Drafts are Required to be Retained Under Appraisal Standards

The following is a response to a comment from Mr. Rikon’s latest column in the New York Law Journal, which we recently posted here. Below, Mr. Rikon further describes the requirement under USPAP for a condemnation expert to retain his work file for cross-examination purposes.

Drafts are Required to be Retained Under Appraisal Standards

I write this in response to the comment made by Fred Kolikoff, Esq. dated September 1, 2015.  Mr. Kolikoff, a former Assistant Corporation Counsel for the City of New York, found fault in an article I wrote “The Condemnation Expert’s File: Minefield for Cross-Examination” which was published in the New York Law Journal on August 25, 2015.

Mr. Kolikoff’s argument that drafts do not have to be retained as part of the appraiser’s file plays with the language of the Uniform Standards of Professional Appraisal Practice (USPAP).

USPAP requires an appraiser to maintain a workfile for each appraisal.  The workfile must contain the name of the client and related information; true copies of any written reports, documented on any type of media; summaries of oral reports or testimony, or a transcript of testimony; and all other data, information, and documentation necessary to support the appraiser’s opinions and conclusions.

The appraiser must retain the workfile for a period of at least five (5) years after the preparation or at least two (2) years after final disposition of any judicial proceeding in which the appraiser provided testimony related to the assignment, whichever period expires last.  This is a mandatory part of USPAP’s ethics rule.  Thus, the failure to maintain copies of prior reports can be shown to violate the appraiser’s ethics rule which alone may result in substantial impeachment.  USPAP Ethics Rule U-9.

Clearly, if an appraiser completes an appraisal assignment, finds a value and transmits the report to the client, it must be part of the workfile.  It doesn’t matter what the report is labelled. If it is transmitted to the client, it must be part of the file and made available for discovery.

What exactly is Mr. Kolikoff concerned with?  Is it the alteration of the independent expert’s opinion by counsel?  The direction on how to value, or lowering of value?

Trial Judges have very little patience for appraisers who change their reports after consultation with counsel and then claim to have destroyed the earlier reports.  Sanctions have been imposed and affirmed in the following cases.  Matter of Village of Port Chester (Bologna), 27 Misc3d 1203(A), affd. 95 AD3d 894 [2012]; Matter of W. Ramapo Sewer, 37 Misc3d 1222(A) affd. 120 AD3d 703, mot. for lv. den. 24 NY3d 917.

Where there is no question that draft reports existed and were delivered to counsel for comment and would not be made available for cross-examination, courts will not hesitate to make an adverse inference.  In Matter of City of New York (Mobil Oil Corp.), 18 Misc3d 1118(A), a matter handled by Mr. Kolikoff, Justice Abraham Gerges ruled:

Accordingly, in view of the City’s refusal and/or inability to produce the draft reports prepared by Vogel and Becker and reviewed by it, the court agrees with claimant’s contention that it is entitled to an adverse inference.

The decision was affirmed at 65 AD3d 1241 [2nd Dept 2009].

In another matter handled by Mr. Kolikoff, the trial court made a negative inference for counsel’s instructions to its appraiser as to how to value the property.  The court stated,

Having held that the testimony regarding Mr. Salmon’s lack of compliance with the USPAP guidelines is properly before the court, the court further finds that Mr. Salmon’s adoption of the suggestions and valuation formula offered by counsel for the City should have been disclosed in his certification in accordance with the USPAP.  From this it follows that his failure to do so is an issue that impacts adversely on the credibility of his findings.

Matter of City of New York (Darlington Avenue), 25 Misc3d 1240(A).

The well-established law of New York always provided that on cross-examination, an appraiser could be asked about any prior appraisal of the subject property for impeachment purposes.  This rule is not unique to condemnation cases.

On cross-examination, the rules of evidence allow a party to impeach the credibility of his adversary’s witness through the use of prior inconsistent statements.  “Once a proper foundation is laid, a party may show that an adversary’s witness has, on another occasion, made oral and written statements which are inconsistent with some material part of the testimony, for the purpose of impeaching the credibility and thereby discrediting the testimony of the witness.”  § 6-411, Prince Richardson on Evidence, Eleventh Edition citing People v Duncan, 46 NY2d 74, 80, 412 NYS2d 833, cert den 442 US 910, rearg dsms 56 NY2d 646; Larkin v Nassau Electric R.R., 205 NY 267, 98 NE 465.

Mr. Kolikoff as puzzled why I did not cite Matter of Oakwood Beach (Yeshivas Ch’ San Sofer) in my article.  Mr. Kolikoff, who represented the City in that case, notes that Justice Wayne Saitta did not agree that drafts were required to be retained, but this language was limited to drafts which were not transmitted to the client upon completion of an assignment.  But more important was the Court’s language which immediately followed the quoted excerpt.  The Court wrote:

However, the fact that USPAP does not require retention of drafts does not end the inquiry as to whether a negative inference should be taken.  An adverse inference is permitted where a document which is in the control of a party, and that is material and non-cumulative, is not produced by that party, without a reasonable explanation for non-production.  An adverse inference can also be taken where a party destroys such a document without reasonable explanation.  Whether there was a legal requirement to retain the document is not necessarily dispositive, but only one factor in determining whether there was a reasonable explanation for destruction of the document.  The adverse inference that may be drawn, is that the document would not support the position of the party at trial or would support the position of the opposing party.

A party’s appraiser is under control of the party for purposes of an adverse inference.  Earlier drafts of an appraiser’s report may be relevant if there is evidence that the party has influenced the opinion of the appraiser or an appraiser has changed his opinion at the behest of its client.  An appraiser’s opinion should be based on the appraiser’s independent judgment. Of course, an appraiser may rely on facts and assumptions given to him by other experts or by his client, but the report must clearly state where the appraiser is relying on outside material or assumptions.  Only in this way can a trier of fact properly weigh an appraiser’s opinion.

The Court concluded:

In this case there was no basis to conclude that the earlier draft of Sterling’s report was material or non-cumulative.  The only evidence before the Court was Sterling’s testimony that there were no changes between the draft and final report, other than deleting the term draft in the final report.  Thus, the Court finds no basis, in this case, for drawing an adverse inference from the destruction of Sterling’s draft.

The Yeshivas Ch’ San Sofer case supports the legal principles set forth in my Law Journal article.  It also was a remarkable win.  2015 NY Slip Op 50896 (v).

 

Posted in Appraisers, Cross Examination, Published Articles, USPAP, Work file
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