Author Topic: Federal Court Excludes Evidence Of Stigma Damages In Eminent Domain Case Involving Gas Pipeline  (Read 92 times)

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Offline Elderberry

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JDSUPRA by Roetzel & Andress 5/13/2020

Federal Court Excludes Evidence Of Stigma Damages In Eminent Domain Case Involving Gas Pipeline

A recurring theme in the area of eminent domain is so-called “stigma damages” caused by the construction of an improvement that may be thought to reduce the market value of a property. A common example is gas pipelines, which are sometimes associated with negative health implications in the form of explosions or environmental contamination from pipeline ruptures. In a recent decision, the U.S. Court of Appeals for the Third Circuit excluded appraisal testimony seeking to increase a damages award due to the stigma allegedly associated with the construction of a gas pipeline, finding that the methodology underlying that testimony was unreliable.

UGI Sunbury LLC v. A Permanent Easement for 1.7575 Acres, 949 F.3d 825 (3d Cir.2020) involved the standard for admissibility of expert valuation testimony in a condemnation proceeding under the Natural Gas Act, 15 U.S.C. § 717 et seq. In that case, the condemnor proposed to construct an underground gas pipeline in Pennsylvania that would cross the properties at issue. The property owners engaged an appraiser who relied on a “damaged goods” theory in reaching his opinion of the compensation due to the property owners for the taking. This theory holds that markets treat real estate near actual, or even perceived, environmental contamination, as a “damaged good,” and that this stigma has a permanent negative impact on market value.

In supporting this theory, the appraiser relied on his own experience working with “scratch and dent” products in his grandfather’s appliance shop as a high school and college student, as well as the reduction of real estate values caused by the Three Mile Island nuclear incident in 1979, the Exxon Valdez Alaskan oil spill in 1989, and various leaking underground storage tanks.


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