Fifth Circuit Court Of Appeals Rules That Contractors Qualify For Government-Contractor Immunity And Therefore Are Not Liable For Hurricane Katrina’s Flooding Damage Linked To Dredging Performed By The Contractors
On Wednesday, November 25, 2009, the United States Court of Appeals for the Fifth Circuit ruled that pursuant to the government-contractor immunity defense, federal contractors cannot be liable for flood damage in New Orleans, linked to the dredging of the Mississippi River-Gulf Outlet (“MRGO”) shipping canal prior to Hurricane Katrina. In re Katrina Breaches, et al, No. 07-30272 (5th Cir. 2009). This ruling comes on the heels of the November 18, 2009 United States District Court for the Eastern District of Louisiana’s decision that the U.S. Army Corps of Engineers (“Corps” or “Government”) was negligent under the Federal Tort Claims Act (“FTCA”), 28 U.S.C. § 2671, et. seq. for damages incurred in portions of New Orleans due to, in the court’s opinion, negligent maintenance by the Corps of the MRGO canal. See In re Katrina Canal Breaches Consolidated Litigation, 05-cv-4182, U.S. District Court, Eastern District of Louisiana (New Orleans). Under In re Katrina Breaches, et al, federal contractors also faced the potential for judgments worth billions of dollars by New Orleans residents for dredging work performed pursuant to federal contracts with the Corps. This judgment continues to provide contractors, specifically those performing construction, engineering and other public works projects, with a defense against liability unless such contractors exceeded their authority in performing the work, i.e. they did not comply with the contract, or such authority was not validly confirmed to the contractors.
Originally, the plaintiff’s in In re Katrina Canal Breaches Consolidated Litigation filed suit against both the United States and 32 contractors asserting, among other things, negligence claims against the government pursuant to the FTCA for improper design, maintenance and operation of the MRGO and negligence in dredging the MRGO against the contractors. The MRGO is a canal that was originally completed by the Corps in 1968 and subsequently dredged by contractors thereafter to enhance the capabilities of the Port of New Orleans and to provide a shorter shipping route from the Gulf of Mexico. Both the United States and contractors moved to dismiss the plaintiff’s actions pursuant to Federal Rules of Civil Procedure (“Rules”) 12(b)(1). The contractors also moved to dismiss pursuant to Rule 12(c). The district court denied the government’s motion and, as stated above, later found the government liable for failure to maintain and operate the MRGO despite the immunity provision under the Flood Control Act of 1928 (“FCA”), 33 U.S.C. § 702c, or the due care, discretionary function, or misrepresentation exceptions to the FTCA. However, the district court granted the contractors motions to dismiss under Rules 12(b)(1) and 12(c), “concluding that the contractor defendants had government-contractor immunity under Yearsley …”
In writing the opinion of the Fifth Circuit affirming the District Court’s dismissal of the claims against the contractors, Judge Priscilla R. Owen, relied upon the government-contractor immunity defense in Yearsley v. W.A. Ross Construction Co., 309 U.S. 18 (1940) and Boyle v. United Technologies Corp., 487 U.S. 500 (1988). Interestingly, the Court’s decision focuses on Yearsley, which does not examine the relationship between the contractor defendant and the government to determine whether the contractor was in fact an agent, thereby entitling the contractor to invoke the government-contractor immunity defense. Instead, the Court states that, as in Yearsley, the work at issue here involved public-works projects. Further, the Court noted that here, as in Yearsley, the “actions causing the alleged harm were taken pursuant to contracts with the federal government that were for the purpose of furthering projects authorized by acts of Congress.” Thus, the Fifth Circuit found the government-contractor immunity defense available to the contractors here. The Court’s analysis provides further legal support for contractors asserting a government-contractor immunity defense where a traditional agency relationship with the government may be lacking if, “the contractor defendants were executing Congress’s will …” Hence, because the Court agreed that there was no allegation or evidence that the contractors had exceed their authority or in any way deviated from Congress’s direction or expectations, the plaintiff’s “allegations attack Congress’s policy of creating and maintaining the MRGO, not any separate act of negligence by the contractor defendants.” Therefore, the Court agreed that lower court was correct in dismissing the plaintiff’s claims because the contractors were entitled to the government-contractor immunity defense.
The central premise in the Fifth Circuit’s affirmation of the lower courts grant of the contractors motion to dismiss was the holding in Yearsley that states “to the extent that the work performed by [the contractor defendant] was done under its contract with [a government agency], and in conformity with the terms of said contract, no liability can be imposed upon it for any damages claimed to have been suffered by the [plaintiffs].” Thus, because the plaintiff’s did not allege that the contractors performance exceeded their authority or deviated from the contract or Congress’s direction or expectations, the contractors were entitled to the Yearsley defense. In contrast, in dealing with the Corps in In re Katrina Canal Breaches Consolidated Litigation, the district court found that because the government knew since at least 1988 that the erosion of the MRGO threatened human life and property, but did nothing to prevent the catastrophic disaster that occurred following Hurricane Katrina, the government was liable to the plaintiffs for negligence, and neither the immunity provision of the FCA nor the exceptions to the FTCA precluded plaintiff’s actions. Somewhat surprisingly, the district court rejected the government’s argument that the discretionary function exception precluded the plaintiff’s claims. In dismissing the government’s argument, the district court found that the Corps' failure to abide by statutory direction, here the National Environmental Policy Act of 1969, 42 U.S.C. §§ 4321-4370f (“NEPA”), requiring updated environmental impact statements in the face of known concerns related to the ongoing operation and maintenance of the MRGO within the Corps, precluded the government’s reliance on the protection of the discretionary function exception.
The district court’s finding against the government is one of the few FTCA decisions that has been applied against a government agency for failing to follow a prescription (not “proscription” as stated in the decision) in a law or regulation (here, NEPA). This district court decision will almost certainly face stiff resistance on appeal. However, the Fifth Circuit’s Yearsley analysis fortifies the government-contractor immunity defense available to federal contractors, particularly to federal construction contractors.
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