By Joe Forward, Legal Writer, State Bar of Wisconsin

Sept. 14, 2010 – The government may introduce evidence of future contamination and remediation costs to establish the fair market value of property taken through eminent domain, a Wisconsin Appeals Court recently held.

The Department of Transportation (DOT) used its eminent domain power to acquire property owned by Basil Ryan Jr. and 260 North 12th Street LLC (LLC) for a highway construction project in Milwaukee. Ryan sought $3.5 million as just compensation, but received $1.348 million, in large part because the DOT’s appraisal of the fair market value of the property included estimates for future contamination and remediation costs.

Ryan challenged the compensation amount in circuit court under Wis. Stat. section 32.05(11), which allows a condemnee to challenge the amount of just compensation paid for the government taking of property.

At trial, a jury determined the fair market value of the property to be $2.001 million. The circuit court entered judgment for that amount, plus interest, $268,000 in attorney fees, and $48,000 in costs in favor of Ryan.

Ryan and the LLC appealed, arguing that evidence of contamination and remediation costs should not be admissible in condemnation proceedings as a matter of law.

In Ryan v. Wisconsin Department of Transportation, 2009AP1557 (Sept. 14, 2010), the appeals court held that contamination and remediation evidence is admissible in condemnation proceedings because “[e]nvironmental contamination and the need to remediate the contamination is relevant to fair market value” under section 32.09(5)(a).

Section 32.09(5)(a) establishes that just compensation must be paid for a total taking of property, where just compensation is the fair market value of the property taken.

The court also rejected Ryan’s alternative argument that contamination and remediation estimates should be limited to $10,000, his deductible after receiving a Petroleum Environmental Cleanup Fund Award.

Ryan also challenged the DOT’s appraisal of contamination and remediation costs as speculative and therefore not admissible. But the appeals court upheld admissibility, noting that Ryan did not challenge the DOT appraiser’s qualifications as an expert. Thus, the jury was free to weigh the credibility of the appraiser’s testimony, the court explained.

The appeals court also upheld the trial court’s determination that Ryan could not use two expert witnesses because he failed to meet a scheduling order deadline to disclose his expert witness list and did not show good cause for failing to meet the deadline.

Ryan argued that he reserved the right to put forth rebuttal witnesses, and the scheduling order was silent on that point. But the court noted that a party “cannot unilaterally extend the deadline to abide by a scheduling order simply by stating that it ‘reserves the right to do so.’”

The court noted that the case had been pending for more than two years, and Ryan never made a motion for relief to name new witnesses before trial, which would have given the DOT an opportunity to respond.