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Monday, June 21, 2010

Expert Reliance: Court Of Appeals Of Kentucky Finds Expert Opinion Testimony On Damages Was Properly Based On Inadmissible Hearsay

Kentucky Rule of Evidence 703(a) provides that

The facts or data in the particular case upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing. If of a type reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject, the facts or data need not be admissible in evidence.

And, as the recent opinion of the Court of Appeals of Kentucky in Kessler Homes, Inc. v. Petzold, 2010 WL 2427415 (Ky.App. 2010), makes clear, estimates of damages based upon inadmissible hearsay are often admissible under Kentucky Rule of Evidence 703(a) and similar rules.

In Petzold,

On August 30, 2000, [Adolph and Marilyn Petzold] and Kessler [Homes, Inc.] entered into a contract for the construction of a residence. Toward the end of the construction project, disputes arose between the parties concerning the quality of the work and Kessler's billing practices. In light of the disagreements, the Petzolds refused to pay Kessler. The efforts of the parties to resolve their differences failed.

On October 14, 2002, Kessler filed suit against the Petzolds in Fayette Circuit Court seeking amounts it believed were owed by the Petzolds under the contract. The Petzolds filed a counterclaim asserting various causes of action relating to fraud, violations of the applicable building codes, and violations of Kentucky's Consumer Protection Act. Protracted litigation followed. The parties waived their respective rights to a jury trial, and a four-day bench trial was held from August 29, 2005, to September 1, 2005, presided over by Judge Goodwine.

On February 3, 2006, Judge Goodwine entered an opinion, order, and judgment. The judgment dismissed Kessler's claims against the Petzolds; awarded the Petzolds $21,668.00 upon their claim for building code violations; awarded the Petzolds $8,466.00 upon a finding that Kessler breached its duty of good faith and fair dealing, but dismissed the underlying fraud claim; dismissed the Petzolds [sic] claims for damages for other construction defects, for violation of the Consumer Protection Act, and for the loss of the use and enjoyment of their residence; and found that the Petzolds were entitled to recover their attorney fees and expenses, expert fees and expenses, and costs. Both parties thereafter filed motions to alter, amend, or vacate. On May 2, 2006, the trial court entered an order denying Kessler's motion to amend, sustaining the Petzolds' motion to amend, and finalizing the award of $106,024.59 for attorney fees and expenses and $5,367.60 for expert fees. Both parties appealed the trial court's rulings to the Court of Appeals.

Part of the basis for Kessler's appeal was that the trial court abused its discretion by admitting certain testimony of the Petzolds' expert witness, Sasan Pasha, a structural engineer. Kessler Homes stipulated that Pasha was qualified to testify as an expert regarding the Petzolds' roof, and Pasha later testified that the Petzolds' roof was defective and in violation of the building codes and that it would cost $21,668.00 to replace the roof. In reaching this latter conclusion, Pasha considered estimates from two different roofing companies when formulating his opinion.

On appeal, Kessler's argument regarding Pasha's testimony was twofold. First, it argued that Pasha, as a structural engineer, was only qualified to testify regarding whether the roof was defective and was not qualified to testify regarding the cost of replacing the roof. The Court of Appeals of Kentucky easily turned this argument aside, finding that Kessler stipulated that Pasha was qualified to testify as an expert and never objected to his credentials at trial.

Second, Kessler claimed that Pasha improperly relied upon inadmissible hearsay to reach his conclusion regarding the cost to replace the roof. The court again disagreed, finding that

KRS 703(a) specifically provides that the "facts or data in the particular case upon which an expert bases an opinion...need not be admissible in evidence." "Thus when the expert witness has consulted numerous sources, and uses ... his own professional knowledge and experience, to arrive at his opinion, that opinion is regarded as evidence in its own right and not as hearsay in disguise."...

Pasha met the standards set forth above. He consulted more than one source and then utilized his professional knowledge and experience to derive an opinion regarding roof replacement cost. Kessler Homes was not precluded from substantive cross-examination as Pasha was available and did testify regarding the basis of his opinion. Any inadequacies exposed from this cross-examination properly affected the weight of his testimony and not its admissibility. Accordingly, we discern no abuse of discretion in the trial court's admission of Pasha's opinion regarding cost replacement.

-CM

http://lawprofessors.typepad.com/evidenceprof/2010/06/703--kessler-homes-inc-fayette-circuit-court-v-adolph-petzold-and-marilyn-----sw3d------2010-wl-2427415kyapp2010.html

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