Updated

A federal appeals court has upheld a judge's landmark ruling that the Army Corps of Engineers is liable for property owners' claims, saying the shoddy work on a shipping channel caused billions of dollars in damage from Hurricane Katrina's storm surge.

A three-judge panel from the 5th U.S. Circuit Court of Appeals on Friday ruled the federal government isn't entitled to immunity from lawsuits blaming Katrina's flood damage on the corps' operation and maintenance of the Mississippi River-Gulf Outlet, a New Orleans navigation channel.

The federal government had asked the judges to reverse a 2009 decision by U.S. District Judge Stanwood Duval, who ruled that flooding in St. Bernard Parish and New Orleans' Lower 9th Ward was a manmade disaster created by the corps' negligence.