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Background

 

The U.S. Army Corps of Engineers completed construction of Barker Dam in 1945 and Addicks Dam in 1948 and have operated and maintained them since that time. They were built as flood control dams to contain rainwater and avoid the flooding of downtown Houston and the Port of Houston that occurred in 1929 and 1935 by the flooding of Buffalo Bayou.  The dams have been strengthened since that time.  The area adjacent to and near Buffalo Bayou downstream of the dams have not flooded from the time they were built until Hurricane Harvey occurred.

 

The reservoirs behind the dam only contain water when heavy rains occur upstream and previously the water was slowly released through the dams’ floodgates into Buffalo Bayou at rates to avoid flooding until the reservoirs were dry again.

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Hurricane Harvey Dam Releases & Flooding

 

According to the Corps’ press releases and news reports when these reservoirs reached record levels as a result of the Hurricane Harvey rains, the Corps was not concerned with the dams breaking.  The Corps originally planned on slowly releasing water from each reservoir.  Although most of the rainfall from Hurricane Harvey had ceased, on August 27, 2017 the Corps decided it needed more storage capacity in the reservoirs in order to protect downtown Houston and the Port of Houston in the event of substantial rainfall in the near future, so late August 27th and early August 28th, prior to the time announced to the public, the Corps intentionally increased the release through the floodgates on each dam to 7,500 cubic feet per second from the Barker reservoir dam and 6,300 cubic feet per second from the Addicks reservoir dam into Buffalo Bayou knowing  this would flood nearby commercial and residential areas that had never flooded before.  These releases not only flooded areas in both the 100 and 500 year flood plains, but also areas higher than the 500 year flood plain.  Property within the 100 year flood plain has a 1% chance per year of being flooded and the 500 year flood plain has a 0.2% chance per year of being flooded. It is estimated over 4,000 homes and businesses along Buffalo Bayou were flooded. These increases with little or no warning not only flooded these areas, but occurred so rapidly that many residents were trapped and had to be rescued by boat and were unable to save anything.  Thus, it appears the Corps intentionally decided to sacrifice the safety of people, homes and businesses in areas below the dams between highway 6 and Beltway 8 for the benefit of downtown Houston and the Port of Houston.

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“Just Compensation” for Damages Caused by Flooding

 

The Corps is a U.S. governmental agency.  Under the 5th Amendment to the U.S. Constitution, the U.S. government is required to pay “just compensation” to property owners if the government “takes” your property for a public purpose, even if it takes it temporarily.  In 2012 in a case involving release of water from another Corps dam, the U.S. Supreme Court held that government-induced flooding of limited duration can constitute a “taking” for which the property owner is entitled to “just compensation”.  The Court held among the factors to be considered in determining whether government-induced flooding is compensable to the property owner are:

 

  • Duration (how long is the property flooded)

  • The degree to which the flooding is intended or is the foreseeable result of authorized government action.

  • Character of the property (such as commercial or residential property).

  • The owner’s “reasonable investment backed expectations” regarding the land’s use (the property had not previously flooded so the owner didn’t purchase or build on the property expecting it to be flooded).

 

The government argued to the Supreme Court that the owner in this case was downstream from the flood control dam and an intended beneficiary of the project so the owner shouldn’t be compensated for the flooding, but had not argued or presented evidence on this in the lower courts.  The Supreme Court remanded (returned) the case to the Federal Circuit Court to consider the above factors and the issue of the owner being a downstream beneficiary of the flood control project. The Court of Appeals held the owner met the above factors and noted that where the project results in substantially increased flooding of one downstream owner’s property (such as yours) due to efforts to benefit other downstream properties (such as downtown Houston and the Port of Houston) the flooded owner isn’t precluded from claiming compensation for the flooding.  Subsequent federal cases involving the Corps, including the breach of the Corps’ levees in New Orleans during Hurricane Katrina, have confirmed a single government-induced flood can constitute a “taking” for which the owner is entitled to “just compensation”.

 

In our opinion there appears to be existing evidence that the Corps intended to release additional water in an effort to protect downtown Houston and the Port of Houston from flooding, a public purpose; the Corps has admitted the dams were not in danger of breaking; that it was foreseeable the release of the additional water would cause flooding of property in the area of Buffalo Bayou that had never flooded in the 70+ years since the dams had been built; the Corps knew or should have known the releases of additional water would flood commercial and residential properties; the owners whose property was flooded didn’t purchase or build on the property expecting it to be flooded; and the property was flooded for approximately 2 weeks causing extensive damage to the property and continuing loss of use of the property so owners along and near Buffalo Bayou are entitled to “just compensation” from the U.S. Government for the flooding induced by the Corps.

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Just Compensation

 

“Just Compensation” under the 5th Amendment is defined by the U.S. Supreme Court as compensation needed to put the owner back in as good a position as the owner would have been if the property had not been “taken” even if the taking is temporary.  Such compensation in federal inverse condemnation cases includes, among other items:

 

  • Repairs and remediation and interest on loans obtained to perform them

  • Loss and damage to furniture, equipment, vehicles, etc.

  • Diminution (loss) of value in the property as a result of the flood, such as expert opinion that the owner would not receive as high a price for the property in a future sale as would have been received if it hadn’t been flooded.

  • Additional costs to conduct business while the property is inaccessible and while unusable.

  • Loss of business income.

  • Loss of prospective business.

  • Probable increase in flood and other insurance premiums due to the flooding.

  • Other similar losses.

  • Reasonable attorney fees and litigation cost and expenses.

  • Pre-judgment interest from date of loss on the damages awarded, post-judgment interest from date of judgment on the damages awarded, and post-judgment interest on attorney fees, cost and expenses awarded.

 

It is critical that records and receipts for recoverable damages be maintained in order to recover them.

 

Offsets

 

Claims for “just compensation” must be reduced (offset) by flood insurance, FEMA grants and other proceeds the property owner receives to reimburse losses caused by the flood. “Just compensation”, however includes more types of recoverable damages than generally recoverable under flood or other insurance. Most business property or homeowners policies do not cover flood damage.  Insurers who pay the property owner for flood damage can then pursue the insurers’ claims for reimbursement from the Corps under the subrogation provision of flood and other applicable insurance policies.

 

Taxes

 

The President declared Harris County a federal disaster area as a result of Hurricane Harvey.  Thus, certain different rules apply such as filing 2016 federal tax returns being extended to January 31, 2018, and casualty losses due to the Hurricane can be deducted on 2016 federal tax returns if desired, with amended 2016 returns to be filed not later than October 15, 2018.  Losses that exceed the amount deductible for the year, such as exceeding taxable income, can be deducted in future years as Net Operating Losses (NOL). Gains resulting from any recovery received after the tax returns claiming casualty losses has been filed might be postponed under some circumstances until the sale of the property.  We are not, however, tax attorneys so property owners should confer with their tax advisor on these and other flood-related tax issues.

 

Lawsuits

 

A number of Houston law firms have or are considering filing suits on the flooding, most on a contingent fee basis.  On contingent fee suits the attorneys pay pre-judgment litigation expenses, and are paid percentage fees only if they recover, and generally are reimbursed litigation expenses out of the client’s portion of the recovery.  Litigation expenses will be substantial as experts will be required on the liability issue of whether the Corps’ actions constituted a “taking” and different experts on damage issues such as diminution in the value of the property flooded.  We have partnered with the Lanier firm to litigate this matter. 

 

While this memo focuses mainly on downstream effects of the dam releases, the Lanier firm and our office are also seeking just compensation for those who were flooded upstream of either the Addicks or Barkers dam.

 

Please contact me if you have any questions or comments with regard to the above.  The above does not substitute for specific legal advice, may not reflect the most current legal developments, and is not intended to create an attorney-client relationship.


Best Regards,

 

 

Gary W. Dugger

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