The panel held that, under federal law, the government cannot be sued over actions that were based “on considerations of public policy.” The corps' decisions regarding the shipping channel fall under that protection, the judges held, saying the new ruling “completely insulates the government from liability.”

Duval signed the order dismissing the cases Dec. 20. He also dismissed a similar lawsuit against a contractor. It claimed excavation work weakened flood walls in New Orleans' Industrial Canal.

In the New Orleans cases, more than 500,000 residents, businesses and governments sought damages against the Corps. Residents of southern Louisiana argued that the flooding in the wake of the 2005 storm was a man-made disaster—one caused specifically by the corps—and they have wanted the agency to pay up for lost homes and property.

The corps claimed immunity from suits related to decisions on flood-control projects, including most levees, based on a 1928 federal law. But lawyers tried to get around that by claiming the agency had been negligent in maintaining navigation channels, including the Mississippi River Gulf Outlet.

As a result of Duval's decision, only one major lawsuit remains active in federal court that might result in payments to a large number of Katrina flood victims. That case is being heard in the U.S. Court of Federal Claims in Washington, D.C. before Judge Susan Braden.