Appeals court reverses Katrina decision on flood damages Tue Sep 25, 2012 10:42am EDT (Reuters) - A U.S. appeals court has reversed itself and found that the Army Corps of Engineers cannot be held liable in property owners' lawsuits over flood damage during Hurricane Katrina. More than 400 property owners had filed lawsuits following the August 2005 hurricane, many targeting the Corps of Engineers. The plaintiffs had alleged the Corps of Engineers delayed armoring the Mississippi River-Gulf Outlet shipping channel against flood damage due to incorrect scientific decisions rather than public policy considerations. In an unusual move, a three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans on Monday withdrew its earlier ruling in March that had been in the plaintiffs' favor. Monday's ruling came after the federal government sought review of the panel's earlier decision by the full appeals court. Judge Jerry Smith, writing for the court, said the Corps of Engineers is immune from being held liable for property damage under the so-called "discretionary function exception" to the Federal Tort Claims Act, which governs litigation against the U.S. government. The exception bars lawsuits against the government for conduct arising from statutes and regulations that don't require an agency's action but involve its discretion. The 5th Circuit decision reverses a 2009 ruling by U.S. District Judge Stanwood Duval Jr. in New Orleans, who found that the federal government did not have immunity from lawsuits arising out of Katrina's flood damage in 2005. New Orleans is still struggling to fully recover from the devastation of Katrina, which swept across the city on August 29, 2005, killing more than 1,800 people and causing billions of dollars of damage along the coast. Judge Smith said the actual reasons for the delay in armoring the shipping channel were "varied and sometimes unknown, but there can be little dispute that the decisions here were susceptible to policy considerations." Joseph Bruno, a lawyer for the plaintiffs, was not immediately available for comment on the ruling. The Corps of Engineers had no immediate comment. The case is In re: Katrina Canal Breaches Litigation, 5th U.S. Circuit Court of Appeals, 10-30249 Reporting By Nate Raymond in New York; Editing by Claudia Parsons