108 named Plaintiffs admitted that they purchased their Shipyard properties for residential purposes.

Plaintiffs each bought units on Parcel A of the former Hunters Point Naval Shipyard (“HPNS”). HPNS is a Superfund site where Tetra Tech EC, Inc. (“TtEC”) conducted environmental remediation work in certain areas years before the Plaintiffs bought their units. Plaintiffs now bring claims against the Tetra Tech Defendants for purported lost profits, in addition to other damages, under theories of fraud and misrepresentation (among other claims not addressed in this motion).

Plaintiffs sought class certification, citing their claims for negligence, nuisance, common law fraud, and California statutory fraud.

In support of their motion for class certification, the Plaintiffs submitted a nine-page declaration from their expert, Brett Reynolds. He investigated multiple areas of potential damages including appreciation impairment, and excess charges incurred by impacted Shipyards homeowners.

The Defendants moved to exclude Reynolds’ opinions under Federal Rule of Evidence 702. They argued that Reynolds lacked the necessary expertise to offer the opinions in his declaration and that the methodology underlying his conclusions was fundamentally flawed, rendering his testimony unreliable.

Real Estate Valuation Expert Witness

Brett Reynolds is a licensed appraiser with almost 18 years of experience in the real estate industry, with an emphasis on valuation, acquisition, and asset management.

He has a degree in economics from the University of Southern California and holds the top designations in the appraisal profession. Reynolds has been a Designated Member of the Appraisal Institute (MAI) since 2008 and a Certified Commercial Investment Manager (CCIM) since 2009. He has been a licensed appraiser in the State of California (Certified General License 042466) since 2007. He has testified as an expert witness in both Federal Tax Court and California State Court.

Want to know more about the challenges Brett Reynolds has faced? Get the full details with our Challenge Study report.

Discussion by the Court

Reynolds opined on the two primary sources of economic damages incurred by the class members: (1) appreciation impairment/ diminution in value of the Parcel A homes owned by the putative class members, and (2) excess tax charges/ Mello-Roos damages.

For the appreciation impairment damages, Reynolds stated that he was provided with a list of 241 market-rate homes that had been sold on Parcel A as of August 2, 2018. Assuming an average appreciation impairment of 20.4%, he concluded that these units have suffered a total appreciation impairment of $55,523,536. Additionally, Reynolds calculated the amount of past Mello-Roos liabilities incurred by each of the 241 market-rate homes sold on Parcel A on the same date. Assuming certain Communities Facilities District (CFD) rates as specified in his declaration, Reynolds opined that the Parcel A homeowners have incurred $8,393,735.00 in Mello-Roos liabilities.

Defendants said that Reynolds “has no relevant expertise on which to base his opinion on the cutoff date Plaintiffs use for the class definition.”

However, Reynolds did not express a substantive opinion about the cutoff date for Plaintiffs’ class definition. Reynolds mentioned events that took place in 2018, but that is not in the context of giving an opinion as to why August 2, 2018, and not, say, another date in 2018, might be the proper cut-off date. Consequently, the Court overruled this objection.

For Reynolds’ methodology, Defendants’ main contention is that Reynolds’ choice of index was wrong because it “measures different types of homes than those present at the shipyard” and also “measures non-representative neighborhoods.” The Court decided that the details of what Reynolds “did or didn’t take into account in running his analysis . . . may be grist for a good cross-examination at trial, but they do not play a material role in deciding whether [Reynolds’] work should be admitted under Rule 702.”

According to the Court, Plaintiffs have not identified any common evidence that might warrant class certification. This shortfall is particularly problematic for causation, which is a necessary element of each of the claims for which they are seeking certification. Plaintiffs relied solely on the Reynolds declaration as the ostensible common proof of causation. The Reynolds declaration is also identified as the only common evidence of the damages the class suffered because of Defendants’ alleged fraud and negligent misrepresentation. But the Reynolds’ declaration did not even try to supply class-wide proof on these issues. Also, Reynolds did not offer any opinions whatsoever about causation.

Held

The Court denied Defendants’ motion to exclude the testimony of Brett Reynolds.

Key Takeaway:

Reynolds investigated multiple areas of potential damages. Exclusion is denied because it was the Court’s opinion that the details of what Reynolds “did or didn’t take into account in running his analysis . . . may be grist for a good cross-examination at trial, but they do not play a material role in deciding whether [Reynolds’] work should be admitted.”

Case Details:

Case Caption:	Pennington Et Al V. Tetra Tech, Inc. Et Al
Docket Number:	3:18cv5330
Court:	United States District Court for the Northern District of California
Order Date:	December 23, 2024

Category: Real Estate Valuation Expert witness

Real Estate Valuation Expert Witness’ Testimony on Appreciation Impairment Damages Admitted

Real Estate Valuation Expert Witness’ Testimony on Appreciation Impairment Damages Admitted