Nicholas Malfitano Aug. 11, 2016, 12:35pm


PHILADELPHIA – In a recent judicial order, U.S. District Court Judge Paul S. Diamond found parties representing and funding the pursuit of a Liberian multimillion-dollar insurance judgment in contempt of a federal court order.

On July 22, Diamond issued an order finding Martin Kenney, Samuel M. Lohman and Garrett Kelleher in contempt of U.S. federal court, for what he believed was the respondents’ collective violation of a prior order in the same court, from Judge Thomas N. O’Neill Jr.

Diamond further found Lohman individually in contempt of his own prior discovery orders.

As part of his order, Diamond further ordered Cigna Worldwide (CWW) to submit a memorandum of law in which it addresses the appropriate damages.

“In its Memorandum, CWW shall also advise the Court with specificity as to the appropriate professional disciplinary authorities to which the Court may refer Mr. Lohman, and the appropriate manner of referral. Any response to CWW’s Memorandum shall be submitted on or before Aug. 19, 2016,” Diamond said.

The case history began in 1991, when plaintiff Abi Jaoudi and Azar Trading Corporation (AJA), owner of commercial property in Liberia, brought action against CWW, in connection with damage the plaintiffs' commercial properties sustained in the Liberian civil war.

After a jury verdict for AJA, O’Neill reversed its findings and entered a judgment in favor of CWW, finding the property damage was subject to the policy’s war risk exclusion.

However, AJA later refiled the case against CWW in a Liberian court and won a judgment of $66.5 million in 2000. When AJA tried to enforce the judgment, O’Neill issued an injunction in 2001, prohibiting any and all attempts to collect the $66.5 million judgment award in question.

The following year, a Liberian court reaffirmed the multimillion-dollar judgment and labeled O’Neill’s injunction “unenforceable”.

Diamond alleges Kenney, a dual Irish and Canadian citizen based in the British Virgin Islands who practiced as a foreign legal consultant in New York, and Lohman, a United States citizen and a member of the Oregon bar with an office in Switzerland, “acted in concert to violate O’Neill’s injunction.”

In February 2005, Kenney and Lohman formed CC International Ltd., an entity to “obtain access to a court of neutral jurisdiction to determine the validity of their claims” – such as the enforceability of the $66.5 million Liberian judgment.

In return for CCI stock, AJA assigned CCI title to rights to receive proceeds from the enforcement of the enjoined Liberian judgment.

In November 2008, CWW filed a motion for contempt against AJA, a Liberian receiver, Lohman and others for violating O’Neill’s injunction.

CWW also sought to identify the funders of the efforts to enforce the Liberian judgment. After a long discovery process, it was learned in August 2014 that Garrett Kelleher, an Irish property developer, had invested $2.85 million in efforts to enforce the aforementioned Liberian judgment.

Funds from Echemus Investment Management Ltd., an investment vehicle Kenney had created “to fund various cross-border asset recovery claims,” supplemented Kelleher’s funding. On Nov. 12, 2014, CWW personally served Kelleher in Ireland with papers naming him as a contempt party.

A hearing on this matter took place in January in the U.S. District Court for the Eastern District of Pennsylvania, at the James A. Byrne Federal Courthouse in Philadelphia.

Prior to that hearing, Diamond had ordered respondents Kenney, Lohman and Kelleher to appear and show cause why they should not be found in contempt of a 2001 injunction forbidding legal action against CWW, or face “fines or other sanctions.”

Through their respective attorneys, Kenney and Lohman submitted correspondence indicating they did not plan to attend the hearing, feeling it would subject them to federal court jurisdiction in the United States. Kelleher is representing himself in this matter. None of the three respondents attended the January proceedings.

“In 1991, AJA availed itself of this Court’s jurisdiction by filing a civil action in this District. After receiving a disappointing result, it found a more amenable jurisdiction, where it obtained a result more to its liking,” Diamond said.

“In the fourteen years that followed, AJA and those whom it recruited – Lohman, Kenney, and Kelleher – have made repeated efforts to contravene this Court’s judgment, nullify this Court’s injunction, and defy this Court’s orders. Now invoking this Court’s jurisdiction, now denying it; now proceeding under American law, now alleging that they cannot comply with it; now claiming immunity, now refusing to provide any supporting discovery, respondents’ outrageous behavior is an affront to the Courts of the United States,” Diamond added.

Diamond stated the respondents’ knowing violation of O’Neill’s injunction order made them “indisputably subjected” to both the District Court’s jurisdiction and sanctions it may impose, though they may still seek to enforce the Liberian judgment elsewhere.

“Because contempt sanctions could deter such wrongful conduct and would compensate CWW for the costs it has incurred, a contempt citation is entirely proper. Accordingly, I find each respondent in contempt and will order supplemental briefing as to the appropriate remedy,” Diamond said.

Donald W. Hawthorne and Howard Schrader, both members of counsel for CWW, expressed satisfaction with Diamond’s recent ruling.

“We’re delighted with the decision and we plan on pursuing the claim for damages and penalties that the judge invited us to submit. It certainly does vindicate what we’ve been trying to do all along in this lawsuit, which is to hold these people accountable for very blatant violations of a federal injunction,” Hawthorne said.

Hawthorne indicated Diamond’s ruling could set an important precedent in future cases of this nature.

“In a litigation scene that is increasingly international, Judge Diamond’s opinion makes an important statement for the rightful ability of U.S. courts to enforce their orders and exert jurisdiction over foreign parties when they contravene U.S. court orders,” Hawthorne said. “Judge Diamond’s opinion sends a clear and strong message, and will be a powerful precedent for helping to police the fringes of the funding world.”

Fellow counselor Schrader concurred.

“I think it’s particularly important that Judge Diamond issued in his opinion such a strong, clear and well-reasoned defense of the ability of U.S. courts to defend and enforce their orders against not only the parties before them, but also foreign entities and persons who assist others to violate those orders, which is what he found occurred here,” Schrader said. “The other thing I think is quite significant [is] that he found both foreign lawyers and foreign litigation funders to be responsible for their actions in violating U.S. law.”

In a later motion filed Aug. 5, CWW counsel detailed the compensatory relief damages sought from AJA and the contemnors in this action as $14,675,292.70. These funds were comprised of $10,391,831.78 in damages related to litigation in this case in the U.S., the District Court and the Delaware Chancery Court, plus $4,283,460.92 in damages related to litigation in this case in the Cayman Islands.

Further, if the final judgment were approved, AJA and the contemnors would need to pay the funds, jointly and severally, within 30 days. If this stipulation was not fulfilled, CWW counsel asked the Court for post-judgment interest to be levied, a daily $10,000 fine imposed on behalf of the District Court for each day the damages went unpaid and if necessary, arrest warrants to be issued for Kenney, Lohman and Kelleher.

According to the motion, in the event any of the contemnors were unable to satisfy the judgment, if it were to be approved, they would be required to submit a payment plan for said judgment within 14 days of its approval.

One member of opposing counsel, Gary M. Miller of Shook Hardy & Bacon in Chicago, Ill., conveyed disappointment with Diamond’s July 22 ruling.

“We are disappointed in the Court’s decision. Mr. Kenney is an attorney practicing in the British Virgin Islands. He represented Liberian clients in connection with a lawsuit in the Cayman Islands against a Swiss corporation,” Miller said.

Miller indicated the ruling will likely be challenged to a federal appellate court in the future.

“In light of U.S. Supreme Court decisions, we do not believe the Court has jurisdiction over this matter or over Mr. Kenney. We plan to seek review from the Third Circuit Court of Appeals at the appropriate time,” Miller added.

U.S. District Court for the Eastern District of Pennsylvania case 2:91-cv-06785

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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