United States District Court, D. Maine
ORDER ON MOTION FOR STAY AND INJUNCTIVE RELIEF
LEVY U.S. DISTRICT JUDGE.
bankruptcy appeal concerns a secured claim made in connection
with the 2013 Lac-Mégantic train derailment tragedy.
Appellant Wheeling & Lake Erie Railway Co.
(“Wheeling”) moves under Rule 8007(b) of the
Federal Rules of Bankruptcy Procedure to stay the judgment of
the United States Bankruptcy Court for the District of Maine
(the “Bankruptcy Judgment”) dated June 22, 2018.
To implement the stay, Wheeling also seeks an injunction
requiring Appellee Robert J. Keach, the post-confirmation
Estate Representative of Montreal Maine & Atlantic
Railway Ltd. (the “Estate Representative” of
“MMA”), to ensure that the Debtor's Estate
contains sufficient funds to pay Wheeling's claim if
Wheeling prevails on appeal. For the reasons that follow, I
deny the motion.
6, 2013, MMA's freight Train 282, which was transporting
crude oil, derailed in Lac-Mégantic, Quebec, Canada,
killing 48 people and causing catastrophic damage to the
town. MMA subsequently filed for bankruptcy in the District
of Maine-as well as in Canadian courts-because of the losses
and liabilities arising from the derailment. After filing for
bankruptcy, the Estate Representative (then serving as the
Estate Trustee) commenced litigation against various parties,
including the shipper of the crude oil, Western Petroleum
Company, together with its corporate affiliates World Fuel
Services Corporation and World Fuel Services, Inc.
(collectively, the “Shipper”), for their
respective roles in causing the disaster. In 2015, the Estate
Representative entered into a global settlement with the
Shipper, whereby the Shipper agreed to contribute 110 million
dollars to a settlement fund in exchange for the release of
all claims against it arising from the Lac-Mégantic
derailment. Wheeling subsequently initiated this litigation
seeking, in relevant part, a declaratory judgment that it
held a valid, perfected, and enforceable security interest in
MMA's contractual and/or statutory and regulatory claims
against the Shipper that were released as part of the
2015, the Bankruptcy Court entered an order confirming the
Trustee's “Revised First Amended Plan of
Liquidation” (the “Confirmation Plan”).
Paragraph 84 of the Confirmation Plan-which was added to
resolve Wheeling's objection to the plan-required the
Estate Representative to set aside $5, 032, 134.12 (the
“Set-Aside Fund”) “pending further order of
the Bankruptcy Court” to secure payment to Wheeling if
Wheeling was later found to be entitled to payment on its
22, 2018, the Bankruptcy Court issued an oral decision ruling
that MMA had no contractual, statutory, or regulatory claims
against the Shipper to which Wheeling's security interest
attached, and even if such claims existed, Wheeling had
failed to establish that they had any net value. Immediately
after the decision was announced, counsel for Wheeling made
an oral motion to stay, which the court denied. Later that
day, the Estate Representative released the money in the
Set-Aside Fund to the Canadian Monitor (essentially the
Estate Representative's Canadian counterpart in the
parallel Canadian bankruptcy proceedings) in keeping with the
Confirmation Plan. There is no evidence before me as to
whether the money in the Set-Aside Fund has been disbursed by
or remains with the Canadian Monitor. Wheeling's appeal
from the Bankruptcy Order to this Court is taken pursuant to
28 U.S.C. § 158 (2012) and Rule 8003 of the Federal
Rules of Bankruptcy Procedure.
ruling on a motion for stay pending appeal under
Fed.R.Bankr.P. 8007, the Court must consider: “(1)
whether the applicant has made a strong showing of success on
the merits; (2) whether the applicant will be irreparably
harmed absent injunctive relief; (3) whether issuance of the
stay will injure other parties (i.e. balance of the
hardships); and (4) where the public interest lies.”
Rivera v. Lake Berkley Resort Master Ass'n (In re
Otero Rivera), 532 B.R. 425, 426 (Bankr. D.P.R. 2015)
(citing Acevedo-García v. Vera-Monroig, 296
F.3d 13, 16 n.3 (1st Cir. 2002)); accord Ross-Simons of
Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 15 (1st
Cir. 1996). “The sine qua non of this
four-part inquiry is likelihood of success on the merits: if
the moving party cannot demonstrate that [it] is likely to
succeed, the remaining factors become matters of idle
curiosity.” New Comm Wireless Servs., Inc. v.
SprintCom, Inc., 287 F.3d 1, 9 (1st Cir. 2002) (emphasis
consider Wheeling's motion for stay relative to the
required four-part inquiry, focusing primarily on the
likelihood of success on the merits, “the touchstone of
the preliminary injunction inquiry.” Maine Educ.
Ass'n Benefits Trust v. Cioppa, 695 F.3d 145, 152
(1st Cir. 2012) (quoting Philip Morris, Inc. v.
Harshbarger, 159 F.3d 670, 674 (1st Cir. 1998) (internal
quotation marks omitted)).
Likelihood of Success on the Merits
Wheeling argues that the Bankruptcy Court made two critical
errors that give it a reasonable likelihood of appellate
success: first, the court misinterpreted federal rail
transportation law in concluding that MMA, one of several
rail carriers transporting the crude oil, has no contractual,
statutory, or regulatory claims against the shipper of the
crude oil; and second, the court relied on improper lay and
expert opinion testimony to find that even if MMA had
contractual, statutory, or regulatory claims, those claims
have no value. I conclude that Wheeling has failed to
demonstrate that it is likely that the Bankruptcy Court erred
in finding that any potential claims have no value.
Accordingly, I limit my analysis to the valuation question
and I will not attempt to unravel the thicket of federal rail
transportation law associated with the first alleged error at
Bankruptcy Court gave two reasons for its conclusion that any
potential non-tort claims by MMA against the Shipper have no
value: first, Wheeling, as the party with the burden of
proof, failed to introduce evidence establishing the
reasonable settlement value of MMA's claims; and second,
Wheeling did not rebut the Estate Representative's
testimony that the claims have no value. ECF No. 7 at
22. Although Wheeling contends that the Bankruptcy
Court erred in considering the Estate Representative's
testimony, which Wheeling asserts was improper expert
testimony, the Bankruptcy Court's first rationale for
determining that the claims have no value is not dependent on
Wheeling's burden, as the secured party, to identify the
value of the proceeds of its collateral. See Gen. Elec.
Co. Bus. Lighting Grp. v. Halmar Distribs., Inc. (In re
Halmar Distributors, Inc.), 232 B.R. 18, 24 (Bankr. D.
Mass. 1999) (“[The secured party] has the burden of
identifying the proceeds from the sale of its
collateral.”); UCC § 9-315(a)(2) (Am. Law Inst.
& Unif. Law Comm'n 2017) (“[A] security
interest attaches to any identifiable proceeds of
collateral.”). Here, the collateral is MMA's
contractual, statutory, and regulatory claims against the
Shipper. The “proceeds” of the collateral is
“whatever is acquired upon the sale, lease, license,
exchange, or other disposition of the collateral . . .
.” UCC § 9-102(a)(64)(A).
cites to a written stipulation between the parties as
evidence of the value of its collateral. That ...