Vinson & Elkins Scores Victory in the Fifth Circuit on Behalf of the Sabine Neches Navigation District

The Fifth Circuit upheld a Rule 12(b)(6) dismissal on all counts, setting to rest complex issues of first impression critical to the funding of improvements to the nation’s shipping channels after years of neglect. Working closely with Sabine Neches Navigation District General Counsel DeWayne Layfield, the team in the Fifth Circuit included senior partner Harry Reasoner, partner Jeremy Marwell, counsel Stacey Neumann Vu, senior associate James Dawson, and associates Michael McCambridge and Shelby Hart-Armstrong. Partner John Michael also provided valuable education on the shipping industry.

The Sabine Neches Navigation District governs the shipping channel along the border of Texas and Louisiana that provides access to the ports of Beaumont, Port Arthur, and Orange and Louisiana terminals. The channel is the number three waterway in the country by total cargo tonnage and is the nation’s primary liquid energy gateway. The Navigation District, in partnership with the U.S. Government, is spearheading a $1.2 billion project that will enable the waterway to accommodate supertankers and improve the safety and efficiency of the channel. This project represents the first major improvement to the waterway in more than 60 years, and the Navigation District has sought the necessary federal authorization and funding for more than 20 years. To fund its 40% share of project costs, the Navigation District utilized little-used provisions of the Water Resources Development Act of (“WRDA”)  to impose harbor dues on vessels using the waterway. WRDA provides congressional consent to certain tonnage duties that would otherwise violate the U.S. Constitution. Prior to this case, no court had ever decided whether harbor dues assessed under WRDA complied with WRDA’s requirements.

In September 2021, two major oil and gas companies sued the Navigation District, claiming that the new harbor dues purportedly violated WRDA in five different ways.  V&E filed a motion to dismiss on an expedited basis. The district court held oral argument in early January and dismissed on all seven counts in late February. The motion was argued by Harry Reasoner and Stacey Neumann Vu.

The plaintiffs promptly appealed. V&E successfully moved for an expedited hearing and briefing schedule in the Court of Appeals. Harry Reasoner argued the case, successfully impressing upon the panel the gravity of the underlying equities and the ramifications an erroneous ruling would have for southeast Texas, the shipping industry, and the nation as a whole. Just six weeks after oral argument, the Fifth Circuit handed down an opinion affirming the district court’s ruling on all counts.

The litigation team shepherded this high-stakes matter from an unexpected lawsuit to vindication of SNND in less than a year, securing a ruling that will benefit ports and navigation districts throughout the entire country.