United States: Texas Supreme Court Raises The Evidentiary Bar For Damages In Environmental Contamination Cases

Keywords: environmental, contamination, chemical, real property

In a recent decision involving damages for environmental contamination, the Texas Supreme Court reversed a jury award because the plaintiff failed to meet the high standard for establishing loss of market value, and the even higher standard for "stigma" damages associated with environmental contamination of real property in the absence of a sale of the underlying property. The decision in Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch1 highlights the impropriety of permitting stigma damages when a plaintiff fails to ground expert testimony regarding damages on established and clear principles.

This case involved chemical contamination on a cattle ranch caused by Houston Unlimited, a neighboring metal processing facility. The Texas Commission on Environmental Quality ("TCEQ") confirmed the contamination, and the ranch owner then filed suit seeking damages for loss of market value. At trial, the ranch owner's expert testified that because of the stigma resulting from the TCEQ action, the value of the plaintiff's property had declined—although the ranch had not undergone a sale. The jury found Houston Unlimited liable and awarded the ranch owner approximately $350,000 in damages. Despite a dissent criticizing the damages testimony of the ranch owner's expert, the Texas Court of Appeals affirmed.2 

On cert to the Texas Supreme Court, the parties debated whether stigma damages are available in environmental-contamination cases. The court ultimately failed to reach that issue, but it highlighted the daunting standard of proof required for such recovery by stating that while it may be "legally possible to recover stigma damages, it is often legally impossible to prove them." 

In focusing on the legal sufficiency of the ranch owner's evidence of damages, the Texas Supreme Court found the evidence in the record inadequate to prove that the contamination diminished the fair market value of the property. While the court did not categorically reject the expert's "percentage-reduction-in-value" approach, it found that the "manner in which" the expert "used the approach here is fatally flawed." The court identified three specific flaws: (i) unreliable data, (ii) unsupported assumptions and (iii) analytical gaps.

Unreliable Data

The court found that "the facts on which [the expert] relied" for her calculations "do not actually support her" opinions. For example, regarding one of the "comparable properties," the expert used the listing price, rather than the market price, as the "high value" and an offer price as the "low value," both of which occurred after the contamination. The court found that the data were "not temporally connected to the contamination" and held that "[w]hen the facts support several possible conclusions, only some of which support the expert's conclusions, the expert must explain to the fact finder why those conclusions are superior based on verifiable evidence, not simply the expert's opinion."

Unsupported Assumptions

While noting that when competing "evidence conflicts, it is the province of the jury to determine which evidence to credit," the court asserted that "if the record contains no evidence supporting an expert's material factual assumptions, or if such assumptions are contrary to conclusively proven facts, opinion testimony founded on those assumptions is not competent evidence."

In this case, the ranch owner's expert based her opinion on the assumption that the "diminutions she found for [the comparable properties] were 100 percent attributable to contamination that occurred." Accepting arguendo that diminution occurred, the court noted that the expert "did not attempt to establish that the contamination caused some or all of the diminution in market value that she found, nor did she attempt to rule out other plausible causes." The court held that "[t]his kind of material assumption, entirely lacking evidentiary support, renders expert testimony unreliable and incompetent to support a judgment" and further emphasized that the plaintiff had neither offered evidence showing that all of the diminution in value was attributable to stigma nor attempted to apportion the diminution among possible causes.

Analytical Gaps

Finally, the court noted that a verdict may not rest on expert testimony "if there is simply too great an analytical gap between" the relied upon "data and the opinion proffered." In this case, the expert failed to account for differences between the property at issue and the comparable properties. For example, the expert did not address how the types of contamination on the various properties were similar or different. In rejecting the expert's testimony because of such gaps, the court explained that the foundation of the approach used is that "the appraised property is compared to comparable properties, which justifies an assumption of comparable values, and then adjusted for differences between the properties."

Lessons

The Texas Supreme Court concluded that the damages expert's "reliance on insufficient data and unsupported assumptions and the analytical gaps in her analysis render her opinion conclusory and without evidentiary value." Because there was no other legally sufficient damages evidence, the court reversed the order awarding damages and the plaintiff recovered nothing. 

Counsel defending against claims for stigma damages can use Houston Unlimited to illustrate the uncertainty of whether such damages are available in Texas and, even assuming that they are, to illustrate the high evidentiary standard that must be met to recover such damages. Even outside of stigma damages, this case provides useful precedent to defend against more traditional claims for loss of market value.  

Note that the Texas Supreme Court did not take issue with the fact that the defendant did not object to the plaintiff's expert testimony at trial. In examining the probative value of the expert's testimony, the court explained that "the evidentiary value of expert testimony is derived from its basis, not from the mere fact that the expert said it." Nonetheless, prudence dictates objecting to and highlighting flaws at an available opportunity to create a supportive record for review.

Footnotes

1.No. 13-0084 (Tex. S. Ct. Aug. 22, 2014).

2. 389 S.W.3d 583 (Tex. App. 14th Dist. 2012).

Originally published September 15th, 2014

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2014. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions