The trustee for the bankrupt Montreal, Maine & Atlantic Railway and the lawyers and consultants working on his behalf are asking a federal bankruptcy judge to approve nearly $3 million in compensation and reimbursement of expenses, which would come out of the railroad’s estate, for their work bringing the railroad this far through Chapter 11 bankruptcy proceedings.
The filings offer a first look at what MM&A’s bankruptcy case will cost in legal and related fees.
Additional Photos
Robert Keach, a bankruptcy attorney at Portland-based Bernstein Shur, has requested $792,740.15 in compensation and expenses for serving as the railroad’s trustee during the bankruptcy case. As trustee, Keach is working on his own behalf and that fee would go to him, not his firm. Keach was not available on Friday for comment.
In a separate request, Bernstein Shur requested $1,047,697.82 in compensation and reimbursement of expenses for providing Keach and the railroad with legal services throughout the bankruptcy proceeding. Portland-based law firm Verrill Dana has requested $65,126.48 for similar work.
In addition to legal fees, two companies that provided financial consulting services to Keach and the MM&A have filed applications for compensation. Chicago-based Development Specialists Inc. is requesting $733,700.31 in compensation and reimbursement of expenses for acting as Keach’s financial adviser during the bankruptcy proceeding and his efforts to sell the railroad. New York-based Gordian Group is requesting $276,562.37 in compensation and reimbursement of expenses for providing investment banking services to Keach and MM&A.
The five requests total nearly $2.9 million. If approved by federal Judge Louis Kornreich of the U.S. Bankruptcy Court in Bangor, the five companies would be paid first among secured creditors out of the railroad’s estate. Other secured creditors include Camden National Bank, the Federal Railroad Administration and Wheeling & Lake Erie Railway.
“They’re at the top of the pile,” says Judith Ross, a bankruptcy lawyer based in Dallas, Texas, and chairwoman of the American Bar Association’s business law subcommittee on bankruptcy trustees.
MM&A operated nearly 500 miles of railroad tracks that connect Searsport, Millinocket and Bangor with Montreal. The company filed for bankruptcy last August, a month after one of its trains carrying crude oil was involved in a deadly derailment in the Quebec town of Lac-Megantic.
The accident and resulting explosion resulted in the deaths of 47 people and the destruction of most of the community’s downtown.
How much money would be available from MM&A’s estate to compensate the victims’ families and others impacted by the disaster is a question that’s been asked since the beginning of the bankruptcy case.
In bankruptcy law, secured creditors get paid first and unsecured creditors get the rest. Victims, such as those in Lac- Megantic, are considered unsecured creditors.
Ross understands that situation can raise the ire of observers of a bankruptcy case.
“I think there’s an instinct, especially when you have victims who have been harmed by a company, to look at lawyer fees and say, ‘Oh my gosh, this is outrageous that they’re being paid before victims,’ ” she said. “But the fact of the matter is you can’t get any money to victims unless counsel comes in and does what needs to be done.”
In the case of the MM&A, Keach decided the company needed to sell the railroad, its tracks between Montreal and Bangor and its related assets, such as locomotives and repair facilities, and use the proceeds to pay back secured and unsecured creditors. The $15.85 million sale of the U.S. assets closed on May 15. Railroad Acquisition Holdings, an affiliate of New York-based Fortress Investment Group, is the buyer. It has changed the name of the railroad to the Central Maine and Quebec Railway. The sale of the Canadian assets will close after regulators in that country approve the company’s certificate of fitness.
According to documents filed by lawyers representing the majority of the victims’ families, secured creditors alone are claiming $40 million.
Ross was not willing to comment on whether the fees being requested by Keach, the law firms and other consultants should be considered reasonable because she did not know all the details of the case.
“The judge is the ultimate arbiter of that issue,” she said. “He or she will examine the fees and determine if he or she thinks it’s fair.”
A hearing before the judge has been set for June 10 in Bangor.
Calls to several of the lawyers representing the victims were not returned Friday.
Whit Richardson can be contacted at 791-6463 or at:
wrichardson@pressherald.com
Twitter: @whit_richardson
Send questions/comments to the editors.
Success. Please wait for the page to reload. If the page does not reload within 5 seconds, please refresh the page.
Enter your email and password to access comments.
Hi, to comment on stories you must . This profile is in addition to your subscription and website login.
Already have a commenting profile? .
Invalid username/password.
Please check your email to confirm and complete your registration.
Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.
Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.