Evidence of contamination and remediation costs is admissible in condemnation proceedings

By Joe Forward, Legal Writer, State Bar of Wisconsin

Dec. 22, 2011 – In condemnation proceedings, the government is allowed to introduce evidence of environmental contamination and future remediation costs to reduce the just compensation it must pay to a property owner, the Wisconsin Supreme Court has ruled.

“Such evidence is admissible in condemnation proceedings in the circuit court’s discretion so long as it is relevant to the fair market value of the property,” wrote Justice Annette Ziegler for a unanimous court in Ryan v. Wisconsin Dept. of Transportation, 2011 WI 103 (Dec. 22, 2011).

The Wisconsin Department of Transportation (DOT) used its eminent domain power to acquire Menomonee Valley property owned by Basil Ryan Jr. through a LLC. The acquisition was necessary in the construction of the Marquette Interchange project in Milwaukee.

Ryan’s appraiser valued the property at close to $3.5 million. The appraisal assumed the property was environmentally clean.

But the DOT offered and awarded just compensation of $1.35 million, under Wis. Stat. section 32.05(7). The DOT’s appraisal included deductions for environmental contamination and estimated remediation costs. Ryan appealed to the Milwaukee County Circuit Court.

A jury awarded Ryan $2 million. Ryan appealed, arguing that evidence of environmental contamination and costs for remediation is inadmissible. A Wisconsin appeals court upheld the jury award of $2 million, ruling that such evidence was admissible in determining the fair market value of the property. Ryan sought review before the Wisconsin Supreme Court.

Double-take argument rejected

Ryan argued that allowing contamination and clean-up cost evidence in condemnation cases allows the government to take property through eminent domain at a discounted rate, then pursue the same property owner for to get clean-up costs. Such a ruling results in a “double-take” or “double-liability” for the property owner, Ryan argued.

In making this argument, Ryan invoked a Minnesota Supreme Court case, Moorhead Economic Development Authority v. Anda, 789 N.W.2d 860 (Minn. 2010). The Anda court held that evidence of environmental contamination and clean-up costs are generally inadmissible in condemnation cases, based on fairness and due process considerations.

But the Wisconsin Supreme Court refused to adopt the Minnesota rule. “[T]he concerns raised by Ryan and the Minnesota Supreme Court are based on an assumption that a subsequent environmental action [against the contaminator] is a certainty. It is not,” Justice Ziegler wrote.

“We decline to exclude evidence of environmental contamination and of remediation costs in condemnation proceedings as a matter of law, and thereby require the condemnor to always pay more than the property’s fair market value, based on the mere possibility of a ‘double take,’” Justice Ziegler wrote. “Indeed, in the case of a taking, fairness to the property owner is only half the equation.”

The supreme court noted that case law and Wisconsin’s jury instruction on fair market value in total takings cases, Wis. JI-Civil 8100, instructs jurors to consider every element establishing fair market value, including elements that a prudent purchaser would consider.

Other rulings

Even if the contested evidence is admissible as a matter of law, Ryan argued, the circuit court erroneously exercised its discretion to admit testimony from the DOT’s appraiser because he did not use the proper methodologies to appraise contaminated property.

But the supreme court disagreed, explaining that the DOT’s appraiser was a qualified expert witness, and flaws in his methodology concerns the weight of his testimony, not the admissibility of it. Ryan had an opportunity to attack the methodology on cross-examination, the court explained, and it was up to the jury to assess the appraiser’s credibility.

The court also ruled that two of Ryan’s expert witnesses were properly excluded from testifying based on untimely disclosure, and upheld the circuit court’s decision to use a standard jury instruction for determining fair market value of the property. Ryan argued it was insufficient.

Concurrence

Chief Justice Shirley Abrahamson wrote a concurring opinion, agreeing with the result, but for a different reason. The supreme court should have either dismissed the matter as improvidently granted or “adopted the court of appeals decision with further writing,” she argued.

“Why?” the chief justice asked. “Because the property owner conceded at oral argument that evidence of contamination and anticipated remediation costs is admissible in valuation of condemned property.”

Attorneys

Dan Biersdorf of E. Kelly Keady and Biersdorf & Associates S.C., Milwaukee, represented the plaintiffs Basil E. Ryan and 260 North 12^th Street, LLC. Assistant Attorney General Charlotte Gibson represented the Wisconsin Department of Transportation.