On January 8, 2015, the Third Department issued a decision in Latham Land I LLC v. TGI Friday’s Inc., 2015 NY Slip Op. 00264, modifying an award of damages.
In Latham Land, the Third Department examined whether a damages award had a proper basis in the evidence. It held that it did not, explaining:
[W]e . . . agree with [plaintiff] that Supreme Court’s award of damages cannot stand. . . . Setting the appropriate capitalization rate is a factual issue and, as such, Supreme Court’s findings in that regard are generally entitled to deference. Plaintiff asserts that such deference is not warranted here, inasmuch as [the defendant’s expert] testified in a conclusory fashion, relying solely on his background and experience, and offered no factual justification for his opinion.
We agree. [The defendant’s expert] premised his testimony upon the incorrect assumption that the agreement between the parties was not valid and, as such, conducted a comparable market analysis using sales of undeveloped land. He agreed with plaintiff’s appraiser, Bruce Bauer, that an income capitalization method would be the appropriate means of valuation if the agreement were valid and that comparable properties to be used in that analysis would not be undeveloped parcels, but rather those sold subject to triple net leases. [The defendant’s expert] did not agree with the capitalization rate that Bauer derived from his analysis of such sales, but failed to explain how he arrived at a different capitalization rate. Indeed, [the defendant’s expert] testified that he had done no research to locate relevant comparable sales, gave no details as to how he had derived an appropriate capitalization rate, and admitted that he would want to look at the issue again if the agreement between the parties was deemed to be valid. Rosenblatt’s opinion, in short, was not supported by facts in the record and is entitled to little weight. The competing opinion of Bauer, who found a 6.5% capitalization rate to be appropriate, was not above question. It was, however, the only detailed and factually supported opinion offered, and Supreme Court erred in failing to credit it. Thus, plaintiff is entitled to a damages award calculated using a 6.5% capitalization rate, which amounts to $1,528,886.
(Internal quotations and citations omitted). This decision illustrates the importance of a properly supported expert opinion.