good morning ladies and gentlemen our first case for this morning will be the kansas city southern real life company and levee drainage district and i say again mr brown please the court you are is i'm paul brown i represent the appellant's kansas city southern railway company and north folks southern railway company i see from the panel that you are all well acquainted with the parties to this lawsuit and with the federal statute that is to be construed on this appeal this is an appeal by my clients the railroad from a judgment by the district court in favor of snow ireland levy drainage district and the bench tried cakes this lawsuit was brought by the railroad against this nine island seeking injunctive relief to prevent collection of a tax assessment by this night against the railroads on the grounds that the assessment violates the anti tax discrimination provisions of the railroad rehabilitation and it forty nine u s c eleven five a one before your honors i want to say initially that this case involves an additional assessment since we were last here six years ago this nine never did go back and attempt to reassess the railroads in a nondiscriminatory fashion with respect to the annual assessment they have left in place for these six years and will assess meant that continues at the same rate it had been since we were last up here and it applies to all properties in the district and it's on a the basis of a per acre allocation of the assessment they did they don't have to do that for the additional sets not gathered in these three types of assessments right the original the annual and the additional correction the additional group so they could do it by then they could and i suspect the reason they have not done that is because they do not want to offend the major property owners in the district the ninety percent of the properties that are the big farmers do not want to have to go back through the reassessment process and i think this nie concluded and it conclusion that i made when i looked at it independently although i've not had discussions with counsel about this that they concluded that they would have to go through the entire reassessment process in order to assess the railroads on a benefits basis in other words they have if in fact a court that mohnish to the side that they would assess all parties and the district if they want to use the benefits basis then all parties all landowners have to be assessed on the benefits basis and that's a process they simply did not want to go through one side makes a lot of findings of fact about methodology so mean there are competing methodologies doesn't think the methodology your experts used was as well accepted and is sound is the methodology that th niland experts use and you know your opponents say the burden of proof meaning the burden of persuasion ultimately is on you so how is it that we get from this very thorough careful pay two ruling for you there are two things that i have to convince this court of in order to prevail in this appeal first of all that the in fact the court's findings support as a matter of law a finding of discrimination against the railroad and i'll talk about that in just a second second this court must convince this court that although my clients have the burden of proof of proving discrimination that the burden then rest upon the taxing  this is not to prove a justification for that discrimination and in this case that justification is oh it's ok that we discriminate against the railroads on a per acre basis the basis that we've done for over one hundred years because we have sat down and figured out what the benefits that the railroads and everybody else in the district gets from the levies and we have allocated this additional assessment on a on the basis it proportionate to the benefits received which would be a nondiscriminatory basis you would agree if you if you thought that they had the benefits properly they can do that and i agree your honor they can do that that the four hours act does not prevent them from using such a methodology provided that it is not discriminatory now in this case and i would like to point out that mr klinger the lead engineer that prepared the benefits analysis put in his report that's exhibit d to put in his report that annual assessment not only have the additional assessment but redo the engle assessment using the same methodology and using the essentials of the same tax rate the railroads will end up proportionately pain is higher tax rate what many of the methodology three  engine use were derived from the army corps from theme from industry practice and to the extent the engineers deviated from their practice or created their own methodology does that speak doesn't really go to wait more admissibility in some respects it does on the other hand with respect to the ability that the key is and the district court put this in its find the key was determining what the excuse my looks something was whether this knife could determine what the benefits were without legs and that meant somebody had to have the ability to say well what kind of damage with the railroads have if there were no legs why is that the right question that attacked because the levees have been around for better or for worse for one hundred years or so for a very very long time and i gathered that one of the debates it is is the proper analysis levy versus no let see or is the proper analysis levee breach versus no breach those are two different questions i believe your honor snide tried to make that an issue in the district court in the district co that that it made no sense we have an affidavit that mr klinger filed where he said my benefits analysis is on the basis of what damages would occur if there were no leavitt's now it didn't have to do with whether there were no levees permanently it was as if at my expert said dr hunter if the levees are magically removed but i am going to get that because you know if if no one had ever from the beginning of time built levees on the mississippi then when there was a huge flood the water would spread very evenly across you know agricultural land depending on you know elevations and hog a few in the and the like but it's going to spread much further once you have a lev and there's a breach of her to killer area it just makes sense that the waters and behave very differently from come rushing through and they're going to be much more philosophy to it it's a it's a really different question i think levee versus no levee on the one side or breach versus no breach on the other side and you are interesting lee it was mr clinger in the snide that said oh there's no difference between what happens if there are no levees there and if there is a breach of the levee now attempted to argue to the district court that they were and analyzing a levee breach situation they made this reference that if the levee was removed through a particular cross section if the court will read the record very closely you'll see that mr klinger said as if all of this nice levees were removed and all the levees upstream and downstream that is from other levee districts were left in place and the district court was frankly confused by that and they were confused because quite frankly this not was desperately trying overcome the challenges we had to their methodology and one way to do it is say dr penner did it wrong because he removed the levees and we simply duplicated a levee breach they did not they did exactly what dr painter did and there was one place in the record where and it's referenced in in the brief where mr clinger is asked that question and he said as if the snivel levees were removed and the levees upstream and downstream were left in place but trying to we really don't need to address that issue for my client to prevail because i have to show i have to convince this court that there was discrimination and i've got to convince this court what the appropriate comparative class is and if i can't do that i don't win on this appeal and i'd like to just first compare the class go for the c to the supreme court's most recent pronouncement on the four hours act case decided about thirteen months ago makes it very clear that there's two things that the a plaintiff in a four hours case has to show in order to establish with comparative classes and i think there's no question that the standard on review is it's an issue of law so this court decides that question de novo it's an interpretation of the of the statute in every case that has decided compared class issues have decided that i didn't know in fact this court did that last time we were we were up here the court said two things that the plaintiff test proof first of all it has to prove what is it says the comparative class should be based it can be anything and it should be based upon what the plaintiff's claim is in the particular lawsuit and in this lawsuit our claim is based upon the fact that we were discriminated against on a per acre basis and that the appropriate comparative class is to compare all landowners in the district on a per acre basis with the railroads and it has a court ever to what the terms that's the oyster analogy now why is that the appropriate ok so the second thing that we have to show is that the parties are similarly situated and it's very clear in this case yes but what i'm not sure i see and see a sex too is a compulsion to use everything as opposed to just saying use you something that makes sense for the purpose that we are pursuing here and i would say  it's more than what makes sense what is right what is accurate and the court said we're a party brings a claim alleging discrimination the first thing the court needs to look at is what is that claim what is the claim that's being made and here the claim that the railroads are that that agricultural land be benefited in a certain way and maybe pipeline utilities are residential property or railroads for that matter that it's not automatically the case of the benefit is going to be exactly the same for each type of use that's correct and actually the benefit is the same it's measured a little bit differently so in the case of the railroads it's measured so you get the benefit is the same that is protection from  well there's no question about that and that's where the experts came in but as i say in this case the railroads can prove discrimination by saying look at the way it's been done for one hundred years look the way this nice still doing it for all other taxpayers with respect to the annual assessment look at the fact that but now we have the commercial and industrial people getting the same treatment you are getting don't we yes and that's an inadequate class and i can tell you very easily why it isn't an adequate class there are a mere twenty eight properties in the district that are called other than the railroads in the pipelines and utilities that are classified as other industrial and commercial properties they they have fifty one acres out of one hundred and fourteen thousand acres that works out two point zero four percent not even a half of one percent of about ten percent the railroads comprise about three tenths of all the land in the district so together railroads and industrial properties other industrial commercial properties consist of about a third of a percent of all the land in the district you get yourself there you get and the court points out that we have to show that the railroads are similarly situated to the other taxpayers in the class that they wish to be compared to and that would include residential that would include other industrial commercial include farms how are they similarly situated they are similar really situated because the tax at issue supports the operation and maintenance of this nice lepus all other plans in the district as well as the railroads received flood protection from the size cliffs all other lands in the district as well as the railroads pay the taxes issue now it's not contends that all land from the district as well as the before i i sit down and one is it's the district court's own findings that proves discrimination if the comparative class is all other lands in the district and i will concede that if it is not if it's just other commercial and industrial properties although this is not clear from the record i can't provide all this case my clients can't provide the court will recall that mr powell one of the engineers that worked on the benefits analysis did all this work and then and the court will recall that we pulled out his spreadsheets and we looked inside the cells we didn't take just the piece of paper and we saw where he was manipulating the numbers he put all kinds of unit values and he had no documentation to show how he came up with those numbers and then even then the number produced by spreadsheet he applied a seventy five percent discount why did he do that and i think i know the answer to equalize the railroads to the other commercial industrial properties taking that seventy five percent discount to the railroads brought the railroads into the same range on a per acre basis as other commercial and that's why he did it and that's why i cannot prove discrimination if the comparison class is other industrial properties but i submit that under c s x to the proper comparative class is based upon what our allegations of discrimination are and based upon our proof of the similarity were all taxed were taxed for the same reason flood benefits and this night contends they used the same methodology with all properties even if it's measured a little differently for different types of properties so that's the issue of comparative class what is the facts in the district court opinion that prove discrimination on a per acre basis and that is the court found in its opinion that point three percent of the rich of the property in the district is owned by the railroads yet the railroads or pain six percent of the assessment the court also made a finding regarding the amount of the tax the railroads would pay if they were assessed on a per acre basis rather than assessed on the benefits basis and when i say that i mean within that the assessment is allocated on a per benefits basis per this nine versus on a per acre basis and we see that this nice assessment on a per acre basis would be twenty three thousand two hundred thirteen dollars versus when the  allocated on the basis of the benefits that this nie came up with it's ninety one thousand eighty four dollars that's a fair four fold disparity likewise the norfolk southern their assessment on a per acre basis is fifteen thousand eight seventy seven compared to one hundred two thousand nine hundred seventy six when it's allocated based upon the snide benefits analysis that's a seven fold despair when we look at the comparison of the railroads that the tax that they are pain versus the amount of land they have that's a twenty fold despair those are facts that are in the ports findings of fact and that shows as a matter of law that there was discrimination let me say very briefly the the sniper's entitle to find out to justify that discrimination by proving that they accurately allocated the benefits and they did not because the district court made no finding that the sniper accurately did that the only finding that the district court made with respect to what this night did on their benefits analysis is to say they attempted to do it and that it may be impossible to do it and in fact we know it's impossible to do it mr powell i asked him the question in his deposition at trial you don't know what kind of damage railroad embankment sustained from flooding in that situation i'm talking about the situation in an unlovely floodplain where the water comes up over the river embankment that cresting or breaching a levee answer i don't think anybody knows ok thank you thank you very making sure that out of county or out of area entities are not paying more than their fair share and i'm looking at these four different categories under the four our  act and number four is very broad based as the supreme court itself said impose another tax that discriminates against a real carrier providing transportation and so it seems that even if you're on a benefit  agricultural land in the district is benefiting proportionally more than rail land or commercial lander pipeline land or whatever else kind of land you want then that's preempted by part for your honor to address that question i understand of the court's concern about some of the district court's comments and i believe those reflect the fact that the district courts have two or three weeks of extremely complex expert testimony understand that but we're here to review it and he wrote a very detailed opinion that there are critical points where people seem to just pull numbers out of the air like this seventy five percent number or in the building remodeling adding thirty percent for the value back i don't know where that comes from what your honor actually that was explained very carefully to the district court and if i could could back up and talk to the court about the the agricultural i'm going to just make that it's very similar to a case somebody is challenging the determination of peer market value for tax purposes under b three but it's not good but you have to grant me that there are some differences in what the various subdivisions that we're looking at address so the first one seems to be looked into the market value of the rail transportation property in the ratio with the assessed value other commercial and industrial property tax compared to commercial industrial net all of a sudden you get to four which the supreme court itself observers you know doesn't have that limitation so presumably congress didn't want it in their purpose of the act obviously to prevent discrimination against right and so we've got commercial industrial singled out for one two and three but it's not there and four in the supreme court said so it's not there for and i believe though and we've really first issue that under it's under subsection four it's not under the first three subsections we believe the same rationale apply but why why should it in the in the wake of i mean this is a different case from the earlier ones you yourselves have argued very very differently that you started from scratch and you did all this work to which i say find you know that's the new set of facts that we have before us but it also means that what we said in the previous case about proper comparisons may not have any bearing anymore because of what you did because of what the supreme court has done well i think the supreme court has said that the comparison class is not necessarily limited to commercial industrial properties they do and we can see that because the legislature has indicated in the first three subsections that the states can trick agricultural property different for property tax purposes and because this is at heart a property tax i believe that holds but your honor but why should it why i mean why does case said you've got to compare it to similarly situated properties the district court found it is a matter of fact that the commercial industrial properties were the only similarly situated properties but shouldn't the district court feel compelled  cites our earlier decision and similarly situated always has to be with respect to what and in this instance it's who's going to bear a tax burden to pay for these levees nobody thinking that levees are going to be dismantled tomorrow that's a point that i thought was important and the other side and i agree around it but similar situated deals with benefit and you have raised the issue are these properties benefited differently they absolutely are the nature of the property makes the benefit very different in fact agricultural property is benefited in much different way that if there's a flood they lose the farmers lose a crowd the next year the fields dry up and they replant it but the thing about that is though assumed that people were off their carting everything out of their house they excluded the contents of structures and i wasn't i just didn't see any evidence about that i was thinking to myself well maybe you could look at evidence of insurance claims you know who's claiming for structural damage and who's claiming for contents damage whether it's commercial property or ever you know farm structures or the like but there's there's nothing people are just pulling this out of their heads well they did not put out their heads at all your honor we had very sophisticated we hired them the premier hydraulic engineering firm in the midwest why does that tell you about whether farmers are filing claims for structure because they understand what they had to do with the estimate the amount of damages to all of these different types of properties in hypothetical flood events from a levee breach at different elevations and the kind of damages that occur and they had extensive data bases basically irrelevant the contents there was undisputed testimony that everybody that took two days for the snow to fill in one thousand nine hundred three everybody had time to move personal property and the railroads did too we did not assess the reverence for loss of their cars or contents it was their track and the things that couldn't be but you didn't take into account the norfolk's damages from the ninety three flood but not casey's lack of damages from that sludge everybody was going to be the worst case scenario to our experts determination because again we're looking at the benefit for the levee holding the levee holds zero zero damage right just like kansas city southern had but what the ninety three flood demonstrates is that when the levee breaches there is a nine million dollars art or experts said safe dollars the differences is the key around are we're looking at and measuring the benefit for the levees holding and that's exactly what mr clinger did spite what mr brown has testified to and this is really an issue of fact  the evidence mr to mr clingers testimony was clear he looked at the potential for a breach at one particular location one particular cross section where as dr pincher the rarest experts assume the levees were gone permanently you have to look at what the assessments for to determine what the benefits right so in this case the assessment was for repairs and maintenance to keep the levees in place to prevent a breach to prevent the ninety three damages that's exactly what our experts will  calculations were not reliable you know your honor and let me address that because it is it's it's a it was one point in a very major overall calculation dummer experts and there is no dispute that there is a large degree of professional judgment and that's what the court was referring to talked about the difficulty when you're determining benefits to property from hypothetical but events there is an element of professional judgment that comes into play now when they when the engineers did their calculations of potential damages at the various for the rare blood they use the evidence from the ninety three flood they use their own cost estimates they use their own in house data they have regarding different floods and there were damages and they came up with some numbers and before putting those numbers into their complex computer manual that did the statistical analysis to spit out the different estimated annual benefit the engineer determined to reduce that seventy five percent and his testimony on that was very clear he said did he come to that your i understand he's put everything in the computer it spit it out and he reduced it but it's the basis of the seventy five percent reduction that i'm questioning his professional judgment and at some point that's what you have to rely on in these extensive notes or spreadsheets to show how it calculates flood damage he doesn't document unit values he that he puts into the spreadsheet he looks at the number it comes up with uses that it's too high and he plays with it until it gets down to something he's comfortable with but that's the number that you want so it's like give me the answer and then i'll tell you what the question is and that's your honor that's not how the testimony played out and it's not what what the experts testified to what the paul testified that at all times he knew he was going to use the number between twenty and thirty percent and he settled on twenty five and he did it he testified to be conservative he did not just pick a number dare do that would i mean like regularly if there's a property assessor goes out and figures out the fair market value of all the property in a tax industry then sometimes they'll tax people on the basis of you know thirty percent of the use as value or something but it's uniform it's across many different kinds of property this is you know everybody else has one rule in the railroads or other over here and they've come up with this other well your honor just if i could number one of the differences for the other all the other types of practice there are published  damage curbs that most that the k engineers used frankly so did the robert engineers for the railroads there are no published at damage occurs there's nothing out there saying when you have a hundred year flood or it's going to have x amount of damage just over history well it is data is terrible is what this means and what the actual damages are because if he's got to suddenly reduce it by seventy five percent he's got an unreliable number i beg to differ on i don't believe he said he wasn't comfortable with the number i believe he said he wanted to be conservative and there's nothing wrong with that and then the two other experts after he got his number mr clinger and mr risley did extensive check on that number on the number that had already been reduced by seventy five percent they used various other methodology is to determine whether or not that was an accurate number it's no different than what the where what the railroads engineers came up with their own numbers they use nothing but professional judgment as well when they had experience as well how much of we actually paid to do this kind of work and we had that data well we had the actual date of what they paid what they didn't have your honor was someone who'd ever attempted to estimate damages in a hypothetical fun of that another it's us me i might use hypothetical better than real because that was their task here there's only those are all hypothetical situations they had estimate damages from their expert at mit he had no hydraulic experience and he had never before attempted to determine potential damages the other expert had the hydraulic experience they're working as a team are other expert was a geologist your honor he had absolutely no hydraulic expertise at all and he's been criticized by the corps in the regulatory authorities consistently first lack of expertise in the area and in fact the district court went back and carefully reviewed the methodology agencies which inspected maintain the levees in our short compliance with the political standards at times the members of the k team exercise professional engineer engineering judgment that there was not a political program or industry practice and that would be a political to seventy five percent reduction of talked about the court went on it said the court finds that to be a reasonable approach the engineers and other witnesses were generally credible and discussing this process it's a page eighty three nine and that's in page eighty fourth that i thank you for and that's really what this case comes down to it's an expert case your honor it's an issue of fact the determination of benefits is an issue of fact now do you agree that if we were to disagree with you on the relevant set of comparisons with these look discriminatory no i'm going to take into account all of the land in the district not all your honor we the parties presented their credit their methodology and their determinations with respect to every single category of property bowl party stood our experts to determine the benefits for the agricultural the other categories of properties and use the same basic methodology to do so and apply the exact charge those privacy exact same percentage to twenty five percent of their benefit so even considering all of the properties in the district the evidence clearly supports that there was a proportionate spreading of the benefit occurrence crossed all properties and the same deficiencies undermined the railroads evidence with respect to the commercial duster properties with a similar hold for the other purposes while in other words they could not meet their burden of proving discrimination because as the district court found their evidence wasn't reliable and they measured the wrong benefit so even if you consider all the properties we submit the result would be exactly the same and i want to talk a minute about about the issue of what is discrimination here mr brown has said repeatedly that because he can show a per acre difference washed away in the maximum four hundred four hundred year flood in the others their sumo ever lasted all that that kind of damage would occur and was your honor they base that on their evidence of the ninety three flood and their experience and judgment and their evidence of other peri generations yeah i mean if i stand up there and say well i have experience in judgment usually under seven o two under our standards you've got to back it up later on i believe the experts did and they had more than their experience and judgment they had a lot of data there are mistakes of the court previously identified it hired a professional engineering firm and applied a uniform methodology to determine the benefits to all the properties in the district the district court found as a matter of fact not just noticed criminal intent but also noticed  and those factual findings are not clearly erroneous for that reason we asked the court to affirm thank you ok thank you very much i think you actually ran out of times mr brown but if you can restrict yourself to one minute i'll let you  it's the sniper's burden to prove that on a benefits basis the assessment was proportionate and that was their burden they failed to do that because the district court did not find that they did that the district court simply said they attempted to do that and furthermore i would submit that they cannot prove it because our daubert the railroads daubert motion should have been granted and the sniper experts should not have been allowed to testify and then the final point that i would make and this court noted it in the koehler pain in the last time or up here is if in fact there is intentional discrimination even justification will not overcome intentional discrimination and i think it's very clear this court's familiar with what happened last time this is just a continuation of what happened the last time we were up here it's intentional discrimination and that would overcome even showing just cation thank you your honor all right thank you very much thanks to both counsel take