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(Reuters) - When Irish real estate developer Garrett Kelleher agreed to put up about $3 million to back Cayman Islands litigation to enforce Liberian judgments against the insurer Cigna, he thought the worst possible outcome was that he’d lose his money.
He was wrong.
Last Friday, U.S. District Judge Paul Diamond of Philadelphia issued a bench warrant for the arrest of Kelleher and Martin Kenney, a Virgin Islands lawyer involved in the Caymans case, on misdemeanor criminal contempt charges. Those charges stem from Cigna’s long-running suit for sanctions against Kelleher and Kenney, which culminated in a ruling last July holding them and a U.S. lawyer liable for civil contempt of court.
“Never in my wildest dreams did I imagine anything like this would happen,” Kelleher said in a phone interview Tuesday. “I have been told that this ruling is unprecedented.”
I should note here that Kelleher and Kenney contend Judge Diamond did not have jurisdiction over them in Cigna’s civil suit. In a statement issued Monday, Kenney said he had “no expectation that a U.S. court would use its long-arm powers to intervene in my ability to act as a British Virgin Islands lawyer for Liberian clients seeking justice in the Cayman Islands … when no U.S. company or person could be adversely affected by my work as a lawyer.”
Kelleher said he and Kenney will appeal Judge Diamond’s rulings against them. “This story has run for over 26 years and I believe it is likely to run for some time to come,” he said.
But as the case moves forward, Kelleher said, the entire litigation funding industry in the U.S. and the U.K. should pay attention to his experience. “It seems irrational,” he said, that he had no active involvement in the case yet “can end up having this consequence.”
Kelleher is not in the business of litigation finance. His investment in enforcing the Liberian judgments, he said, was the first and only time he has agreed to back litigation. And after what has happened in this case, he said, he doesn’t intend to do it again.
Kelleher told me he met Martin Kenney, the Virgin Islands lawyer, in Dublin, where they were both interested in a project to develop an indoor ice-skating rink. Kelleher said Kenney told him about potential litigation to enforce nearly $100 million in Liberian court judgments against Cigna. The judgments were obtained by Liberian businesses that accused Cigna of improperly denying insurance claims for losses sustained in the country’s civil war. (A document from the Liberian Civil Law Court recounts Cigna’s history in Liberia, including allegations that the insurer violated Liberian law when it ceased operations in the country.)
Kelleher said he was interested. He said he trusted Kenney, whose expertise is in international asset recovery. He was also swayed by “the philanthropic side” of litigating judgments obtained by Liberian businesses.
“These people didn’t have resources to pursue what seemed to me to be legitimate claims and for all intents and purposes were badly done by,” Kelleher said. “There are significant judgments extant in Liberia to this day against the insurer …. I feel very passionate about the injustice done to these African businessmen.”
Based on counsel from financial advisers at Deloitte Dublin, Kelleher said, his investment was structured as a loan to a Maltese limited company. He said he was not a director of the Maltese company and had no personal involvement in litigating the enforcement action, which was brought in the Cayman Islands on behalf of a Liberian insurance official.
“I had no hand, action or part,” Kelleher said. “No familiarity.”
Kelleher said he was not aware that in 2001, following appellate confirmation of a judgment for Cigna in a case brought by one of the Liberian businesses, Cigna had obtained an injunction in federal court in Philadelphia that barred efforts to enforce the largest of the judgments at issue in the Cayman Islands litigation. (A judge in Liberia ruled the U.S. anti-enforcement injunction “does not deter or prohibit” enforcement of the Liberian court’s judgment.)
“My focus was not on the U.S.,” Kelleher said. “It was all about effecting the Liberian judgments.” (Kenney was not available for comment on Kelleher’s account. An attorney for Kenney, Joseph Lilly, confirmed most of Kelleher’s account but said he could not confirm or deny whether Kelleher knew about the 2001 anti-suit injunction at the time he invested in the Caymans litigation.)
Cigna went to federal court in Philadelphia to get the Caymans case shut down – and to pursue sanctions against Kelleher, Kenney and a Switzerland-based U.S. lawyer named Samuel Lohman, who worked with Kenney on the Cigna litigation in the Caymans. Kelleher said he continued to think of himself as only minimally involved in the case. He said he didn’t hire a U.S. lawyer to represent him in the sanctions litigation.
Most importantly, said Kelleher, citing the opinion of senior counsel in Ireland whom he recently consulted, Kelleher didn’t believe Judge Diamond had jurisdiction over him – an Irish citizen who had funded an action in the Cayman Islands via a loan to a Maltese company.
“It is a mystery to me how I am liable for anything, be it in the Caymans or the U.S.,” Kelleher said.
Kelleher said he received a shock last summer when Judge Diamond ruled that he, Kenney and Lohman had “repeatedly thumbed their noses at the courts of the United States.” Judge Diamond found them to be in civil contempt of court and held them liable to Cigna. The insurer has subsequently said it’s owed more than $15 million in damages.
Judge Diamond ordered Kelleher and the others to appear at a hearing in December about Cigna’s damages. Kelleher hired a U.S. lawyer to go to court for the day to tell the judge that the real estate developer had nothing to say. “I’m a passive investor,” Kelleher said.
Nevertheless, in February, the judge opened a docket accusing Kelleher and Kenney of criminal contempt of court, a misdemeanor. (Lohman reached a settlement with Cigna and is not named in the criminal case.)
Judge Diamond formally referred the case to the Philadelphia U.S. attorney’s office, which entered an appearance in the docket earlier this month. The judge issued the bench warrant, which directs U.S. marshals to take steps to arrest Kenney and Kelleher. It is not clear from the docket in either the civil suit or the criminal case what prompted the warrant.