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In July 2013, a train carrying oil destroyed the center of a Canadian town, killing 47 people. The shipper did not operate the train, did not own the tracks, and was not at fault for the derailment, yet they still paid $110 million. When an attempt was made to recover these funds from the railway as cargo damage, courts ruled that only the value of the oil itself could be claimed, and eventually, even that amount was reduced to zero. What does this story tell Polish and European shippers of hazardous materials about who really pays for a documentation error?
New Town, North Dakota. Light crude oil from the Bakken formation arrives by truck from over a dozen wells and is loaded into rail tank cars. The recipient is the Irving Oil refinery in Saint John, Canada. The seller and shipper is Western Petroleum, a company within the World Fuel Services group. The first leg of the route is handled by Canadian Pacific (CP). In Montreal, the train is taken over by a small railway, the Montreal, Maine & Atlantic (MMA).
In the shipping documents, the oil is listed as a Class 3 flammable liquid, Packing Group III, which is the lowest hazard category in that class.
On the night of July 5–6, 2013, an MMA engineer leaves the train unattended on the main track, on an incline above the town of Lac-Mégantic. The train begins to roll and gains speed on the downgrade. In the town center, 63 tank cars derail. A series of explosions kills 47 people.
The case seems straightforward. The train was operated by MMA, the tracks belonged to MMA, and the brakes were secured by an MMA employee. The MMA railway files for bankruptcy. That is, until investigators look inside the tank cars.
The heart of the dispute: one digit in the documents
The Transportation Safety Board of Canada (TSB) tested samples from undamaged tank cars. The result: the oil met the criteria for Packing Group II, not III. Its volatility was comparable to condensate or gasoline, and its flash point was similar to unleaded gasoline.
The difference comes down to simple thresholds. A flammable liquid falls into Group II if it has a flash point below 23°C and an initial boiling point above 35°C. Group III is a fallback category for substances that do not meet the criteria for higher groups.
The TSB also noted that the documents from the truck transport to the terminal correctly described the oil as Group II. The error only appeared in the rail documents.
This is where the paradox begins. The TSB itself admitted that with the correct classification, the oil would have traveled in the same tank cars anyway. The incorrect label did not cause the derailment. Nevertheless, in January 2015, the MMA trustee, Robert Keach, sued World Fuel Services, alleging that the group had incorrectly labeled the oil as low-hazard.
Settlements and judgments: 110 million one way, zero the other
On June 8, 2015, World Fuel Services reached a settlement with the MMA trustees in the U.S. and Canada. They paid $110 million into the compensation fund. In return, they received a global release from claims and assigned their claims against third parties to the trustees. According to the company's annual report, the entire settlement was covered by insurance. The recipient, Irving Oil, paid 75 million CAD (approx. $61 million).
CP was the only one of 24 defendants that did not pay into the fund. The assigned World Fuel claims went to Joe Whatley, the trustee for the wrongful death victims, who sued CP in 2016 under the Carmack Amendment (49 U.S.C. § 11706). Carmack is the U.S. regime for railway liability for cargo. The trustee demanded the value of the oil and the tank cars (approx. $6 million) as well as the reimbursement of the shipper and recipient settlements ($110 million and $60 million).
On January 20, 2023, a federal court in North Dakota dismissed the claims for reimbursement of the settlements. Carmack covers damage to cargo, not a shipper's liability to the world. On January 5, 2024, it ordered CP to pay approx. $3.95 million, which was the value of the lost oil. CP's legal team calculated that the claim had shrunk from approx. $176 million.
The reversal came on appeal. The 8th Circuit Court of Appeals (Whatley v. Canadian Pacific Railway Co., No. 24-1109, July 3, 2025, Judge Gruender) applied the judgment reduction clause from the MMA bankruptcy plan. Since the courts had established the sole fault of MMA, any judgment against CP under Carmack had to be reduced to zero.
The basis for this was the Canadian findings. On December 14, 2022, the Superior Court of Quebec (Justice Martin Bureau) ruled that CP's actions were not the direct cause of the damages. On February 26, 2025, the Quebec Court of Appeal unanimously upheld this judgment. On April 21, 2026, the U.S. Bankruptcy Court for the District of Maine (Bk. No. 13-10670) issued a summary judgment in favor of CP, ruling that the issue of the railway's liability could not be relitigated. In May 2026, the Supreme Court of Canada refused to hear an appeal against the Quebec judgments.
Note for the Polish consignor
The Carmack Amendment does not apply in Europe, but the mechanism is very similar. International rail transport is governed by the CIM Uniform Rules (Appendix B to the COTIF Convention), and the transport of dangerous goods is regulated by RID.
- Classification is the consignor's responsibility. RID (section 1.4.2.1.1) requires the consignor to ensure that goods are classified and authorized for transport, and that the carrier receives correct information and documentation. The packing group on the consignment note is a declaration by the consignor, not the carrier.
- Incorrect data is the consignor's liability. Article 8 of the CIM makes the consignor liable for costs and damages resulting from incorrect or incomplete entries in the consignment note. Article 9 of the CIM specifically addresses dangerous goods declared in violation of RID.
- Recovery from the carrier covers only the goods. The carrier's liability for cargo is limited by Article 30 of the CIM to 17 SDR per kilogram of missing gross mass. Damages to third parties do not constitute damage to the shipment and cannot be recovered through this channel.
- Third-party damages are subject to tort law, in Poland, for example, Article 435 of the Civil Code. This is a matter of general liability insurance, not a cargo policy, which only protects the goods themselves.
Practical takeaway: Document sample testing at loading and verify the consistency of data from the supplier at every stage of the chain. Ensure your general liability insurance covers damages resulting from dangerous goods declarations. World Fuel may have paid $110 million from their insurance policy, not out of their own pocket.
The moral
In episode #4 we wrote about the danger hidden in the cargo hold. Lac-Mégantic shows the other side of the same coin: the risk hidden in a single digit on a transport document. The consignor did not operate the train and did not cause the accident, yet became one of the largest contributors to the victims' fund. The carrier to whom they entrusted the oil did not even pay for the lost oil after 12 years of litigation.
You pay one hundred and ten million for a label, and you get zero for the lost cargo.
Sources
- Whatley v. Canadian Pacific Railway Co., No. 24-1109, U.S. Court of Appeals for the Eighth Circuit, July 3, 2025 – text of the judgment (ca8.uscourts.gov), Justia
- In re Montreal, Maine & Atlantic Railway, Ltd. v. Canadian Pacific Railway Co.Bk. No. 13-10670, Adv. No. 14-1001, U.S. Bankruptcy Court for the District of Maine, April 21, 2026 – ruling (meb.uscourts.gov)
- Canadian Pacific Kansas City, 10-Q report for Q2 2025, note on Lac-Mégantic proceedings – SEC
- World Fuel Services Corp., 2015 10-K report – SEC; June 8, 2015 press release – SEC, 8-K
- Business Insurance / Reuters, "World Fuel Services to pay $110 million in Lac-Mégantic settlement"
- Bangor Daily News, "Lac-Megantic settlement fund grows to $345 million", June 8, 2015
- Taft Law, "Eighth Circuit Overturns $3.95M Judgment Against Taft Client CPKC"
- Taft Law, "Bankruptcy Court Grants Full Summary Judgment to Canadian Pacific and Soo Line"
- CTV News / Canadian Press, Superior Court of Quebec judgment, December 14, 2022
- Railway Age / Canadian Press, Quebec Court of Appeal judgment, February 26, 2025
- Global News / Canadian Press, Supreme Court of Canada denies leave to appeal, May 14, 2026 – globalnews.ca
- Railway Age, "TSB: Lac-Mégantic crude as explosive as gasoline" (TSB laboratory report LP 148/2013)
- Bangor Daily News, TSB report on misclassification, September 11, 2013
- CBC, Class 3 packing group criteria
- COTIF Convention, Appendix B (CIM Uniform Rules), Arts. 8, 9, 30; RID, section 1.4.2.1.1 – OTIF texts
Our previous "Dark Stories" series publications
- Why do we need FOB? Dark Stories #1
- Seriously, CIF?! Dark Stories #2
- EXW as my shield? One signature and you're liable for everything: cargo, carrier damages, and potentially third parties! Dark Stories #3
- Ticking time bomb in hold number 4 - Dark Stories #4
- To copper or not to copper? - Dark Tales #5
- Your container is intact. You're paying anyway - Dark Stories #6
- Really DDP? — Dark Tales #7
- One letter, 800,000 euros, and prison sentences. Anatomy of "fake carrier fraud" - Dark Stories #8
- Not my railcar, not my fault? - Dark Stories #9
- How a loose cable sank a bridge and cost the shipowner $2.25 billion - Dark Stories #10
- Your cargo. Not your carrier - Dark Tales #11
- The evidence that went down with the ship - Dark Tales #12
- Concrete blocks at the price of copper - Dark Stories #13
- Pallet or parcel? - Dark Tales #14
- The shipowner paid the ransom. The bill went to the cargo owner anyway - Dark Stories #15
- The Yellow Fleet: eight years at a standstill, or how one war froze fifteen ships - Dark Stories #16
- How a wave of molasses killed 21 people in Boston - Dark Stories #17
- A TIR carnet with a customs stamp, and it still doesn't count - Dark Stories #18
- Free trade at gunpoint - Dark Stories #19
- Pirates ordered by the owner - Dark Stories #20
- Volcafe: coffee ruined by its own moisture. Who had to prove it? Dark Stories #21