September 12, 2013 / 5:28 PM / 5 years ago

Bankruptcy panel sought for Quebec train disaster victims

(Reuters) - A judge should appoint a broad committee of victims of a deadly train explosion in Quebec to resolve a split among claimants in the railway operator’s U.S. Chapter 11 bankruptcy, according to a U.S. bankruptcy watchdog.

A flurry of lawsuits have been filed in the wake of the devastating blast in Lac-Megantic and victims have clashed over the best way to press their claims against Montreal, Maine & Atlantic Railway Ltd.

An MMA train loaded with crude oil derailed and exploded in the town on July 6, killing 47 and causing widespread property and environmental damage.

A month later, the company filed for bankruptcy in Bangor, Maine.

The U.S. Trustee, a Department of Justice official who oversees bankruptcy cases, asked the bankruptcy court to appoint a broad committee covering property owners, government entities and those killed or hurt.

“No victim should be excluded from representation,” he said in papers filed by William Harrington, the U.S. Trustee in Portland, Maine.

A hearing on the dispute is scheduled in Bangor on Friday at 10 a.m. EDT in front of Judge Louis Kornreich.

U.S. bankruptcies allow creditors to form court-recognized committees that negotiate a settlement of claims. The bankrupt company provides a budget and the committee can hire legal and financial advisers.

Potential claimants, however, had split over who should get a seat on a committee.

Attorneys for many of those killed or injured asked the court to give them their own committee, which they said will promote due process for the victims who speak French and are unfamiliar with U.S. law.

They argued in court papers that wrongful death and bodily injury claimants had rights that others do not have, including the right to a trial to determine their damages.

One of their attorneys, Daniel Cohn of Murtha Cullina in Boston, declined to comment.

A separate group that includes the Province of Quebec as well as property owners backed the U.S. Trustee’s approach, according their lawyer Luc Despins of Paul, Hastings, Janofsky & Walker.

An attorney who was appointed by the court to oversee the company, Robert Keach of law firm Bernstein Shur, argued for no committee at all.

That is because Montreal, Maine & Atlantic falls under a special area of the bankruptcy code reserved for railroads. In such cases, a trustee like Keach is appointed to oversee the company and that trustee owes a duty to all creditors.

As a result, creditor committees in railroad cases are unusual.

MMA has about $37 million in secured and unsecured debt, but faces claims that could run into the hundreds of millions of dollars for wrongful death, bodily injury, property and environmental damage.

An estimated 1.48 million U.S. gallons (5.6 million liters) of oil were spilled in the crash.

Reporting by Tom Hals in Wilmington, Delaware; editing by G Crosse

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