Ruling in MR-GO Takings Lawsuit

Yesterday, on May 1, 2015, in Saint Bernard Parish Government v. United States, the U.S. Court of Federal Claims found the U.S. government liable in a major takings case arising from property damage in Louisiana caused by Hurricane Katrina and other hurricanes.  The lawsuits were brought by St Bernard Parish itself and by numerous property owners in the Lower Ninth Ward of New Orleans and in St Bernard Parish.  The takings claims are based on the theory that Army Corps of Engineer’s construction, expansion, operation and failure to maintain the Mississippi River – Gulf Outlet (“MR-GO”) resulted in temporary takings by causing increased flooding of the plaintiffs’ properties during Hurricane Katrina and several lesser hurricanes.

The MR-GO project, authorized in the 1950’s and constructed in the 1960s, was a commercial navigation channel linking New Orleans with the Gulf of Mexico.  From the first, the proposed project was controversial, drawing warnings of serious risks of erosion and environmental damage from a local advisory board, the Department of the Interior, and the U.S. Fish and Wildlife Service.   Despite the warnings, Congress proceeded to fund the project and the Army Corps proceeded to construct the project, which soon turned into the disaster its critics had predicted.   Due to constant erosion, the channel quickly expanded beyond its original design dimensions.  Salt water erosion caused degradation and destruction of wetlands.  Engineers became increasingly concerned that, under the right storm conditions, MR-GO would be a funnel directing floodwaters into St Bernard Parish and the Lower Ninth Ward.  Which is exactly what happened during Hurricane Katrina.  In 2009, four years after Hurricane Katrina, the government admitted failure and permanently closed MR-GO.

These takings lawsuits were filed in parallel with other suits arising from Hurricane Katrina filed against the U.S. government under the Federal Torts Claims Act.  The federal District Court handling the FTCA suits concluded that the government was liable, and that ruling was initially affirmed on appeal by the U.S. Court of Appeals for the Fifth Circuit, but upon rehearing the Fifth  Circuit concluded that the suits were barred by the FTCA “discretionary function” exemption.  See In re Katrina Canal Breaches Litig., 696 F.3d 436, 441 (5th Cir. 2012).  With the FTCA litigation concluded, Judge Braden of the claims court reactivated the takings lawsuits, leading to this order on liability.

To resolve the liability question the claims courts relied heavily on the Supreme Court’s relatively recent decision in the flooding-takings case of Arkansas Game & Fish Commission v. United States, 133 S. Ct. 511 (2012).  Based on that precedent, the claims court ruled that the plaintiffs were required to establish five things in order to prevail: “(1) a protectable property interest under state law; (2) the character of the property and the owners’ ‘reasonable-investment backed expectations;’ (3) foreseeability; (4) causation; and (5) substantiality.”  The court did not appear to break much of a sweat in concluding that plaintiffs made a strong case on each of these factors.

The claims court also rejected a slew of government defenses, mostly related to the causation issue, including that (1) Hurricane Katrina was a one-time event (the court said that under Arkansas Game & Fish Commission one flooding event is enough to establish liability for a taking, and in any event Katrina was one of several hurricanes that caused the flooding); (2) Hurricane Katrina was an “intervening event;” (3) land subsidence, sea level rise, and land loss due to other causes was the cause of the flooding of plaintiffs’ properties, and (4) economic development was the cause of the wetland/habitat loss.  The court also rejected the government’s statute of limitations defense, relying on the “stabilization doctrine.”

From a legal standpoint, given the ease with which the plaintiffs prevailed in this case, the decision would appear to convert the Federal Tort Claims Act and its carefully crafted governmental immunities into a dead letter, at least in the flooding context.   Has the claims court, with encouragement from the Supreme Court, allowed takings doctrine to improperly invade the traditional domain of tort law?

From the standpoint of climate adaptation, there are at least several problematic aspects of the court’s analysis.  Take the reasonable investment-backed expectations factor.  The court concluded that the plaintiff property owners had reasonable investment-backed expectations because the government had offered (misleading) assurances about the safety of their neighborhoods and Hurricane Katrina was not “comparable” to anything that had come before.   But if the risk of serious flooding was sufficiently foreseeable to hold the government liable for causing this risk (and the court said it was) why was the risk not sufficiently foreseeable to affect plaintiffs’ investment-backed expectations?  Are citizens held to a different standard of foresight than their government?  Would such an approach create perverse incentives in terms of preparing for climate change?

Also interesting is the court’s rejection of the government’s argument that land subsidence, sea level rise and land loss due to other causes caused the flooding and therefore the government should not be held liable for a taking.  Many factors, of course, contributed to the property losses in Saint Bernard Parish and the Lower Ninth Ward.  Indeed, the court explicitly acknowledged that these other factors “took their toll” on southern Louisiana.  But because MR-GO was the “principal cause” of the increased flooding risk, the court ruled, the government bears 100% of the liability. Is that fair?

And then there is the larger global fairness perspective.  The beleaguered federal taxpayer footed the bill for this ill-advised project to begin with, it presumably footed the bill to close the project; and now it has to pay out millions of dollars more to compensate property owners injured as a result of this project.  But what did the public ever get out of this project?   Shipping companies presumably received some gain while MR-GO operated; no doubt some politicians ran for reelection based on their success in securing federal funding for the project; and some colonels in the Army Corps probably got promoted after the project was built.  But those actors are obviously not being asked to bear any responsibility now for their actions.  Where is the pity for the taxpayer?

Judge Braden had some choice parting shots for the government.  She commended the Army Corps’ “leadership and staff” for being “open, transparent, and helpful in educating the court to understand what happened,” but castigated Department of Justice attorneys for “contesting each and every issue—whether evidentiary or substantive.”  She scheduled a conference for May 6, to ascertain whether the parties would agree to the appointment of a mediator to resolve the issue of compensation.  She concluded:  “In light of the United States Supreme Court’s recent decision in Arkansas Game & Fish and the weight of the evidence in this case, it is the considered view of the undersigned judge that further litigation in this matter is not in the interest of the Army Corps and will not serve the interests of justice. It is time for this final chapter of the MR-GO story to come to an end.”