Wrongful death claimants in Lac-Megantic disaster want George Mitchell to oversee allocation of railroad’s funds

Posted Jan. 29, 2014, at 7:54 p.m.
Former Senator George Mitchell
Former Senator George Mitchell Buy Photo

BANGOR, Maine — A Chicago law firm on Wednesday filed a proposal that would appoint former U.S. Sen. George J. Mitchell to oversee the allocation of available funds in the Montreal, Maine and Atlantic Railway’s bankruptcy case to the victims who have filed wrongful death and personal injury claims.

The firm Meyers & Flowers filed the plan on behalf of the committee representing the families of the 47 people killed in July when a train owned by MMA carrying 50,000 barrels of crude oil derailed in the center of Lac-Megantic, Quebec, and exploded.

Buckling under the costs of the disaster, MMA filed for bankruptcy in early August.

The plan is only a proposal and not final. Robert Keach, MMA’s trustee in the proceedings, told the Bangor Daily News on Wednesday evening that he believes the proposal represents “a litigation tactic and nothing more.”

MMA’s assets were sold last week at a bankruptcy auction to New York investment firm Fortress Investment Group. The deal is expected to officially close in March.

However, the sale price of $15.85 million is much less than the $40 million claimed by secured creditors, let alone unsecured creditors such as the wrongful death claimants, according to court documents filed by Meyers & Flowers on Wednesday in the bankruptcy case.

According to those documents, there is $25 million of indemnity coverage under the insurance policies of MMA and its Canadian subsidiary available to allocate to the wrongful death and personal injury claimants.

The proposed plan “attempts to promote — with Senator Mitchell’s help — a consensual resolution of issues, such as how much the insurance company will pay, which amounts will be distributed through the Chapter 11 case and which amounts through the Canadian Proceeding,” the documents say.

The proposal calls for Mitchell to be appointed as “Plan Fiduciary.” According to the documents filed Wednesday, Mitchell has agreed to take on the job if the plan is approved. Mitchell could not be reached Wednesday evening for confirmation.

“Knowing of Senator Mitchell’s record in this regard, we think he can help break the bankruptcy logjam,” Peter Flowers, a principal of the Chicago law firm that represents the unofficial committee, said in a statement.

Under the proposal, insurance proceeds would be divvied up with 75 percent going to the wrongful death and personal injury claimants and 25 percent going to the property damage claimants, which would be handled through the Canadian insolvency proceeding of MMA’s Canadian subsidiary.

“The idea is to get this done quickly by dividing responsibility between the U.S. and Canadian cases rather than have a tug of war,” Flowers said in a statement. “We hope Senator Mitchell can help rally support for a compromise.”

Keach, the MMA trustee, did not share that view.

“I doubt very much that this plan will go anywhere,” Keach told the BDN. “I don’t think this plan has any legitimacy.”

Keach believes the plan was filed as a prop before a Friday hearing in Portland where a U.S. District Court judge will decide whether to move wrongful death claims to Maine from Illinois, where they were filed because it’s the state of residence of Edward Burkhardt, MMA’s majority owner and chairman.

“The parties who filed the plan are the plaintiffs in those cases, and they don’t want those cases transferred to Maine,” Keach said. “If you put two and two together, you might see this tied to their desire to keep these cases in Illinois and not transferred to Maine.”

As for Mitchell’s role in the plan, Keach said that is likely part of the tactic.

“I’m sure that name was dropped for a reason,” he said, adding that he hadn’t discussed the case with the former Maine senator.

Keach said he assumes the plan won’t go anywhere, but if it isn’t withdrawn, federal bankruptcy Judge Louis Kornreich, who is overseeing MMA’s bankruptcy case, will consider it at some point.

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