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City of Moorhead v. Red River Valley Cooperative Power Association

May 1, 2013

CITY OF MOORHEAD, APPELLANT,
v.
RED RIVER VALLEY COOPERATIVE POWER ASSOCIATION, RESPONDENT.



SYLLABUS BY THE COURT

SYLLABUS 1. A valuation of an electric utility service area under Minn. Stat. § 216B.47 (2012) must include the four factors listed in the statute. 2. The district court did not abuse its discretion when it excluded portions of a revised expert report submitted a month before trial and several months after the deadline for completing discovery and disclosing expert reports.

The opinion of the court was delivered by: Anderson, G. Barry, Justice.

Court of Appeals Anderson, G. Barry, J.

Office of Appellate Courts

Affirmed.

OPINION

We are presented here with issues arising out of the expansion of the City of Moorhead and the decision of the City to provide municipal electrical service to recently annexed territory. The City annexed Americana Estates, a residential subdivision with 65 metered electric service accounts. The City then filed a condemnation petition to begin municipal electric service to residents of Americana Estates under Minn. Stat. § 216B.47 (2012). The Red River Valley Cooperative Power Association (RRVC), which previously served Americana Estates, did not dispute the authority of the City to condemn the territory. The district court appointed a three-member commission to determine the appropriate amount of damages. After a two-day hearing, the commission awarded RRVC $307,214.*fn1 Both parties appealed the commission's award of damages, setting the stage for a jury trial under Minnesota's condemnation procedures.

The case featured two continuances to accommodate the City, and produced four scheduling orders. The third amended order scheduled trial for May 4, 2010, and set a deadline of December 22, 2009, for the exchange of expert reports. Though the trial date was postponed yet again-trial finally commenced October 11, 2010-the fourth (and final) scheduling order retained the previous deadline for exchanging expert reports.

The parties exchanged their initial expert reports on the day of the deadline, December 22, 2009. The City's report calculated damages using a traditional fair market value approach in which it calculated the total value of RRVC's business enterprise before and after the taking, with the difference constituting the compensation due. According to the City's report, the value of damages to RRVC was $164,456.

RRVC's report declined to use or consider a fair market value approach, instead limiting its analysis to the four statutory factors set forth in Minn. Stat. § 216B.47:

(1) original cost of the facilities less depreciation; (2) loss of revenue to the utility; (3) expenses resulting from integration of facilities; and (4) other appropriate factors. Minn. Stat. § 216B.47. RRVC's expert had testified before the three-member commission that he analyzed the damages from the "seller's perspective," and that such an analysis could, but would not always, result in a higher valuation than a fair market value approach. He noted that one would generally look to the replacement cost of facilities in calculating fair market value, while the statute here specifies "original cost less depreciation," which is "fundamentally different." RRVC's report valued the damages at $385,188.

Both parties sought partial summary judgment, or in the alternative, moved in limine to exclude certain testimony from the opposing party's expert. The City moved for "an order determining that the proper damages standard in this proceeding is fair market value and excluding damages testimony not based on fair market value." RRVC's motion requested, in relevant part, "an order granting partial summary judgment in its favor that (1) the four factors for determining Red River's damages under Section 216B.47 do not include the fair market value of its utility business before and after the acquisition of Americana Estates"; or, in the alternative, "an order excluding the City's Expert Witness Report . . . to the extent that it uses the fair market value of Red River's utility business before and after the acquisition of Americana Estates as the measure of damages."

The district court denied the City's motion and granted partial summary judgment to RRVC, holding that "the appropriate legal damages standard in this eminent domain proceeding is that of Minnesota Statute § 216B.47, and the jury will be instructed that the damages awarded should cumulatively include: (1) the original cost of the property less depreciation, (2) loss of revenue to the utility, (3) expenses resulting from integration of facilities, and (4) other appropriate factors." It further ordered that all evidence regarding fair market value, including testimony and portions of the report by the City's expert, would be excluded.

On September 8, 2010-just over one month before the new trial date, several months after the trial was scheduled to begin at the time the expert report deadline was set, and almost six months after the district court decided the motions for partial summary judgment-the City served RRVC with a revised expert report. The revised report, among numerous changes, included a new claim for a credit of $78,957 for "deferred capital investment" under the section 216B.47 "loss of revenue" factor. RRVC responded with a new motion in limine seeking to exclude the portions of the revised report dealing with the new deferred capital investment credit. RRVC argued that (1) the new report did not merely make minor amendments, but systematically transformed the overall damage calculation; (2) the deadline for exchanging expert reports was long past; (3) the new claim would require additional discovery, yet the deadline for discovery had expired; and (4) as the trial had been scheduled to begin months before the City filed the new report, admitting ...


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