A candid railway executive’s next problem: the litigators

It was a press conference unlike any other. Just outside the smouldering remains of the centre of Lac-Mégantic, Que., where a train carrying crude oil derailed, exploded and killed dozens of people, the chairman of the railway stood surrounded by TV cameras and reporters – and pinned the blame on his own employee.

The train's engineer, he said, failed to apply the required handbrakes to keep the railcars from sliding into the town. "We think we have plenty of responsibility here," Edward Burkhardt said. "Whether we have total responsibility has yet to be determined."

Those comments – and others in which Mr. Burkhardt appeared to accept that his Montreal Maine & Atlantic Railway Inc. was at fault – broke from the usual script followed by corporations in crisis. They may also factor into what is expected to be years of litigation.

Mr. Burkhardt's frank admissions, including his statement that the company "blew it big time," raised eyebrows among lawyers who both sue and defend companies in the wake of a deadly accident or other crisis.

Tim Pinos of Cassels Brock & Blackwell LLP in Toronto, who acts for companies facing product liability lawsuits, said he would not advise any spokesman to make such definitive statements before all the facts are known.

"I would have thought that in those situation that while expressions of sympathy and regret for the incident are appropriate, I think it does both the company and the engineer in question a disservice to point fingers when the federal rail safety guys have barely begun their investigation," Mr. Pinos said.

"My advice would have been to establish a public presence but don't say anything prejudicial to yourself."

The list of potential plaintiffs the company may face is staggering. A class action lawsuit could include business owners who lost revenue or property, as well as families who lost loved ones. Damages could be in the hundreds of millions, lawyers estimate. And those civil actions would come on top of any criminal or regulatory sanctions the company could face.

Other parties, including the federal government that regulates rail transport and the company that owned the crude oil being shipped, could also be named as defendants. Some legal observers expressed surprise that there were so far no public reports of any class actions filed in the days after the crash. Quebec courts tend to reward lawyers who, seeking to edge out rivals an control a class action, file first.

The ultimate fate of the embattled rail company may rest on how large its insurance policy is, a number that is not publicly known. But lawyers with experience in such cases expressed doubt that the small, privately-held railway would have enough insurance to cover its costs, meaning its own assets could be on the line. MM&A has about 170 employees.

Class-action lawyer Dimitri Lascaris of Siskinds LLP in London, Ont., said he thought damages would be "far in excess $100-million, and maybe multiples of that."

He said his firm's Quebec arm was considering filing a lawsuit on behalf of the victims of the disaster, but was taking its time to allow the residents of the devastated town to absorb the aftermath.

"What's happened is so traumatic for that community that I think a lot of people, our firm included, are just standing back and letting people cope with the trauma of this event," Mr. Lascaris said.

He added that often, those with seven-figure claims for compensation after the death of loved ones chose to opt out of class actions and launch their own lawsuits. Those with smaller claims, such as for lost business at a restaurant, are more suited to a class action, since it would not make sense for them to pay their own lawyers to file an individual claim.

But Roger Oatley, a lawyer who is acting for victims of the 2012 collapse of a shopping mall in Elliot Lake, Ont., said he doesn't think Mr. Burkhardt's comments about taking responsibility will make a difference to the company's legal exposure.

"I would think that proving responsibility against the railway company would be in the slam dunk category," Mr. Oatley said. "Regardless of what caused it to happen, the railway company is responsible for that train."