Claim for Lost Tax Revenue due to Flooding Barred by Maritime Proprietary Damage Rule

Claim for Lost Tax Revenue due to Flooding Barred by Maritime Proprietary Damage Rule

By: John Yadamec

Edited by: Brooke E. Michiels

St. Bernard Parish v. LaFarge North America, et al., 2015 U.S. Dist. LEXIS 121987, 2015 WL 5550545 (E.D.La. 2015)

            In an action for damages arising out of a levee breach during Hurricane Katrina, the Eastern District of Louisiana granted LaFarge North America’s (“LaFarge” herein) motion for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) and dismissed St. Bernard Parish’s claim for “impairment and/or loss of tax base(s) and consequent loss of tax revenue.” The casearose after a barge, allegedly moored improperly at a facility owned by LaFarge, broke free and allided with the Industrial Canal causing two breaches that resulted in flooding and damage to properties within the Parish. The Parish sought recovery on grounds that the damage to Parish property prevented it from providing “governmental services and protection” to residents and businesses, which delayed the return of those third parties and diminished the tax-revenue generating activities that would have occurred had the barge not created the breaches.The court applied the bright line rule from Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927), which bars recovery for pure economic loss caused by an unintentional maritime tort absent physical harm to property. The court stated that the “key consideration is the character of the Parish’s interest in the properties and whether those properties sustained any physical damage.” Citing Secko Energy, Inc. v. M/V Margaret Chouset, 820 F.Supp. 1008, 1014 (E.D.La. 1993).While acknowledging that the law barred recovery for economic loss without property being damaged, the Parish claimed that the harm to it’s infrastructure, real property, buildings, vehicles, equipment, and various other facilities, opened the door to its claims of lost tax revenue. Ruling that the Parish suffered the requisite property damage to allow it to pursue a claim for economic loss, the court framed the issue as, whether “the Parish may be entitled to recover lost tax revenue flowing from damage to Parish property, flooding, and concomitant absence of residents.”However, the court ultimately found that the connection between the damage to Parish infrastructure was “too attenuated and distant” to make the economic loss compensable. It granted the defendant’s motion and dismissed the plaintiff’s claim with prejudice.