CINCINNATI (CN) — Homeowners argued Tuesday before an appeals court panel that the Federal Energy Regulatory Commission did not conduct due diligence before giving an operating license to the owner of a hydroelectric dam that failed numerous inspections prior to a 2020 failure that caused catastrophic flooding.
Daniel and Cathleen Allen were evacuated from their Midland County, Michigan, home on May 19, 2020, when the Edenville Dam failed and caused flooding that destroyed their property.
Boyce Hydro took control of hydroelectric operations at the dam in 2004 and refused to comply with maintenance plans or follow orders from the Federal Energy Regulatory Commission, or FERC, to upgrade spillways at the facility.
The company was ordered to stop electricity production in June 2017 and when it became clear it had no intention of coming into compliance with federal regulations, FERC revoked its license in September 2018.
The state of Michigan graded the Edenville Dam "fair" at the time, took over regulatory control, and allowed Boyce to continue its operations through the flood in May 2020.
A year after the flood, the Allens sued the federal government under the Federal Tort Claims Act and alleged decades of negligence by both Boyce Hydro and FERC made the dam's failure inevitable.
U.S. District Judge Thomas Ludington, a George W. Bush appointee, sided with the government and dismissed the case in November 2021 on the grounds of sovereign immunity.
Ludington accepted the government's interpretation of the Federal Power Act and rejected the Allens' claim an exemption under the law applied only to facilities constructed after FERC granted the owner a license to operate the hydroelectric facility.
Whether the government granted an operating license before or after construction of the facility is immaterial, according to Ludington, who determined it was Congress' intent to impose liability for damages on the plant operators, not the federal government.
On appeal to the Sixth Circuit, the Allens pushed back and argued that "to hold that the government is immune in cases where the works were not constructed under the license would render that statutory language meaningless."
"In cases where the dam is constructed under a license," their brief states, "the government has applied the rigorous application requirements, thus providing a reason to shelter the government from liability. On the other hand, where the government is not involved in licensing a dam for its construction, there is no comparable justification for its immunity."
The government disagreed and argued in its brief the Allens' interpretation of the Federal Power Act "would mean that Congress passed a self-defeating statute."
"Congress would not have passed a liability provision that excluded virtually all of the dams originally licensed under the Federal Power Act," it said. "As the Supreme Court has stressed, courts 'should not lightly conclude that Congress enacted a self-defeating statute.'
"That is especially true here, because a self-defeating interpretation would have undermined, rather than vindicated, the Federal Power Act's expressed intent to impose all costs directly and peripherally related to hydroelectric projects on licensees."
Attorney Kevin Carlson of the Royal Oak, Michigan-based firm Pitt McGehee argued Tuesday on behalf of the Allens and emphasized his clients are seeking damages for the government's negligent entrustment of the Edenville Dam to Boyce Hydro.
U.S. Circuit Judge John Nalbandian, a Donald Trump appointee, asked how damages from the government for that claim would differ from a standard negligence claim against Boyce.
"There would definitely be some overlap," the attorney admitted.
"Why wouldn't it be exact overlap?" Nalbandian asked, while also pointing out the Allens would have to prove Boyce was negligent in order to prevail against the government.
U.S. Circuit Judge Amul Thapar, a fellow Trump appointee, agreed with Nalbandian and told Carlson if the only damage sustained by the Allens was the loss of their home, there could be no additional damages against the federal government.
"There were pre-existing dangers [at the dam]," Carlson responded. "Discovery would have to establish which parts of the dam actually led to the ultimate failure."
Assistant U.S. Attorney Zak Toomey argued on behalf of the government and rejected his opposing counsel's negligent entrustment claim on the grounds the dam was always owned and operated only by Boyce Hydro.
Toomey emphasized the license granted and eventually revoked by the federal government was for the sole purpose of allowing Boyce to generate hydroelectric power at the facility.
"The harm [to the Allens] was from the maintenance and operation of the dam," he said. "All of the physical structures of the site were always owned by Boyce."
The government's attorney urged the panel to adopt Ludington's interpretation of the Federal Power Act, which he claimed imposes all liability on the licensee.
"The plain language of the statute must be read in context," Toomey said. "[There is] no distinction between when the dam was constructed."
"All possible costs, responsibilities, and liabilities are imposed on the owners for good reason," he continued, meaning the "tremendous financial benefit" of the license.
In his rebuttal, Carlson cited the lack of a "rigorous screening process" by FERC prior to its grant of the hydroelectric license to Boyce, a company he claimed was founded by inheritors of a fortune who simply wanted to turn a profit.
"If they had done the due diligence, they would have seen revoking the license was inevitable," he said.
Thapar pointed out the license was eventually revoked by the federal government, but Carlson said Michigan may have intervened sooner to correct maintenance issues and prevent the dam's failure.
Senior U.S. Circuit Judge Helene White, a George W. Bush appointee, rounded out the panel.
No timetable has been set for the court's decision.
Follow @@kkoeninger44
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
