Tax Court

TAX COURT lowe’s Maple Grove vs. hennepin county

STATE OF MINNESOTA

COUNTY OF HENNEPIN

Jake Pidde, SAMA, Stearns County Editorial Committee Member

TAX COURT

REGULAR DIVISION

Lowe’s Home Centers, LLC, (Maple Grove),

Petitioner,

vs.

County of Hennepin,

Respondent.

ORDER

File Nos: 27-CV-16-4307 27-CV-17-4539

Filed: November 13, 2020

This matter came before the Honorable Wendy S. Tien, Judge of the Minnesota Tax

Court, for hearing on petitioner’s motion to allow limited additional direct testimony of its expert

witness, Gary Battuello, at trial.

Thomas R. Wilhelmy, Christopher A. Stafford, and Gauri S. Samant, Fredrickson &

Byron, P.A., represent petitioner Lowe’s Home Centers, LLC (Maple Grove).

Shannon M. Harmon, Assistant County Attorney, represents respondent Hennepin

County.

Based upon all the files, records, and proceedings, the Court now makes the following:

1.

ORDER

Petitioner’s motion is denied. At trial, Lowe’s may seek leave to present Mr.

Battuello’s testimony in rebuttal, to the extent Mr. Mitchell testifies concerning such

2. Within 20 days of the date of this Order, the parties shall contact the court for a

pretrial conference to discuss trial date certain scheduling.

IT IS SO ORDERED.

BY THE COURT:

Wendy S. Tien, Judge MINNESOTA TAX COURT

DATED: November 13, 2020

MEMORANDUM

I. BACKGROUND

On March 31, 2016 and April 5, 2017, Lowe’s Home Centers, LLC (“Lowes”), filed

property tax petitions in this Court with respect to property located at 11201 Fountains Drive

North, in Maple Grove, for the 2016 and 2017 tax payable years. 1 This court entered scheduling

orders in both cases.2 Both scheduling orders provide the written report of any expert retained in

this case who is expected to testify at trial shall serve as the authoring expert’s direct testimony.3

Following the parties’ stipulated motion to consolidate these cases, this court ordered the

cases consolidated and included an amended scheduling order, adopting the scheduling order in

1 Pet. No. 27-CV-16-4307 (filed Mar. 31, 2016) (the “Pay-2016 Case”); Pet. No. 27-CV17-4539 (filed Apr. 5, 2017) (the “Pay-2017 Case”). 2 Sched. Order, Pay-2016 Case (filed Feb. 6, 2017); Sched. Order, Pay-2017 Case (filed Apr. 9, 2018). Other than the dates, these scheduling orders are substantively identical and will be referenced as one Scheduling Order. 3 Sched. Order ¶ 7.

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the Pay-2017 Case with slight modifications. 4 The consolidation order requires the parties to

serve (but not file) review appraisals not later than March 4, 20195 and establishes a new trial

ready date, 6 which has been continued.

The parties exchanged expert reports and subsequently filed pretrial submissions in

accordance with the consolidation order. 7 These included: (1) two primary appraisals of the

subject property by Lowes (one for each tax year), each by Michael MaRous; (2) two primary

appraisals of the subject property by the County (one for each tax year), each by Timothy

Mitchell; (3) two review appraisals by Lowes’ review appraiser of the County’s primary

appraisals (for the respective tax years), each by Gary Battuello; and (4) a review appraisal by

the County’s review appraiser of Lowe’s primary Pay-2017 appraisal, by Mark Kenney.

On March 4, 2019, Lowes moved for leave to conduct additional direct oral testimony of

its review appraiser at trial.8 Lowes contends that Mr. Battuello’s written review appraisal “will

not and cannot review and respond to all of” the appraisal testimony of Mr. Mitchell.9

Specifically, Lowes represents that Mr. Battuello should be able to address Mr. Mitchell’s

written appraisal in an expanded fashion as it relates to the use of sales of leased-fee properties

as comparables in the sales comparison approach;10 deed restrictions as they relate to the value

4 Order Granting Parties’ Stip. To Consol. & To Amend Sched. Order (filed July 3, 2018) (the “Consolidation Order”). 5 Consol. Order ¶ 4. 6 Consol. Order ¶ 6.

2019).

at 6. 7 The parties filed pretrial submissions between March 22 and April 1, 2019. 8 Not. Mot. & Mot. Leave Lim. Dir. Test. Of Gary Battuello (filed Mar. 4, 2019).

9 Pet’r’s Mem. Supp. Mot. Leave Lim. Dir. Test. Of Gary Battuello 2 (filed Mar. 4,

10 Pet’r’s Mem. 3-4; see Aff. Jennifer R. Pusch (Mar. 4, 2019) ¶¶ 4-5, Ex. A, at 6, Ex. B,

of big box properties;11 and “the nuances of the so-called ‘dark store theory.’ ” 12 Lowes

contends this additional direct testimony by its review appraiser is warranted because Mr.

Mitchell, in his principal appraisal for the County, “appends to his report only the IAAO paper

titled ‘Commercial Big-Box Retail: A Guide to Market-Based Valuation’ ” and only cites to the

paper.13 Lowes expresses concern that, if the County does not cross-examine Mr. Battuello, or

undertakes only a limited cross-examination, Mr. Battuello “will never have an opportunity to

fully respond to Mr. Mitchell’s written appraisal. ” 14 (Emphasis added.)

The County responds that Lowes may seek to offer Mr. Battuello’s rebuttal testimony in

response to Mr. Mitchell’s oral testimony at trial (whether in response to cross-examination or

redirect), but not to explain matters already addressed in his written testimony. 15 A telephonic

hearing on this motion was held on August 27, 2020.

II. GOVERNING LAW

Minnesota Statutes, section 271.06, subdivision 7 (2018), provides that, in general, the

Minnesota Rules of Civil Procedure and the Minnesota Rules of Evidence (collectively, the

“Rules”) govern the procedures in the tax court, where practicable.

With respect to discovery, Rule 26.05 provides:

A party is under a duty seasonably to amend a prior response to an interrogatory, request for production, or request for admission if the party learns that the response is in some material respect incomplete or incorrect and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing.

11 Pet’r’s Mem. 4; see Pusch Aff. ¶¶ 7-8, Exs. D & E. 12 Pet’r’s Mem. 4. 13 Pet’r’s Mem. 3-4. 14 Pet’r’s Mem. 2. 15 Resp’t’s Resp. to 2-3 (filed Apr. 29, 2019). Pet’r’s Mot. Add’l Dir. Test. Of Review Appraiser Gary Battuello

Minn. R. Civ. P. 26.05. This responsibility extends to any report of the expert. Id.; Minn. R.

Civ. P. 26.01(b)(5).

Regarding the presentation of evidence at trial, Rule 611(a) authorizes the court to control

its mode and order:

The court shall exercise reasonable control over the mode and order of interrogating witnesses and presenting evidence so as to (1) make the interrogation and presentation effective for the ascertainment of the truth, (2) avoid needless consumption of time, and (3) protect witnesses from harassment or undue embarrassment.

Minn. R. Evid. 611(a).

Consistent with Rule 611(a), this court regularly employs scheduling orders that require

the direct testimony of expert witnesses to be reduced to writing, absent leave of court. Minn. R.

Civ. P. 16.03(d) (authorizing the court to consider and take appropriate action with respect to

“limitations or restrictions on the use of testimony under Rule 702 of the Minnesota Rules of

Evidence”); Minn. Rule Civ. P. 16.02(f) (authorizing the court to enter a scheduling order for

trial); Minn. Rule Civ. P. 26.01(b)(2); see, e.g., 1300 Nicollet, L.L.C. v. Cty. of Hennepin, No.

27-CV-17-06284 et al., 2019 WL 5495872, at *2 (Minn. T.C. Oct. 16, 2019); N. Nat. Gas Co. v.

Comm’ r of Revenue, Nos. 8864-R & 8976-R, 2019 WL 2479445, at *8 n.29 (Minn. T.C. June 4,

2019); Signature Flight Support Corp. v. Cty. of Hennepin, Nos. 27-CV-13-08346 & 27-CV-14-

06368, 2017 WL 11104166, at *1 (Minn. T.C. Feb. 16, 2017) (all describing this court’s use of

scheduling order requiring direct testimony of experts to be limited to written expert report).

Appraisers in Minnesota are required to act according to the standards of professional

appraisal practice. 82B.195, subd. 1 (2018). Such standards are set forth in USPAP, Minn. Stat.

§§ 82B.021, subd. 26 (2018), which “reflects the current standards of the appraisal profession.”

Mandel v. Comm ’ r of Revenue, No. 8787-R, 2016 WL 903301, at *5 (Minn. T.C. Mar. 8, 2016).

The professional standards applicable to review appraisals require such appraisal reports to state,

among other things: (1) the scope of work used to develop the appraisal review; (2) the

reviewer’s opinions and conclusions about the work under review, including the reasons for any

disagreement; and (3) when the scope of work includes the reviewer’s development of an

opinion of value or review opinion related to the work under review, at a minimum, summarize

any additional information relied on and the reasoning for the reviewer’s opinion of value or

review opinion related to the work under review. The Appraisal Foundation, Uniform Standards

of Professional Appraisal Practice (“USPAP”) Standards Rule 4-2(g), (h), (i)(iii) (2018-19 ed.).

III. ANALYSIS

Lowes seeks leave for additional oral direct testimony of its review appraiser at trial to

expand on matters not contained in Mr. Battuello’s written review appraisal.16 The motion is

denied.

Lowes contends Mr. Battuello will not be able to respond adequately to the written

appraisals of Mr. Mitchell (i.e., Mr. Mitchell’s direct testimony), particularly in the event the

County does not cross-examine Mr. Battuello at trial. 17 The USPAP standards governing review

appraisals, however, require such appraisals to disclose the scope of their work to intended users

by providing “[s]ufficient information” by “disclosure of research and analyses performed… ”

USPAP Standards Rule 4.2(g), cmt. Moreover, “[t]he report must provide sufficient information

to enable the client and intended users to understand the rationale for the reviewer’s opinions and

conclusions.” USPAP Standards Rule 4.2(h), cmt. The Scheduling Order incorporates these

requirements, and provides that expert reports must include “(1) a complete statement of all

opinions the witness will express and the basis and reasons for them; [and] (2) the facts or data

16 Pet’r’s Mem. 2-3. 17 Pet’r’s Mem. 2.

considered by the witness in forming the opinions . . . .” 18 Minn. R. Civ. P. 26.01(b)(2).

Accordingly, Mr. Battuello’s written reports should have contained all the bases and reasons for

his opinion concerning the use of sales of leased-fee properties and the effect of deed restrictions

on value, as well as the sources on which he relied. Lowes may not supplement Mr. Battuello’s

written reports with additional direct testimony at trial to overcome deficiencies in his written

review appraisals so the court can “understand the rationale for [his] opinions and conclusions. ”

USPAP Standards Rule 4.2(h), cmt.

Furthermore, Rule 26.05 requires parties seasonably to amend reports of expert witnesses

“if the party learns that the response is in some material respect incomplete or incorrect and if the

additional or corrective information has not otherwise been made known to the other parties

during the discovery process or in writing. ” Minn. R. Civ. P. 26.05. To the extent Lowes seeks

an opportunity to elicit more detailed direct testimony from Mr. Battuello regarding the premises

of his review appraisals, on account of the review appraisals being incomplete or incorrect,

Lowes was obliged to amend the review appraisals when the need for Mr. Battuello to

supplement his appraisals became apparent, and not to delay such amendments until the time of

trial. See, e.g., Macy’s Retail Holding, Inc. v. Cty. of Hennepin, No. 27-CV-13-6683, 27-CV-14-

6579, 2017 WL 2656305, at *4 (Minn. T.C. June 19, 2017) (noting that “[n]othing in rule

26.05 … limits the duty to … some prescribed period”). This obligation is not satisfied by

requesting leave for additional direct testimony at trial, as the purpose of discovery is to avoid

unfair surprise. See Gale v. Cty. of Hennepin, 609 N.W.2d 887, 891 (Minn. 2000); Thorson v.

Zollinger Dental, P.A., 728 N.W.2d 261, 266 (Minn. App. 2007).

18 Sched. Order. ¶ 7.

To the extent Lowes anticipates the need to respond to Mr. Mitchell’s trial testimony

regarding the use of sales of leased-fee properties and the effect of deed restrictions on value,

however, the situation is different. At the time of trial, if applicable, Lowes may seek leave to

present the rebuttal testimony of Mr. Battuello pertaining to matters elicited on its

cross-examination of Mr. Mitchell, or during the County’s redirect examination of Mr. Mitchell.

W.S.T.

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