The Line Between Expert and Lay Opinion Testimony — Testimony as to Value of Real Property from an Indirect Corporate Owner — Disclosure Implications

From Reid Road Municipal Utility Dist. No. 2 v. Speedy Stop Food Stores, Ltd., 2011 Tex. LEXIS 190 (Tex. Sup. Ct. Mar. 11, 2011):

In this case we address *** whether an employee of the corporate general partner of a limited partnership qualifies to testify about the fair market value of partnership property under either the Property Owner Rule or Texas Rule of Evidence 701.***

[W]e believe the better rule is to treat organizations the same as natural persons for purposes of the Property Owner Rule, with certain restrictions on whose testimony can be considered as that of the property owner. We hold that the Property Owner Rule is limited to those witnesses who are officers of the entity in managerial positions with duties related to the property, or employees of the entity with substantially equivalent positions and duties. Further, the Property Owner Rule falls within the ambit of Texas Rule of Evidence 701 and therefore does not relieve the owner of the requirement that a witness must be personally familiar with the property and its fair market value, but the Property Owner Rule creates a presumption as to both.

[The proffered witness,] LaBeff, however, was not an employee or officer of Speedy Stop. Nor did his affidavit set out facts showing he was personally familiar with the Property and its value and that his opinion was not substantively an expert opinion based on specialized knowledge, skill, experience, training, or education. Thus, the trial court did not abuse its discretion by excluding his opinion as to the Property's diminution in value. ***

The line between who is a Rule 702 expert witness and who is a Rule 701 witness is not always bright. But when the main substance of the witness's testimony is based on application of the witness's specialized knowledge, skill, experience, training, or education to his familiarity with the property, then the testimony will generally be expert testimony within the scope of Rule 702. A witness giving such testimony must be properly disclosed and designated as an expert and the witness's testimony is subject to scrutiny under rules regarding experts and expert opinion. See Seale, 732 S.W.2d at 669; Perry, 667 S.W.2d at 264; see also Asplundh Mfg. Div. v. Benton Harbor Eng'g, 57 F.3d 1190 (3d Cir. 1995). Any other principle would allow parties to conceal expert testimony by claiming the witness is one whose opinions are merely for the purpose of explaining the witness's perceptions and testimony. See generally Gregory P. Joseph, Emerging Expert Issues Under the 1993 Disclosure Amendments to the Federal Rules of Civil Procedure, 164 F.R.D. 97, 108 (1996) (noting that "there is no good reason to allow what is essentially surprise expert testimony," and that courts "should be vigilant to preclude manipulative conduct designed to thwart the expert disclosure and discovery process").

Footnote 2. Prior to a 2000 amendment to the Federal Rules of Evidence, Rules 701 and 702 of the Texas and Federal Rules of Evidence were almost identical. Federal Rule 701, however, was amended to prohibit lay opinion testimony "based on scientific, technical, or other specialized knowledge within the scope of Rule 702." Fed. R. Evid. 701 (amended Dec. 1, 2000). The Advisory Committee Note explains that the change was made "to eliminate the risk that the reliability requirements set forth in Rule 702 will be evaded through the simple expedient of proffering an expert in lay witness clothing." Fed. R. Evid. 701 advisory committee's notes. Texas Rule of Evidence 701 has not been similarly amended, but the same concern — that expert testimony will be offered as evidence without meeting the reliability requirements of Rule 702 — underlies our opinion.

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