606 B.R. 1
D. Me.2019Background
- 2013 Lac-Mégantic derailment: Train 282 (72 tank cars) carrying misclassified crude oil exploded, killing 47 and causing massive damages; MMA filed Chapter 11 in U.S. bankruptcy court.
- Four years earlier Wheeling had extended MMA a $6,000,000 secured, perfected loan that encumbered MMA’s contractual and statutory (non‑tort) payment rights.
- The shipper (Western Petroleum/World Fuel) created an online through bill of lading (BOL) naming CP (originating carrier) and MMA (connecting carrier); shipper misclassified the oil as Packing Group III though it tested far more hazardous.
- MMA (through its Estate Representative) sued and ultimately entered a Comprehensive Settlement with the shipper: $110 million to resolve many claims and releases, including MMA’s claims against the shipper.
- Wheeling objected in bankruptcy, asserting the released MMA claims were its collateral (contractual/statutory indemnity claims) and sought adequate protection/value for the release; bankruptcy court found (1) released claims were not Wheeling’s collateral and (2) even if they were, Wheeling failed to prove any net value. District court affirmed judgment.
Issues
| Issue | Plaintiff's Argument (Wheeling) | Defendant's Argument (Estate Representative) | Held |
|---|---|---|---|
| Whether MMA had regulatory indemnity claims under the Uniform Bill of Lading that constituted Wheeling’s collateral | Uniform BOL (required by 49 C.F.R. pt.1035) is mandatory for rail common‑carriage and thus grants MMA indemnity for shippers’ failure to disclose dangerous goods | Uniform BOL was not automatically incorporated into the negotiated BOL; MMA, as a connecting carrier, was not a party entitled to enforce it | Court: Uniform BOL applies by federal regulation to common carriers (including connecting carriers); bankruptcy court erred in holding otherwise |
| Whether MMA was a party to the through BOL or otherwise could enforce CP tariff/contractual indemnities | A through bill of lading binds the shipper and all carriers; MMA can enforce contractual indemnity (CP tariffs and BOL representations) | Connecting carriers are mere agents of the originating carrier (Ward) and cannot sue on the BOL | Court: Commercial Metals controls for carrier‑vs‑shipper suits; a connecting carrier can enforce through BOL provisions; bankruptcy court erred finding no contractual claims |
| Whether Wheeling carried its burden to prove the value of its collateral (for adequate protection/§ 506 valuation) | The parties’ stipulation of MMA’s net economic damages (≥ $10M) establishes prima facie value of the claims | Value must account for litigation uncertainty, counterclaims, contributory negligence, and actual settlement dynamics; stipulation does not prove realized collectible value | Court: Bankruptcy court did not err—Wheeling failed to prove the claims had value; factual finding of no value is affirmed |
| Whether Wheeling is entitled to recovery or tracing into the $110M settlement fund | Wheeling argues adequate protection requires payment equal to collateral value without tracing; stipulation suffices | Estate Representative relied on § 506 valuation principles and bankruptcy court findings about settlement discount and likely defenses | Court: Because collateral found to have no value, tracing/relief issues need not be reached; Wheeling not entitled to recovery |
Key Cases Cited
- Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 561 U.S. 89 (Sup. Ct. 2010) (through bill of lading is the basic transportation contract governed by Carmack principles)
- Missouri, Kansas & Texas Ry. Co. of Texas v. Ward, 244 U.S. 383 (Sup. Ct. 1917) (connecting carriers treated as agents of initial carrier for purposes of fixing carrier liability)
- S. Pac. Transp. Co. v. Commercial Metals Co., 456 U.S. 336 (Sup. Ct. 1982) (bill of lading binds shipper and all connecting carriers; connecting carrier can sue shipper under BOL)
- Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14 (Sup. Ct. 2004) (addresses downstream contracts and when carriers may invoke liability limitations in bills of lading)
- Whatley v. Canadian Pac. Ry. Ltd., 904 F.3d 614 (8th Cir. 2018) (discusses incorporation/role of Uniform BOL and limitations; relevant to whether Uniform BOL terms are impliedly incorporated)
- Ill. Steel Co. v. Baltimore & Ohio R. Co., 320 U.S. 508 (Sup. Ct. 1944) (Uniform BOL promulgated in interest of uniformity)
- CSX Transp., Inc. v. Novolog Bucks Co., 502 F.3d 247 (3d Cir. 2007) (discusses uniform rules and liability clarity under bills of lading)