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Court Limits Public Agencies' Liability for Flooding

By: Rick E. Rayl, Bradford B. Kuhn
03/27/09

For decades, courts and legal commentators alike have struggled with the proper liability standard in inverse condemnation cases arising from flood damage. Some have touted traditional strict inverse-condemnation liability, believing that strict liability is the only way to ensure that the costs of government conduct are spread among the public as a whole, avoiding one person's bearing a disproportionate burden. Others view strict liability as arcane and inappropriate in the flood control context, as it effectively renders the government as an absolute insurer against flood damage.

Earlier this week, in Hauselt v. County of Butte (2009 DJDAR 4359) __ Cal.App.4th __, the Court of Appeal confronted a claim by a property owner that the County's modifications to a drainage channel subjected the owner's property to increased flooding. The Court sided with the "reasonableness" camp, holding that the County was not liable unless it acted unreasonably. Because the owner failed to demonstrate that the County's conduct was unreasonable, the Court upheld the judgment -- finding no inverse condemnation liability.

Some Background:

Typically, we think of inverse condemnation as a classic strict liability cause of action. If the government takes or damages private property, it is liable, without regard for the government's intent -- or the wisdom of its conduct. The underpinning of this is the belief that no private citizen should be compelled to bear a disproportionate burden of the costs of government conduct meant to benefit the public at large. By imposing strict liability, the costs of government activity are spread among the public as a whole.

In the flood control context, however, a line of cases has evolved that changes traditional strict-liability rules. Those cases hold that the government is liable in inverse condemnation only if its conduct that results in flooding is unreasonable. (See, e.g., Belair v. Riverside County Flood Control Dist. (1988) 47 Cal.3d 550, Locklin v. City of Lafayette (1994) 7 Cal.4th 327.) The rationale is that public policy warrants encouraging the government to undertake flood control projects, and that strict liability whenever flooding nonetheless occurs renders the government effectively an insurer against floods whenever it constructs a flood control project. The potential chilling effect on flood control projects under such a rule warrants a different approach.

Cases in this area tend to turn on two inquiries:

(1) Was the damage caused by intentional government conduct (such as intentionally using one property as a retention basin in order to protect other property from flooding) or by accident (such as a flood occurring despite a flood control project, either because the project does not perform as intended or because the storm event exceeds the design capacity of the project); and

(2) Was the flooded property subject to historical flooding before the government built the flood control project at issue.

Two things became clear. Where the damage was caused by accident and the property was historically subject to flooding, the government is only liable if it acts unreasonably. (See, e.g., Locklin.) Conversely, where the government intentionally diverts floodwaters to a property that was not subject to historical flooding, traditional strict liability principles apply. (See, e.g., Akins v. State of California (1998) 61 Cal.App.4th 1.) Existing law left some answers less clear, including deciding what rule applies where intentional government conduct increases the flow of water onto property already subject to historical flooding.

The Hauselt Case:

In Hauselt v. County of Butte, a property owner purchased a 94-acre almond orchard that he intended to develop with a residential subdivision. Keefer Slough, a privately-owned natural watercourse, crossed the property and occasionally received floodwater overflow through a natural drainage. The owner's property had a history of periodic shallow flooding two to three times a decade. The owner contended, however, that the County's actions resulted in an increase in the water flow onto the property.

According to the owner, the County's activities included (1) implementing a drainage plan which made Keefer Slough part of the public drainage system; (2) approving adjacent residential subdivisions which drained into Keefer Slough; (3) removing a bridge which previously acted as a "plug" on the flow of water down Keefer Slough; and (4) sponsoring a project to restore the sediment bed of an upstream watercourse, which increased the flow into Keefer Slough. The owner claimed these activities increased the flooding on his property and resulted in a taking of his property for a public use.

The trial court found that the County's activities were not unreasonable, and would not, therefore, give rise to inverse condemnation liability. The trial court also concluded that Keefer Slough is a private watercourse and the County's activities did not transform the slough into a public work or increase the flow of water in the slough on the owner's land.

On appeal, the property owner alleged that the trial court should have applied the strict liability standard instead of a rule of "reasonableness" standard. The Court of Appeal explained the two standards:

(1) The "reasonableness" rule: "the public agency is liable if its conduct poses an unreasonable risk of harm to the plaintiff, the unreasonable conduct is a substantial cause of the damage to the plaintiff's property, and the plaintiff has taken reasonable measures to protect his property."

(2) The strict liability standard: a public agency is strictly liable where it appropriates private property in order to protect other property and thereby creates a risk that would not otherwise exist.

Looking at the two-pronged inquiry (intentional vs. accidental and whether the property was historically subject to flooding), the Hauselt Court concluded that the key inquiry was whether the property was historically subject to flooding. Because the facts in Hauselt revealed that the property had been subject to "shallow flooding" even before the County's conduct, the reasonableness rule from Locklin and its progeny applied. Though the decision is not a model of clarity on this point, it appears that the Court found this to be true without regard for whether the County's conduct arose (1) from an intentional decision to use Mr. Hauselt's property as a flood control basin to facilitate the surrounding property's development, or (2) through conduct that had the unintended consequence of increasing flooding to Mr. Hauselt's property.

The Impact:

While the case does not confront the issue head on, the potential impact of the Hauselt opinion is that the government can intentionally turn one private property into a retention basin used to divert flood waters from other private property without liability, as long as (1) the government's conduct is reasonable, and (2) the property chosen for the retention basin was subject to historical flooding. And, where the government can show that using a single property as a retention basin protects thousands of acres of other property, establishing reasonableness of the conduct may be a relatively simple task.

Whether a court will actually apply Hauselt in that manner when confronted with such facts remains to be seen (public policy would seem to warrant a different result). For now, however, the commentators who have predicted the increasing use of a reasonableness test in flood damage cases have at least one new sandbag for their levee.

Rick E. Rayl is a Partner in Nossaman's Eminent Domain and Valuation and Real Estate Practice Groups and is an experienced trial attorney dealing with eminent domain, inverse condemnation and other real estate and business disputes. He can be reached at rrayl@nossaman.com or 949.833.7800.

Brad Kuhn is a member of Nossaman's Eminent Domain and Valuation Practice Group and specializes in business and commercial litigation with an emphasis on eminent domain, inverse condemnation and other real estate disputes. He can be reached at bkuhn@nossaman.com.

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