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In re Montreal Maine & Atlantic Railway, Ltd.

United States District Court, D. Maine

June 8, 2015

In re: MONTREAL MAINE & ATLANTIC RAILWAY, LTD., Debtor.
v.
WORLD FUEL SERVICES CORP., WORLD FUEL SERVICES, INC., WESTERN PETROLEUM CO., WORLD FUEL SERVICES, CANADA, INC., PETROLEUM TRANSPORT SOLUTIONS, LLC, CANADIAN PACIFIC RAILWAY CO., and IRVING OIL LTD., Chapter 11. Defendants. ROBERT KEACH, solely in his capacity as the chapter 11 trustee for MONTREAL MAINE & ATLANTIC RAILWAY, LTD., Plaintiff, Adversary Proceeding No. 14-1001 No. 1:15-mc-22-NT

ORDER ON DEFENDANT CANADIAN PACIFIC'S MOTION TO WITHDRAW THE REFERENCE

NANCY TORRESEN, Chief District Judge.

Before me is Defendant Canadian Pacific Railway Co.'s ("Canadian Pacific") motion requesting that I withdraw the reference of an adversary proceeding that was automatically referred to the Bankruptcy Court. For the reasons stated below, I DENY the motion.

FACTUAL & PROCEDURAL BACKGROUND[1]

On June 29, 2013, a train known as "Train 282" departed from an intermodal transloading facility in New Town, North Dakota with seventy-two tank cars in tow, bound for an Irving Oil Ltd. ("Irving") refinery in Saint John, New Brunswick. Under an arrangement Irving had with World Fuel Services Corp. and a number of affiliated entities (collectively, the "World Fuel Affiliates"), the cars had been loaded with crude oil transported to New Town by truck.

Canadian Pacific operated Train 282 from New Town to Cote Saint-Luc, Quebec. There, it transferred control of the train to Montreal Maine & Atlantic Railway, Ltd. ("MMA"), which was to carry it the remainder of its journey.

At about 11:25 p.m. on July 5, 2013, MMA stopped Train 282 for the evening in Nantes, Quebec. Shortly after midnight, the Nantes Fire Department was called to put out a fire in one of Train 282's locomotives. The train's lead engine was powered down to allow firefighters to put down the blaze, and the fire was extinguished by 12:15 a.m. on July 6, 2013. Firefighters turned the train over to the custody of an MMA employee, who allegedly left the scene without restarting the lead engine.

Without power from a running locomotive, Train 282's air-brake system lost power and the train began rolling downhill toward Lac-Megantic. It reached downtown at around 1:15 a.m. and derailed, causing many of its tank cars to rupture. Large explosions and a massive, uncontrolled fire followed. Forty-seven people were killed.

Lawsuits against MMA mounted in the weeks following the accident, including wrongful death claims filed in Cook County, Illinois (later transferred to this District) and a proposed class action filed in the Superior Court of the Province of Quebec. Facing massive potential liability, MMA petitioned for chapter 11 bankruptcy in this District on August 7, 2013. MMA's Canadian subsidiary initiated a parallel bankruptcy case in the Superior Court of the Province of Quebec. On August 21, 2013, Robert Keach was appointed as the trustee of the bankruptcy estate in the U.S. case (the "Trustee").

To date, MMA's purported creditors have filed nearly 500 proofs of claim[2] in the U.S. case seeking approximately $2.1 billion from the bankruptcy estate. Among those are proofs of claim filed by each of the World Fuel Affiliates and by Canadian Pacific. The World Fuel Affiliates' proofs of claim dispute that they bear any fault for the Lac-Megantic tragedy and assert claims for subrogation, indemnification, reimbursement, and contribution related to the wrongful death suits. In re Montreal & Atlantic, Bk. No. 13-10670, D. Me. Bankr. Ct., Claim Register, Doc. Nos. 28-1 through 32-1. Canadian Pacific's proof of claim also disputes that it bears any fault for the derailment and asserts the following: (1) claims for subrogation, indemnification, contribution, and reimbursement for any amount Canadian Pacific is required to pay under the wrongful death suits and the Quebec class action; and (2) claims for reimbursement for any amount Canadian Pacific is ordered to pay under (a) a lawsuit for the value of Train 282's cargo and railcars, among other things, brought by a number of the other defendants in this adversary proceeding, (b) other lawsuits for derailment-related property damages that may be brought against Canadian Pacific in the future, and (c) environmental remediation orders issued by the Quebec Minister of Sustainable Development, Environment, Wildlife and Parks. Am. Claim #92, In re Montreal & Atlantic, Bk. No. 13-10670, D. Me. Bankr. Ct., Claim Register, Doc. No. 92-2, ¶¶ 6-30 ("Can. Pac.'s Am. Proof of Claim").

In response, the Trustee initiated an adversary proceeding, filing a complaint both: (1) objecting to the allowance of the claims filed by the World Fuel Affiliates and Canadian Pacific; and (2) asserting common law negligence claims against Canadian Pacific, three of the World Fuel Affiliates, and Irving. Keach v. World Fuel Services Corp. (In re Montreal, Me. & Atlantic Ry., Ltd.), Bk. No. 13-10670, Adversary Proceeding No. 14-1001, Doc. No. 95, First Am. Compl., ("Tr.'s Am. Compl.").

The complaint implicates the Defendants under two main theories of liability. First, it alleges that the Defendants had duties to evaluate whether the train's load was classified properly and that they breached those duties by classifying it as low volatility "Packing Group III" cargo rather than high volatility "Packing Group I" cargo. Tr.'s Am. Compl. ¶¶ 7-8, 111. Had they properly classified the crude oil, the complaint alleges, MMA would have operated Train 282 under more stringent protocols that would have prevented the derailment altogether. Tr.'s Am. Compl. ¶ 83. Second, it alleges that the Defendants had a duty to ensure that the cargo was packaged safely, and that they breached that duty by shipping the crude oil in unsuitable non-retrofitted DOT-111 tank cars. Tr.'s Am. Compl. ¶¶ 9, 111. Had they shipped the crude oil in stronger tank cars, the complaint alleges, the derailment would not have caused nearly as much damage. Tr.'s Am. Compl. ¶¶ 9-11, 114.

The complaint also narrows in on a more specific legal theory of why Canadian Pacific should bear liability for the Lac-Megantic disaster despite its limited role in the events preceding it. It asserts that Canadian Pacific "had reasonable grounds to suspect that the classification of the crude oil shipment was incorrect" and therefore "had an affirmative duty to not carry the shipment or to stop the shipment until the classification was correct." Tr.'s Am. Compl. ¶ 108. The Trustee clarified at oral argument that this is the only claim he intends to bring against Canadian Pacific.[3]

The Trustee's complaint was automatically referred to the Bankruptcy Court under 28 U.S.C. § 157(a) and Local Rule 83.6. In lieu of filing an answer, Canadian Pacific filed the motion before me, requesting the withdrawal of the reference pursuant to 28 U.S.C. § 157(d). See Can. Pac.'s Mem. of Law in Support of Mot. to Withdraw Reference (ECF No. 1-1) ("Can. Pac.'s Mot.").

DISCUSSION

Article I of the United States Constitution authorizes Congress to pass "uniform Laws on the subject of Bankruptcies." U.S. Const. art. I, § 8, cl. 4. Under this grant of authority, Congress passed the Bankruptcy Amendments and Federal Judgeship Act of 1984 (the "1984 Act" or the "Act"), Pub. L. 98-353, 98 Stat. 333, which vests United States district courts with "original but not exclusive jurisdiction of all civil proceedings arising under title 11 [the "Bankruptcy Code" or the "Code"], or arising in or related to cases under title 11." 28 U.S.C. § 1334(b).

The Act also provides that "[e]ach district court may provide that... all cases under title 11 and... all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district." 28 U.S.C. § 157(a). The District of ...


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