World Fuel Services 2014 Annual Report Download - page 73

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We, on behalf of DPM, contracted with Canadian Pacific Railway ("CPR") for the transportation of the tank cars and the
crude oil from New Town, North Dakota to a customer in New Brunswick, Canada. CPR subcontracted a portion of that
route to Montreal, Maine and Atlantic Railway ("MMA"). On July 6, 2013, the freight train operated by MMA with tank cars
carrying approximately 50,000 barrels of the crude oil derailed in Lac-Mégantic, Quebec. The derailment resulted in
significant loss of life, damage to the environment from spilled crude oil and extensive property damage. For additional
information regarding the legal proceedings relating to this incident described below, see Part I — Item 3 of this 2014 10-K
Report.
In 2013, we, certain of our subsidiaries, DPM and DPTS, along with a number of third parties, including MMA and certain
of its affiliates, as well as several manufacturers and lessors of tank cars, were named as defendants in twenty complaints
filed in the state of Illinois. The complaints generally allege wrongful death and negligence in the failure to provide for the
proper and safe transportation of crude oil and seek economic and compensatory damages, as well as costs. In addition,
in 2013, we, certain of our subsidiaries, DPM and DPTS, along with a number of other third parties, including CPR, MMA
and certain of its affiliates, several manufacturers and lessors of tank cars, as well as the intended purchaser and certain
suppliers of the crude oil, were named as defendants in a motion filed in Quebec Superior Court to authorize the bringing
of a class-action lawsuit seeking economic, compensatory and punitive damages, as well as costs. The motion generally
alleges wrongful death and negligence in the failure to provide for the proper and safe transportation of crude oil.
Furthermore, in 2013, an order was issued by the government of Quebec against MMA and us, which was subsequently
modified and added CPR as a party. The orders require MMA, CPR and us to recover the spilled crude oil caused by the
incident and to otherwise fully remediate the impact of the incident on the environment. We have filed a contestation of
these orders before the Tribunal administratif du Québec, an administrative body responsible for hearing such proceedings,
challenging the legality and validity of the orders on various grounds.
In January 2014, the Trustee for MMA’s U.S. bankruptcy estate (the “Trustee”) filed an adversary proceeding against us,
and certain of our subsidiaries, in the United States Bankruptcy Court for the District of Maine alleging negligence in the
failure to provide for the proper and safe transportation of crude oil, and seeking economic damages, as well as costs and
expenses associated with MMA’s lawsuits arising from the incident. The Trustee and the monitor in MMA’s Canadian
bankruptcy (the “Monitor”) are continuing to explore a potential global settlement of all third party claims arising out of the
incident. The Monitor has represented in court filings that those discussions have resulted in firm commitments from certain
third parties of settlement funds totaling approximately C$200.0 million ($170.0 million). The Trustee and the Monitor
continue to discuss global settlement with various other parties, including us.
In addition to these proceedings, we have received demands for indemnification from certain tank car lessors pursuant to
our lease agreements with such parties and three lessors subsequently filed declaratory judgment actions against us in
connection with such indemnification demands during 2014. We are currently assessing the merits of these demands as
well as of the underlying claims for which such indemnification is sought. Additional claims, lawsuits, proceedings,
investigations and orders may be filed, commenced or issued with respect to the incident, which may involve civil claims for
damages or governmental investigative, regulatory or enforcement actions against us.
In December 2014, we sold our 50% interest in DPM and DPTS to certain subsidiaries of Dakota Plains Holdings, Inc.
(“DAKP”), our partner in the joint ventures. In connection with the sale transaction, we agreed to indemnify DAKP and
certain of its affiliates, including DPM and DPTS, for third party claims for bodily injury or property damage arising from the
derailment. Pursuant to the agreement, we will control the defense of DAKP and the joint ventures for claims associated
with the derailment. In addition, DAKP assigned to us all recoveries from third parties and under applicable insurance
policies held by DAKP and the joint ventures for claims arising out of the derailment. Finally, DAKP also agreed to indemnify
us for certain costs and expenses arising out of the derailment up to $10.0 million.
While we, DPM and DPTS, maintain insurance to mitigate the costs of environmental releases as well as other results of
unexpected events, including loss of life, property damage and defense costs, there can be no guarantee that our insurance
will be adequate to cover all liabilities that may be incurred as a result of this incident.
We are separately evaluating potential claims that we may assert against third parties to recover costs and other liabilities
that may be incurred as a result of this incident. We can provide no guarantee that any such claims, if brought by us, will be
successful or, if successful, that the responsible parties will have the financial resources to address any such claims.
We are currently unable to determine the probability of loss, or reasonably estimate a range of potential losses related to
the proceedings arising from the train derailment. Accordingly, we have not made any provision for these potential losses
in our consolidated financial statements. However, based on estimated losses related to the value of the tank cars involved