Federal Government Escapes Liability in Class Action Seeking Recovery of Damages Caused by Hurricane Katrina

The Army Corps of Engineers (Corps) built the MRGO navigation channel in 1968 to increase commerce by providing a direct connection between the port of New Orleans and the Gulf of Mexico.  In addition to operating and maintaining the navigation channel over several decades, the Corps built several flood mitigation projects adjacent to the MRGO, including a vast levee system.  The plaintiffs contended that the levees would not have been breached, or would have held out longer and caused less damage to their property, if the Corps had properly maintained or modified the MRGO channel.  After a trial in December 2011, the Court of Federal Claims found a government taking occurred under the theory of inverse condemnation.  Specifically, the court ruled that the “continued operation of, and failure to maintain and modify MRGO caused erosion, increased salinity, wetlands loss, and a funnel effect, which in turn caused increased storm surge.”  After a separate trial on damages in November 2013, the Court of Federal Claims awarded the plaintiffs $5.46 million.  The federal government appealed both judgments.

The United States Court of Appeals for the Federal Circuit reversed the trial court decision, concluding that the plaintiffs failed to demonstrate that the Corps’ operation and maintenance of the MRGO navigation channel caused their alleged damages.  In so holding, the court focused on two errors by the lower court.  First, the trial court erred in finding that the failure to maintain or modify the MRGO served as a proper basis for a takings action.  The government cannot be liable for inaction in a takings claim; it may only be liable for affirmative acts.  Although the government’s failure to act may give rise to a tort claim, it “cannot be the basis of takings liability.”

The court next turned to whether any affirmative acts of the federal government proximately caused the damages of which the plaintiffs complained.   The plaintiffs argued that the construction and operation of the MRGO should be the only activity considered, not the separate flood mitigation projects constructed by the Corps in the same time period.  The court rejected this approach and held that the government’s separate flood mitigation projects must also be taken into account in the takings analysis.  On this point, the plaintiffs “failed to present evidence comparing the flood damage that actually occurred to the flood damage that would have occurred if there had been no government action at all.”  In other words, the “causation analysis must consider the impact of the entirety of government actions that address the relevant risk [i.e., flooding].”

The appeals court ultimately held that the separate flood mitigation projects constructed by the federal government, composed primarily of the levee system, may have placed the plaintiffs in a better position than if the government had done nothing at all.  After noting the absence of supporting evidence and expert testimony, the court reversed the trial court judgments and ruled that the plaintiffs failed to prove their property damage was greater than the damage that would have occurred had the government not built the MRGO or the levee system in the first place.

This decision clarifies that a claimant’s burden of proving causation in a takings cause of action against the federal government may only rely on affirmative acts of the government and must take into consideration all government acts related to the pertinent risk of harm.