Train Disaster Case Appears to Run Aground in 1st Circuit

Victims of a crash that virtually incinerated an entire Canadian town argued that the railroad is playing games with the courts, but the judges seemed unsure. 

Lac-Mégantic, Quebec, on July 6, 2013, after a train owned by a subsidiary of Canadian Pacific, derailed and caused a fatal oil spill. (Photo by a Sûreté du Québec helicopter via Courthouse News)

BOSTON (CN) — A massive lawsuit over the 2013 Lac-Mégantic train explosion put the First Circuit at odds Wednesday over whether legal technicalities are more important than fairness to the victims. 

As argued by lawyers for dozens of bereaved families, the Canadian Pacific Railway is primed to escape liability after having covered up which of its U.S. subsidiaries was responsible, then using the plaintiffs’ failure to name the correct subsidiary as grounds to throw out the case. 

Canadian Pacific has a long history of using its “obscure web of corporate affiliates” to get out of trouble and play games with the courts, attorney Matthew Wessler claimed this morning at oral arguments in Boston. 

But “we’re not talking about games here,” objected U.S. Circuit Judge Bruce Selya, “we’re talking about rules of jurisdiction, which we are bound to honor.”

The Reagan appointee nevertheless seemed sympathetic to the families.  

“Here’s your main problem,” he told Canadian Pacific’s lawyer, Paul Hemming of the Taft firm in Minneapolis. “I understand your technical legal arguments, and they may have considerable force, but there is some aura in this case of unfairness.

“Is there anything you can do,” he asked, “to ease that feeling?” 

The disaster occurred in Lac-Mégantic, Québec, on July 6, 2013, as a train carrying oil from the Bakken formation in North Dakota derailed on its way to a refinery. More than a million gallons of oil spilled into the town’s streets and then ignited, leveling most of the town and killing 47 people.

Bakken oil is especially volatile and flammable, the plaintiffs claimed, but it was being transported in cheap, outdated containers that they called “the Ford Pinto of rail cars.” The rail cars had been the subject of an urgent safety warning by the National Transportation Safety Board the previous year. 

Worse, the oil had been mislabeled as safe, the plaintiffs said, which allowed the train to be operated by a single engineer. 

The engineer parked the train for the night in a nearby town and went to a hotel, leaving the engine running. A fire broke out shortly afterward in the engine. Firefighters successfully shut it down, but without power the train’s air brake didn’t work and the train started rolling downhill. By the time it reached a sharp curve in Lac-Mégantic, it was going 65 miles per hour and derailed.  

When the owner of the rail line filed for bankruptcy, the victims sued Canadian Pacific for negligently shipping the oil. The case became tangled up in the bankruptcy proceeding in Maine.  There, Canadian Pacific claimed that it had nothing to do with the shipping and pointed fingers at its U.S. subsidiaries — but refused to say which subsidiary was responsible. The plaintiffs eventually figured out that the Soo Line was the correct defendant, but the Maine judge refused to let them amend their complaint to name the Soo Line. 

The question is whether the issue should be decided under the bankruptcy rules, which favor Canadian Pacific, or the federal rules, which favor the families. 

Hemming was asked if the railroad had relied on the bankruptcy rules below, and he said it did but it never had an opportunity to specifically state that.  

“No, counsel, that’s plainly not correct,” interrupted U.S. Circuit Judge Sandra Lynch, a Clinton appointee. “You had the opportunity, and you never once said it.” 

Selya complained that, “now all of a sudden, like a rabbit out of a hat, you pull on appeal this reference” to the bankruptcy rules. “I’m troubled by the notion that there’s something about this that feels unfair.” 

But when Wessler, of Gupta Wessler in Cambridge, Massachusetts, cited a series of cases suggesting that the federal rules applied, Selya responded that, “I read those cases differently. I don’t think any of them say that.” 

Hemming argued that the plaintiffs should have known about the Soo Line as early as 2015 because the information was publicly available in SEC documents. “This wasn’t hidden,” he insisted. “Soo Line is a very well-known company, at least in my locality.” 

“What’s your locality?” Lynch asked. 

“Minneapolis,” Hemming answered. 

“Okay, so it’s known in the Midwest,” Lynch said. 

But Wessler countered that “Canadian Pacific identified itself as the driver of the train in the bankruptcy proceeding. On that basis the plaintiffs pled that it was Canadian Pacific that drove the train. … We did not know and could not know that it was the Soo Line.” 

The rules of procedure are “not designed to be a trap for the unwary,” he argued. But Hemming shot back that the rules are also not intended to let the plaintiffs “lazily get repeated bites at the apple.” 

At one point Lynch summarized the plaintiffs’ argument at length, to which Wessler replied, “You’re right.” 

“No, please,” Lynch said. “All I did was outline an argument. I didn’t say I thought it was correct.” 

U.S. Circuit Judge Robert Katzmann, a Clinton appointee on the Second Circuit, joined the panel by designation. 

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