noting that a economic financial feasibility study “is a question of fact, not the application of axioms—elements of logical analysis employed without regard to actual facts.”
How later courts described this case
- noting that a economic financial feasibility study “is a question of fact, not the application of axioms—elements of logical analysis employed without regard to actual facts.”
Written by the judges who cited it.
The opinion
IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Property Tax
LOWE’S HIW, INC., )
)
Plaintiff, ) TC-MD 210115R; 210116R
)
v. )
)
MARION COUNTY ASSESSOR, )
) ORDER ON DEFENDANT’S MOTION
Defendant. ) TO COMPEL DISCOVERY
This matter came before the court on Defendant’s Motion to Compel Discovery
(Motion), filed December 1, 2021, requesting the court compel production of certain documents.
Plaintiff filed its Response in Opposition (Response), requesting the court deny Defendant’s
Motion on December 15, 2021. Defendant filed a Reply to Plaintiff’s Response on December
16, 2021. Oral argument on the Motion was held January 12, 2022.
I. STATEMENT OF FACTS
Plaintiff appeals the Board of Property Tax Appeals’ order sustaining the real market
value (RMV) of Property Tax Account R337298 (subject property) for the 2020-21 tax year.
(See Compl at 2.)
On June 29, 2021, Defendant sent a request for production to Plaintiff. (Mot at 1.) Four
of those requests are at issue in Defendant’s Motion as follows:
Request 7: “All documents describing the profitability and viability of the Lowe’s
operation at the subject property, or the criteria used to measure the profitability
and viability of the Lowe’s operation at the subject property, including but not
limited to company metrics used to compare the viability of operations of its stores,
revenues, expenses, and customer counts.”
Request 8: “All documents comparing the profitability and viability of the Lowe’s
operation at the subject property to other Lowe’s operations in Oregon.”
Request 25: “All documents that describe how internet sales are accounted for as it
ORDER ON DEFENDANT’S MOTION TO COMPEL DISCOVERY
TC-MD 210115R 1
impacts the operation at the subject property and its viability[;]”
Request 26: “All documents that describe how internet sales merchandise is
supplied form [sic] individual stores and central warehouses including the subject
property.”
(Mot at 1-4). Plaintiff asserts the requested documents are highly confidential and not relevant.
Defendant asserts the requests are relevant on the issue of highest and best use of the subject
property.
II. ANALYSIS
Tax Court Rule-Magistrate Division (TCR-MD) 9 requires parties make available any
“relevant” documents requested in writing by the opposing party. A motion to compel discovery
in the Magistrate Division must “state with sufficient particularity the items it seeks” and “the
reasons for requesting those items.” TCR-MD 9 B(1). The Regular Division Rules (TCR), permit
parties to “inquire regarding any matter, not privileged, which is relevant to the claim or defense of
the party seeking discovery.” 1 TCR 36 B(1). A party may not object to a discovery request on the
basis that it will be inadmissible at trial provided it is “reasonably calculated to lead to the
discovery of admissible evidence.” Id. ORS 40.150 defines “relevant evidence” as “evidence
having any tendency to make the existence of any fact that is of consequence to the determination
of the action more probable or less probable than it would be without the evidence.”2 Because the
ultimate issue is the subject property’s RMV, Defendant’s requests will be relevant if they leads to
the discovery of items that have a “tendency to make the existence of any fact that is of
consequence” to the determination of RMV more or less probable. ORS 40.150.
1
The court has not ordered the application of TCR 36 to 46 (governing discovery) in this case. However,
the court looks to the Regular Division Tax Court Rules “as a guide” to the extent relevant. See TCR-MD Preface.
2
Proceedings in the Magistrate Division are not bound by the “statutory rules of evidence” but may
conduct hearings in any manner that will achieve substantial justice. ORS 305.501(4)(a). To that end, the court
takes guidance from Oregon’s Evidence Code (ORS Chapter 40).
ORDER ON DEFENDANT’S MOTION TO COMPEL DISCOVERY
TC-MD 210115R 2
Highest and best use is “the reasonably probable use of land * * * that is legally
permissible, physically possible, financially feasible, and maximally productive, which results in
the highest real market value.” OAR 150-308-0240(1)(e). Determining highest and best use “is
necessary for establishing real market value.” OAR 150-308-0240(2)(i). The highest and best
use analysis considers “all possible uses that might result from retaining, altering, or ceasing the
integrated nature of the unit of property.” Id.
A. Request 7
Defendant first requests “all documents describing the profitability and viability of the
Lowe’s operation at the subject property, or the criteria used to measure the profitability and
viability of the Lowe’s operation at the subject property, including but not limited to company
metrics used to compare the viability of operations of its stores, revenue, expenses, and customer
counts.” Defendant stated that the information in this request “provides insight into all four
factors” of the highest and best use analysis, but in its later Reply, narrowed its focus to the
“financial feasibility and maximal productivity” factors specifically. (Id.; Reply at 1.) During
oral argument, Defendant explained that this information would be used as “just one data point”
in the overall market data used to determine highest and best use. Plaintiff argues the
information is irrelevant because it pertains “only to [the] property’s value-in-use, and not its
market value,” and therefore does not help determine RMV. (Resp at 2.)
Defendant’s reason for gathering this information comports with prior case holdings on
the issue. Hewlett-Packard Co. v. Benton Cty. Assessor, 21 OTR 186 (2013), aff’d, 357 Or 598,
356 P3d 70 (2015) (noting that a economic financial feasibility study “is a question of fact, not
the application of axioms—elements of logical analysis employed without regard to actual
facts.”) “Economic demand for the subject property is a requisite to the financial testing of
ORDER ON DEFENDANT’S MOTION TO COMPEL DISCOVERY
TC-MD 210115R 3
alternative uses.” Appraisal Institute, The Appraisal of Real Estate 307 (15th ed 2020). In STC
Submarine v. Dept. of Rev., 320 Or 589, 596, 890 P2d 1370 (1995), the Oregon Supreme Court
held the Tax Court “properly considered the continued viability of taxpayer’s entire operation”
because the continued market demand for the “taxpayer’s products and services support[ed] the
department’s conclusion that taxpayer’s existing use of its building and structures was their
‘highest and best use.’” See also STC Submarine 320 Or at 594 n6. Highest and best use
analysis “focuses on the uses to which a property can most profitably be put.” Id. at 18.
Similarly, in Symantec Corp. v. Lane County Assessor, 130286N, 2014 WL 1031303 at *8 (Or
Tax M Div, Mar 17, 2014) the court pointed out that “[i]f the existing use will remain financially
feasible and is more profitable than modification or redevelopment, the existing use will remain
the highest and best use of the property as improved.” (internal quotations omitted). The highest
and best use analysis therefore requires a comparison of the current use’s profitability and
viability to the profitability and viability of an alternative use, and the operation at the subject
property provides data on the profitability of the current use. Because profitability and viability
of the current use of the subject property informs the determination of its highest and best use,
the information Defendant seeks is generally relevant to the issue of RMV and is therefore
relevant for the purpose of TCR-MD 9, and Defendant’s reason is sufficiently stated.3
Defendant must also describe with “sufficient particularity” the items requested to prevail
in their Motion. Defendant’s request for “all documents” describing the profitability and
viability of Plaintiff’s operation at the subject property is extremely broad. “All documents”
Plaintiff possesses about its profitability is likely to generate documents that are duplicative or
3
The court neither accepts nor rejects Defendant’s claim that profitability and viability information have
“tremendous influence” on the highest and best use analysis but does reaffirm its holding that such information can
inform a highest and best use analysis.
ORDER ON DEFENDANT’S MOTION TO COMPEL DISCOVERY
TC-MD 210115R 4
ultimately irrelevant to determining whether the current use is more probable than not its highest
and best use. Defendant requests, in the alternative, “all documents” describing Plaintiff’s
criteria for measuring the viability of the operation at the subject property “including * * *
metrics used to compare the viability of operations of its stores, revenues, expenses, and
customer counts.” (Mot at 2.) The court finds that revenues, expenses, and customer counts are
relevant and sufficiently specific. However, insight into a single market participant’s metrics
and self-evaluations would likely reveal much about an individual participant’s business acumen
but little regarding the profitability and viability of the subject property.
In Level 3 Communications, LLC v. Dept. of Rev., TC 5236, 5269, 5291, 2018 WL
4471078 (Or Tax Feb 21, 2018), the department similarly submitted a broad request for “all
documents” pertaining to a sale of the company or its property. The court found that although
the requested documents generally met the standard of relevance to the claim at issue, it
determined the request for “all” documents would generate irrelevant documents. Id. at 4. The
court ordered the parties to confer to limit the scope to prevent discovery of documents that were
repetitive or exposed information irrelevant to the claim at issue.
The court comes to a similar conclusion here. Though the profitability and viability of
the current use is generally relevant to determination of highest and best use, Defendant’s request
for “all documents” pertaining to that issue is not sufficiently particular for the purposes of TCR-
MD 9. The court will grant Defendant’s motion to compel with regards to documentation of the
operation’s profitability and viability, with the direction that parties: 1) confer to narrow the
scope of the request to prevent discovery of duplicative and irrelevant documents and identify
only those documents regarding profitability and viability information that are necessary for
determining the most profitable use of the property; and 2) collaborate on a proposed protective
ORDER ON DEFENDANT’S MOTION TO COMPEL DISCOVERY
TC-MD 210115R 5
order regarding any discovered documents. Defendant’s motion is granted with regard to the
subject property’s revenues, expenses, and customer counts. Defendant’s motion is denied with
regard to “company metrics” used to compare viability of its stores.
B. Request 8
Defendant’s Request 8 requests “all documents comparing the profitability and viability
of the Lowe’s operation at the subject property to other Lowe’s operations in Oregon.” (Mot at
2.) Defendant again argues that this information is important to determine the highest and best
use of the property and more specifically to understand the likelihood that the subject property
will be closed or redeveloped in the future. (Mot at 3.) Whether Lowe’s as an operation intends
to close that location is not relevant to the four factors used in a highest and best use analysis.
As Plaintiff points out, that information has more to do with Lowe’s business viability, capital,
equity, and business plans as a whole as a going concern. As discussed, Oregon looks at “market
value” not “going concern value” or value to a specific user. Deschutes Cty. Assessor v. Broken
Top Club, LLC, 15 OTR 231, 237 (2000). Having already granted Defendant request for
documents relating to the viability and profitability of the subject property, this information
would either be duplicative or irrelevant. Defendant’s Motion is denied regarding this request.
C. Request 25
Request 25 looks for “all documents that describe how internet sales are accounted for as
it impacts the operation at the subject property and its viability.” During oral argument,
Defendant explained that internet sales constitute a subset of data that contributes to the analysis
of overall profitability and viability of the current use. Defendant explained in its Motion that a
location that is profitable as both traditional retailer and pick-up location for online sales may not
be as profitable as a store operating solely as a traditional retailer. Understanding the
ORDER ON DEFENDANT’S MOTION TO COMPEL DISCOVERY
TC-MD 210115R 6
profitability of these different uses, Defendant argues, impacts the highest and best use analysis.
During oral argument, Defendant argued that this data would inform the financial feasibility and
maximal productivity factors in particular. Defendant has stated with sufficient particularity the
reason this request is relevant to the highest and best use analysis.
Again, Defendant has broadly requested “all documents,” not describing any items with
particularity. As with Request 7, the court will grant the Motion with regards to this request with
the direction that parties: 1) confer to narrow the scope of the request to prevent discovery of
duplicative and irrelevant documents and identify only those documents necessary for comparing
profitability as a traditional retailer to profitability as retail acting in a traditional capacity and as
a pick-up location for online sales to determine highest and best use; and 2) collaborate on a
proposed protective order regarding any discovered documents.
D. Request 26
Defendant’s final request is for “all documents that describe how internet sales
merchandise is supplied form [sic] individual stores and central warehouses including the subject
property.” (Mot at 4.) Similar to Request 25, Defendant’s Motion argues that this request is
designed to discover information about the viability of the current use. Defendant does not
explain how a single market participant’s supply chain structure informs a highest and best use
analysis. As the court noted above, hypothetical alternate use, or another market participant
using the same property at its current use, cannot be presumed to make the same business
decisions of any other. As a result, this court is not convinced that this information as “one data
point” is relevant to the highest and best use analysis.
///
///
ORDER ON DEFENDANT’S MOTION TO COMPEL DISCOVERY
TC-MD 210115R 7
III. CONCLUSION
The court grants Defendant’s Motion in part, and denies in part as described with the
direction that parties: 1) confer to narrow the scope of the request to prevent discovery of
duplicative and irrelevant documents and identify only those documents regarding profitability
and viability information that are necessary for determining the most profitable use of the subject
property; and 2) collaborate on a proposed protective order regarding any discovered documents.
The court grants defendant’s motion with regard to its request for revenues, expenses and
customer counts at the subject property but denies Defendant’s Motion with regards to requests
for documentation of Plaintiff’s metrics and criteria for evaluating profitability and its request for
documentation of Plaintiff’s internet merchandise supply structure. Now, therefore,
IT IS ORDERED that Defendant’s Motion is granted in part and denied in part with
instructions for the parties to meet and confer on the scope of the documents requested and a
protective order.
This interim order may not be appealed. Any claim of error in regard to this
order should be raised in an appeal of the Magistrate’s final written decision
when all issues have been resolved. ORS 305.501.
This document was signed by Magistrate Davis and entered on February 3, 2022.
ORDER ON DEFENDANT’S MOTION TO COMPEL DISCOVERY
TC-MD 210115R 8