that
opinion.
The award of compensatory damages in this case
rests almost entirely on the testimony of Charles Snyder.
Snyder graduated from Miami University in Oxford, Ohio,
with a degree in English and history. From 1976 through
1980, he was a real estate broker in the state of Ohio. Since
1980, he has been a real estate appraiser. In that capacity,
he has conducted several hundred commercial appraisals
and some 5,000 single family home appraisals for law firms,
banks and other lending institutions, and various
governmental agencies. He is a licensed Ohio appraiser
and holds a temporary Kentucky license and is a member of
the Appraisal Institute (M.A.I.). The trial court correctly ruled
that he is a qualified appraiser who could give his expert
opinion as to the post-contamination value of the
landowners’ properties.
The unimpaired value of the landowners’ properties $7.5 million, a sum not in dispute - was determined by
another appraiser, Larkin Summers. Appraisers, according
to Snyder, generally use one of three methods to determine
the fair market value of a piece of property: (1) the market
data approach; (2) the cost approach; or (3) the income
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capitalization approach; or they use a combination of these
methods.
Snyder has virtually no experience appraising
contaminated properties and none valuing contaminated
farms in Kentucky or elsewhere. However, after attending
seminars, conducting research and conferring with two other
Ohio appraisers, he developed an empirical model for use in
this case rather than using one of the accepted valuation
methods. Snyder admitted that he is not an expert on PCBs
and, indeed, has no knowledge of the safe levels of PCBs.
However, he opined that flood plain property that has any
level of PCB contamination is worthless. This is so,
according to Snyder, because a responsible person would
not farm or otherwise use PCB contaminated property until it
has been thoroughly tested and, if necessary, remediated.
A farm must be considered as an economic unit. Thus, a
farm containing a contaminated flood plain has a negative
value since the owner may be responsible for remediating
the flood plain at great cost. Furthermore, even in the
absence of proof of the extent of PCB contamination, the
flood plain should be fenced off from the rest of the property
to prevent people and animals from going upon it. Snyder
admitted that this was merely his subjective opinion and
pointed to no scientific evidence to support his view.
Snyder acknowledged a complete lack of knowledge
of the effect of PCB deposits on real property and had no
idea whether at some level PCBs are not hazardous to
people, animals or crops. Snyder agreed that eleven
properties interspersed among the properties at issue in this
case had been sold on the open market after it became
widely known that Rockwell had released PCBs into the
streams abutting them,5 and that in every instance the
properties sold at fair market value6 with no discount for
PCB contamination. His view was that although the buyers
51ncluded among these are the properties owned by the appellants in
Appeal No. 1997-CA-000210-MR.
‘“Fair market value” represents the price that a willing seller will take and
a willing buyer will pay for property, neither being under any compulsion to sell or buy
and both being in possession of all relevant information regarding the property. See
Central Kentucky Dryina Co.. Inc. v. Commonwealth, Dept. of Housina, Buildinas and
Construction, Ky., 858 S.W.2d, 165, 167 (1993); and Black’s Law Dictionarv 537 (5th
ed. 1973).
4
of these properties were informed that the flood plains of the
properties had been subjected to PCB contamination, the
buyers were not truly informed of the risk of purchasing such
properties. Some did not consider themselves at risk and
others thought Rockwell would remediate the property they
purchased. In one instance, the buyer and seller agreed to
split any award obtained from Rockwell, and in another, one
of the plaintiffs in this action bought an adjoining farm while
this lawsuit was pending. In short, Snyder found no sales of
property abutting the Mud River useful in determining the
impaired market value of the landowners’ properties.
In determining that the landowners’ properties had a
negative value, Snyder assumed that PCB-contaminated
property that has not been remediated should not be used
for growing crops, grazing cattle or for any other purpose, no
matter what the level of PCBs present on the property. After
conferring with experts in PCB contamination, Snyder
calculated that even if Rockwell remediated the properties at
issue, it would take as long as thirty years to do so. Until
remediation is completed, there will be a loss of economic
rent, that is, the landowners will be unable to safely use (or
lease) their properties, or, at least, that portion of the
properties that are not free from PCB contamination.
As was said earlier, the landowners’ claim for
compensatory damages rests on Snyder’s testimony. His
empirical model, constructed for this case and untested in
any other forum, finds no support in the literature. It has not
been subjected to peer review other than in informal
conversations Snyder had with two other Ohio appraisers.
There is no scientific basis for the assumption upon which it
rests - - that any quantity of PCB contamination increases
the risk of cancer in humans and may harm animals and/or
crops. His unsupported opinion cannot form the basis for a
damage award.7
As the Snyder testimony was the only evidence to support fair market value
compensation, the Court of Appeals determined that the judgment should be reversed
with directions to enter a directed verdict for Rockwell.
7 Rockwell International Corp. v. Wilhite, No. 1997-CA-000188-MR, slip
op. at 19-24, 26-27 (Jan. 14, 2000).
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Appellants obtained review in this Court (CR 76.20) arguing that Snyder’s
testimony was properly admitted, and that even if it was not, there was ample evidence
otherwise of harm to the properties to sustain the compensatory damages award. We
now affirm in part and reverse in part.
The Court of Appeals decision with respect to admissibility of the Snyder
testimony is unassailable. While it was rendered prior to our decision in Goodvear Tire
and Rubber Co. v. Thomoson and prior to the adoption of the view of the Supreme
Court of the United States in Kumho Tire Co. v. Carmichael, it properly anticipated our
position. The Court of Appeals followed Daubert v. Merrell Dow Pharmaceuticals. Inc.,
Mitchell v. Commonwealth’ and Fuaate v. Commonwealth9 in all material respects.
Accordingly, we affirm the Court of Appeals decision to exclude the expert testimony of
Charles G. Snyder.
Despite our agreement with the Court of Appeals opinion pertaining to the
Snyder testimony, we do not agree that the remedy is reversal for a directed verdict.
Charles G. Snyder was not Appellants’ only witness. Appellants presented evidence
that PCBs were designated by Congress as hazardous in 1976 and that the EPA has
determined that concentrations in excess of 50 parts per million presents an
“unreasonable risk of injury to health within the United States.“” There was evidence
that under Kentucky law PCBs are classified as a “hazardous substance” and that the
Kentucky Natural Resources and Environmental Protection Cabinet prevailed in
’ Ky., 908 S.W.2d 100 (1995).
’ Ky., 993 S.W.2d 931 (1999).
lo Rockwell International Corn v. Wilhite, No. 1997-CA-000188-MR, slip
op. at 11 (Jan. 14, 2000) (quoting 40 C.F.R. § 761.20).
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litigation to require Rockwell to remediate property subject to flooding along Town
Branch. Evidence was presented that PCBs were present on the landowners’
properties, that PCBs were dangerous and carcinogenic, that the properties should be
tested and that the presence of PCB contamination affects the fair market value of real
property and impairs its value as collateral.
The Court of Appeals acknowledged all of the foregoing evidence but
concluded that without the Snyder testimony, the landowners had
failed to prove [ ] that additional PCB exposure at low levels
equals additional risk to themselves, their crops or their farm
animals. The landowners must prove more than the
presence of PCBs on their property; they must prove that
the PCBs have somehow harmed their property. And the
only way they can do so is by showing that PCBs in the
quantities present on their properties are a health hazard.”
This Court recently confronted real property damages issues in Ellison v.
R&B Contractina. Inc.‘* In that case, the landowners sought recovery against
construction companies for trespass alleging the deposit of construction debris and the
unauthorized storing and servicing of heavy equipment on their properties. The Court
distinguished between permanent and temporary injury to real property. Permanent
injury was defined as being when the cost of restoration exceeded the value of the
property and temporary injury was when the property could be restored to its original
state at a cost less than the market value. Our holding in Ellison was that evidence of
cost of removal in permanent injury cases created a reasonable inference as to the
diminution of fair market value. This was argued to be a departure from State Property
” Rockwell International Corp. v. Wilhite, No. 1997-CA-000188-MR, slip
op. at 24-25 (Jan. 14, 2000).
‘* Ky., 32 S.W.3d 66 (2000).
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& Buildina Commission v. H.W. Miller Construction Co.13 and Newsome v. Biltios,14 a
fact squarely faced by the Court. Nevertheless, we held that a property owner can
recover for diminution of the value of the real property based on evidence that waste
material was illegally dumped and that the cost of removal exceeds the value of the
property.
The Court of Appeals seems to have taken the position that Appellants’
failure to present competent evidence of the total destruction of the real properties must
result in a directed verdict for Rockwell. We disagree with this conclusion. In Stewart v.
Sizemore,” it was determined on appeal that the trial court had admitted damage
evidence improperly and the case was reversed. On the second trial, similar evidence
was admitted and on appeal the second judgment was likewise reversed. The Court
addressed the issue of the proper remedy where incompetent though not insufficient
evidence is presented and whether the proper result is a directed verdict for the party
opposing admission of evidence. We answered in the negative as follows:
It is not a matter here of failure of proof, but of the improper
admission of incompetent evidence. To follow the
appellant’s suggestion, and reverse the case with directions
to reduce the judgment to $500, would be the equivalent of
granting a directed verdict as to damages. And we are not
aware of any precedent for holding that incompetent
evidence, improperly admitted by the trial court, is the
equivalent of no evidence at all, from the standpoint of the
granting of a directed verdict for failure of proof. We believe
the case must be reversed for another trial.16
l3 Ky., 385 S.W.2d 211 (1964).
I4 Ky.App., 671 S.W.2d 252 (1984).
l5 Ky., 332 S.W.2d 281 (1960).
l6 M. at 282.
-8-
Our recent decision in Osborne v. Commonwealth” contains a similar
holding.
Finally, Appellant asserts that absent Joe Reid’s grand
jury testimony, there was insufficient competent evidence to
convict him of these crimes and that to retry him would
constitute double jeopardy. However, the issue is not
whether Appellant would have been entitled to a directed
verdict of acquittal absent the improperly admitted evidence,
but whether the evidence that was, in fact, admitted was
sufficient to take the case to the jury. Lockhart v. Nelson,
488 U.S. 33, 109 S.Ct. 285, 102 L.Ed.2d 265 (1988). We
conclude that it was. Commonwealth v. Benham, Ky., 816
S.W.2d 186 (1991). It is not our province to determine now
whether the Commonwealth can produce competent
evidence to avoid a directed verdict of acquittal upon
retrial.”
In the case at bar, the Snyder testimony was not insufficient, it was
inadmissible. As it was persuasive evidence supporting the verdict and final judgment,
the Court of Appeals properly reversed and we affirm that portion of its decision. There
was other evidence, however, of permanent injury to properties for which landowners
may be entitled to compensation, and the proper remedy is remand to the trial court for
a new trial in accordance with the views set forth herein.
Prior to a new trial, however, there are other issues that must be decided
by the Court of Appeals. On appeal from the final judgment, Rockwell presented
numerous issues, some of which asserted a right to prevail on all claims, while others
asserted a right to prevail on the claims of particular landowners. As the Court of
Appeals’ decision rendered a ruling on those other issues unnecessary, our disposition
I7 Ky., 43 S.W.3d 234 (2001).
I8 rd. at 245.
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requires remand to consider the issues raised by Rockwell but left unresolved by the
Court of Appeals.
Accordingly, this cause is hereby remanded to the Court of Appeals for
consideration of the issues presented by Rockwell but not decided in its opinion of
January 14, 2000. In the event the Court of Appeals discovers no reversible error in
other respects, the case shall be returned to the trial court for a new trial in conformity
with this opinion and the subsequent opinion of the Court of Appeals, subject to the
right of either party to move for discretionary review in this Court.
All concur, except Stumbo, J., who perceives no abuse of trial court
discretion in its decision to admit the Snyder testimony.
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I
*
COUNSEL FOR APPELLANTS:
Charles L. Cunningham, Jr.
6010 Brownsboro Park Blvd., Suite G
Louisville, KY 40207-I 294
Michael 0. McDonald
607 Cloverleaf Road
Louisville, KY 40206
John W. Don Barrett
BARTLETT LAW OFFICES
404 Court Square North
Lexington, KY
W. Patrick Murray
Steven C. Bechtel
Charles E. Fell, Jr.
MURRAY & MURRAY CO., LPA
111 East Shoreline Drive
Sandusky, OH 44871-0019
Thomas A. Noe, III
317 West Fourth Street
Russellville, KY 42276
Joe C. Savage
SAVAGE, GARMER & ELLIOTT, PSC
141 North Broadway Street
Lexington, KY 40507
COUNSEL FOR APPELLEE:
Virginia Hamilton Snell
Mark Stephen Pitt
Donald J. Kelly
John Anthony Goebel
WYATT, TARRANT & COMBS
2600 Citizens Plaza
Louisville, KY 40202
Evan M. Tager
Andrew L. Frey
Charles A. Rothfield
MAYER, BROWN & PLATT
1909 K Street, NW
Washington, DC 20006
-ll-
APPELLANT
VANCE WILHITE, ET AL.
V.
ON APPEAL FROM THE COURT OF APPEALS
1997-CA-000188-MR
LOGAN COURT NO. 93-Cl-000158
ROCKWELL INTERNATIONAL CORPORATION
APPELLEE
ORDER
The Petition for Modification is granted in part and the Opinion is ordered
modified by correction of typographical errors on page 1 and by addition of the citation
to Black’s Law Dictionarv 537 (5th ed. 1973) to page 4, footnote 6.
The modifications made hereby do not alter the holdings of the original opinion.
Lambert, C.J.; Cooper, Graves, Keller, Stumbo and Wintersheimer, JJ., concur.
Johnstone, J., would deny the Petition.
ENTERED: September 26,2002.
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