A Primer And Update On Damage Claims
Based On Fear And Stigma
Brandee L. Caswell
There is a lot to learn from the Fear And Loathing in San Bruno
Brandee L. Caswell,
a partner with Faegre Baker Daniels in Denver,
is an experienced trial lawyer who has successfully litigated numerous cases in both state
and federal court. She brings first-chair trial
and appellate experience to clients of Faegre
Baker Daniels, handling cases from inception
to conclusion. Her practice focuses primarily
on complex real estate, construction, eminent
domain, and natural resources litigation. In her
eminent domain practice, Brandee has developed expertise in the protection and acquisition of rights-of-way for energy companies.
A September 9, 2010 pipeline explosion in the community of San Bruno, California put the suburb of San
Francisco in the national spotlight. The explosion left a
crater 72 feet long and 26 feet wide in the middle of a
residential subdivision. The 30-inch high pressure gas
pipeline that exploded was over 50 years old. It failed for
a combination of reasons, starting with inadequate pipeline material and welds followed by a 1980 sewer line replacement project undertaken by the City of San Bruno
(during which the 30-inch line suffered damage at the
crossing site), and finally pressures too great for the pipeline to sustain. The accident has been studied in detail
by both the NTSB and an independent panel constituted
by the California Public Utilities Commission. The report
by the CUPC panel can be found at: http://www.cpuc.
ca.gov/NR/rdonlyres/85E17CDA-7CE2-4D2D-93BAB95D25CF98B2/0/cpucfinalreport_v2.pdf.
Public response to the San Bruno accident was visceral, as the fiery images of the accident were cycled over
national media. The burned out vestiges of homes and
cars, along with the huge crater left by the accident may
be etched in the minds of audiences for years to come.
But, what impact does such a devastating accident have
The Practical Real Estate Lawyer | 21
22 | The Practical Real Estate Lawyer on condemnation jurisprudence? That question
has yet to be fully answered.
The admissibility of evidence relating to perceived safety hazards of all kinds has been addressed by courts across the country for many years.
Since the recent and widely publicized explosion in
San Bruno, the frequency of damage claims based
upon fear and stigma has, in this practitioner’s experience, risen dramatically. Thus, although these
types of damage claims have existed for decades, it
is a good time to review the legal landscape to understand the prevailing rules of admissibility when
it comes to fear and stigma.
THE THREE PREVAILING TESTS OF ADMISSIBILITY • There are three distinct views on
the admissibility of such evidence in condemnation
actions, ranging from wholesale rejection of it to
permitting evidence of even unreasonable fear so
long as there is proof that the fear impacts market
value. All three tests are discussed below. The common requirement of each test, however, is that a
proponent of such evidence must prove the proffered safety hazard — whether real or perceived –
actually affects market value. See 23 A.L.R.4th 631,
§2[b] (“compensation for the diminution in value
of property due to [public fear] … requires proof
on the part of the landowner that the fair market
value of the property was in fact diminished”). Accordingly, consistent among all of these views is the
requirement that the landowner link issues with a
project’s safety to the property’s market value. Coronado Oil Co. v. Grieves, 642 P.2d 423, 432 (Wyo. 1982)
(reversing trial court for admission of evidence that
the “owners characterized as conditions which affect the value of the property…,” concluding that
“[w]hile these imaginative detriments arising from
the presence of a road may affect buyers, they must
be tied to market value….”). See also 4A Nichols on
Eminent Domain, §14A.06 (“In any eminent domain proceeding, damages are measured as of the
date of taking, taking into account the prospective
May 2012
project to be constructed on the part taken, to the
extent that they have an effect upon present market
value. Thus damages which are deemed too contingent, speculative or remote as to affect present
market value will not be considered.”).
Evidence Of Fear In The Marketplace
Considered Without Proof of
Reasonableness
Evidence of fear in the marketplace may be considered without proof of reasonableness, so long as
there is sufficient evidence that the fears adversely
affect market value. The most lenient admissibility
standard is the view that if perceived safety hazards
create fear in the marketplace and impact property
values, such evidence can be admissible even without proof of the reasonableness of the fear. This
test focuses on the fact that even unreasonable fears
may depress market value if the market holds such
fears and the market devalues land because of those
fears. See, e.g., Ryan v. Kansas Power & Light Co., 815
P.2d 528 (Kan. 1991) (evidence of fear in the marketplace is admissible with respect to the value of
property taken without proof of reasonableness).
See also San Diego Gas & Elec. Co. v. Daley, 253 Cal.
Rptr. 144, 152 (Cal. Ct. App. 1988); Florida Power &
Light Co. v. Jennings, 518 So. 2d 895, 897 (Fla. 1987);
Western Farmers Elec. Coop. v. Enis, 993 P.2d 787
(Okla. Ct. App. 1999). In these cases, the admissibility threshold for such evidence is proof of actual
impact on market value. See, e.g. Criscuola v. Power
Auth., 621 N.E.2d 1195, 1197 (N.Y. 1993) (admissibility turns on “whether the fear of the danger existed and would affect market value”); United States v.
87.98 Acres, 530 F.3d 899 (9th Cir. 2008) (“[i]f fear
of a hazard would affect the price a knowledgeable
and prudent buyer would pay to a similarly wellinformed seller, diminution in value caused by the
fear may be recoverable”). Thus, a landowner’s —
or even an expert’s — personal fear is not enough.
Criscuola, supra, 621 N.E.2d at 1197 (“No witness,
whether expert or non-expert, may use his or her
Fear And Stigma Claims | 23
personal fear as a basis for testifying about fear in
the marketplace”); Sacramento & San Joaquin Drainage
Dist. v. Reed, 29 Cal. Rptr. 847, 853-54 (Cal. App. 3d
Dist. 1963), modified only as to cost, 217 Cal. App.
2d 611, 31 Cal. Rptr. 754 (1963) (appraiser should
not be allowed to support his otherwise incompetent opinion of value by attributing his opinions to
that of a ‘prospective purchaser.’”). There must be
evidence that the market is fearful of the proffered
safety hazards, and that the market values property
less because of it. See, e.g., Santa Fe v. Komis, 845 P.2d
753, 760 (N.M. 1992) (“[w]hether the transportation of hazardous nuclear materials actually is or
is not safe is irrelevant; the issue is whether public
perception of those dangers has a depressing effect
on the value of the property not taken”); San Diego Gas & Elect. Co., 253 Cal. Rptr. at 152 (refusing
to admit evidence that electromagnetic radiation
from overhead utility lines would not be harmful
because that evidence had no bearing on whether
public perception of harm has a depressing effect
on property value). Accordingly, general evidence
relating to the “unsafe nature” of pipelines, transmission lines, and similar infrastructure — without
any market link — is irrelevant and inadmissible
even under the broadest test of admissibility.
Evidence Of Fear In The Marketplace That
Is “Reasonable” And Tied To
Market Evidence
Evidence of fear in the marketplace considered
if it is “reasonable” and tied to market evidence.
Some courts have adopted a more stringent view
that evidence of safety hazards and resulting public
fear is only admissible if the fear of the danger is
reasonable. Thus, in addition to proof of market
fear and proof of diminution in value required by
the test above, these courts also impose a burden
on the landowner to establish that the fear is “wellfounded” in science and technology. See, e.g. Phillips
Pipe Line Co. v. Ashley, 605 S.W.2d 514 (Mo. Ct. App.
1980) (fears regarding a pipeline could be compen-
sable only if there were a basis in reason or experience for such fears, and if fears caused a diminution
in the fair market value of the property); Northeastern
Gas Transmission Co. v. Lapham, 117 A.2d 441 (Conn.
1955) (holding that the fear must be a well-founded
public fear which caused a diminution in the market value of the property); Heddin v. Delhi Gas Pipeline
Co., 522 S.W.2d 886, 888 (Tex. 1975) (reduction in
market value due to fear of an unfounded danger is
not recoverable).
Evidence Of Fear Is Inadmissible
Generally
Finally, some courts exclude evidence of fear in
the marketplace generally as too speculative to justify damages. See Alabama Power Co. v. Keystone Lime
Co., 67 So. 833, 836-37 (Ala. 1914) (finding that fear
is based on pure speculation by an ignorant public and can never be an element of damages even
if it affects the market value of the land); see also
Trunkline Gas Co. v. O’Bryan, 171 N.E.2d 45 (Ill. 1960)
(determining that the mere fear of gas transmission
line was not compensable); Central Illinois Light Co. v.
Nierstheimer, 185 N.E.2d 841, 843-44 (Ill. 1962) (reversing trial court decision allowing testimony from
various witnesses expressing fears from overhead
power line, including potential for broken wires,
danger from fire and lightning, danger to crops if
the towers were blown over, and danger of trespass
by utility employees finding such imagined sources
of fear “so remote and speculative and uncertain
as to afford no basis for allowance of damages”);
Louisville & N. R. Co. v. Hall, 136 S.W. 905, 906 (Ky.
1911) (testimony regarding fears of trespassers and
frightening of horses and cattle due to railroad right
of way held inadmissible speculative testimony not
tied to market value).
PRACTICE EXAMPLES: SUCCESS AND
FAILURE • With the foregoing substantive legal
standards in mind, this section focuses on the successes and failures of various attempts to introduce