Twelve years following Hurricane Katrina in New Orleans, when universities and colleges around the country embraced Tulane students displaced by the storm, Tulane has announced that it will offer a tuition-free semester for students from universities and colleges in Puerto Rico. The program, offered for the spring 2018 semester, is also open to students in other areas affected by recent storms in the USVI and St. Maarten/St. Martin. Tulane is requesting that students pay tuition at their current school to aid schools in the recovery process. For more information visit the Tulane University Admissions Blog.
The disaster wrought by Hurricanes Harvey, Irma, and Maria has also occasioned a flood of federal relief dollars into the areas impacted. Projects seeking federal funding must meet a variety of legal requirements, each of which warrant separate analysis. Here, we discuss a single federal construction contract requirement and how it has changed in light of these natural disasters: the requirement that federal contracts have written affirmative action programs.
Over the course of the last month, the U.S. Department of Labor, and specifically the Office of Federal Contract Compliance Programs (OFCCP), has worked to support relief efforts from the devastation of Hurricanes Harvey, Irma, and Maria by temporarily relaxing federal contractors’ requirements to have written affirmative action programs. The OFCCP’s National Interest Exemptions—or NIEs—protect contractors for a limited time and in limited areas: for a period of three months (subject to possible extension) following these weather events, new Federal contracts to provide hurricane relief efforts will be exempt from the written affirmative action programs contained in Executive Order 11246, the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA), and Section 503 of the Rehabilitation Act of 1973. But these exemptions are limited in breadth, as well as temporally and geographically.
What contracts are covered?
The NIEs apply to new supply & service and construction contracts which are entered into within the three-month period (discussed below) and which are solely for the specific purposes of providing hurricane relief. Let’s break that down. According to OFCCP, the contract must be:
- New. That means that if it is a contract entered into before the NIE applied, even if for hurricane relief, it is not covered by the NIE.
- For the specific purpose of providing hurricane relief. The OFCCP takes a Justice Stewart “I know it when I see it” approach to defining this requirement. While the OFCCP says it has notified all federal contracting agencies of the NIE and provided them with “language to include in new supply & service and construction contracts,” it goes on to state that “Federal contracting officers know the terms and conditions of the contracts they execute. Therefore, they are in the best position to determine what constitutes a supply & service or construction contract specifically to provide Hurricane Harvey relief and whether it is appropriate to include the NIE language in the contract.”
- Solely for the specific purpose of providing hurricane relief. So if the contract is for hurricane relief and something else, it is not covered by the NIE.
Further, the NIEs also apply to subcontractors as long as the subcontractor is providing goods or services as part of a prime contract specifically for hurricane relief.
For what time period does the NIE apply?
- For Hurricane Harvey: applies to new supply & service and construction contracts entered into between September 1, 2017, and December 1, 2017 (with possible extension).
- For Hurricane Irma: applies to new supply & service and construction contracts entered into between September 8, 2017, and December 8, 2017 (with possible extension).
- For Hurricane Maria: applies new supply & service and construction contracts entered into between September 21, 2017, and December 21, 2017 (with possible extension).
What geographic areas are covered?
For all three hurricanes, this is defined as any area that has been designated a Designated Area by FEMA to receive both individual and public assistance (FEMA categories A and B). For Harvey, the OFCCP lists some specific counties in Texas: Aransas, Bee, Brazoria, Calhoun, Chambers, Colorado, Fayette, Fort Bend, Galveston, Goliad, Hardin, Harris, Jackson, Jasper, Jefferson, Kleberg, Liberty, Matagorda, Montgomery, Newton, Nueces, Orange, Refugio, Sabine, San Jacinto, San Patricio, Victoria, Waller, Wharton. The ultimate list is available on FEMA’s website: www.fema.gov/disasters.
What the NIE does not exempt?
New supply & service and construction contracts falling under NIE continue to be subject to the nondiscrimination requirements of EO 11246, VEVRAA, and Section 503, and must still meet the following FAR requirements:
- Posting of the “Equal Opportunity is the Law” notice under all three laws;
- Record keeping and record retention requirements under all three laws; and
- Employment listing with the appropriate employment service delivery system as required under VEVRAA.
Louisiana’s legal community has grown accustom to offering pro bono legal assistance to Louisiana storm victims. After addressing foremost concerns like shelter, food, water, and clothing, disaster victims are left to grapple with more intricate setbacks like insurance claims and FEMA appeals, landlord-tenant disputes, contractor fraud and contract disputes, custody and domestic disagreements, consumer issues, and lost legal documents, to name a few.
The 2017 hurricane season has largely spared Louisiana relative to other U.S. states like Texas and Florida, and U.S. territories like the USVIs and Puerto Rico, where millions were left without power and basic necessities weeks after Hurricane Maria. Louisiana lawyers are paying it forward and expanding a “disaster legal hotline”—normally reserved for low-income Louisiana residents—to help those devastated by the hurricanes in Puerto Rico and the USVIs.
Louisiana’s efforts are a leading example of a national program established in 1978 by the Federal Emergency Management Agency (FEMA) in partnership with the American Bar Association Young Lawyers Division (ABA YLD) to provide pro bono disaster legal services to low-income survivors of a federally-declared disaster. When the Federal Government issues a disaster declaration in a particular state, FEMA and the ABA YLD, through the state’s young lawyer representative, coordinate with bar associations, legal aid groups, and law firms to implement the program, known as Disaster Legal Services (DLS). In Louisiana, the Disaster Legal Services program is administered with the Louisiana State Bar Association through the Louisiana Civil Justice Center (LCJC), which was formed after Hurricane Katrina and works to expand access to justice to low-income populations around Louisiana. The LCJC operates a year-round civil legal aid hotline, which is adapted to intake disaster-related calls for the Disaster Legal Services program.
the largest intake in the history of the Federal Disaster Legal Services program.
Louisiana displayed its pro bono capacity following the historic Baton Rouge flooding in August 2016, when more than 4,300 individuals called into the disaster legal hotline—the largest intake in the history of the Federal Disaster Legal Services program.
Louisiana’s legal community, all too familiar with disasters, is now graciously leveraging its experience to help our fellow Americans as their needs transition from “boots on the ground” to “suits on the ground.” Storm victims who qualify for Disaster Legal Services can contact the Louisiana Civil Justice Center at 1-800-310-7029.
On September 29, President Trump signed into law the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (the “Act”). The Act provides temporary tax relief to the victims Hurricanes Harvey, Irma, and Maria (the “Hurricanes”). The Act also provides victims of the Hurricanes with additional access to their retirement accounts and lessens the tax burdens related to these distributions. Below is a summary of the relief provided by the Act.
This relief is in addition to the relief previously provided by the IRS, DOL and PBGC, as discussed in our recent client alert titled “Federal Agencies Provide Benefit Plan Relief to Victims of Hurricanes Harvey and Irma,” released earlier this month.
Relief to Participants of Eligible Retirement Plans
Qualified Hurricane Distributions
In addition to the relaxed withdrawal rules under prior IRS guidance, the Act permits individuals directly affected by the Hurricanes to take a “qualified hurricane distribution” from their retirement plan accounts. A “qualified hurricane distribution” is any distribution from an eligible retirement plan to an individual affected by the Hurricanes, as follows:
- For an individual whose principal residence on August 23, 2017, is located in the Hurricane Harvey disaster area and who has sustained an economic loss by reason of Hurricane Harvey, a distribution made on or after August 23, 2017, and before January 1, 2019 (see https://www.fema.gov/disaster/4332 for the applicable Harvey disaster area);
- For an individual whose principal residence on September 4, 2017, is located in the Hurricane Irma disaster area and who has sustained an economic loss by reason of Hurricane Irma, a distribution made on or after September 4, 2017, and before January 1, 2019 (for the applicable Irma disaster areas, see https://www.fema.gov/disaster/4337 for Florida, https://www.fema.gov/disaster/4338 for Georgia, https://www.fema.gov/disaster/4336 for Puerto Rico, and https://www.fema.gov/disaster/4335 for the U.S. Virgin Islands); and
- For an individual whose principal residence on September 16, 2017, is located in the Hurricane Maria disaster areas and who has sustained an economic loss by reason of Hurricane Maria, a distribution made on or after September 16, 2017, and before January 1, 2019 (see https://www.fema.gov/disaster/4339 for the applicable Maria disaster area).
The total amount of qualified hurricane distributions to an individual from all eligible plans cannot exceed $100,000. When applying this limit, plan sponsors are only responsible for monitoring total distributions from plans that they (or other controlled group members) sponsor.
The following special rules apply to qualified hurricane distributions:
- Exempt from the 10% excise tax that normally applies when an active participant takes money out of a plan before age 59-1/2.
- Exempt from the usual 20% mandatory withholding.
- The distribution can be included in taxable income ratably over the 3-taxable year period that begins with the year in which the distribution is received.
- Individuals can avoid paying tax on all or a portion of a qualified hurricane distribution if they repay the same amount to the same or other eligible retirement plans (i.e., an IRA, 403(b), 457 plan, etc.) in which they participate at any time within 3 years from the date of the distributions.
Qualified Plan Loan Relief
The Act increases the maximum loan amount for “qualified hurricane distributions” (defined below) from $50,000 to $100,000, and removes the limit that would normally cap a loan at 50% of the vested account balance. This allows a participant to borrow up to the lesser of $100,000 or his or her entire vested account balance.
In addition, “qualified individuals” (defined below) with an outstanding plan loan on or after August 23, 2017 (for Harvey victims), September 4, 2017 (for Irma victims) and September 16, 2017 (for Maria victims), may delay for one year any loan repayments due after the applicable date, and before January 1, 2019. Participants taking advantage of the delay must have their loans reamortized to reflect the one-year postponement, and the one-year postponement period does not impact the term of the loan.
Re-contribution of Prior Withdrawals for Home Purchases
The Act includes a special provision that allows participants who to took a hardship distribution for the purchase or construction a home in any of the designated disaster areas to re-contribute the distribution if the Hurricanes prevented the home from being purchased or constructed. To be eligible for this relief, the withdrawal must have been received after February 28, 2017 and before September 21, 2017, and the re-contribution must be made during the period from August 23, 2017 through February 28, 2018. Re-contributed amounts are treated similar to repayments of qualified hurricane distributions discussed above.
Relaxed Qualifications for Casualty Loss Deductions
The Act has relaxed casualty loss deduction requirements. Under current law, a taxpayer may claim an itemized deduction for any loss sustained during the tax year that is not compensated by insurance, but only to the extent that is at least $100 and exceeds 10% of adjusted gross income (“AGI”). Under the Act, the requirement that personal casualty losses must exceed 10% of AGI is eliminated for individuals affected by the Hurricanes. However, the Act increases the casualty minimum deduction from $100 to $500.
Further, the Act removes the itemized requirement of the casualty loss deduction. Currently, in order to be eligible for a casualty loss deduction one must claim it as an itemized deduction on their federal income tax return. Thus, the casualty loss was unavailable to a taxpayer who did not itemize but rather opted to use the standard deduction. Under the Act, the amount of the casualty loss deduction will be allowed to be added to the standard deduction. Thus, the Act allows taxpayers to deduct casualty losses whether they itemize or take the standard deduction.
Charitable Deduction Limitations Suspended for Qualifying Hurricane Relief Contributions
Under the Act, “qualified contributions” towards hurricane relief are exempt from the limitations under Code Section 170. Currently, Section 170 limits the deduction of charitable contributions based on a percentage of the taxpayer’s AGI, depending on both the type of property contributed and the type of taxpayer. Further, any excess contribution amounts may be carried forward five years. “Qualified contributions” are cash contributions made during the period beginning on August 23, 2017, and ending on December 31, 2017, to specific, listed organizations providing relief to victims of the Hurricanes. For the contribution to be qualified contribution, the taxpayer must also make an election and provide evidence substantiating that the contribution was used for covered relief efforts.
Employment Tax Credits
The Act creates an employee retention credit for eligible employers equal to 40% of up to $6,000 of qualified wages with respect to each eligible employee for the tax year. For purposes of the Act, “eligible employers” are those that conducted an active trade or business in a declared disaster zone on the date of the disaster and, for some period of time following the disaster, were rendered inoperable.
Special Rule on “Earned Income”
The Act allows an individual whose place of abode on August 23, 2017 was located in a federally declared disaster area to substitute their previous year’s earned income for purposes of calculating the earned income tax credit and child tax credit. To be eligible for the election, the earned income of the taxpayer for the tax year in which the disaster occurred must be less than the earned income of the preceding year.
U.S. Territory Tax Relief
Individuals subject to Puerto Rico income taxation may qualify for deadline extensions and other relief from the Puerto Rico Department of Treasury, which is operating from a temporary remote location. In addition, in Notice 2017-56, the IRS relaxed the requirements to be considered a bona fide resident of Puerto Rico or the U.S. Virgin Islands (and therefore exempt from U.S. income tax), for those who temporarily left the territories due to Hurricanes Irma or Maria. Individuals who are residents of Puerto Rico or the U.S. Virgin Islands should consult U.S. territory tax advisors for guidance.
Plan sponsors interested in adopting the special distribution rules under the Act have until the end of the first plan year beginning on or after January 1, 2019 (December 31, 2019, for calendar year plans) to amend their plan documents. Plan sponsors who amend (or intend to amend) their plans to provide qualified hurricane distributions should also consider taking the following steps to insure that participants are aware of the opportunities offered by Act:
- Consider notifying all participants, both active and inactive, about the availability of qualified hurricane distributions.
- Supplement the plan’s Special Tax Notice to include information regarding the special tax treatment of qualified hurricane distributions.
- Send participants a Summary of Material Modifications to the plan’s Summary Plan Description (“SPD”), or restate the SPD.
The IRS is likely to issue additional guidance on these topics in the coming weeks. In the meantime, if you have any questions regarding qualified hurricane distributions or any of the additional tax relief provided under the Act, or would like assistance amending your plan, please contact your Jones Walker relationship attorney or one of the attorneys listed below.
Ricardo Carlo, Katelyn Gunn and Joseph Landry are associates in Jones Walker’s Tax and Estates practice group. Ricardo can be reached at firstname.lastname@example.org or (504) 582-8409, Katelyn can be reached at email@example.com or (504) 582-8205, and Joe can be reached at firstname.lastname@example.org or (504) 582-8428.
The floodwaters from the aftermath of Hurricane Harvey have receded, and now it’s time to focus on the overwhelming task of getting back to normal, that includes protecting your property values. Below are helpful steps to do just that.
Step 1 – Notify Mortgage and Insurance Company and FEMA: If you have flood insurance, file a claim with the insurance company and schedule an appointment with the insurance adjuster. If you did not have insurance, file a claim with FEMA and schedule an appointment with a FEMA adjuster. This adjuster appointment should occur prior to conducting any demolition or rebuilding; however, with the extent of the damage to the Houston area, this may not be feasible since it may take weeks to schedule such appointment. In that case, document the damage, as discussed below. Filing a flood insurance claim will not prevent you from filing a FEMA claim; however, FEMA may require you to file an insurance claim prior to filing with FEMA.
Step 2: Document the Damage: Now that all claims have been filed, owners need to take steps to prevent further damage, such as patching or tarping damaged roofs and boarding up broken windows. Separate salvageable items and store in a safe dry place. Prior to any demolition or rebuilding, take photos and videos of the damage, including any standing water remaining in the home, visible floodwater level lines, structural damage and all discarded items. Ensure those photos and videos include a date/time stamp. Make a list of all damaged items, including the value, date of purchase and receipts, if possible, and going forward, be sure to keep copies of all receipts, work orders, contractor agreements, and all other items relating to clean up and rebuilding.
Step 3: Air Out, Tear Out, Clean Out and Dry Out(i): Once documentation has been completed and stored in a safe place, begin airing by opening windows, all doors, including closet doors, and all cabinets. Next, the property owner should tear out and remove all damaged furniture, carpet, flooring, sheetrock, cabinets and other porous items and furniture. Unlike Step 4 below, a property owner may do this on their own or hire a contractor to perform the work. No additional certification is required to “muck and gut” your property, and mucking out your property will not prevent you from obtaining a mold certification, discussed below. If your property is located in the City of Houston, report your debris to the Houston Solid Waste Management Department (“HSWMD”) by dialing 311 or report at Houston311.org. The HSWMD requests that all debris be placed on the sidewalk or edge of the property before the curb, and to be separated into six piles for pick up: (1) vegetative debris, (2) construction and demolition debris, (3) appliances, (4) electronics, (5) household hazardous waste, and (6) normal household trash(ii). Before any rebuilding starts, you or your contractor should follow all local ordinances and obtain all required permits prior to construction. It is important to note that the Texas Real Estate Commission’s Seller’s Disclosure Notice (“Disclosure Notice”) specifically asks the seller if they are “aware of any room additions, structural modifications, or other alterations or repairs made without necessary permits or not in compliance with building codes in effect at that time”(iii), so it is important to ensure that all ordinances are followed and permits obtained. The Department maintains a list of licensed mold remediation contractors on their website(iv).
Step 4: Mold Assessment and Remediation(v) : A property owner may treat their own property for mold; however, it is strongly recommended that you hire a licensed mold and remediation company. A mold remediation company will evaluate your property to determine if mold is present and at what levels, and if mold is present the company will remediate and remove the mold. Unlike Step 3, your insurance and/or mortgage company may require you to obtain a Certificate of Mold Damage Remediation (“CMDR”), which verifies that any mold located on the property was removed correctly. The Texas Mold Assessment and Remediation Rules (“TMARR”) require that all mold remediation companies/contractors have a license issued by the Texas Department of Health Services (the “Department”); however, the Department has waived such requirements for mold remediation and assessment companies for the duration of the disaster declaration in Harris and surrounding counties. Suspending the licensing requirement will allow those experienced remediation companies that are not licensed in Texas to provide necessary services. In lieu of licensure, unlicensed companies and persons who wish to conduct work in the Houston area may register with the Department. An unlicensed mold remediation or assessment company can provide mold services and assessment and can verify whether mold is present; however, unlicensed remediation or consultants cannot issue a CMDR. The Department pointed out that those licensed in Texas should inform property owners that using the waiver process may cause issues with insurance claims, so it is recommended to hire a licensed mold remediation or consultant. The Department maintains a list of licensed mold remediation contractors on their website(vi).
Step 5: Seller’s Disclosure: Should you decide to sell your home now or in the future, it is important to note that Texas homeowners are required to disclose previous flood damage and whether the property is located in a 100 year flood plain on the Disclosure Notice(vii). This form specifically asks the seller if they are:
– “aware of any previous flooding” and
– “the property is located in 100 Year Flood Plain.”
The above steps are things that you as an owner can do to protect the value of your property. Unfortunately, many Houston area homes will see low property values for the next few years. The drop in value will depend on the location of the property and the extent of damage caused by the flooding. For now, we are all in the same boat, still riding out the effects of our dear friend Harvey.
(i) “FEMA – Initial Restoration for Flooding Buildings” http://www.floods.org/PDF/FEMA_InitialRestorationFloodBldg.pdf
(ii) See http://www.houstontx.gov/solidwaste/debris_08302017.html
(iii) Texas Property Code § 5.008 and a copy of the disclosure form is available at https://www.trec.texas.gov/sites/default/files/pdf-forms/OP-H_0.pdf.
(iv) See https://vo.ras.dshs.state.tx.us/datamart/login.do;jsessionid=39CFC0D4B8F83F005338D87285E544C5.i-03a38ec2506c5b8dd
(v) Texas Department of State Health Services, “Emergency Guidance on Mold Remediation Under the Governor’s Disaster Declaration” and “Q & A on Mold Remediation Related to Hurricane Harvey”; https://www.dshs.texas.gov/mold/
(vi) See https://vo.ras.dshs.state.tx.us/datamart/login.do;jsessionid=39CFC0D4B8F83F005338D87285E544C5.i-03a38ec2506c5b8dd
(vii) Texas Property Code § 5.008 and a copy of the disclosure form is available at https://www.trec.texas.gov/sites/default/files/pdf-forms/OP-H_0.pdf.
On September 28, 2017, the Department of Homeland Security (DHS) announced that it approved a 10-day waiver of the Jones Act with respect to the movement of merchandise between points in the United States and Puerto Rico. The waiver will be in effect for 10 days, commencing immediately, and will apply to all products being shipped to Puerto Rico. The waiver applies to covered merchandise laded on board a vessel within the 10-day period of the waiver and delivered by October 18, 2017. Carriers or shippers who conduct transportation pursuant to the waiver are recommended by DHS to provide notice of the vessel, dates of embarkation and disembarkation, type and quantity of cargo, and port of embarkation to JonesActWaiverRequest@cbp.dhs.gov.
The “Jones Act” is the common name used to refer to the set of federal statutes and regulations that, among other things, prohibit the transportation of merchandise between points in the United States by foreign-flag vessels. The Jones Act limits such transportation to U.S.-flag vessels built in the United States, owned and operated by U.S. citizens, and predominantly crewed by U.S. citizens. The Jones Act may be waived, though, if certain conditions are met by statute, including when “necessary in the interest of national defense.”
The DHS press release for the current waiver for Puerto Rico states that the waiver was granted following a determination by the Secretary of Defense that a waiver is in the interest of national defense. Under DHS’ current waiver for Puerto Rico, foreign-flag vessels will be allowed to bring aid to Puerto Rico from U.S. ports.
Earlier this month, DHS approved a separate waiver of the Jones Act following Hurricane Irma, but DHS’ prior waiver was limited to the movement of refined petroleum products, as well specific points of origin within the continental United States. The current waiver by DHS is broader with respect to the permitted movement of merchandise in that, according to DHS’ press release, the current waiver applies to all products being shipped to Puerto Rico, and not just refined petroleum products, and the current waiver is not limited to certain points of origin in the United States.
Remember that these legal principles may change and vary widely in their application to specific factual circumstances. You should consult with counsel about your individual circumstances. For further information regarding these issues, contact:
On August 25, 2017, and September 10, 2017, President Trump declared major disasters in Texas and Florida due to Hurricanes Harvey and Irma (the “Hurricanes”). Following the declarations, the Internal Revenue Service (“IRS”), the Department of Labor (“DOL”) and the Pension Benefit Guaranty Corporation (“PBGC”) issued relief for affected individuals and entities. The IRS is postponing certain tax filings and payment deadlines for taxpayers who reside or work in the disaster area. The relief also provides qualifying individuals with expanded access to their retirement plan assets to alleviate hardships caused by the Hurricanes. Additional IRS guidance allows donation of employer-paid leave to charitable organizations aiding victims of the Hurricanes.
The DOL is providing additional relief to employers and plan fiduciaries, in the form of deadline leniency and relaxation of fiduciary requirements for benefit plans that have compliance lapses resulting from the Hurricanes. Finally, the PBGC is waiving certain penalties and extending certain filing deadlines. Below is a summary of the relief provided by the IRS, DOL, and PBGC. Additional relief is sure to follow for victims of Hurricane Maria in Puerto Rico and the U.S. Virgin Islands.
Continue Reading Federal Agencies Provide Benefit Plan Relief to Victims of Hurricanes Harvey and Irma
Come Hell or High Water
By Ann L. Latimer and Daniel J. Baldwin
September 21, 2017
On Friday, Aug. 25, 2017, Houston and surrounding communities were preparing for Hurricane Harvey as city officials warned the storm would be more of a rain event than wind event.
On Saturday morning, many property owners woke to find that they had survived the storm with little to no damage; however, their situation would change within the next 24 to 48 hours. Harvey dumped record breaking amounts of rainfall, more than 51 inches in some areas, and by some reports, over 9 trillion gallons of water overall, enough to fill the Great Salt Lake twice over. Where does all that water go? Harris County has the Addicks and Barker reservoirs that help prevent flooding in 22 main channels and bayous within Houston, and are monitored by the Harris County Flood Control District.
On Sunday, the United States Army Corps of Engineers, the HCFCD and local officials began controlled releases from the reservoirs to protect the integrity of the reservoirs from catastrophic damage that could occur from an uncontrolled release, and to preserve storage capacity for future rains. In an attempt to reduce flood levels, the USACE and the HCFCD raised the release rates from 2,000 cubic feet per second to 13,000 cfs, which caused extensive flooding in the channels and bayous. Neighborhoods that were not flooded by the initial storm were now inundated with several feet of water.
A similar event took place north of Houston at the Lake Conroe dam. Lake Conroe rose to a record level of 205.88 feet above mean sea level. The San Jacinto River Authority (conducted a record setting controlled release rate of 79,100 cfs, eclipsing the 1994 record of 33,360 cfs, to protect the integrity of the dam and prevent extensive damage to lakefront properties; however, the release caused extensive flooding along the San Jacinto River and Spring Creek areas.
Flooded out property owners are outraged with the USACE, SJRA, HCFCD, and local officials, and many are asking who is responsible for the damage and what causes of action do I have?
Federal Tort Claims Act and Texas Tort Claims Act
Historically, under the doctrine of sovereign immunity, you could not “sue the king”. The FTCA and TTCA, however, provide limited waivers of immunity when property is damaged, by the wrongful or negligent act of a government employee acting in the scope of their duties. Neither statute likely provides affected Harris County homeowners with relief.
The FTCA exempts claims based upon the performance of, or failure to perform, a discretionary function, which the USACE would argue encompasses the controlled releases. Likewise, the TTCA specifically excludes equipment used in connection with operation of floodgates or water release equipment.
The Federal and Texas constitutions protect private property rights and prohibit the taking of a person’s property for a public use without adequate compensation. In other words, when the government physically takes possession, even temporarily, of a property for some public purpose, it has a duty to compensate the property owner. A taking occurs when a government action directly and immediately interferes with the use and enjoyment of a piece of property.
Some affected homeowners have already filed lawsuits against the USACE, HCFCD and SJRA, among others, contending that the controlled releases amounted to an impermissible taking of their homes. Plaintiffs are seeking recovery for property loss, repair costs, diminution in value, lost income and any consequential damages. To recover on an inverse condemnation claim, these homeowners must establish that the governmental agencies made an intentional decision to perform the controlled releases for a public use, resulting in a taking of their property.
The success of these lawsuits and others that will follow likely depends upon the knowledge and intent of the government, i.e., whether the agencies intended to cause the flooding, as well as the length of time each property was flooded, the character of the land at issue and whether the water released initially flowed directly onto the homeowner’s property or a river, bayou or other man-made channel.
For homeowners that have experienced continuous flooding, a buyout program may be the best option. Harris County official Ed Emmett has reportedly requested $800 million from the federal government to buyout properties that cannot be repaired or where a buyout is more cost effective. The HCFCD recently launched its home buyout program, and residents are asked to submit a Notice of Voluntary Interest to the HCFCD. As of Wednesday, Sept. 13, 2017, approximately 1,850 property owners have taken advantage of such program, which is well above the norm of 12 a month. A buyout still has pitfalls, such as limited funding, delays in processing applications, receiving approval from federal, state and local officials and issuing final payments. The typical buyout process takes between two and two and a half years.
Additional lawsuits may be filed against federal, state and local agencies over the next few months and years, but we all need to remember that this was an extreme weather event, setting record amounts of rainfall. The concern was that if there had not been controlled releases, then the reservoirs and Lake Conroe dam could have failed, bringing even more devastation. This was a situation where you are “dammed” if you do and “dammed” if you don’t … pun intended.
Ann L. Latimer is Special Counsel in Jones Walker’s Real Estate Practice Group and practices from the firm’s Woodlands office. Daniel J. Baldwin is an associate in Jones Walker’s Business & Commercial Litigation Practice Group and practices in the firm’s Houston office.
Reprinted with permission from the September 21, 2017 edition of Texas Lawyer© 2017 ALM Media Properties, LLC. All rights reserved.
Please find below a press release that was issued yesterday by The Harris County Office of Homeland Security & Emergency Management.
September 21, 2017 – (Houston, Texas) – The Harris County Office of Homeland Security & Emergency Management invites residents affected by Hurricane Harvey to a recovery fair this weekend.
- WHAT: Hurricane Harvey Recovery Fair
- WHEN: Saturday, September 23 and Sunday, September 24
9 a.m. – 4 p.m.
- WHERE: Houston Community College – Northeast
Art Hub Gallery
555 Community College Drive
Houston, Texas 77013
The Harvey Recovery Fair will provide important recovery information about available disaster assistance from both governmental and non-profit organizations. Representatives from the Federal Emergency Management Agency (FEMA) and the Small Business Administration (SBA) will be available to answer questions and help residents apply for disaster assistance.
This recovery event is targeting residents living in northeast and east Houston, East Aldine, Jacinto City, Galena Park, Cloverleaf and the Channelview areas.
Harris County Commissioner Precinct Two will be providing free shuttle service to the event from the following locations:
Flukinger Community Center
16003 Lorenzo Street
Channelview, TX 77530
Northeast Community Center
10918 1/2 Bentley Street
Houston, TX 77093
Alvin D. Baggett Community Center
1302 Keene Street
Galena Park, TX 77547
Morning Trip: 9 a.m. pick-up and 12 p.m. return
Afternoon Trip: 12 p.m. pick-up and 4 p.m. return
- Harris County Office of Homeland Security & Emergency Management
- Harris County Office of Commissioner Jack Morman
- Harris County Community Services Department
- Harris County Engineering Department
- Harris County Flood Control District
- Harris County Public Library
- Harris County Public Health Services
- City of Houston 311
- City of Houston Housing and Community Development
- City of Houston Department of Neighborhoods
- City of Houston Permitting Center
- Office of U.S. Representative Sheila Jackson Lee
- Federal Emergency Management Agency (FEMA)
- Small Business Administration (SBA)
- American Red Cross
- Texas Gulf Coast Voluntary Organizations Active in Disasters (VOAD)
- United Way of Greater Houston
- Houston Community College
Law360 recently featured Jones Walker lawyers in two articles discussing the legal implications that Texas businesses will face following the widespread damage caused by Hurricane Harvey. The publication turned to Houston-based partner Krystal Pfluger Scott and Baton Rouge-based partner Davis B. “Pepper” Allgood to share their knowledge.
Scott was quoted in a Law360 article, “5 Biggest Client Questions After Hurricane Harvey.” She discusses how Jones Walker is providing legal guidance to clients who have concerns about employee benefits, commercial leasing disputes, insurance claims, contractual obligations, and property damage. She explains that many of the firm’s clients in the greater Houston area are small and midsized businesses that face the dilemma of taking care of their workers while keeping their business operations sound. Scott notes that “The generosity is so consistent in our clients and how they are managing that question.”
Clients are also seeking advice about how Harvey will affect leases after extensive property damage and business closures. Scott advises that when these disputes arise, it is best to look at specific leasing situations separately as every agreement is different. And, on the transactional side of property damage, Scott said that Jones Walker lawyers are drafting construction contracts to protect clients against potential breaches by contractors. Lawyers are also advising clients on flood protection measures.
Scott remains optimistic, saying, “People love this city and they want to be in business here. It’s just a question of how we do that without suffering the same kind of loss again.”
Allgood, Baton Rouge-based Construction team partner, was quoted in a Law360 article, “Disaster Response Has Unique Hazards for Contractors.” Allgood discusses key legal and regulatory issues faced by contractors participating in the recovery from Hurricane Harvey.
Rebuilding efforts will require billions of dollars, which presents significant opportunities for contractors. The challenge in short-term emergency situations is a potential conflict between state and federal laws and requirements. Allgood advises contractors to seek legal counsel “…to make sure that the rules are going to be followed, particularly if there’s a lot of money involved.” He recommends this because many entities will need to turn to the federal government for assistance in paying contractors, which is not always guaranteed and can result in disputes. Allgood cautions against relying upon local governments, even amid time pressures of the rebuilding efforts.