United States Court of Appeals For the First Circuit

No. 19-1894

IN RE MONTREAL, MAINE & ATLANTIC RAILWAY, LTD.,

Debtor. ̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶

WHEELING & LAKE ERIE RAILWAY COMPANY,

Appellant,

v.

ROBERT J. KEACH, in his capacity as Estate Representative for MONTREAL, MAINE & ATLANTIC RAILWAY, LTD.,

Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE

[Hon. Jon D. Levy, U.S. District Judge] [Hon. Peter G. Cary, U.S. Bankruptcy Judge]

Before

Howard, Chief Judge, Selya and Lynch, Circuit Judges.

George J. Marcus and Daniel L. Rosenthal, with whom Marcus|Clegg was on brief, for appellant. Adam R. Prescott, with whom Robert J. Keach, Letson B. Douglass, and Bernstein, Shur, Sawyer & Nelson, P.A. were on brief, for appellee. April 9, 2020 SELYA, Circuit Judge. On the surface, this appeal poses

intricate questions concerning such esoteric areas of the law as

secured transactions, carriage of goods, and corporate

reorganization. Digging deeper, though, the appeal turns on

abecedarian principles relating to the allocation of the burden of

proof and the deference due to the finder of fact. After

application of these principles in light of the record and the

decisions of the courts below, we affirm the entry of judgment in

favor of appellee Robert J. Keach, the estate representative of

Montreal, Maine & Atlantic Railway, Ltd. (MMA), and against

creditor-appellant Wheeling & Lake Erie Railway Company

(Wheeling).

I. BACKGROUND

This case is a by-product of litigation spawned by the

tragic derailment of an MMA freight train carrying crude oil in

Lac-Mégantic, Québec. The derailment, coupled with MMA's

subsequent bankruptcy filings (both in the United States and in

Canada), has led to protracted dueling between Wheeling and Keach.1

See, e.g., Keach v. Wheeling & Lake Erie Ry. Co. (In re Montreal,

Me. & Atl. Ry., Ltd.),

(1st Cir. 2018); Wheeling & Lake

1 Keach served as the Chapter 11 trustee for MMA's bankruptcy proceeding until the effective date of the plan of liquidation, see

, at which point he became the representative of the estate. For ease in exposition, we refer to him throughout as the estate representative.

- 3 - Erie Ry. Co. v. Keach (In re Montreal, Me. & Atl. Ry., Ltd.),

(1st Cir. 2015). We assume the reader's familiarity with

these two prior opinions and rehearse only the discrete set of

facts needed to place this appeal into a workable perspective.

In June of 2009, Wheeling extended a $6 million line of

credit to MMA, evidenced by a promissory note. In connection with

this note, MMA executed and delivered a security agreement to

Wheeling. The security agreement gave Wheeling an enforceable

security interest in MMA's "Accounts and other rights to payment

(including Payment Intangibles)," which extended to any non-tort

claims accrued by MMA.2 Wheeling perfected its security interest

by filing a UCC-1 financing statement with the Delaware Secretary

of State.

Four years later, Western Petroleum Company and certain

corporate affiliates (collectively, the Shipper) arranged for the

transport of seventy-two tank cars of crude oil with Canadian

Pacific Railway Company (Canadian Pacific). Pursuant to the

through bill of lading, Canadian Pacific and its American affiliate

transported the oil from its point of origin in New Town, North

2 Under the Maine Uniform Commercial Code, which governs the interpretation of the security agreement, commercial tort claims are excluded from the definition of payment intangibles. See

(61) (defining payment intangible as "a general intangible under which the account debtor's principal obligation is a monetary obligation");

§ 9-1102(42) (defining general intangible as including "things in action" but not "commercial tort claims").

- 4 - Dakota, to Québec, Canada, and transferred the shipment to MMA for

carriage to its final destination in New Brunswick, Canada.

A noted Scottish poet famously wrote that "[t]he best-

laid schemes o' [m]ice an' [m]en [g]ang aft a-gley." Robert Burns,

To a Mouse (1785). So it was here: the shipment never reached

its destination. On July 6, 2013, the MMA freight train carrying

the oil derailed in Lac-Mégantic, Québec, sparking massive

explosions that destroyed part of the town and killed nearly fifty

people.

The derailment triggered a frenzy of litigation in U.S.

and Canadian courts against MMA, the Shipper, and others involved

in arranging and transporting the crude oil shipment. Several

victims of the explosions, or family members on their behalf,

sought damages for personal injury or wrongful death in state court

in Illinois. A group of victims filed a class action lawsuit in

Québec on behalf of all residents, property owners, and business

owners in Lac-Mégantic affected by the derailment. The government

of Québec began administrative proceedings to recover for

environmental damage and clean-up costs.

In August of 2013 — one month after the derailment — MMA

filed a voluntary petition for protection under Chapter 11 of the

Bankruptcy Code, see

, as well as an ancillary

insolvency proceeding in Québec. Soon thereafter, Wheeling

instituted an adversary proceeding in the bankruptcy court against

- 5 - MMA and the estate representative, seeking to protect its rights

under the security agreement. Pertinently, Wheeling sought a

declaratory judgment regarding the existence and priority of its

security interest in certain property of the MMA estate (the

estate).

Recognizing the possibility that the estate would face

significant liability arising out of the derailment, the estate

representative began pursuing litigation against several entities

involved in the crude oil shipment with the aim of establishing a

fund for the derailment victims. As relevant here, the estate

representative commenced an adversary proceeding against the

Shipper in January of 2014. His complaint alleged that the Shipper

negligently mislabeled the crude oil as less volatile than it

actually was, causing MMA not to take the necessary precautions

for handling a hazardous shipment. The complaint did not allege

any contract or regulatory claims against the Shipper. In order

to facilitate settlement discussions, the parties agreed that the

Shipper would not assert counterclaims against the estate (but the

Shipper reserved the right to do so if those discussions failed).

After extensive negotiations, the Shipper and the estate

representative reached a settlement. The Shipper agreed to pay

$110 million to the monitor in the Canadian bankruptcy case (for

the ultimate benefit of the derailment victims), and the Shipper

- 6 - and the estate representative agreed to release all claims and

counterclaims against each other arising out of the derailment.

There were other terms as well. For one thing, the

Shipper committed to assigning to the estate representative its

Carmack Amendment claims against the non-MMA carriers involved in

transporting the crude oil.3 For another thing, the settlement

was to become effective only upon the confirmation of the proposed

plans in both the U.S. and Canadian bankruptcy proceedings

(including the entry of orders barring all persons and entities

from pursuing derailment-related claims against the Shipper).

Striving to achieve global closure, the estate representative

executed similar settlement agreements around the same time with

many other entities.

When the estate representative presented the settlement

agreements and his plan of liquidation to the bankruptcy court for

approval and confirmation, Wheeling objected. It complained that

the estate representative had agreed to release non-tort claims

that the estate possessed against the Shipper as part of the

3 The Carmack Amendment imposes liability on any rail carrier that receives or delivers a shipment for damage that occurs to the property during the rail route, regardless of which carrier caused the damage. See

(a). The purpose of the Carmack Amendment "is to relieve cargo owners 'of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment of goods.'" Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp.,

(2010) (quoting Reider v. Thompson,

(1950)).

- 7 - settlement — even though the estate representative had not asserted

any such claims in the adversary proceeding — and that those

released non-tort claims constituted a part of Wheeling's

collateral. Wheeling posited that the bankruptcy court's approval

of the settlement and confirmation of the plan would deprive it of

compensation for the estate representative's use of its collateral

to secure the settlement with the Shipper, despite the fact that

the plan classified its secured claim as unimpaired.

Notwithstanding Wheeling's objection, the bankruptcy

court approved the settlement agreements and confirmed the estate

representative's plan of liquidation. See

§§ 1129, 1173. To

address Wheeling's plaint, Paragraph 84 of the confirmation order

stated that neither the order nor the settlement agreements

"limit[ed] or affect[ed] Wheeling's ability to contend, and the

[estate representative's] ability to contest, that Wheeling's

security interest, if any, attaches to the Settlement Payments

(whether as original collateral, proceeds, products or

otherwise)." The confirmation order contained the injunctions

against the prosecution of derailment-related claims necessary to

render the settlement agreements effective.

While the estate representative was resolving the main

bankruptcy proceeding, he was simultaneously engaged in litigation

with Wheeling. After addressing other matters not relevant here,

the adversary proceeding between Wheeling and the estate

- 8 - representative reduced to the same issue that prompted Wheeling's

objection to confirmation of the plan of liquidation: whether it

was entitled to compensation for the release of non-tort claims

that the estate possessed against the Shipper. In May of 2018,

the bankruptcy court held a two-day bench trial relative to this

issue. Wheeling and the estate representative agreed that the

following stipulation should become part of the trial record:

1. The derailment of the freight train carrying crude oil on July 6, 2013, in Lac- Mégantic, Quebec (the "Derailment") caused MMA to suffer economic damages as a result of the loss in value of its business, and other economic damages, in an amount no less than $25,000,000.

2. Assuming (without admitting) that such claims existed, the Estate Representative would have incurred legal fees and costs in an amount no less than $825,000 but not greater than an amount that would cause the net economic damages referred to above, after deducting legal fees and costs, to be less than $10,000,000, had he pursued civil breach of contract claims directly against the shipper of the crude oil transported on the freight train involved in the Derailment, including attorneys' fees, litigation costs, expert fees, and the cost of defending against any and all counterclaims.

In a bench decision, the bankruptcy court ruled in favor

of the estate representative on two alternative grounds. First,

the court held that the estate representative did not use

Wheeling's collateral when he agreed to a release as part of the

settlement agreement because the estate did not have any cognizable

- 9 - non-tort claims against the Shipper. Second, the court found that,

even if the estate possessed such claims, Wheeling had not carried

its burden of proving their value.

Wheeling appealed to the district court. That court

determined that the estate did have non-tort claims against the

Shipper (which the estate representative released as part of the

settlement) but that the bankruptcy court was correct in concluding

that Wheeling had not proven that those claims had any value. See

Wheeling & Lake Erie Ry. Co. v. Keach,

, 12, 14-15

(D. Me. 2019). This timely appeal ensued.

II. ANALYSIS

Appeals in bankruptcy cases proceed by means of a two-

tiered framework. See Privitera v. Curran (In re Curran),

(1st Cir. 2017). The losing party in the bankruptcy

court may take a first-tier appeal either to the district court or

to the bankruptcy appellate panel. See

(a)-(b);

In re Curran,

. Whichever route is taken, a second

tier of appellate review is available in the court of appeals.

See

(d)(1); In re Curran,

. At that

stage, we accord no particular deference to determinations made by

the first-tier appellate tribunal but, rather, focus exclusively

on the bankruptcy court's determinations. See In re Curran,

. In the course of that endeavor, we review the

bankruptcy court's findings of fact for clear error and its legal

- 10 - conclusions de novo. See Berliner v. Pappalardo (In re Puffer),

(1st Cir. 2012). Under the clear error standard,

we defer to the bankruptcy court's factual findings "unless, on

the whole of the record, we form a strong, unyielding belief that

a mistake has been made." Gannett v. Carp (In re Carp),

(1st Cir. 2003) (quoting Cumpiano v. Banco Santander P.R.,

(1st Cir. 1990)).

A. Framing the Issue.

Wheeling challenges both of the grounds supporting the

bankruptcy court's entry of judgment in favor of the estate

representative. According to Wheeling, the bankruptcy court erred

in concluding that the estate representative did not use its

collateral when he agreed to the release as part of the settlement

with the Shipper. In its view, the estate possessed contract and

regulatory claims against the Shipper based on indemnification

obligations under both the through bill of lading issued by

Canadian Pacific and the uniform bill of lading applicable to rail

shipments pursuant to

. Given the estate

representative's use of these non-tort claims to secure a

settlement of significant value to the estate, Wheeling's thesis

runs, the court erred as well in finding that Wheeling failed to

prove the value of these claims.

The parties wrangle over a host of complex legal issues

in the course of expounding their respective views on the merits

- 11 - of the bankruptcy court's ukase. Many of these issues raise

questions of first impression in this circuit — questions about

matters ranging from the carriage of goods to secured transactions.

We are mindful, however, that "courts should not rush to decide

unsettled issues when the exigencies of a particular case do not

require such definitive measures." In re Curran,

.

Because we discern no clear error in the bankruptcy court's finding

that Wheeling failed to carry its burden of proving the value of

the non-tort claims, we need not resolve the rest of the complex

legal issues raised by the parties. We explain briefly why we are

able to skirt those questions.

The parties' debate over whether the estate possessed

cognizable non-tort claims against the Shipper reduces to the

following question of law: can a connecting carrier sue a shipper

to enforce the terms of either a through bill of lading issued by

the originating carrier or the uniform bill of lading for rail

shipments under federal law? Relying largely on the Supreme

Court's decision in Southern Pacific Transportation Co. v.

Commercial Metals Co.,

(1982), Wheeling contends that

a connecting carrier has a contractual relationship with a shipper

governed by the terms of the through bill of lading. See

(stating that bill of lading's "terms and conditions bind the

shipper and all connecting carriers" (citing Tex. & Pac. Ry. Co.

v. Leatherwood,

(1919))). The estate

- 12 - representative responds that the Supreme Court has characterized

connecting carriers as "mere agents" of the originating carrier

with no independent contractual rights vis-à-vis the shipper.

E.g., Mo., Kan. & Tex. Ry. Co. of Tex. v. Ward,

, 387-

88 (1917).

We need not answer this arcane and unsettled question

about the relationship between a shipper and a connecting carrier.

In order to prevail in this appeal, Wheeling must show that the

bankruptcy court erred in finding both that the estate did not

possess any non-tort claims against the Shipper and that Wheeling

failed to prove the value of those claims. See

(a)(1) ("An allowed claim of a creditor secured by a lien on

property in which the estate has an interest . . . is a secured

claim to the extent of the value of such creditor's interest in

the estate's interest in such property . . . ."). Since we uphold

the bankruptcy court's finding on the latter question, determining

whether the estate possessed any non-tort claims against the

Shipper would be wholly gratuitous. We therefore assume — solely

for purposes of this appeal — that the estate did possess such

non-tort claims and that those claims constituted a part of

Wheeling's collateral.

Next, the parties vehemently disagree about the source

of Wheeling's entitlement to compensation for the estate

representative's use of the non-tort claims. Wheeling asserts

- 13 - that this entitlement arises from the Bankruptcy Code's guarantee

of adequate protection to compensate an entity with an interest in

property that is used by the trustee. See

§ 363(e). The

estate representative counters that adequate protection is

available only before plan confirmation and that Wheeling's

entitlement to compensation derives instead from Paragraph 84 of

the confirmation order (which protected Wheeling's right to assert

that its security interest attached to the Shipper's settlement

payment).

The parties' agreement on certain aspects of the

valuation inquiry absolves us of any need to explore this shadowy

corner of bankruptcy law. Whatever the source of Wheeling's

entitlement to compensation, the parties concur that Wheeling bore

the burden of proof before the bankruptcy court to demonstrate the

value of the non-tort claims (or at least that the claims were

worth more than the amount of Wheeling's secured claim). What is

more, they agree that

(a)(1) supplies the applicable

standard for valuing those claims. In light of our conclusion

that the bankruptcy court did not clearly err in finding that

Wheeling failed to carry this burden, choosing between the two

possible sources of Wheeling's entitlement to compensation

(adequate protection and plan confirmation) would be an empty

exercise.

- 14 - The short of it is that we assume, without deciding,

that the estate possessed cognizable non-tort claims against the

Shipper, which constituted a part of Wheeling's collateral. We

also assume, again without deciding, that the estate

representative released those non-tort claims as part of the

settlement with the Shipper.

These assumptions tee up the work that remains. To merit

compensation for the estate representative's use of its

collateral, Wheeling bore the burden of demonstrating the value of

the released claims pursuant to section 506(a)(1). The bankruptcy

court found that Wheeling had failed to carry this burden, and we

now shift the lens of our inquiry to Wheeling's challenge to that

finding.

B. Valuation of Collateral.

The bankruptcy court formulated two reasons for its

holding that Wheeling did not carry its burden of demonstrating

the value of the non-tort claims: Wheeling had neither adduced

"evidence identifying specific settlement value" of the claims nor

proven that they "had any positive net value" in relation to

Carmack Amendment counterclaims that the Shipper held against the

estate. Wheeling attacks this two-pronged holding, arguing that

both of its branches resulted from a series of legal errors. To

begin, it contends that the bankruptcy court should not have

required a showing that the non-tort claims were more valuable

- 15 - than the Shipper's hypothetical counterclaims. Relatedly, it

assigns error to the bankruptcy court's consideration of what it

views as expert testimony proffered by the estate representative.

It also assails the court's imposition of a tracing requirement,

which took into account that the Shipper's settlement payment was

earmarked for compensation for derailment victims.

Taking these arguments as a group, Wheeling says, in

effect, that the bankruptcy court impermissibly constructed an

insurmountable set of obstacles, which hamstrung its ability to

prove its entitlement to compensation for the estate

representative's use of the non-tort claims. But as previously

noted, Wheeling concedes that it had the burden of attributing

some value to the non-tort claims under section 506(a)(1). We

therefore start our analysis with the question of whether Wheeling

carried this burden. If it did not, the propriety of the

additional requirements that the bankruptcy court imposed becomes

a matter of purely academic interest (and, thus, poses questions

that we need not decide).

Section 506(a)(1) directs a bankruptcy court to

determine the value of property in which a creditor has a secured

interest "in light of the . . . disposition or use of such

property."

§ 506(a)(1). The secured creditor must demonstrate

this value by a preponderance of the evidence. See Prudential

Ins. Co. of Am. v. SW Bos. Hotel Venture, LLC (In re SW Bos. Hotel

- 16 - Venture, LLC),

(1st Cir. 2014). We assume,

for argument's sake, that the estate representative used some of

Wheeling's collateral when he released the non-tort claims as part

of the settlement with the Shipper. Hence, Wheeling bore the

burden of showing the settlement value of the non-tort claims,

that is, their value as a bargaining chip to secure a settlement

with the Shipper. We further assume — again for argument's sake

— that neither the valuation attributed to the non-tort claims by

the settling parties nor the value of the consideration that the

estate representative actually received in exchange for their

release was conclusive on the question of their settlement value.

In other words, we assume (favorably to Wheeling) that Wheeling

could have satisfied its burden by offering evidence of the claims'

settlement value, independent of the actual settlement that the

parties reached.4

As we read the record, the bankruptcy court applied this

valuation standard when it concluded that Wheeling "failed to

establish evidence identifying specific settlement value" of the

4 By defining Wheeling's burden of proof in this straightforward manner, we honor its argument that it is entitled to compensation for the estate representative's use of the non- tort claims "however one might assess or value what the Estate got in exchange" — an argument that relates to its belief that this is a matter of adequate protection and not a matter of plan confirmation. We use the term "settlement value" only to make clear that, as the parties agree, Wheeling had to show the value of the claims as a bargaining chip in the settlement with the Shipper, not, say, their value on the open market.

- 17 - non-tort claims. The court appears to have reached this conclusion

based on Wheeling's failure to present any probative evidence at

all, not on the estate representative's testimony either that the

Shipper held valuable counterclaims against the estate or that the

settling parties did not attribute any specific value to the non-

tort claims.5 Because the court applied Wheeling's proposed

valuation standard in fashioning this finding, we review the

finding (that Wheeling failed to present sufficient evidence to

carry its burden of showing the settlement value of the non-tort

claims) for clear error. See

(reviewing finding as to

when secured creditor became oversecured under section 506 for

clear error); cf. United States v. One Star Class Sloop Sailboat

Built in 1930 with Hull No. 721, Named "Flash II",

(1st Cir. 2008) (same for finding as to fair market value for civil

forfeiture).

Wheeling's challenge to this finding centers on the

stipulation that the parties submitted to the bankruptcy court.

According to the stipulation, the derailment caused MMA to suffer

at least $25 million in economic damages, and the amount of MMA's

5 When the district court denied Wheeling's motion to stay the judgment of the bankruptcy court, it too treated the bankruptcy court's first rationale for ruling against Wheeling on the valuation issue as reliant on a failure of proof, not on any aspect of the estate representative's testimony. See Wheeling & Lake Erie Ry. Co. v. Keach, No. 1:18-cv-00262-JDL,

, at *2 (D. Me. Oct. 1, 2018).

- 18 - "net economic damages" (economic damages minus legal fees and

costs) for the non-tort claims was at least $10 million. Wheeling

contends that the bankruptcy court clearly erred in rejecting this

stipulation as alone sufficient to prove that the value of the

non-tort claims was not less than this $10 million figure, which

is higher than the amount of Wheeling's secured claim.6

This contention relies on the erroneous premise that the

value of a claim is the amount of damages suffered by the claimant,

net of prosecution costs. Valuing a claim, at least for settlement

purposes, is not so simple. See Polis v. Getaways, Inc. (In re

Polis),

(7th Cir. 2000) ("A claim for $X is not

worth $X." (emphasis in original)); cf. Limone v. United States,

(1st Cir. 2009) ("[I]t is unrealistic to assume

that settlement values . . . equate to actual damages."). At its

most elementary, the settlement value of a claim is the amount

that the claimant would recover if he prevails in litigating the

claim multiplied by the probability of recovery. See In re Polis,

. In turn, the probability of recovery depends on

a gallimaufry of factors, such as the strength of the claimant's

evidence, the viability of any defenses, and the ability of the

defendant to satisfy a judgment. See United States v. Safety Car

6 On the day that MMA filed its Chapter 11 petition, Wheeling had advanced it the full $6 million available under the line of credit. Various post-petition collections have reduced the outstanding principal balance to $3,421,443.33.

- 19 - Heating & Lighting Co.,

(1936) (explaining that

value of patent infringement claim was uncertain because "[t]he

patent might be adjudged invalid" or "[t]he infringer might become

insolvent"). Many other considerations, including the cost of

litigation, the staying power of the parties, their relative desire

to avoid litigation, and their bargaining leverage, also may inform

the settlement value of a claim. See Ernst & Young v. Depositors

Econ. Prot. Corp.,

(1st Cir. 1995). As such,

even a claim alleging a substantial figure for damages may have no

settlement value at all if the cost, difficulty, or uncertainty of

litigation makes it not worthwhile to pursue.

The stipulation's damages estimate of at least $25

million measures only the estate representative's potential

recovery if he successfully litigated the non-tort claims against

the Shipper; it does not take into account the cost of litigation

or the odds that the estate representative actually would have

recovered this sum (or any sum, for that matter) had he litigated

the non-tort claims instead of settling them. In the highly

ramified circumstances of this case, such a recovery was far from

certain. For instance, the Shipper faced the real possibility of

significant tort liability to victims of the derailment because of

its apparent mislabeling of the crude oil. If, in the absence of

a global settlement, both the estate representative and the

derailment victims had successfully pursued their respective

- 20 - claims, the Shipper may well have had insufficient assets to

satisfy all the monetary judgments.

The stipulation's second figure — its "net economic

damages" estimate of at least $10 million — added nothing of

consequence to Wheeling's attempt to carry its burden of proof.

Importantly, the stipulation does not say that this figure is an

estimate of the estate representative's expected recovery. Thus,

although this figure factors in the costs that the estate

representative would have incurred had he litigated the non-tort

claims, it still fails to account for the likelihood (or lack of

likelihood) that the estate representative would have secured such

a recovery. Wheeling offered no evidence that would have allowed

the bankruptcy court either to assess this likelihood or to gauge

any of the relevant factors other than the estate's potential

recovery that may have affected the settlement value of the non-

tort claims. Given this paucity of proof, we conclude that the

bankruptcy court did not clearly err in holding that Wheeling

failed to carry its burden of offering some probative evidence,

over and beyond the stipulation, showing the settlement value of

the non-tort claims.

Wheeling resists this conclusion. In defense of its

reliance on the "net economic damages" figure, it points out that

a plaintiff's potential recovery serves as the "value" of a claim

in other contexts. For example, courts use a version of this

- 21 - metric to determine whether a claim meets the amount-in-

controversy requirement for federal diversity jurisdiction, see,

e.g., Barrett v. Lombardi,

(1st Cir. 2001), and

to calculate damages when attorney malpractice results in the loss

of a claim, see, e.g., Black v. Shultz,

(8th

Cir. 2008). But as Wheeling concedes, it bore the burden of

valuing the non-tort claims in the idiosyncratic context of the

settlement between the estate representative and the Shipper. The

measures used to "value" claims in other (inapposite) contexts

furnish little guidance as to whether the bankruptcy court clearly

erred in rejecting the estate representative's potential recovery

as the settlement value of the non-tort claims.

Wheeling has another weapon in its armamentarium. It

strives to persuade us that the non-tort claims must have

significant value because the estate representative released them

in exchange for the Shipper's payment of $110 million, the

discharge of Carmack Amendment counterclaims against MMA, and the

assignment of Carmack Amendment claims against other carriers to

the estate. We are not convinced.

Wheeling's argument vastly oversimplifies the exchange

and completely ignores the other items of value that the Shipper

received as part of the settlement. For one thing, the estate

representative released not just the hypothetical non-tort claims

but also the negligence claim that he had asserted against the

- 22 - Shipper in the adversary proceeding complaint — a claim that

presumably had some value for settlement purposes. For another

thing, the settlement only became effective upon confirmation of

the plans in both the U.S. and Canadian bankruptcy proceedings,

including the entry of orders barring all derailment-related

claims against the Shipper. Such orders obviously were of

significant value to the Shipper. After all, multiple derailment

victims already had sued the Shipper, and the Shipper's mislabeling

of the crude oil appears likely to have contributed to the carnage

engendered by the derailment.

Last — but surely not least — the Shipper secured peace

of mind knowing that it would not face further liability arising

out of the derailment. A defendant seeking such a global

settlement would naturally seek to obtain a release of all claims,

not just the ones that seem to have apparent value. Almost always,

a main goal of a global settlement is to leave no loose ends.

To say more on this point would be supererogatory. The

bottom line is that because the Shipper received much more than

just the release of the non-tort claims in the settlement, we

cannot fault the bankruptcy court for declining to find that the

fact of the settlement alone comprised sufficient evidence of the

value of those claims.

We add a coda. Even if the settlement proved that the

non-tort claims had some value — and it did not — Wheeling still

- 23 - would have had to demonstrate what that value was (or at least

that the value exceeded the amount of its secured claim). That

the settlement agreement included the release of these claims does

not, without more, tell us anything about their specific value.

To show the required value, Wheeling offered nothing more than the

stipulation of "net economic damages." But for the reasons

previously discussed, the bankruptcy court did not clearly err in

rejecting this stipulation as sufficient proof of the settlement

value of the non-tort claims.

Finally, Wheeling makes a policy argument. It submits

that an affirmance of the bankruptcy court's valuation finding

will encourage estate representatives to use the difficult-to-

value collateral of secured creditors for the benefit of unsecured

creditors without paying any compensation for such use. This

concern, though, is overblown. Our affirmance of the bankruptcy

court's finding is not based on the failure of the estate

representative and the Shipper to allocate a specific value to the

non-tort claims as part of the settlement; instead, it is based on

Wheeling's failure to carry its burden of proof.

And although a cause of action may be a difficult asset

to value, we do not agree with Wheeling's suggestion that it had

no means, other than the stipulation of "net economic damages,"

for showing the settlement value of the non-tort claims. For

instance, an expert witness could have analyzed the range of

- 24 - factors that may have affected the settlement value of the non-

tort claims and given expert opinion testimony as to that value

before the bankruptcy court. That Wheeling instead chose to rely

on a plainly insufficient stipulation of "net economic damages"

does not mean that valuing the non-tort claims was impossible.

To sum up, the principal evidence that Wheeling

presented to the bankruptcy court to satisfy its burden of

demonstrating the settlement value of the estate's non-tort claims

against the Shipper was the parties' stipulation that the amount

of MMA's "net economic damages" (economic damages minus

prosecution costs) was no less than $10 million. Because the

settlement value of a claim may depend on other factors, though,

the bankruptcy court's finding that Wheeling did not carry its

burden of proof was not clearly erroneous. This finding, in turn,

is sufficient to permit the resolution of this appeal, and we take

no position on whether Wheeling's entitlement to compensation

depended on its ability either to make an additional showing that

the non-tort claims had positive net value in relation to the

Shipper's Carmack Amendment counterclaims or to trace its

collateral to identifiable proceeds. So, too, we have no occasion

to decide whether the bankruptcy court properly considered the

estate representative's testimony about those counterclaims.

- 25 - III. CONCLUSION

We need go no further. The phrase "burden of proof" is

not merely a rhetorical flourish. It signifies that the party to

whom the burden is assigned must offer evidence, either direct or

circumstantial, sufficient to persuade the factfinder of some fact

or proposition to a certain quantum of proof (here, a preponderance

of the evidence). The factfinder's judgment as to whether that

party has offered evidence adequate to carry this burden should

not readily be disturbed. This is such a case: giving due

deference to the factfinder's resolution of the burden-of-proof

issue, the judgment of the district court must be

Affirmed.

- 26 -