Reversal in St. Bernard Parish Case

On Friday, April 20, 2018, the U.S. Court of Appeals for the Federal Circuit issued an important ruling in the case of St. Bernard Parish v. United States, reversing a judgment of the U.S. Court of Federal Claims that threatened to impose hundreds of millions of dollars of liability on U.S. taxpayers based on flood losses allegedly attributable to the construction and management of the Mississippi River-Gulf Outlet (MRGO) navigation channel.  The decision represents a potential landmark precedent limiting the extent to which the government can be held financially responsible for flood damages, an already serious challenge for private landowners that will only get more serious with advancing climate change.

Fifty years ago the U.S. Army Corps of Engineers completed construction of the MRGO channel for the purpose of providing a more direct navigation connection between the Gulf of Mexico and the port of New Orleans.  MRGO was never much of a success as a navigation project, but it produced major environmental damage.  Increased volumes of salt water invaded Louisiana’s coast, leading to the destruction of cypress forests and marshlands.   Over time, steady erosion of its banks led to expansion of the MRGO channel, allowing more water to flow up the channel at higher velocities.   When Hurricane Katrina struck in 2005, the coastal storm surge traveling up the channel flooded St. Bernard Parish and the city’s Lower Ninth Ward.  Following this destruction, the Army Corps closed and partly filled in the MRGO channel.

Property owners affected by the flooding sued the United States in tort (in federal District Court) and under the Takings Clause (in the U.S. Court of Federal Claims).  The takings litigation was initially stayed to allow the tort litigation to proceed first.  The District Court ruled in favor of the tort plaintiffs and that judgment was affirmed by a panel of the U.S. Court of Appeals for the Fifth Circuit, but upon rehearing the Fifth Circuit panel rejected the tort claims on the grounds that the United States was immune from suit under the federal Flood Control Act and under the discretionary–function exception to Federal Tort Claims Act.  See In re Katrina Canal Breaches Litig., 696 F.3d 436 (5th Cir. 2012).

The takings litigation was then revived in the claims court.  In a ruling issued on May 2, 2015, claims court Judge Susan Braden ruled that “plaintiffs established that the Army Corps’ construction, expansions, operation, and failure to maintain the MRGO caused subsequent storm surge that was exacerbated by a ‘funnel effect’ during Hurricane Katrina and subsequent hurricanes and severe storms, causing flooding on plaintiffs’ properties that effected a temporary taking under the Fifth Amendment to the United States Constitution.”  See St. Bernard Parish Government v. United States, 121 Fed Cl. 687 (2015).  On May 4, 2016, the court made just compensation awards in favor of the owners of eleven selected properties and entered a partial final judgment subject to review by the U.S. Court of Appeals for the Federal Circuit. St. Bernard Parish Government v. United States, 126 Fed Cl. 707 (2016).

Now, with two clear-cut holdings, the Federal Circuit, in an opinion by Judge Timothy Dyk, has reversed the claims court’s liability determination.  First, the Court ruled that, to the extent the claims court rested its finding of takings liability on the Army Corps’ alleged failure to act (alleged failure to maintain or modify MRGO), the claims court relied on a theory of liability outside the scope of takings doctrine as conventionally understood.  The Court wrote, “[o]n a takings theory, the government cannot be liable for failure to act, but only for affirmative acts by the government.”  In addition, “[i]n the flooding context, in particular, both Supreme Court precedent and our own precedent have uniformly based potential takings claims on affirmative government acts.”   In the process, the Federal Circuit implicitly declined to take up the suggestion by some academics that government inaction should be recognized as a potential basis for takings liability.  See Christopher Serkin, “Passive Takings: State Inaction and the Duty to Protect Property,” 113 Michigan Law Review 345 (2014).

Second, the Federal Circuit ruled that the claims court erred in ruling that plaintiffs established that the government’s actions related to the MRGO project caused the plaintiffs’ property injuries.   To carry their burden of proof on the issue of causation, the Court ruled, the plaintiffs were required to show that they would not have suffered flooding in the absence of government action.  But the plaintiffs’ case rested “entirely on the premise that it was sufficient to establish that the plaintiffs’ injury would not have occurred absent the construction and operation of the MRGO channel.”   This approach ignored the fact that in the mid 1960’s, while the MRGO project was still under construction, the government launched a program of constructing levees and floodwalls to control flooding in the vicinity of the MRGO project.  What the plaintiffs needed to address, but failed to address, was whether the combination of MRGO and the flood control project made the flooding associated with Katrina worse than it would have been in the absence of government action.  Stated differently, “the causation analysis must consider both risk-increasing and risk-decreasing government actions over a period of time to determine whether the totality of the government’s actions caused the injury.”

Having determined that the plaintiffs failed to establish causation, the Federal Circuit found it unnecessary to address whether the plaintiffs’ flooding losses were a “foreseeable” consequence of the government’s actions or whether the other elements of a takings claim based on a temporary flooding theory pursuant to Arkansas Game & Fish Commission v. United States, 568 U.S. 23 (2012), were met in this case.

The Federal Circuit’s ruling probably brings an end to this lengthy litigation arising from Hurricane Katrina’s devastating effects on Louisiana.  In addition, the ruling will have important collateral impacts in other important pending litigation.  Most importantly, the St. Bernard’s Parish decision will make it more difficult for plaintiffs to recover in the scores of takings cases filed in the aftermath of Hurricane Harvey based on flooding damage allegedly caused by the operation of an Army Corps flood control dam in Houston, Texas; after St. Bernard Parish, the relevant question is not whether the Army Corps’ operation of the flood control dam may have caused flood damage, but what level of flooding would have occurred if the flood control dam had never been built to begin with.   Likewise, in the ongoing litigation over whether ESA-mandated modifications to the operation of water projects along the Missouri River resulted in a taking, see Ideker Farms v. United States, an important issue after St. Bernard Parish is whether landowners along the Missouri River still enjoyed greater protection from flooding than they would have if the projects had not been built.