Judge rejects CP Rail’s challenge of Lac-Mégantic settlement

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Canadian Pacific Railway Ltd. has failed in its attempt to block a court settlement that could pay millions of dollars in compensation to families of the victims of the 2013 Lac-Mégantic oil-train disaster.

Quebec Superior Court Justice Gaétan Dumas rejected CP's challenge of the settlement in a decision released on Monday, saying the process can go ahead. CP had argued that the court had no jurisdiction over the settlement, which was proposed under bankruptcy proceedings for the Montreal, Maine and Atlantic Railway Ltd., which was responsible for the explosion.

The settlement process, in which 25 companies would contribute to a compensation fund of about $431-million, will now go to a U.S. court for further approval, unless CP tries to appeal Monday's decision. Victims and creditors have given their approval to the arrangement.

CP spokesman Martin Cej said the railway has not yet decided on an appeal. "We are reviewing the judge's decision and have no further comment at this time," he said.

The judge rejected CP's argument that, because the Companies' Creditors Arrangement Act excludes railways, the court had no jurisdiction over Montreal, Maine and Atlantic.

In his ruling, the judge said CP should have raised its arguments over the past two years, after the rail company sought bankruptcy protection.

"Where was CP during all of these processes?" the ruling asks in French, calling CP's move a "disguised appeal" made "two years too late."

In a separate ruling, the judge also approved the settlement for those harmed by the disaster and for governments seeking to recoup cleanup and other costs. About $111-million would go to the families of those killed, about $200-million to the Quebec government and the town of Lac-Mégantic, and the rest for other claims and lawyers' fees.

CP has said it has no responsibility for the accident that destroyed the centre of the town and killed 47 people. CP hauled the oil train from the Bakken area in North Dakota to Montreal, where MMA took control. The operator of the train, who is facing charges of criminal negligence causing death, allegedly left it unattended before it rolled down a hill on July 6, 2013, derailed and blew up in the centre of Lac-Mégantic.

CP said it had no choice but to carry the oil to Montreal, because it is under a "common carrier obligation," which means it hauls whatever goods its customers require, and does not get to choose the route.

CP's refusal to contribute means that, unlike the other defendants, it still faces litigation from a class action launched over the disaster and other potential litigation.

Patrice Benoit, a lawyer acting for Montreal, Maine and Atlantic, said the ruling was a step forward for the families of the victims of the disaster.

"We are extremely pleased with these two judgments. It's great news for our 4,000 victims or so, and we do hope that the same thing will [be approved] in the U.S.," Mr. Benoit said.

Andrew Adessky of Montreal-based Richter Consulting, the court-approved monitor for MMA, said some compensation could be paid out as early as this fall. "If everything stays on track, then we would look to October or November before we would be in a position to start making distributions."

Mr. Adessky said he was satisfied with the judge's decision., and "we think this is a good plan for the victims."

The names of contributors to the compensation fund have generally been kept private, but some have been identified. Irving Oil Ltd. issued a news release in March saying it was contributing $75-million to the fund. Oil broker World Fuel Services Corp., which sold the crude to Irving Oil's New Brunswick refinery, agreed to pay $135-million. Others who have contributed include ConocoPhillips Co. and the makers of the tank cars. The negotiated payments to the settlement fund give contributors a release from any current or future lawsuits or liabilities stemming from the disaster.