Companies involved in the bankruptcy case of the Montreal, Maine & Atlantic Railway will probably begin suing each other, potentially dragging the case out in the courts, said lawyers Friday at a hearing on whether to consolidate 20 related wrongful-death cases against the railroad and move them to Maine.
The goal of the companies involved in the railroad’s massive Chapter 11 reorganization will be to divert blame for the derailment and explosion of a train loaded with crude oil that killed 47 people and destroyed 40 buildings in Lac-Megantic, Quebec, on July 6.
Defendants named in the wrongful-death cases include companies that drilled the oil, labeled and loaded it onto the train, built the rail cars, leased the cars, built the engine and operated the train.
Each one will try to place blame for the disaster on the others, likely leading to the various parties litigating or settling their respective lawsuits and pooling the judgments and settlements into a single fund to pay victims, lawyers’ fees and other judgments, said Robert Keach, a Portland attorney who is the trustee for the railroad in the bankruptcy case.
Keach said he hopes that fund will total in the hundreds of millions of dollars.
The first such lawsuit was filed Thursday by Keach against a list of defendants including Miami-based World Fuel Services Corp., which the railroad has accused of mislabeling the oil and then putting it in inadequately reinforced rail cars.
“We have just submitted a claim saying we’re not responsible for the accident,” Keach said during Friday’s hearing.
In all, the Montreal, Maine & Atlantic Railway expects 47 wrongful-death cases and at least one class-action lawsuit involving thousands of plaintiffs who were injured, suffered property damage or were affected by the environmental disaster the derailment created.
The damages awarded in those cases are expected to total as much as $700 million, including an estimated $200 million for victims and $200 million to $500 million for environmental cleanup, Keach said. The railroad’s insurance policy covers no more than $25 million, plus coverage for legal fees.
Not everyone at Friday’s hearing in U.S. District Court in Portland favored combining the derailment victims’ lawsuits and paying judgments out of a single fund.
Daniel Cohn, a Boston attorney, represents a group of wrongful-death claimants who filed a total of 20 lawsuits, including 19 in Illinois. He said that transferring his clients’ cases to Maine because of the bankruptcy would be a “terrible injustice.”
The 20th case was filed in Pennsylvania by Sarah Troester, a Delaware resident whose husband, Jefferson Troester, was a railroad engineer who was crushed to death in 2012 when two 1,500-pound rolls of newsprint fell out of a Montreal, Maine & Atlantic rail car.
“There will be no significant recovery in the bankruptcy, probably for anyone,” Cohn said. “I’ve never yet seen anybody walk away happy from a bankruptcy case.”
Claimants in the wrongful-death cases also are suing some of the owners of the Montreal, Maine & Atlantic’s parent company, Rail World Inc., including its president and CEO Edward Burkhardt, as well as World Fuel Services, which they have accused of mislabeling the oil, and the rail car manufacturer, Union Tank Car Co.
The plaintiffs claim that the oil was more volatile than its labels suggested, and that the cars carrying it had a history of rupturing in derailments.
Cohn wants the lawsuits to be tried in Illinois, not Maine, which caps payouts at $400,000 in wrongful-death cases on damages that are not easily assigned a monetary value, such as emotional stress.
“If the defendants didn’t perceive that there would be a big advantage in bringing this case out of Cook County (Illinois), they would not have called for this action,” he said.
But Keach and others argued that the only alternative to consolidating the cases and moving them to federal court in Maine would be trying each of them individually in multiple locations, which would require much more effort, time and money.
Keach said the cost to keep the various cases separate could exceed $1 million in unnecessary legal fees and would not put money into the hands of victims’ families any faster.
The reason, he said, is that several other claimants, including Rail World and Burkhardt, have claims for legal fees and other damages that are legally equal in priority to those of the victims.
“While the claims of the Illinois victims are significant, they are by no means the only claims,” Keach said. “I cannot distribute a single dime to victims of the derailment until these other cases are resolved.”
The Hermon-based Montreal, Maine & Atlantic was driven into bankruptcy by the disaster in Lac-Megantic and has sought protection from creditors in courts in the U.S. and Canada. The railroad has continued to operate during the bankruptcy proceeding, running trains between Millinocket and Searsport, and between Brownville and Montreal.
In January, judges in Bangor and Quebec approved the sale of the railroad’s primary assets to New York-based Fortress Investment Group for $14.25 million. Keach said the railroad has a few remaining assets to sell that are valued at roughly $1.6 million.
In addition to anticipated liabilities from pending lawsuits, the railroad owes $28 million to the Federal Railroad Administration, $2 million to the Maine Department of Transportation, $5 million to Wheeling & Lake Erie Railway Co., $3 million to Camden National Bank and $3.25 million in administrative fees to the Canadian court where the bankruptcy of its sister company, Montreal, Maine & Atlantic Canada Co., is being adjudicated.
U.S. District Judge Nancy Torreson, who presided over Friday’s hearing, listened to arguments for and against consolidating the cases, asked several questions and then adjourned to consider the facts and make her ruling.
Torreson did not say how long that would take.
J. Craig Anderson can be contacted at 791-6390 or at: