Real Estate Counseling in Class Action Litigation: Determining Real Estate Damages from Natural Disasters

Article excerpt

INTRODUCTION: HURRICANE KATRINA AND THE 'LEVEE CASE' CLASS ACTION

The most important thing to remember about the drowning of New Orleans is that it wasn't a natural disaster. It was a man-made disaster, created by lousy engineering, misplaced priorities and pork-barrel politics.... The city's defenses should have withstood its surges, and if they had we never would have seen the squalor in the Superdome, the desperation on the rooftops, the shocking tableau of the Mardi Gras city underwater for weeks.... The Federal Emergency Management Agency (FEMA) was the scapegoat, but the real culprit was the U.S. Army Corps of Engineers, which bungled the levees that formed the city's man-made defenses and ravaged the wetlands that once formed its natural defenses... one Corps project actually intensified Katrina's surge. After Katrina, a series of investigations ripped the Corps for building flimsy floodwalls in soggy soils, based on wildly flawed analyses-and shoddy engineering was only one way the Corps betrayed New Orleans.... By the time [Corps commander Carl] Strock admitted his agency's 'catastrophic failure' eight months after the storm, the U.S. had moved on.

-Michael Grunwald, "The Threatening Storm" TIME Magazine, Wednesday, Aug. 1, 2007.

ALTHOUGH THE NATION AS A WHOLE MAY HAVE "MOVED ON" emotionally by mid-2006, eight months after the storm, the residents of New Orleans had not. In the wake of Hurricane Katrina, hundreds of lawsuits (including two major class actions in federal district court) were filed against the U.S. Army Corps of Engineers and others, asserting that the negligence of the defendants in designing and building the dike system protecting New Orleans (as alleged in the TIME Magazine piece above) had resulted in "extensive harm and loss of life, and destroying or rendering uninhabitable approximately 160,000 residences and buildings." 1

The largest of the class action lawsuits, the so-called "Levee Case"2 involved somewhere between 140,0000 and 180,000 properties in New Orleans proper and parts of Jefferson Parish immediately west of the city itself. The defendants, in addition to the Corps, included two local levee districts, the city, the state, the Port Authority and even the CSX railroad.3 Taken literally, the proposed Levee Case class included all property, residential as well as commercial/industrial and institutional/governmental, vacant as well as improved, owner-occupied as well as rented, within the geographic boundary of the purported class area encompassing much of the city of New Orleans, as well as parts of Jefferson Parish. This included not only all of the historic residential neighborhoods of New Orleans, such as the Garden District and the Vieux Carré, but also all of the downtown office buildings, French Quarter restaurants, jazz clubs and hotels, hospitals, schools and even universities, such as Tulane, that suffered damage from flooding.

One of the very first issues that had to be decided in the Case was the question of whether a formal "class" should even be "certified" under federal class action standards at the time 4 as embodied in Rules 23(a) and 23(b) of the Federal Rules of Civil Procedure. Under Rule 23(b) there are two essential inquiries federal courts must undertake in cases involving real estate damages. First, the court must determine whether common questions of law or fact predominate over questions and issues affecting only individual members of the proposed class. Second, the court must determine whether certifying a class will result in a more fair and efficient process for handling damage claims than will a property by property analysis.

THE ROLE OF REAL ESTATE COUNSELING IN CLASS ACTION CERTIFICATION HEARINGS

Real estate counseling plays a critical role in class action determinations under Federal Rule of Civil Procedure 23(b). Among the key counseling questions to be answered in the Levee Case were the following:

* What are the types of "real property damages" that Hurricane Katrina caused? …