ALI-ABA Course of Study Condemnation 101: How To Prepare and Present an Eminent Domain Case January 8-10, 2009 Miami Beach, Florida

Transcription

1 85 ALI-ABA Course of Study Condemnation 101: How To Prepare and Present an Eminent Domain Case January 8-10, 2009 Miami Beach, Florida The Three Approaches To Measure Fair Market Value: What Does Jed Clampett Know About Picasso Anyway? Case Study Jacksonville Port Authority v. Keystone Coal Company By Andrew P. Brigham Brigham Moore LLP Jacksonville, Florida Author s Note: This case study on Jacksonville Port Authority v. Keystone Coal Company, Case No CA (Fla. 4th Judicial Circuit Court, 2008) is intended to be used together with a course outline that is adapted from earlier study materials from the January 5-7, 2006 (San Diego, California) Condemnation 101 Course of Study. The case study includes trial exhibits to example each of the three approaches to value which were at issue in the eminent domain proceedings that resulted in a jury verdict of $67,410,000, the largest jury verdict in Florida state court eminent domain proceedings. Special thanks is given to Jackson Bowman (Brigham Moore LLP - St. Petersburg) Mark Natirboff (Brigham Moore LLP Jacksonville), and Amy Brigham Boulris (Brigham Moore LLP - Miami) in the preparation of materials for this seminar presentation.

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3 87 ALI-ABA Course of Study Condemnation 101 January 8-10, 2009 Miami Beach, Florida (Eden Roc Resort) THE THREE APROACHES TO MEASURE FAIR MARKET VALUE What Does Jed Clampett Know About Picasso Anyway? Case Study Jacksonville Port Authority v. Keystone Coal Company By Andrew Prince Brigham BRIGHAM MOORE LLP Jacksonville, Florida Author s Note: This case study on Jacksonville Port Authority v. Keystone Coal Company, Case No CA (Fla. 4 th Judicial Circuit Court, 2008) is intended to be used together with a course outline that is adapted from earlier study materials from the January 5-7, 2006 (San Diego, California) Condemnation 101 Course of Study. The case study includes trial exhibits to example each of the three approaches to value which were at issue in the eminent domain proceedings that resulted in a jury verdict of $67,410,000, the largest jury verdict in Florida state court eminent domain proceedings. Special thanks is given to Jackson Bowman (Brigham Moore LLP - St. Petersburg) Mark Natirboff (Brigham Moore LLP Jacksonville), and Amy Brigham Boulris (Brigham Moore LLP - Miami) in the preparation of materials for this seminar presentation.

4 88 Condemnation 101: Case Study Jacksonville Port Authority v. Keystone Coal Company Case Study Table of Contents I. Statement of Facts (A Retrospective View of the Facts Leading Up to the Lawsuit) II. III. Case Commentary (A Retrospective View of the Strategy and Valuation Theory Applied in the Case) Epilogue (A Retrospective View of Case Evaluation and Case Management Decisions Made By Lawyer and Client) Index to Appendix I. Subject Property Introduction A. Land Inventory Study: St. Johns River (Jacksonville Harbor) B. Subject Property Aerial Photograph C. Subject Property Ground Photographs D. Timeline (Keystone Chronology) II. Market Forces/Highest and Best Use A. Fuel Diversity: Regional Coal Supply for Florida/Georgia B. Fuel Delivery: Class I & II Railroads and Existing Coal-Fired Power Plants in Florida/Georgia C. Intermodal Gateways: Ports of Call with Coal Ocean Terminals (Southeast U.S.A.) D. Global Trade Lanes (Panama Canal Expansion) III. Income Approach A. Discounted Cash Flow: Memorandum of Understanding ( MOU ) B. Basic Terms of Memorandum of Understanding ( MOU ) C. Composite Exhibits Showing Income Approach Using Direct Capitalization Method D. Composite Exhibits Showing Income Approach Using Yield Capitalization Page -2-

5 89 Condemnation 101: Case Study Jacksonville Port Authority v. Keystone Coal Company Method/Discounted Cash Flow Analysis E. Composite Exhibits Showing Owner s Revenue Projections Using Yield Capitalization Method/Discounted Cash Flow Analysis IV. Cost Approach A. Industrial Flow Chart (Lime Kiln) B. Ground Photographs (Lime Kiln) C. Composite Exhibits Showing Cost Approach (Core and Auxiliary Equipment Description, Replacement Cost New for Core Equipment, Compensation Summary for Core Equipment, Salvage Value for Auxiliary Equipment, Summary of Full Compensation for Lime Kiln) V. Sales Comparison/Market Approach A. Composite Exhibit of Subject Property (Keystone) B. Composite Exhibit of Center Point Comparable Sale C. Composite Exhibit of U.S. Gypsum Comparable Sale D. Composite Exhibit of Georgia Ports Authority Comparable Sale E. Composite Exhibit of Macalloy Comparable Sale F. Composite Exhibit of Sales Comparison Approach (Keystone) G. Composite Exhibit of Sales Comparison Approach (Jaxport #1) H. Composite Exhibit of Sales Comparison Approach (Jaxport #2) Page -3-

6 90 Condemnation 101: Case Study Jacksonville Port Authority v. Keystone Coal Company I. Statement of Facts Author s Note: The following is adapted from Keystone s Statement of Facts dated March 5, 2007, filed in Jacksonville Port Authority v. Keystone Coal Company, Case No CA (Fla. 4 th Judicial Circuit Court, 2008). As part of this case study, the facts detailed below provide a retrospective account of the facts and circumstances existing prior to the filing of the eminent domain lawsuit. In essence, these are the facts which are presented to the lawyer when first commencing work in the case. Keystone Coal Company Keystone Coal Company is owned by Tom Scholl. Its products include coal (all varieties), petroleum coke, and anthracite A & B. With supply points in the United States, Indonesia, Venezuela, Russia, Colombia, and China, and delivery points in the United States, Turkey, South Korea, Canada, Serbia, and France, Keystone works in a global market. Owner Tom Scholl is a native of West Virginia who is one of the few remaining small coal producers/brokers competing with much larger corporate entities in both U.S. domestic and foreign coal trade. At age fourteen, he worked in a coal mine managed by his father. His grandfather was a mine foreman, his father ran mines for other people, and now Scholl owns his own mine in Marmet, West Virginia. He also owns a number of coal concessions in Columbia, South America. Graduating from West Virginia Tech with a BA in industrial management, mining emphasis, he was involved in prospecting and exploration early in his career. He worked for years as superintendent in active coal mining operations in both West Virginia and Pennsylvania. One day, on a whim, Scholl answered an ad in the local newspaper and pursued a job that would later open the door to greater opportunity. He took a position with J.E. Baker Company in York, Pennsylvania. He was the single broker for a J.E. Baker s subsidiary, Keystone Coal Company, founded in He bought coal for the J.E. Baker s lime kilns. After a time, company founder John Baker died, and his heirs offered up the J.E. Baker Company to an employee-buyout. Keystone Coal Company, its brokerage business, was for sale. Scholl mustered up all his finances, borrowed money from his father, pledged a year of coal brokerage commissions and drove his Ford Escort to the nub, buying and selling coal, all to become a half-owner in Keystone Coal Company. That s how it all started. Jacksonville Property Search (St. Johns River) In 1998, Keystone Coal Company came to Jacksonville, Florida to begin looking for property to open a coal terminal on the St. Johns River. Scholl, working with local property consultants, soon understood his options were few. Properties suitable for port development along the St. Johns River were already owned by others and committed to other uses. Tom Scholl recognized that the St. Johns River offered one of the last opportunities along the U.S. east coast to develop deep water port facilities within close proximty to rail, an intermodal connection strategic to coal supply operations. Having purchased coal concessions in South Page -4-