Opinion
17379-19 17380-19 17381-19 17382-19
11-09-2023
GREEN VALLEY INVESTORS, LLC, BOBBY A. BRANCH, TAX MATTERS PARTNER, ET. AL.,[1] Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Christian N. Weiler, Judge.
These consolidated cases are calendared for trial at the Court's special session in Winston-Salem, North Carolina, beginning November 13, 2023.
On October 26, 2023, respondent filed a Motion in Limine to Exclude Expert Report of Ted Whitmer and a Motion in Limine to Exclude Messrs. B. Wayne King and Kevin Andrews as Non-Compliant Expert Witnesses. On October 27, 2023, respondent filed a Motion in Limine to Exclude the Report of Mr. James C. Clanton for Failing to Comply with Fed.R.Evid. 702(D).
On October 27, 2023, petitioner filed a Motion in Limine to Preclude Expert Testimony from Geologist Martin Messmer, a Motion in Limine to Preclude Testimony from Witnesses That Were Not Timely Disclosed, a Motion in Limine to Limit Trial Testimony Consistent with Stipulation to be Bound, and a Motion in Limine to Preclude Expert Testimony from Geologist Erik Ronald.
By separate orders, both served on October 31, 2023, we directed respondent to file a response petitioner's Motions in Limine and directed petitioner to file a response to respondent's Motions in Limine. Having reviewed the various Motions in Limine and responses, we are now prepared to rule on these motions.
A. Motion in Limine to Exclude Expert Report of Ted Whitmer
Respondent's Motion in Limine seeks to exclude from evidence the report of Ted Whitmer and to exclude Whitmer from providing expert witness testimony at trial. Respondent asserts that Whitmer's report is not in compliance with Rule 143 (g)(1)(F), which states an expert return must contain "a statement of the compensation to be paid for the study and testimony in the case." Mr. Whitmer's report did not originally contain his compensation.
Unless otherwise indicated, all Rule references are to the Tax Court Rules of Practice and Procedure.
On November 1, 2023, petitioner filed a Motion to Supplement the Record in which petitioner asked to supplement the expert report of Ted Whitmer. The Motion to Supplement states that Mr. Whitmer is being compensated at a rate of four hundred dollars per hour and states that the compensation information was inadvertently omitted from the report. The Motion to Supplement was granted by this Court on November 1, 2023.
Rule 143(g)(2) provides that this Court will exclude a witness's testimony altogether if the report fails to comply with the provisions of this Rule. However, the witness need not be excluded if the failure is due to good cause and does not unduly prejudice the opposing party. Petitioner has stated that the original omission was inadvertent, and information regarding Mr. Whitmer's compensation has been provided within a reasonable time as to not prejudice the respondent's case. We agree and will deny respondent's Motion in Limine to exclude the Report of Mr. Whitmer.
B. Motion in Limine to Exclude Messrs. B. Wayne King and Kevin Andrews Non-Compliant Expert Witnesses
Respondent's second Motion in Limine seeks to exclude the testimony of B. Wayne King and Kevin Andrews, as non-compliant expert witnesses. According to the motion, Mr. King is a civil engineer, and Mr. Andrews is a geologist who specializes in hydrogeology. Although Mr. King and Mr. Andrews are being offered by petitioner as fact witnesses, respondent asserts that petitioner is effectively trying to offer these witnesses as expert witnesses while avoiding the requirements of Rule 143(g).
Petitioner's response disputes respondent's characterization of these witnesses' potential testimony and argues this motion is premature. We agree with petitioners' argument.
We will deny the Motion in Limine to exclude Mr. King and Mr. Andrews without prejudice since we find the motion to be premature. To the extent that respondent believes Mr. King or Mr. Andrews is offering impermissible opinion testimony, respondent is free to object at the appropriate time.
C. Motion in Limine to Exclude the Report of Mr. James C. Clanton for Failing to Comply with Fed.R.Evid. 702(D)
Respondent's third Motion in Limine seeks to exclude the expert report of James C. Clanton. Respondent argues that Mr. Clanton's report does not meet the requirements of Rule 702 of the Federal Rules of Evidence (FRE) because it allegedly does not reliably apply Uniform Standards of Professional Appraisal Practice (USPAP) standards. USPAP Rule 1-4 requires an appraiser to "collect, verify, and analyze all information necessary for credible assignment results." In his report, Mr. Clanton states that he "relied on information provided by the client," which he assumed to be correct. Respondent argues that Mr. Clanton did not verify the information provided, and he, therefore, violated USPAP Rule 1-4. As a result, respondent alleges, he did not reliably apply the principles and methods used in his expert report and did not meet the requirements of FRE 702.
Proceedings of this Court are conducted in accordance with the FRE. See § 7453; Rule 143. Testimony by expert witnesses is generally governed by FRE 702 and 703. FRE 702 provides that a witness who is "qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion" if his testimony will help the trier of fact and the following conditions are met: (1) the testimony is based on sufficient facts or data; (2) the testimony is the product of reliable principles and methods; and (3) the expert has reliably applied the principles and methods to the facts of the case.
Testimony based on scientific, technical, or other specialized knowledge is subject to the Court's gatekeeping function, which forecloses expert testimony that does not "rest[] on a reliable foundation" or is not "relevant to the task at hand." Daubert v. Merrill Dow Pharm., Inc., 509 U.S. 579, 597 (1993); see Kumho Tire Co. v. Carmichael, 526 U.S. 137, 149 (1999) (extending the principles of Daubert to all expert testimony). The Court has broad discretion in the exercise of this gatekeeping function. See Trimmer v. Commissioner, 148 T.C. 334, 351 (2017); Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, 85 (2000), aff'd, 299 F.3d 221 (3d Cir. 2002).
In this Court, an expert report is "received in evidence as the direct testimony of the expert witness." Rule 143 (g)(2). Generally, expert testimony is admissible under FRE 702 if it assists the Court in understanding the evidence or determining a fact issue.
With respect to Mr. Clanton's expert report, we are not persuaded that the report is irrelevant, unhelpful to the trier of fact, or unreliable, nor do we agree with respondent that Mr. Clanton's report fails to comply with FRE 702. Therefore, we will deny the Motion in Limine to Exclude the Report of Mr. James C. Clanton.
To the extent that respondent's challenge impacts the credibility of Mr. Clanton's expert reports, respondent is free to continue to press those challenges at trial during cross-examination. We are not inclined to discount Mr. Clanton's report or testimony without first giving him the opportunity to be heard.
D. Motion in Limine to Preclude Expert Testimony from Geologist Martin Messmer
Now turning to petitioner's first Motion in Limine to Preclude Expert Testimony from Geologist Martin Messmer.
Petitioner's motion first contends that Mr. Messmer's report does not meet the requirements of Rule 143(g) because it does not contain "a list of publications authored in the previous 10 years" or the "exhibits used to summarize or support."
In respondent's Objection to this Motion, respondent states that no publications were included because Mr. Messmer does not have any publications. While a statement to this effect would have been prudent to include within Mr. Messmer's report, we will not grant petitioner's Motion on this basis. Respondent's Objection goes on to state how his failure to attach Mr. Messmer's exhibits was an oversight, and how all exhibits referenced (except one) are either publicly available or already in the possession of petitioner. Additionally, on November 2, 2023, respondent emailed Mr. Messmer's exhibits to petitioner's counsel and filed a Motion to Supplement the Record to include these exhibits. We have granted respondent's Motion to Supplement the Record.
Since the exclusion of the exhibits was inadvertent, and respondent has since corrected his mistake within an appropriate time as to not materially prejudice petitioner's case, the Court will not grant petitioner's Motion on this basis.
Petitioner's motion also seeks to exclude Mr. Messmer's testimony on the grounds that he lacks the requisite training and expertise to render a market study report and to otherwise opine on Green Valley's competition in local and regional markets. Petitioner argues that Mr. Messmer is not qualified to offer such an opinion. At this point, we are not convinced that Mr. Messmer is unqualified to offer an opinion which includes a market study.
Petitioner also argues that Mr. Messmer's report is not reliable because it does not rely on any identifiable methodology. Petitioner asserts that Mr. Messmer's report contains only a list of facts and conclusory statements. Mr. Messmer's report offers an analysis of facts, and not simply a list of facts and conclusory statements. We are not inclined to grant the motion on this basis.
Finally, petitioner argues that Mr. Messmer's report is improper because he is a government employee. Petitioner asserts that Mr. Messmer is an "advocate" for the government, and any testimony he could provide would be "unfairly prejudicial and misleading." We reject this argument and do not find his present employment to disqualify him as an expert witness.
Considering the foregoing, we will deny petitioner's Motion in Limine to Preclude Expert Testimony from Geologist Martin Messmer.
E. Motion in Limine to Preclude Testimony from Witnesses That Were Not Timely Disclosed
Petitioner's second Motion in Limine seeks to preclude testimony from witnesses - including lay witnesses and one alleged expert witness - that were not timely disclosed under the Court's Pretrial Order.
This Court's March 23, 2023, Order which set the deadline for pretrial memoranda states, "[w]itnesses who are not identified will not be permitted to testify at trial without leave of Court upon sufficient showing of good cause." This Court's September 16, 2021, Order specified that witnesses should be identified by name in the pretrial memoranda.
Respondent, in his Objection, contends that he has "sufficiently identified all witnesses" and cites us to petitioner's general catch all statement to include "any witness that may be necessary to testify about documents or evidence obtained after the date of parties filing of their Pretrial Memoranda…".
We agree that the parties generally reserve the right to call witnesses to identify and authenticate documents, and these witnesses are generally representatives from an agency or organization. However, we find respondent's category of witnesses to be more broadly defined since it states "representative from North Carolina…to discuss permitting process" which seems to include testimony related to either personal knowledge or opinion. Accordingly, we are inclined to agree with petitioner, and are inclined to limit the testimony involving personal knowledge or opinion to those witnesses specifically identified in the parties' pretrial memoranda, should there be an objection lodged at trial.
The Court will reserve ruling on petitioner's second Motion in Limine until trial, so that we can better ascertain the purpose and scope of the proposed testimony.
F. Motion in Limine to Limit Trial Testimony Consistent With Stipulation to be Bound
Petitioner's third Motion in Limine asks this Court to exclude the testimony of Jeff Burkhardt and Jeff D. Horsley. Petitioner alleges that these two witnesses will be called solely for facts related to Vista Hill's 2015 tax return. Green Valley is the test case for these consolidated cases, according to the parties' October 3, 2023, Stipulation to be Bound. Petitioner asserts that respondent is trying to improperly interject issues that should no longer be before this Court. Petitioner wishes to keep testimony limited to Green Valley and to exclude the testimonies of Mr. Burkhardt and Mr. Horsley.
Respondent's Pretrial Memorandum states that Mr. Burkhardt may be called "to testify regarding the preparation of the Form 1065 filed in 2015 for Vista Hill."
The Pretrial Memorandum also states, "Mr. Horsley was the tax preparer for the Form 1065 filed in 2015 for Vista Hill." The Stipulation to be Bound sets forth an equation for finding the values of the properties in the bound cases, which only requires the value of the Green Valley property as determined by this Court.
The parties' Stipulation to be Bound, however, has its limits particularly with whether respondent has complied with the provisions of section 6751(b). In respondent's Objection to the Motion, he cites us to the Stipulation to be Bound which states that "the parties are not waiving their right to argue the relevancy of any matter in the Test Case." However, respondent also appears to be in agreement with and accepts petitioner's statement that "respondent should be confined to questions related to Green Valley and any other properties only as they affect Green Valley."
At this point, we find it to be premature for the Court to rule on petitioner's third Motion in Limine and the request to exclude these two fact witnesses without first hearing their testimony.
We will deny petitioner's Motion in Limine to Limit Trial Testimony Consistent With Stipulation to be Bound without prejudice. To the extent that petitioner believes either Mr. Burkhardt or Mr. Horsley offers irrelevant testimony, petitioner may object at trial.
G. Motion in Limine to Preclude Expert Testimony from Geologist Erik Ronald
Petitioner's fourth Motion in Limine asks this Court to preclude Erik Ronald from providing expert testimony. Petitioner's first argument is that Mr. Ronald's expert report does not meet the requirements of Rule 143(g). His report does not contain "a list of all other cases in which, during the 4 previous years, the witness testified as an expert at trial or by deposition;" nor does it contain all the "exhibits used to summarize or support" his report.
Within his report, Mr. Ronald states that he has testified as an expert witness in one case, but he does not name the case. In respondent's October 30, 2023, Motion to Supplement the Record, the name of the case is listed. This Court granted the Motion to Supplement on November 1, 2023. Based on this supplement, we will not preclude Mr. Ronald's testimony on the basis that his report did not include the case name.
Respondent contends in his November 6, 2023, Objection to this motion that the eight documents not contained in Mr. Ronald's report were documents that Mr. Ronald relied on, but not exhibits. Furthermore, respondent contends, all eight of these documents were already in petitioner's possession because they originated from petitioner.
Petitioner's second argument for excluding Mr. Ronald's testimony is that he relies on the wrong standards, and his testimony is irrelevant. Petitioner asserts that Mr. Ronald fails to address industry or state standards which are applicable to Green Valley because Mr. Ronald uses guidelines from the 2017 SME Guide. Petitioner contends the 2017 SME Guide is irrelevant because the mineral exploration at issue occurred in 2012 and the charitable donation occurred in 2014. Respondent argues in his Objection to the motion that the 2017 SME Guide is not meaningfully different than the 2012 SME Guide. Petitioner also criticizes Mr. Ronald's use of the 2018 North Carolina Department of Transportation specifications.
Petitioner asserts that Mr. Ronald's analysis is not specific enough to the Green Valley property or to the minerals on the Green Valley property.
Lastly, Petitioner asserts that Mr. Ronald's training and experience are in geology, but not in the rocks of North Carolina and the Southern Appalachian Mountain Region.
We are not inclined to grant the motion based on these arguments. If petitioner wishes to challenge Mr. Ronald's credibility, petitioner may do so at trial during cross-examination.
Considering the foregoing, it is
ORDERED that respondent's Motion in Limine to Exclude Expert Report of Ted Whitmer is denied. It is further
ORDERED that respondent's Motion in Limine to Exclude Messrs. B. Wayne King and Kevin Andrews as Non-Compliant Expert Witnesses is denied without prejudice. It is further
ORDERED that respondent's Motion in Limine to Exclude the Report of Mr. James C. Clanton for Failing to Comply with Fed.R.Evid. 702(D) is denied. It is further
ORDERED that petitioner's Motion in Limine to Preclude Expert Testimony from Geologist Martin Messmer is denied. It is further
ORDERED that petitioner's Motion in Limine to Limit Trial Testimony Consistent With Stipulation to be Bound is denied without prejudice. It is further
ORDERED that petitioner's Motion in Limine to Preclude Expert Testimony from Geologist Erik Ronald is denied.