U.S. Federal Court’s Actions in a Liberian Case Illustrate How Expensive Third-Party Litigation Funding Can Be

A federal judge in an insurance case commenced in the early 1990s between Liberian group, Abi Jaoudi and Azar Trading (AJA) and Cigna Worldwide Insurance, an American insurer, imposed sanctions on the third-party litigation funder. AJA initially won the insurance case in which it sought justice for property damages incurred during Liberia’s civil war; however, the district court judge overturned the verdict. In 2000, AJA then brought the matter to the attention of the Liberian courts and won a judgment for $66.5 million. Thereafter, in 2001, Cigna obtained an injunction in America prohibiting enforcement of the AJA judgment issued by Liberia in any jurisdiction, which was eventually rendered unenforceable by a Liberian judge. Clearly these troubling occurrences illustrate a clash of courts and legal systems existing in the different countries. [i]

Third-party litigation funding adds another layer of confusion to the already complicated and conflicting judgments. After the injunction, AJA along with a group of Liberian businesses unsuccessfully pursued the matter with the aid of Garrett Kelleher, an Irish property developer. In 2006, Kelleher funded the AJA litigation by providing approximately $3 million in exchange for a 45% stake.

As a result, ACE Group, successor to Cigna, asked a federal district court in Philadelphia to hold Kelleher in contempt of court for funding the case. ACE contended that in funding the case, Kelleher breached the injunction order that barred enforcement of the $66.5 million judgment. The U.S. District Judge Paul Diamond warned Kelleher that a failure to appear would subject him to further sanctions and fines. Kelleher challenged such and stated that appearing in court would subject him to the court’s jurisdiction. The litigation funding of the AJA suit was through companies that were based in Malta. Kelleher failed to appear in person at the hearing. Judge Diamond stated that Kelleher’s behavior was outrageous and an “affront to Courts of the United States” and as a result, is considering referring Kelleher to the US attorney’s office for prosecution for criminal contempt of court. [ii]

This case illustrates the complications that arise when involved in the opaque yet growing industry of third-party litigation financing. Countless questions are on the minds of litigation financiers in the midst of the chaos surrounding the AJA/ACE Group dispute. Should these sanctions be overturned? Should third-party litigation funders be held liable for funding a case? How should these cross-country disputes be solved? Should third-party funders be subject to criminal prosecution? Where should the line be drawn?

[i] THE ECONOMIST, An Epic Legal Battle With Big Implications for Litigation Funding, Dec. 10, 2016, http://www.economist.com/node/21711334/print

[ii] Taryn Phaneuf, LEGAL NEWS LINE, Third-party funders that chased Liberian judgment face sanctions by federal judge, Aug. 23, 2016, 12:38 pm, http://legalnewsline.com/stories/510986924-third-party-funders-that-chased-liberian-judgment-face-sanctions-by-federal-judge.

 Tagged: Litigation Funding, Third-Party Litigation Financing, AJA Dispute, Liberian Case, Garrett Kelleher Sanctions

TownCenter Partner Team

TownCenter Partners, LLC lead Asset Manager is Mr. Roni A. Elias. From modest beginnings, and with the help of a hand-picked dream team of professionals we have built one of the most dynamic and fastest growing companies in the country. TownCenter Partners LLC(TCP) is a real estate partner and master-planner providing development, leasing, management, and third party services. The company’s demonstrated ability to apply big ideas in creative and innovative ways has played a defining role in the firm’s success. Yet, TCP's most important insight has been the core understanding that it is not sight lines or site plans, but human activity, that defines a space and creates a place.

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