Judge rejects Canadian Pacific’s challenge of Lac-Mégantic lawsuit

Judge says settlement process to compensate victims of train tragedy can go ahead

SHERBROOKE, Que. — A Quebec judge has rejected Canadian Pacific Railway Ltd.’s challenge of a court settlement that is aimed at compensating residents of Lac-Mégantic, Que.

About 25 companies accused of responsibility in the 2013 train tragedy that killed 47 people have put up a fund of $431.5 million.

The settlement was being opposed by Canadian Pacific (TSX:CP).

The company wanted Superior Court Justice Gaetan Dumas to declare the ongoing bankruptcy proceedings for the railway responsible for the disaster — Montreal Maine and Atlantic Railway Ltd. — illegitimate.

It argued the case should be heard in Federal Court, not Quebec Superior Court.

CP also wanted Dumas to rule that the settlement fund was unfair because it would have limited the railway company’s ability to countersue the other firms involved in the tragedy.

In his ruling Monday, Dumas stated that Superior Court has legitimate jurisdiction and that the settlement process to compensate victims can go ahead.

CP said Monday it would review the decision and that it would have no other immediate comment.

A lawyer for the railway company said last month the terms of the settlement fund were unfair and would limit its ability to defend itself in court.

The fund was unanimously accepted by victims and creditors of the disaster during a June 8 meeting.

On July 6, 2013, an unmanned train owned by the Montreal Maine and Atlantic Railway Ltd. (MMA) roared into Lac-Megantic and derailed, with its cargo exploding and decimating part of the downtown core.

MMA didn’t have enough insurance to pay damages to victims and creditors, so it filed for bankruptcy in the United States and Canada. The settlement fund is tied to the bankruptcy proceedings on both sides of the border.

The terms of the fund offer all the companies that are giving money a full release from legal liability for the disaster in both the United States and Canada.

While CP has said previously it doesn’t dispute that families of the victims deserve compensation, it insists it was not responsible for what happened.

Its lawyer, Alain Riendeau, reminded Dumas last month that the disaster “did not involve our tracks, did not involve our rail cars, our products or our employees.”

The problem for CP is if any of the 25 companies decides to sue it to recoup money put toward the fund. Being freed from liability means CP wouldn’t be able to countersue.

Riendeau also argued that the fund is technically illegal because Canada’s bankruptcy process doesn’t allow third parties to be fully released from liabilities in certain types of insolvency proceedings such as the one involving MMA.

The approved plan would see just under $200 million go to the government of Quebec and the town of Lac-Megantic for cleanup and other related costs.

About $111 million would be distributed to families of the deceased and the remaining millions are reserved for other claims such as psychological and material damages suffered as a result of the train derailment.

As much as $21 million is earmarked for lawyers’ fees.

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