Clarifying when expert testimony on alleged diminution in property value becomes legally sufficient to support a so-called “stigma” claim, the Texas Supreme Court struck down a $350,000 jury verdict based on environmental contamination of Plaintiff’s property. See Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch, No. 13-0084 (Tex. Aug. 22, 2014).

The case stems from a release of liquid waste into a culvert that drains into a stock tank on Plaintiff’s property. After Plaintiff discovered contamination in 2007, the Texas Commission on Environmental Quality (TCEQ) conducted an unannounced visit to a neighboring metal processing facility and brought an enforcement action for noncompliance with certain regulations. The metal facility took steps to bring the facility into compliance and subsequently concluded that its activities did not have any ongoing adverse impacts on water quality in Plaintiff’s stock tank.Plaintiff disputed this and brought a suit alleging nuisance, trespass, and negligence, and seeking damages for a decrease in the fair market value of his ranch due to contamination and the stigma of contamination. A jury awarded approximately $350,000 in damages, and the appellate court affirmed.

On appeal, the Texas Supreme Court held that “[e]ven when it is legally possible to recover stigma damages, it is often legally impossible to prove them. Evidence based on ‘conjecture, guess or speculation’ is inadequate to prove stigma damages, not only as to the amount of the lost value but also as to the portion of that amount caused by the defendant’s conduct.” Houston Unlimited, Inc., Slip Op.at 9. The court reviewed the expert testimony upon which the jury verdict relied, and affirmed the soundness of the sales-comparison approach, under which real estate experts use sales data from comparable properties in the area to evaluate the value of the property at issue. The court found that the Plaintiff’s real estate expert did not properly employ the sales-comparison approach because the expert (a) provided opinions that were unsupported by available data, (b) unreasonably attributed loss in property value to contamination, and (c) failed to account for the differences in the extent and nature of contamination between the Plaintiff’s property and the properties chosen for comparison.