August 23, 2013

Maine railway's legal fees to hinder pay for victims?

A judge fears a 'run-up' of costs in MM&A's bankruptcy, leaving little funds left to compensate victims of the Quebec disaster.

By J. Craig Anderson
Staff Writer

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Ed Burkhardt, chairman of Montreal, Maine & Atlantic Railway, has said essential rail services will continue while the company goes through bankruptcy.


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He said the railroad has enough money to operate on a break-even basis in the near future, and advised the other parties in the case to cooperate to complete the bankruptcy process as quickly as possible.

"We need to come to a consensual approach to meeting these two goals," he said.

The U.S. Trustees Office appointed Keach, a lawyer who specializes in bankruptcy, as trustee for the railroad Wednesday.

Keach then filed a request with the court to hire Bernstein Shur to represent the Montreal, Maine & Atlantic Railway while he is trustee, according to court records,

The railroad, based in Hermon, owns 512 miles of line in Maine and Canada. Most of its workers have been laid off since the accident disrupted operations.

Because it operates in two countries, the railroad consists of two companies, the Montreal, Maine & Atlantic Canada Co. in Canada and the Montreal, Maine & Atlantic Railway Ltd. in the United States. Each company has its own board of directors.

The Canadian company filed for bankruptcy under Canadian law in Superior Court of Quebec in Montreal, while its sister company in Maine filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.

Because railroads are critical for commerce and have monopoly status, U.S. bankruptcy law has special rules to ensure that they continue to operate and are not liquidated. In fact, railroads are not allowed to file for Chapter 7 bankruptcy, which is used when a company closes its business and sells off its assets.

If a railroad ceases operations, the federal Surface Transportation Board has the authority to order another railroad to provide service to its customers.

Burkhardt has said essential rail services will continue at all stations in Quebec, Maine and Vermont, except in Lac-Megantic because the rail yard there is under the control of authorities who are investigating the accident.

Beth Slavy, an attorney representing the Maine Department of Transportation, said keeping the railroad functional is a matter of broad public concern.

"Continued operation of the rail is in the public interest of Maine," she said.

J. Craig Anderson can be contacted at 791-6390 or at:

Twitter: @jcraiganderson 

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