US Bankruptcy Court asked to handle compensation for victims of Montreal, Maine and Atlantic Railway train disaster

First responders fight burning trains after a train derailment and explosion in Lac-Megantic, Quebec early July 6, 2013 in this picture provided by the Transportation Safety Board of Canada.
HANDOUT | REUTERS
First responders fight burning trains after a train derailment and explosion in Lac-Megantic, Quebec early July 6, 2013 in this picture provided by the Transportation Safety Board of Canada.
By Judy Harrison, BDN Staff
Posted Sept. 01, 2013, at 12:26 p.m.

BANGOR, Maine — A federal bankruptcy judge could decide how much compensation families of the victims killed by the train crash in Lac-Megantic, Quebec, receive.

A motion filed last month in the Montreal, Maine and Atlantic Railway’s bankruptcy petition asked U.S. Bankruptcy Judge Louis Kornrich to appoint a committee to represent wrongful death and personal injury claimants.

If the railroad agreed to allowing the bankruptcy court to handle compensation to victims, the company could avoid dealing with dozens of individual wrongful death lawsuits with “verdicts totalling hundreds of millions of dollars,” Bangor lawyer George Kurr said in the motion.

MMA filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Bangor and in Canada on Aug. 7, a month after one of its trains rolled driverless down a hill before derailing in the middle of the town of Lac-Megantic, causing a fiery explosion that killed 47 people.

The estates of 33 of the victims, which have filed lawsuits against the railroad in Canada, joined in submitting the motion. Forming a committee to make recommendations about compensation to the judge would be the fairest way to represent their interests, which are different than the interests of other creditors, Kurr wrote.

“The decedents were unsophisticated individuals who happened to be in a small-town cafe when it, and they, were incinerated by [MMA’s] runaway train,” Kurr said. “Their estate representatives are, for the most part, family members or friends of the decedents living in Canada far from the location of this court, and themselves not familiar with American bankruptcy law.”

In its bankruptcy filing, MMA estimated that its debts totaled about $3.5 million prior to the accident. That figure excludes the $27.5 million the railroad still owes on a $35 million loan it received from the Federal Rail Administration in 2005.

MMA listed between 200 and 999 creditors in it bankruptcy filing. The railway estimated its assets at between $50 million and $100 million and its liabilities between $1 million and $10 million.

“Given the horrific circumstance of the disaster and [MMA’s] role in it, wrong death verdicts in the hundreds of millions of dollars can be expected [if the cases go to trial],” Kurr wrote.

A separate motion seeking to form a committee to represent creditors also is pending before Kornreich. Kurr urged Kornreich to form two committees — one to represent victims and another to represent creditors.

He also said the formation of a committee to represent victims would “greatly enhance the likelihood of a successful Chapter 11 case” by providing a “negotiating partner” which represents the interests of the victims.

Railroad bankruptcy law defines the victims of train crashes as “administrative creditors.” That means they and their families or estates are paid before the case is closed as are attorneys and experts representing the railway.

Kurr’s motion, dated Aug. 22, said that Robert Keach of Portland, who has been appointed trustee for MMA during the bankruptcy proceeding, had not taken a position on the formation of a committee to represent victims.

A hearing on the motion was scheduled for Oct. 3, but lawyers representing creditors have asked that it be for Sept. 13, the same day a hearing on the motion to form a creditors committee is scheduled.

As of Sunday, Kornreich had not decided if the motions would be considered together or separately.

For the next month at least, the railroad may continue operating. The Canadian Transportation Agency on Aug. 23 allowed MMA and its Canadian subsidiary to keep trains running through Oct. 1. Ten days earlier, it had ordered MMA to cease operations, saying the railway lacked adequate insurance, according to a previously published report.

The CTA initially ordered the railway on Aug. 13 to halt operations as of Aug. 20 because it did not have adequate insurance. The insurance that MMA had in force in July will not come close to meeting the costs of cleanup and restoration after the Lac-Megantic crash, according to a previously published report.

The CTA reversed that order, allowing MMA to operate through Oct. 1 after the railway provided evidence of adequate third-party insurance.

Rail World Inc., MMA’s parent company, purchased the Bangor and Aroostook Railroad in 2002 for $50 million as part of Bangor and Aroostook’s Chapter 11 bankruptcy proceedings, according to a previously published report.

To emerge from the current bankruptcy, the railroad will have to be sold, MMA’s lawyer, Roger A. Clement, Jr., has said.

http://bangordailynews.com/2013/09/01/news/us-bankruptcy-court-asked-to-handle-compensation-for-victims-of-montreal-maine-and-atlantic-railway-train-disaster/ printed on August 28, 2014