Feature Articles and Case Notes Lac Mégantic Judgement and Montreal Maine Atlantic Liability

Jean-François Bilodeau*

Railway (“MMAR”), proceeded in the bankruptcy courts. Eventually, the bankruptcy proceedings allowed for and established a settlement fund of $430,000,000.00 Canadian dollars to compensate many of the victims.

the MMA’s tracks began near Saint-Jeansur-Richelieu. At the Farnham station, a TC inspector performed a mechanical inspection and a brake test. Minor defects were found on some cars and were immediately corrected on the site by MMA’s employees.

On December 14, 2022, the Québec Superior Court issued its judgment on Ouellet et al. v. Canadian Pacific Railway Company 1 The cases stem from the events of July 6, 2012, when the citizens of the town of Lac-Mégantic, Québec experienced one of the worst rail tragedies in Canadian history. A train of tank cars operated by Montreal, Maine, Atlantic (“MMA”) travelling at speeds of over 100 km/h, without a conductor or crew, derailed in the heart of downtown Lac-Mégantic resulting in the death of 47 people with many others suffering from significant physical or psychological harm, as well as causing immense property damage.

The Parties

There were three groups of plaintiffs: representatives of a class action brought on behalf of the residents of Lac-Mégantic.; the Attorney General of Québec (“AGQ”) for the damage suffered by the province and for costs associated with the emergency response and clean-up; and the claims of the subrogated insurers for property damage. Several defendants were named in the actions including but not limited to the shipper, the seller, the rail carriers, the receivers, and Transport Canada (“TC”).

Several actions were filed following the accident but they were suspended while a plan of arrangement involving MMA’s affiliate company, the Montreal, Maine & Atlantic

Following the bankruptcy proceedings, the three actions continued in the Québec Superior Court against MMA and Canadian Pacific Railway (“CP”).

Factual Summary

The circumstances of the accident relate to the transportation of the crude oil sold by World Fuel Services (“WFS”), and shipped from its agent Strobel Straroske Transfer’s (“SST”) facilities in New Town, North Dakota to its intended purchaser, Irving Oil Company (“IOL”) in Saint John, New Brunswick. On June 30, 2013, the CP train consisting of 78 tank cars loaded with Class 3 petroleum crude oil departed the SST transloading facility. The transportation document, a bill of lading (BOL) dated June 30, 2013, indicated that the shipper was a subsidiary of WFS and the consignee was IOL.

The train passed through several U.S. states, arrived in Canada at Windsor, Ontario and headed for Toronto. Prior to departing Toronto, the tank cars originating from SST’s facilities were joined with other cars containing other materials thereby forming a 120-car train pulled by two locomotives. When the train arrived in Montreal, CP employees performed a mechanical and safety inspection on July 5, 2013. Some problems were detected with 5 tank cars, which were removed from the train.

The MMA employees then conducted the train from Montreal to Farnham. Part of the trip was made on CP’s tracks until

* Borden Ladner Gervais LLP (Montreal, Quebec, Canada)

The train, now identified as “MMA002,” departed from Farnham and was approximately 1,432 metres long (4,700 feet). It weighed 10,290 tons, contained 7.7 million litres (approximately 2 million gallons) of crude oil, and consisted of 5 locomotives, 2 special cars and 72 tank cars. The train was, therefore, in the terms generally used in the industry, a unit train.

From Farnham, it travelled on MMA’s tracks to Nantes, a municipality located a few kilometres before Lac-Mégantic. This location was a planned stop to allow both the American crew, who would take over the train the next day to take it to New Brunswick, as well as for the MMA engineer, who left the train in Nantes and who would depart the next morning on a return train of empty tank cars, to take a mandatory overnight break.

From Farnham, the train was handled and operated by a single person, a locomotive engineer, Mr. Harding, who controlled the train from the lead locomotive identified as MMA5017. This is a way of operating regularly referred to as SPTO, namely single person train operation.

In Nantes, Mr. Harding stopped the operation of the other four locomotives, leaving only the engine of the lead locomotive running. As Mr. Harding applied seven hand brakes, he released the automatic air brake system, but the independent brake system remained in operation.

Mr. Harding contacted the Rail Traffic Controller (RTC) located in Farnham to report that the train was stopped and secured in Nantes and he was leaving the train to stay the night in Lac-Mégantic.

A fire broke out and the local fire department shut down the locomotive engine. The situation was reported to the RTC who sent an inspector on the site. It was decided that the RTC would inspect the train and advise on the situation the following day.

At that point, everyone assumed that the correct number of hand brakes had been set by Mr. Harding to secure the train. However, when the locomotive engine was shut down, no other locomotive was operating and, as a result, there was no air pressure available for the operation of the independent brakes. Additionally, and unfortunately, the seven hand brakes applied to secure the train were insufficient to prevent it from moving without the use of additional force from the locomotive independent brakes. Experts calculated that at least 22 hand brakes should have been applied by the locomotive engineer to hold the train.

In the absence of engine operation on the lead locomotive and other locomotives, the train’s independent brake system slowly released, leaving the train without any elements capable of retarding or stopping its movement. At approximately 1:00 a.m. on July 6, 2013, the train began descending the slope leading to Lac-Mégantic, located approximately 11.58 kilometres (7.2 miles) away. At approximately 1:15 a.m., the train derailed near the town centre, releasing nearly 6 million litres (about 1.59 million gallons) of crude oil and causing a major fire and multiple explosions.

Liability

In its judgment, the Court arrived at the conclusion that:

“…of all the circumstances related to this tragedy that is in evidence, the application of the rules and practices or customs of the railway industry and the transportation of dangerous goods, as well as the applicable legislative and regulatory provisions, leads the Court to conclude that the defendant CP has no legal liability for this tragic accident. The acts alleged against CP by the three plaintiffs, whether or not they constituted a fault, are not the direct, immediate and logical cause of the damages suffered by all the victims.”

The Court continued and stated that: “This liability lies primarily with the locomotive engineer and last conductor of the train, Mr. Thomas Harding, and the company that employs him and is in charge of the train at the time of its derailment, the defendant MMA.”

The train had been parked in a grade track in Nantes and the locomotive engineer did not engage enough hand brakes to secure the train.

The Faults Alleged against CP

Despite its conclusion on the sole cause of the derailment, the Court analyzed the allegations against CP under four main themes:

1. Risk Assessment

2. Recommendation of MMA as a Connecting Carrier

3. Misclassification and Dangerousness of the Product Transported

4. Lack of Intervention in MMA’s Unsafe Operating Practices

The Court concluded that CP was not a fault in the circumstances and acted as a prudend railway operator.

Risk Assessment

The plaintiffs argued that this transportation of crude oil constitutes a significant operational change for CP and MMA, and thus assert that a Class 1 or Category 1 carrier had an obligation to, as part of its process, conduct a risk assessment, not only on its own system, but also, in collaboration with any connecting carrier, on the latter’s system.

CP submitted that in the presentation of their evidence the plaintiffs were unable to submit a single example of a Class 1 or other railroads conducting a risk assessment of the transportation of crude oil in 2012 and 2013. They also argued that such a risk assessment is not supported by regulation, industry standards and practices, or jurisprudence. Further, CP took the position that the transportation of flammable liquids, including crude oil, was far from a new business for it in the early 2010s and that even if it was a growing market at the time, it did not constitute a change in its operational practices. CP asserted that the evidence shows that the regulator itself, TC, considered, at the relevant time, that such a risk assessment was not required.

The Court concluded that the evidence did not reveal in any way, that there were any rules or practices in the rail industry requiring a risk assessment prior to transporting crude oil, let alone conducting such an analysis on another railroad’s tracks.

On the specific allegation concerning the absence of a risk assessment, the Court considered that CP did not have a legal or regulatory obligation to carry out such a specific risk assessment before undertaking the transportation of crude oil by unit train between the Bakken region and New Brunswick. This obligation certainly did not exist with respect to an analysis of MMA’s operations or its system.

Moreover, since the product transported was, according to the evidence presented, essentially the same as several other Class 3 flammable petroleum products already being transported by other railways and by CP, the defendant did not need to push further in its prior verification concerning the nature of the product.

Recommendation of MMA as a Connecting Carrier

The plaintiffs alleged that CP was negligent in choosing, or suggesting, recommending, or favouring that the route for the transportation of crude oil from New Town to Saint John be on MMA’s tracks rather than those of CN. They asserted that due to economic and competitive reasons, despite MMA’s poor reputation, CP did everything it could to avoid including CN in this lucrative scheduled service.

The Court accepted that despite the allegations made by the plaintiffs, the