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"Damaged Goods" Not Enough to Sway Third Circuit Court of Appeals

In early February, the Third Circuit Court of Appeals rejected the “damaged goods” approach to valuing property crossed by a pipeline. In UGI Sunbury LLC v. A Permanent Easement For 1.7575 Acres et al., the appeals court vacated the trial court’s property valuation that was based on an expert’s opinion that the stigma of a natural gas pipeline decreased the value of the property crossed by the pipeline.   

The expert largely based his opinion on anecdotes from his past employment in an appliance shop where he noticed customers valued undamaged property more than damaged property. Under his “damaged goods” theory, the expert opined that property under which a pipeline crosses has a lower value because people perceive it as damaged. The panel held that the expert’s methodology was incapable of testing, had not been peer reviewed, was not generally accepted, and did not provide for a rate of error. While an expert’s opinion does not have to meet all, or even most, of those factors, the fact that this expert’s opinion met none left his opinion unreliable.

The panel noted that parts of the expert’s opinion compared the value of properties impacted by oil spills or the radiation emitted from the Three-Mile Island nuclear disaster. Those properties were figurative oranges to the apples and thus incapable of assisting the trier of fact in concluding the impact to the value of property under which a natural gas pipeline crosses.

Finally, the Third Circuit held that the district court must act as “gatekeeper” and ensure that expert opinions are based on reliable science.

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About this Author

Brian Pulito, Steptoe Johnson, construction litigation, intellectual property

Brian Pulito focuses his practice in the areas of eminent domain proceedings, construction litigation, midstream litigation, oil, gas and mineral law litigation, and insurance litigation.



Jon C. Beckman, Steptoe Johnson, Natural Resource Lawyer, Energy Regulation Matters Attorney

Jon Beckman focuses his practice in the area of energy and natural resources law, specifically assisting clients with transactional and environmental matters.  Mr. Beckman is a former Combat Trauma Specialist for the Pennsylvania Army National Guard and served in Operation Iraqi Freedom.

Assisted clients with preparation of mineral title opinions, including complex calculations of ownership and leasehold interests, arising from energy exploration and production operations

Assisted energy client in perfecting an appeal of a Pennsylvania Department of Environmental Protection enforcement action and negotiating a consent order and agreement

Assisted midstream company in navigating Pennsylvania's condemnation laws

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