The Importance of an Expert Witness

By: Wendy S. Cell

In December 2009 Shenehon Company provided expert testimony on behalf of the city of Minneapolis (defendant) regarding the viability of a 21-story condominium project near Loring Park. The city council denied plaintiff’s application for two conditional use permits, two variances, and a site plan review for height, setback, and capacity. Plaintiff filed the lawsuit alleging violations of procedural due process, substantive due process, and equal protection. District Court dismissed plaintiff’s substantive due process and equal protection claims. Because defendant was found liable for a violation of procedural due process, a second phase of trial was necessary to hear evidence on the issue of damages. Plaintiff sought compensatory damages in excess of $11 million for the profits he claims would have been realized had the project been approved and built. The court found Shenehon’s analysis and testimony to be more credible and awarded $0 in damages.

Credibility is the heart of every case. This case demonstrates the importance of retaining an expert witness to prepare a thorough analysis and to provide independent testimony. Robert Strachota of Shenehon Company testified on behalf of defendant while real estate developer and plaintiff, Bradley Hoyt, testified on his own behalf. Mr. Strachota prepared a clear, logical, and well-supported analysis and presentation. He utilized a recognized valuation method and demonstrated his knowledge regarding the subject matter. Mr. Strachota provided expert testimony about his appraisal to assist the trier of fact in understanding the material. In contrast, plaintiff relied on his own informal estimates which were unsupported by any documentation or market evidence. Because Mr. Strachota studied market data and analyzed each market factor, the court found his evidence more persuasive.

The court found plaintiff’s estimates of revenue, costs, and profit highly conjectural and optimistically speculative. Plaintiff’s testimony was based solely on his own informal estimates and was unsupported by contemporaneous documentation. Plaintiff had no feasibility analysis, no agreement with a contractor, no lending commitment or other formal plan for financing, no building permits, no final building plans, no pre-sales, and no marketing plan. Plaintiff’s profit projections hinged upon the accuracy of each of his sanguine construction and market assumptions. Any inaccuracy in plaintiff’s assumptions would have had a dramatic impact on the bottom line actually realized.

The court found that Mr. Strachota’s analysis was based on more realistic assumptions and was supported by actual experiences of other projects under development during the timeframe. Mr. Strachota studied and testified specifically to the condominium market, condominium development, unit mix, construction period, unit pricing, absorption, development costs, and marketing. Mr. Strachota’s experience established him as knowledgeable regarding new development projects, in general, and condominium projects, in particular. Mr. Strachota testified that plaintiff actually would have lost $10 to $20 million had he pursued this project during the timeframe in question.

The courts generally rely on expert testimony and this case is no different. Here, plaintiff presented no testimony by an appraiser and the only evidence of value he presented was his own opinion. He failed to present convincing testimony or documentation to substantiate his opinion as to his claim of lost profits. In sum, the court found plaintiff’s claim of damages remote and speculative.