Judge Poised to Sign Off on Oil Train Disaster Settlement

Canadian Pacific, which opposes the settlement fund, declined to contribute because it contends others were responsible for the tragedy.

Published: 20th September 2015 09:26 PM  |   Last Updated: 20th September 2015 09:26 PM   |  A+A-

Oil Train Derailment_Mukh

In this July 6, 2013, file photo, smoke rises from railway cars from now defunct Montreal, Maine & Atlantic Railways company that were carrying crude oil after derailing in downtown Lac Megantic, Quebec, Canada. A settlement for victims of a fiery train d


PORTLAND, Maine: A $338 million settlement fund for victims of a fiery train derailment that claimed 47 lives in Quebec is poised for final approval, but payments could be held up by a legal challenge from one of Canada's largest railways.

Canadian Pacific, which opposes the settlement fund, declined to contribute because it contends others were responsible for the tragedy.

If the settlement is approved, Canadian Pacific would be left open to lawsuits while those the railroad considers to be responsible would be shielded from further legal battles by the agreement.

"The bottom line is this: We will not contribute to this fund because it frees those parties responsible for the derailment from future liability and legal action, and we continue to contend that we were not among the parties responsible," said Martin Cej, a CP spokesman in Calgary.

But Robert Keach, bankruptcy trustee in Maine, said the railroad is engaging in a "cynical" ploy to delay payments to victims to further its own negotiating position in settlement talks.

"Their howls of innocence ring a little hollow," said Keach, trustee in the bankruptcy of the now-defunct Montreal, Maine and Atlantic Railway Ltd., whose unattended train began rolling downhill and ultimately derailed after the train's operator failed to set enough brakes.

"If they really thought that they were completely innocent and that they had no liability, then they would let the distribution proceed and they would defend themselves in court," he said.

Much of downtown Lac Megantic, Quebec, was destroyed when the runaway train with 72 oil tankers derailed on July 6, 2013. The inferno destroyed about 40 buildings, including a busy bar where many of the victims perished.

The settlement fund, worth $446 million in Canadian dollars, was the product of lengthy negotiations with about two dozen companies with potential liability. Wrongful death lawsuits are currently on hold.

Canadian court officials and Lac Megantic victims have already approved the settlement, leaving final confirmation of the plan by a judge Thursday in a U.S. Bankruptcy Court in Portland.

A Canadian judge has already rejected Canadian Pacific's first attempt to stop the settlement, and the company's request to appeal the decision will be heard next month in a Canadian courtroom. Payments could be delayed for months if CP prevails.

The oil shipment originated with Canadian Pacific, which transported the crude to Quebec before the train moved onto rail lines owned and operated by Montreal, Maine & Atlantic Railway Ltd.

Canadian Pacific contends it bears no responsibility because the train that derailed wasn't operated by CP, wasn't using CP crew or locomotives, and wasn't operating on CP tracks.

But Keach contends there's a distinction between liability for the derailment and liability for the deadly explosions. He contends CP failed to properly classify the Bakken region crude oil, which was as volatile as gasoline. Plaintiffs also believe CP bears some responsibility because it managed shipping documents and contracted to get the crude to its final destination in Saint John, New Brunswick.

From a liability standpoint, Keach said, the railroad is in the same position as other major parties like World Fuel Services, which owned the oil shipment and agreed to pay $110 million to the fund. The means Canadian Pacific could be on the hook for tens of millions of dollars if it chooses to contribute to the settlement.

Canadian Pacific is holding firm on its decision to reject the settlement. "Like all Canadians, we share in the grief and loss suffered by the people in Lac Megantic," Cej said. "The people who were affected need to be compensated by those who were responsible."

In addition to the bankruptcy and civil lawsuits, there's also a separate criminal case pending against three workers each charged with 47 counts of criminal negligence causing death.

The former MM&A railroad that passes through Lac Megantic is now under new ownership. Central Maine & Quebec Railway won't ship crude oil through Lac Megantic before 2016. At present, there are no plans to resume oil shipments through the town, the railroad said.

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