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State v. United States Department of Treasury - Internal Revenue Service

United States District Court, D. Nevada

January 18, 2017

THE STATE OF NEVADA, on relation of its Department of Transportation, Plaintiff,
v.
UNITED STATES DEPARTMENT OF THE TREASURY - INTERNAL REVENUE SERVICE, et al., Defendants.

          ORDER

          GEORGE FOLEY, JR. UNITED STATES MAGISTRATE JUDGE

         This matter is before the Court on Plaintiff's Motion to Strike Tio DiFederico's Supplemental Report (ECF No. 45), filed on December 2, 2016. The Defendant Landowners filed their Response (ECF No. 60) on December 23, 2016 and Plaintiff filed its Reply (ECF No. 66) on January 9, 2017. The Court conducted a hearing in this matter on January 12, 2017.

         BACKGROUND

         This action arises out of the State of Nevada's taking, or proposed taking, of a portion of the Defendants' vacant land located on Martin Luther King Boulevard for “Project Neon, ” a project to widen Interstate Highway 15 between Desert Inn Road and the U.S. 95;1-515 Interchange in Las Vegas, Nevada. The State filed its action to condemn the subject parcel in exchange for fair compensation on February 24, 2016 in the District Court, Clark County, Nevada. Defendant Internal Revenue Service removed the action to this court on March 25, 2016.

         The Defendant Landowners allege a counterclaim for “precondemnation” damages. As stated in Buzz Stew, LLC v. City of N. Las Vegas, 124 Nev. 224, 229, 181 P.3d 670 (2008), to support a claim for precondemnation damages, the landowner must allege facts showing an official action by the would-be condemner amounting to an announcement of intent to condemn. Second, the landowner must show that the public agency acted improperly following the announcement of its intent to condemn. Unreasonable or extraordinary delay in moving forward with the condemnation proceeding can constitute improper action which causes damage to the landowner such as reduced market value of the property. In this case, the Defendant Landowners alleged that the State engaged in unreasonable or extraordinary delay that prevented them from developing an office building on the property. The Landowners seek precondemnation damages for rental income that they would have earned if they could have developed the property. They also seek interest and other charges on the promissory note for the purchase of the property, and attorneys' fees and architectural service fees relating to the rezoning of the property for commercial use.

         The discovery plan and scheduling order entered on May 10, 2016 provided that initial expert witness disclosures were due on September 20, 2016, rebuttal expert witness disclosures were due on October 20, 2016 and discovery would close on November 21, 2016. Scheduling Order (ECF No. 20). On September 20, 2016, the court granted the parties' stipulation to extend the initial expert witness disclosure deadline to September 27, the rebuttal expert witness disclosure deadline to October 27, and the close of discovery to November 28, 2016. Order (ECF No. 29).

         On September 27, 2016, Plaintiff State of Nevada disclosed its appraiser expert witness, Tami L. Campa, and produced a copy of her September 27, 2016 report which valued the Defendant Landowner's just compensation claim at $167, 000 for the diminished value of the property resulting from the partial taking. Motion (ECF No. 45), Exhibit 4 (Plaintiff's Initial Expert Disclosure). On that same date, the Defendant Landowners disclosed Tio DiFederico, a real estate appraiser, as their expert witness, and produced a copy of his September 27, 2016 report which valued the Defendant Landowners' just compensation claim at $215, 000 for the reduced value of the property and for a temporary construction easement. Motion (ECF No. 45), Exhibit 3 (Defendant Landowners' Second Supplement to List of Witnesses and Production of Documents) (“Second Supplement”).

         Defendant Landowners' Second Supplement also stated that Defendants Darrell Jackson, Thomas Strawn, Jr. and Andrew Levy would testify “regarding all of the facts and circumstances surrounding the taking and damaging of the subject property, including precondemnation damages.” Id. Under the computation of damages section, the Second Supplement stated that the Defendant Landowners' precondemnation damages include the loss of rental income and lost development/professional expenses for the office building they were unable to build due to Project Neon. Id. The Defendant Landowners further stated that they would be “timely supplementing their calculation of lost rental income upon review and consideration of the expert's value opinions.” Id. The Defendant Landowners served their Third Supplement to List of Witnesses and Production of Documents (“Third Supplement”) on October 13, 2016. See Plaintiff's Motion to Compel (ECF No. 41), Exhibit 3. The Third Supplement amended the Defendant Landowners' computation of precondemnation damages by stating a claim for lost rental damages of $107, 000 per year from May 2010 to present. Id. Alternatively, the Defendant Landowners claimed lost rental income of approximately $474, 754, that with interest yields a total lost rental income claim of $555, 732 to $665, 075. Id.

         On October 21, 2016, the Court granted the parties' stipulation to extend the rebuttal expert witness disclosure deadline to November 3, 2016. Order (ECF No. 36). On November 2, 2016, the Court granted the parties' stipulation to further extend the rebuttal expert witness disclosure deadline to November 17, 2016 and the discovery cut-off date to January 27, 2017. Order (ECF No. 39).

         On November 17, 2016, Plaintiff disclosed four rebuttal expert witnesses “to rebut the alleged pre-condemnation damages proffered by the individual Defendants.” Reply (ECF No. 66), pgs. 4-5. Plaintiff states that these rebuttal experts “are expected to testify regarding the opinions in their rebuttal reports which relate to Defendants' alleged pre-condemnation damages as set forth in Defendants' ‘computation of damages' disclosed on September 27, 2016 and October 13, 2016.” Id. at pgs. 4-5. One of these rebuttal experts is Plaintiff's appraiser, Tami L. Campa.

         On November 17, 2016, the Defendant Landowners served their Fourth Supplement to List of Witnesses and Production of Documents (“Fourth Supplement”). Motion (ECF No. 45), Exhibit 6. The Fourth Supplement states that the Defendant Landowners' appraiser expert witness, Mr. DiFederico, will also testify regarding their claim for precondemnation damages. Id. The Defendant Landowners produced a November 17, 2016 report by Mr. DiFederico, entitled “A Supplemental Analysis, ” which analyzes the Defendant Landowners' precondemnation damages claim. Mr. DiFederico states that the Defendant Landowners suffered a loss of rental income from June 2010 to February 2016 in the amount of $240, 000. Id. He applies 12 % compound interest to this amount from June 2010 apparently to the date of his report, for total lost rental income damages in the amount of $473, 717.14. Id.

         Plaintiff moves to strike Mr. DiFederico's November 17, 2016 report on the grounds that the report is not a proper supplement to his previous expert report; nor is it a rebuttal expert report.

         DISCUSSION

         Rule 26(a)(2)(D) of the Federal Rules of Civil Procedure provides that a party must make its expert witnesses disclosures at the times and in the sequences that the court orders. Absent stipulation or court order, the rule provides that “the disclosures must be made: (i) at least 90 days before the date set for trial or for the case to be ready for trial; or (ii) if the evidence is intended solely to contradict or rebut evidence on the same subject matter identified by another party under Rule 26(a)(2)(B) or (C), within 30 days after the other party's disclosure.” This District's Local Rule (LR) 26-1(b)(3) states that “[u]nless the discovery plan otherwise provides and the court so orders” expert witness disclosures must be made 60 days before the discovery cut-off date and rebuttal-expert disclosures must be made 30 days after the initial disclosure of experts. In this case, the original discovery plan and scheduling order and the first stipulation ...


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