Appointing a trustee to oversee MMA railroad bankruptcy may take a month, attorney says

A firefighter stands close to the remains of a train wreckage in Lac Megantic in this file photo taken July 8, 2013.
MATHIEU BELANGER | REUTERS
A firefighter stands close to the remains of a train wreckage in Lac Megantic in this file photo taken July 8, 2013.
Posted Aug. 14, 2013, at 3:22 p.m.

BANGOR, Maine — Whether a trustee will be appointed to oversee the Montreal, Maine and Atlantic Railway bankruptcy before the Hermon-based company is due to appear before a judge next week was uncertain Wednesday.

It could take as long as a month for a trustee to be chosen, according to John Stemplewicz, an attorney with the justice department who is representing the Federal Railroad Administration in the bankruptcy proceedings.

Because MMA is a railroad regulated by the U.S. Department of Transportation, the appointment of a trustee is more complicated than it would be for a business that is less regulated, according to attorneys familiar with railroad bankruptcies.

Jane Limprecht, spokeswoman for the U.S. Trustees Office in Washington, D.C., a division of the U.S. Department of Justice, declined Wednesday to comment on the status of the process to appoint a trustee. It is the policy of the Justice Department not to comment on open cases, she said.

The railroad can operate without a trustee due to an emergency motion granted by U.S. Bankruptcy Judge Louis H. Kornreich on Aug. 8 that allows MMA to pay salary and benefits to employees until a trustee can be appointed. The judge set a follow-up hearing for Aug. 22 at the Kennebec County Courthouse in Augusta.

The company filed for bankruptcy in the U.S. on Aug. 7, one day after its affiliate in Canada filed for bankruptcy in that country. A Canadian judge Aug. 8 granted a similar motion that allowed the company to continue operating in that country.

A trustee is appointed in every bankruptcy filed in Maine by the Office of the U.S. Trustee, based in Portland. In business bankruptcies, trustees act as CEOs and as liaisons to bankruptcy judges. The trustee program was created in 1978 “To further the public interest in the just, speedy and economical resolution of cases filed under the Bankruptcy Code,” according to information on the program’s website. “The program monitors the conduct of bankruptcy parties and private estate trustees, oversees related administrative functions, and acts to ensure compliance with applicable laws and procedures”

The section of the Bankruptcy Code that deals with railroads requires that the DOT nominate five possible trustees to the Office of the U.S. Trustee, which chooses a trustee. The names of the nominees are not made public, according to Limprecht.

Railroad bankruptcy cases appear to be the only instance in which an agency nominates potential trustees, she said Wednesday in an email. In all other cases, the Office of U.S. Trustees appoints a trustee.

In this case, it is taking time to interview candidates and determine what conflicts they might have that would prevent any one of them from serving as a trustee, Stemplewicz told Kornreich on Aug. 8. He said that in other cases it has taken between three and four weeks for the DOT to complete that process.

If a trustee is not appointed before the hearing next week, Kornreich could allow the railroad to continue to operate for a few more weeks without one.

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