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Second Appeal Analysis
PA ID# 017-UCWTD-00; Caddo-Bossier Parishes Port Commission
PW ID# PW 55 ; Legal Responsibility
From May 18 to June 20, 2015, heavy rains and severe storms caused flooding in northern Louisiana. The United States Army Corps of Engineers (USACE) executed mandatory water releases from several bodies of water into a river, which then caused flooding along 22 miles of railroad track owned by the Caddo-Bossier Parishes Port Commission (Applicant), located within its port facility. The Applicant leased property at its facility to various commercial tenants and provided them with railroad switching services. As a result of the flooding, the wheels and axles of 63 railroad freight cars (railcars) owned by three of the Applicant’s tenants were inundated with floodwaters at the Applicant’s cargo dock, and the roller bearings on the railcars needed to be replaced. The Applicant requested public assistance (PA) from FEMA for the work to repair the flood damaged railcars.
FEMA prepared Project Worksheet (PW) 55 to document the Applicant’s request for assistance in the amount of $386,332.24, but determined that the Applicant did not demonstrate it was legally responsible for the railcars and denied funding. FEMA issued its determination denying funding on January 19, 2016. FEMA’s determination memorandum stated that pursuant to the rules and standards submitted by the Applicant, it was the tenants, and not the Applicant, who were responsible for the repair of damage sustained to the railcars. FEMA referred to the service agreements (hereinafter collectively referred to as “Service Agreements”) entered into by the Applicant and its respective tenants and noted that the Applicant was not liable for any loss related to property of any kind.
In addition, FEMA considered but rejected the Applicant’s reliance on the Association of American Railroads (AAR) Interchange Rules, and the Louisiana (LA) Civil Code because both the standards and rules supported the Service Agreements, which placed responsibility for all damage on the tenants.
The Applicant appealed FEMA’s deobligation in a letter dated March 23, 2016, requesting PA funding in the amount of $386,332.24. The Applicant argued that FEMA’s determination memorandum misinterpreted the definition of “property” as outlined in its Service Agreements and contended the term “property” did not include railcars. Furthermore, the Applicant pointed to various provisions of the Service Agreements to demonstrate the parties’ intention to distinguish between property and railcars. Accordingly, the Applicant claimed that the provisions on liability did not apply to the railcars. In addition, the Applicant referred to Article 2754 of the LA Civil Code, which states that carriers are liable for loss or damage of things in their care unless caused by an accident or uncontrollable event. As such, the Applicant argued the LA Civil Code assigns liability for the damage to the Applicant because the flood event was neither accidental nor an uncontrollable event since the USACE released the water. Finally, the Applicant claimed that it was considered a non-subscriber under the AAR Interchange Rules, which state that a non-subscriber is responsible for the repair for loss or damage to railcars in its possession.
The State of Louisiana Governor’s Office of Homeland Security and Emergency Preparedness (Recipient) concurred in a May 23, 2016 letter and accompanying memorandum. The Recipient reiterated the Applicant’s arguments and concluded that liability of the Applicant attached when the railcars passed into its possession and it was therefore legally responsible for the damaged railcars.
FEMA sent the Recipient a Basic Request for Information (RFI) on June 29, 2016. In it, FEMA asked for the Applicant’s legal status and for the agreements between the Applicant and its tenants. The Recipient responded on August 2, 2016 and included the Applicant’s July 26, 2016 response, along with the requested agreements (a lease agreement between the Applicant and its tenant Genesis, which discusses legal responsibility, as well as a lease agreement between the Applicant and another tenant that omits liability, which is found on the previously provided Service Agreements)
and legal status. FEMA then sent the Recipient a Final RFI on October 28, 2016 and requested any relevant information regarding the Applicant’s assertion that it was legally responsible for repairing the railcars, noting that the Service Agreements between the Applicant and its tenants stated that the Applicant was not liable for any loss related to property of any kind. The Recipient responded on December 1, 2016 and included the Applicant’s November 22, 2016 response, which reiterated the prior arguments. The Applicant also highlighted language from the Service Agreements in support of its arguments and again disagreed with FEMA’s conclusion that the AAR Interchange Rules place responsibility to repair the railcars on the tenants. The Applicant argued that because the railcars were on tracks owned by the Applicant, and not on private or non-subscriber tracks at the time of the flood event, it was legally responsible for the repairs.
The FEMA Region VI Regional Administrator (RA) denied the appeal on March 10, 2017. The RA determined that the Applicant was not legally responsible for the damaged railcars. The RA pointed out that FEMA regulations require work resulting from a disaster be the legal responsibility of an eligible applicant, which is generally presumed to be a facility’s owner. But, the RA noted that when an applicant leases a facility to another entity, FEMA will review the relevant lease provisions and other statues to determine responsibility for maintaining and repairing the property. Here, the RA found that the 63 railcars were owned by the Applicant’s tenants, though damaged on tracks owned by the Applicant. The RA concluded that the Service Agreements between the Applicant and tenants stated that the Applicant was only legally responsible to repair damage caused by its own negligence. Otherwise, the tenants were legally responsible.
The RA also determined that the AAR Interchange Rules did not impose legal responsibility to effect repairs on any entity other than the presumed owner of the freight equipment.
Finally, the RA reviewed the relevant LA Civil Code, which provided that carriers were liable for loss or damage unless occasioned by accidental or uncontrollable events. According to the Applicant, the USACE released the water and the intentional act caused the damage. In response, the RA inferred that in such an instance, the damage was not a direct result of the disaster and thus, not eligible for PA funding.
In its second appeal dated May 4, 2017, the Applicant contends that the RA misinterpreted the definition of “property” in its Service Agreements and reiterates its request for $386,332.24. The Applicant notes that in interpreting a contract, the common intent of the parties is central, and determined in accordance with the general, ordinary and plain and popular meanings of words used. The term “property” does not include railcars, and in support thereof, the Applicant points to a section in the Service Agreements that discusses the Applicant’s duty to deliver and load and unload property, which the Applicant states would reasonably refer to goods or commodities. In contrast, two sections of the Agreement refer to loaded railcars and empty railcars without any association to the term “property.” In addition, the Applicant contends the LA Civil Code supports the parties’ interpretation that property did not include railcars.
The Recipient concurs in a June 27, 2017 letter and accompanying memorandum. The Recipient reiterates that the Applicant was legally responsible for the 63 railcars, as it moved the railcars onto its property via its rail system and took possession of them. The Recipient further contends that pursuant to the AAR Interchange Rules, the Applicant is responsible for the condition of all railcars on its line. The Recipient argues that ownership of the railcars was temporarily transferred to the Applicant under the terms of the Service Agreements between the Applicant and tenants. Finally, the Recipient restates the Applicant’s contention that the railcars are not “property” and that FEMA misconstrued the Service Agreements.
In order to be eligible for PA funding, an item of work must be the legal responsibility of an eligible applicant.
Legal responsibility to repair a facility usually resides with the owner of the facility, unless the owner has transferred the responsibility to another party by lease or other legal instrument.
The Applicant argues that the RA misinterpreted the Service Agreements in that he equated railcars with the term “property,” which only referred to things like goods and commodities. However, the RA refers to the property damage generally and when referring to the Service Agreements, notes the section referring to property in its entirety. The RA then specifically refers to the provision of the Service Agreements relating to the Applicant being only responsible for damage caused by its own negligence. It is important to note that the RA explicitly stated, “[t]he Agreements state that the Applicant is not liable for any damage, including damage to property ‘or any other loss or injury’ unless the damage or loss is caused by a failure on the part of the Applicant to act prudently.”
On second appeal, FEMA’s review verifies that the liability provisions in the Service Agreements and lease agreement hold the Applicant harmless
and/or relieve the Applicant of liability for any loss or injury unless caused by its own negligence.
Additionally, the Applicant’s reliance on context within the Service Agreement to determine that “property” only refers to goods and commodities is misplaced because the term is broadly defined within the document to include, among other various types of property, “property of any kind.”
Therefore, the term “property” is broad, not vague, and is inclusive of railcars. Consequently, the Service Agreements and lease agreement do not establish the Applicant’s legal responsibility to repair the railcars.
The LA Civil Code likewise discharges the Applicant of responsibility to repair the damages caused by the flood, as there is no question that it was beyond the Applicant’s control, regardless of whether the USACE purposely released the water. FEMA looks to the language of the code, specifically the liability provisions in this case, to determine the responsible party.
The LA Civil Code provides that the Applicant would be liable for loss of damage of the things entrusted to its care, unless it can prove that such loss or damage has been occasioned by accidental and uncontrollable events.
The damage to the railcars was directly attributable to the severe storms and flooding, a natural catastrophe beyond the Applicant’s control. Moreover, the Applicant states in its second appeal, “[u]nder Louisiana law, a contract is the law between the parties and the courts are bound to interpret them according to the common intent of the parties.”
As Louisiana defers to the parties agreement,
and the Service Agreements and lease agreement are the controlling legal documents, the language demonstrates the parties’ intent was to place responsibility for damage to the railcars resulting from the flood event on the tenants.
Finally, the AAR Interchange Rules provide that each handling line is responsible for the condition of all railcars on its line,
and railcars should be repaired by car owner insofar as may be practical.
These rules were established to create uniform standards for safety and security issues in the railway industry. The rules do not address third party responsibility, nor do they create contractual obligations or legal responsibility between parties to carry out repairs.
Thus, the Applicant cannot rely on the AAR Interchange rules to support its contention that it had legal responsibility for the repairs. Accordingly, the Applicant was not legally responsible for the repair work.
The Applicant did not demonstrate that it was legally responsible for the work to repair the damaged railcars. Consequently, the appeal is denied.
 See generally
Services Agreement, between Caddo-Bossier Parishes Port Comm’n D/B/A Port of Shreveport-Bossier and Carbo Ceramics Inc., at 1, Section 4 (Mar. 28, 2008) [hereinafter Carbo’s Service Agreement
] (“Port shall not be liable for any loss or injury to any . . . property of any kind . . . handled or stored by it for [Carbo] or any other loss or injury unless such loss or injury results from the failure of Port to exercise such care as would a reasonably prudent person . . . Port is not liable for damages which could not have been avoided by the exercise of such care.” (emphasis added); Track Storage Agreement, between Caddo-Bossier Parishes Port Comm’n and Georgia Gulf Corp. (Axiall is a part of Georgia Gulf Corp. and Affiliates), at 3, Section 5.3 (Mar. 1, 2000) (“Lessee agrees to defend…and hold harmless the [Applicant]…against any and all claims….”).
Terminals and Land Lease Agreement, between The Caddo-Bossier Parishes Port Comm’n and Red River Terminals, L.L.C. (subsidiary of Genesis), at 24, Section 4.7 (Aug. 1, 2005) states: “ [Tenant] shall indemnify, defend, and hold [the Applicant] harmless against all fines, penalties, and third party claims, demands or causes of action for personal injury or death or loss of or damage to property arising out of or related to activities of [the Tenant] on the Leased Premises at the Port unless caused or occasioned by the gross negligence or intentional conduct of [the Applicant], its representatives, agents, servants or employees.”). The lease agreement between Carbo Ceramics, Inc. and the Applicant is silent on issues of liability, though it was also submitted with the RFI response.
Furthermore, the RA concluded that while the AAR Interchange Rules required water-submerged wheels to have their roller bearings reconditioned prior to being placed back in service, the standards did not address third party responsibility or create a contractual obligation between parties to carry out repairs or provide maintenance. FEMA First Appeal Analysis, Caddo-Bossier Parishes Port Comm’n
, FEMA-4228-DR-LA, at 3 (Mar. 10, 2017) [hereinafter First Appeal Decision
Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.223(a)(3) (2014).
 Public Assistance Guide
, FEMA 322, at 23, 30-31 (June 2007).
 First Appeal Decision
, at 2-3.
Track Storage Agreement, between Caddo-Bossier Parishes Port Comm’n and Georgia Gulf Corp., at 3, Section 5.3 (Mar. 1, 2000).
 Carbo’s Services Agreement
, at 1, Section 4; Terminals and Land Lease Agreement between The Caddo-Bossier Parishes Port Comm’n, and Red River Terminals, L.L.C. (subsidiary of Genesis), at 24, Section 4.7 (Aug. 1, 2005).
In its second appeal, the Applicant points to National Rice Milling Co. v. New Orleans & N.E.R. Co., et al
, 132 La. 615 (1913), in support of the argument that Applicant had the requisite legal responsibility. However, in National Rice Milling Co.
, the railyard disclaimed legal responsibility for damage to railcars due to flooding based on contractual language in the bill of lading. That same language shifted liability to the railyard when the loss was the result of their negligence. The result was that the railyard was found liable for the loss due to its own negligence. Not only does this case not stand for the general proposition of legal responsibility/liability for railcars that happen to be in any railyard, but it is consistent with FEMA’s findings here.
FEMA Second Appeal Analysis, Bethel Missionary Outreach Ministries, Inc.,
FEMA-1603-DR-LA, at 5 (June 22, 2017) (stating “Hurricane Katrina caused floodwaters to inundate the Applicant’s rented building and destroyed its contents; the resultant property damage is directly attributable to Hurricane Katrina, a natural catastrophe beyond the Applicant’s reasonable control. Because the Applicant’s lease does not hold it legally responsible for repairs to the building when damages result from occurrences beyond the Applicant’s reasonable control, the repair of the damages to the building was the legal responsibility of the property owner, not the Applicant.”).
La. Civ. Code Ann. art. 2754 (2011) (stating that “[c]arriers and waterman are liable for loss of damage of the things entrusted to their care, unless they can prove that such loss or damage has been occasioned by accidental and uncontrollable events.”).
Letter from Dir. of Legal Affairs, Caddo-Bossier Port Comm’n, to Deputy Dir., Disaster Recovery, State of La. Governor’s Office of Homeland Sec. and Emergency Preparedness, at 3 (May 4, 2017).
La. Civ. Code Ann. arts. 1983 and 2045 (respectively stating “[c]ontracts have the effect of law for the parties and may be dissolved only through the consent of the parties or on grounds provide by law,” and “[i]nterpretation of a contract is the determination of the common intent of the parties.”).
Field Manual of the Interchange Rules Adopted by the Association of American Railroads, Safety and Operations Rules and Standards, at Rule 1(a) (Jan. 1, 2015).
. at Rule 2(a)(1).
. at Preface (stating, “[t]he rules contained herein do not foreclose AAR members from entering into other agreements which may be contrary to these rules.”).