The trustee for Montreal, Maine & Atlantic Railway Ltd. wants U.S. taxpayers to pay the bankrupt railroad’s legal fees, according to a motion filed Monday in U.S. Bankruptcy Court.

The motion asks the court to carve out $5 million of the anticipated proceeds from selling the railroad’s assets and subtract it from the amount owed to the Federal Railroad Administration.

With the court’s approval, that $5 million would be used to pay for the Maine-based railroad’s Chapter 11 bankruptcy case.

According to the motion, the U.S. government already has agreed to the deal. Without it, there would not be enough money to resolve the bankruptcy case, it says.

“The case (is) impossible to administer, absent a willingness of the trustee and professionals to serve pro bono or for pennies on the dollar, unless the stipulation is approved,” the motion says.

In August, the judge presiding over the railroad’s bankruptcy proceedings expressed concern that attorneys’ fees would suck the company dry of funds before victims of the disastrous July 6 train derailment in Lac-Megantic, Quebec, can be compensated.


U.S. Bankruptcy Judge Louis Kornreich also said the cost of a bankruptcy proceeding could render the railroad inoperable.

Montreal, Maine & Atlantic filed for bankruptcy protection about a month after the accident, in which an unmanned train loaded with crude oil rolled downhill into the town of Lac-Megantic, Quebec, derailed and exploded, killing 47 people and destroying 40 buildings in the heart of town.

Several lawyers and financial experts have been retained to facilitate the railroad’s bankruptcy case and proposed sale to a still-undetermined buyer.

By court order, Portland attorney Robert Keach has assumed all responsibility for managing the company’s finances. His Portland law firm, Bernstein Shur Sawyer & Nelson, is one of the firms representing the railroad in court.

“Currently, the trustee’s professionals include his undersigned counsel, as well as certain additional special counsel and financial advisors, and may include an investment banker and claims and noticing agent, should the court approve retention of same,” the motion says.

Lawyers at Bernstein Shur charge as much as $375 an hour for their services, according to an affidavit filed in U.S. Bankruptcy Court for the District of Maine.


Operation of the railway, which runs from Quebec toward New Brunswick through central Maine, has been in jeopardy since the derailment. The company filed for bankruptcy reorganization Aug. 7.

The bankruptcy case is complex, spanning two countries and connected to a human tragedy with numerous victims. In addition, it involves a railroad, which by federal law cannot be shut down.

According to documents filed in bankruptcy court, the railway company is worth $50 million to $100 million and owes about $39 million to its largest creditors. In all, the company estimates that it has more than 200 unsecured creditors, which are businesses or individuals who are owed money but do not have collateral or legal means to force repayment.

There are 19 pending civil lawsuits filed by victims of the derailment, their families and others. The anticipated amount of judgments in those cases is hundreds of millions of dollars.

The Federal Railroad Administration is the case’s largest secured creditor and is entitled to $28 million worth of the railroad’s assets, including real estate and all shares of its Canadian sister company, Montreal, Maine & Atlantic Canada Co.

Under the agreement proposed in Monday’s motion, $5 million of that money would be set aside to pay for the bankruptcy case.

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

Twitter: @jcraiganderson

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