Trustee Turns to Oil Shipper in Lac-Mégantic Litigation, Highlighting Emerging Trend

Earlier this year, the bankruptcy trustee for Montreal, Maine & Atlantic Railway filed a Complaint in the adversary proceeding in the Bankruptcy Court for the District of Maine against a crude oil shipper for negligence in allegedly misclassifying the Bakken crude oil it was shipping by rail.  According to the Complaint, “Had defendants properly classified, identified and labeled the train’s crude oil cargo, [the railroad] could and would have taken steps that would have avoided the derailment.”

The Complaint highlights an emerging trend – while the initial litigation and regulatory proceedings stemming from recent derailments has focused on rail carriers, litigants and regulators are beginning to focus on shippers.  Last month, the U.S. Department of Transportation issued an emergency order requiring that shippers of crude oil ensure that their crude is properly classified and tested prior to shipping by rail and prohibiting shipping crude oil in Packing Group III.  The Pipeline and Hazardous Material Safety Administration also recently issued notices of probable violations to three shippers.

As the practice of shipping crude-by-rail continues to grow, we expect this trend to continue.  Moreover, in the event of another major incident, particularly one on U.S. soil, future litigants will likely try to pursue shippers not only for improper classification or testing of the crude oil, but also under state and federal environmental laws and common law theories of liability such as ultra-hazardous activity.