Developer Garrett Kelleher and the $90m Liberian civil war lawsuit

In summer 1990, a starving crowd raided 18 stores and warehouses belonging to Abi Jaoudi & Azar Trading (AJA) in Liberia's capital, Monrovia. A bloody civil conflict, sparked by warlord Charles Taylor, had torn the country apart, law and order had broken down and people were so desperate for food that they ate grass.

Abi Jaoudi, a Lebanese businessman, was one of Liberia's biggest food wholesalers, making his businesses natural targets for any hungry mob. While the raids damaged his livelihood, he was insured. As the country's situation stabilised somewhat in 1991, AJA claimed against cover that it had bought from US group, Cigna Worldwide.

After more than a year spent gathering information, the insurer’s loss adjustors told AJA and other clients that the cut-off point for their claims had passed. On top of that, they were informed that their contracts barred them from taking legal action more than 12 months after seeking payment on the policies in the first place.

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Liberian street fighters allied with warlord Charles Taylor fire on advancing troops from rival militias. Photograph: Corinne Dufka/Reuters

AJA and another business argued that the loss adjustors failed to acknowledge that this clause could not have applied during the war, as Liberia's courts were not functioning. They sued in Philadelphia, Pennsylvania, home to Cigna's HQ, where the US district court heard the case over several months in early 1994.

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A central issue was a clause in the insurance contract excluding claims for war damage. This turned on two definitions. In the US, the term embraced looting by civilians and other events that are a consequence of conflict but not directly a part of it. However, AJA argued that a much tougher test used in Liberian law should apply. This defined war damage as the consequence of offensive or defensive actions of troops and weapons, but excluded events such as civilians and non-military personnel looting properties.

In other words, under Liberian law, had AJA’s premises been bombed, or obliterated by troops in the course of a battle, the clause would have applied, but as civilians looted the company, it did not. The jury agreed and found in Jaoudi’s favour.

This looked like a David versus Goliath victory. The Liberians had just one lawyer, John J Seehousen, a sole practitioner who operated from his home in Pennsylvania, against a battery of counsel working for Cigna Worldwide.

Whatever sense of victory they might have had was shortlived. In an unusual move, Judge Thomas O’Neill gave a “judgment notwithstanding the verdict” essentially over-ruling the jury to find in the insurer’s favour.

While he was considering his judgment, the Liberian courts adopted the broader definition of war damage in a case called Mano Insurance, but then reversed this after reconsidering the issue following claims of judicial corruption.

Series of appeals

Cigna Worldwide has always argued that Judge O’Neill was justified, as no reasonable jury could have come to the conclusion the jury in this case did on the basis of the evidence.

AJA and Martin Kenney, a lawyer who advised the company and Liberia's insurance commissioner, all maintain that the judge decided to adopt the change in Liberian law, but ignored the fact that this had been reversed.

A series of appeals through the US courts failed to deliver a different result and in the late 1990s, AJA sued Cigna Worldwide back in Liberia, arguing that the African country's courts should not recognise the US verdict, as its constitution forbids judges from over-ruling juries.

The insurer contested this, saying the case had already been tried in the US and so could not be heard again, but lost on this point several times. The Liberian courts ultimately awarded AJA $65 million (€61.8 million) – $16.6 million for the original claim plus punitive damages.

Two events in 1999 put a new twist on the case. First, a group of 22 Liberian businesses – now called the G22 – began an action against Cigna Worldwide that resulted in a $30 million judgment in their favour in 2005. Separately, Cigna sold its worldwide property and casualty business to Cayman Islands-based Ace Ltd, which took on the African liabilities.

In a 2001 ruling, Liberian judge Winston O Henries found that Cigna Worldwide had failed to comply with legislation requiring it to keep 10 per cent of revenues from policy sales in the country within the jurisdiction.

The company denies this. Chubb, which inherited the Cigna liabilities when it merged with Ace earlier this year, says that, before the looting in 1990, the reserves had never been found to be inadequate. Either way, as the insurer had no presence in Liberia, this left 23 claimants with the question of who to pursue.

Kenney, a Canadian-born Irish citizen, joined the fray in 2003. As he is a solicitor specialising in fraud and cross-border economic law, AJA hired him and Geneva-based US lawyer, Sam Lohman, to advise on collecting the Liberian court award.

Kenney recruited Irish developer Garrett Kelleher in 2006. He was based in Dublin at the time and the pair became friendly. When the lawyer told Kelleher about the Liberian case, it piqued the developer's interest. It was the height of the boom and, like many in property, he was not short of cash. He agreed to put up $2.85 million to help pay for the litigation.

While this entitled Kelleher to a share of any proceeds, he has argued that he was more interested in what he called the justice of the case and no longer believed he would get his money back. He loaned the money to a Malta-registered company which then invested it in a Cayman Islands entity, which used it to fund the litigation.

US district court Judge Paul Diamond criticised the structure earlier this year, implying that the Irishman had used it to obscure his identity. However, Kelleher's answer was that he was advised to do it this way and has never hidden his role.

AJA and the G22 petitioned the Liberian government to appoint its commissioner of insurance, Josie Senesei, as receiver to Cigna Worldwide, so he could pursue their claims. Senesei hired Kenney, who resigned as AJA's adviser, and in 2008 began proceedings against Ace in the Cayman Islands, the third jurisdiction to handle the case. That court dismissed the AJA action.

Legal debate

Chubb's chairman and chief executive, Evan Greenberg, described the Cayman move as a "shakedown" designed to exploit the fact that, at the time, Ace was moving its domicile to Switzerland.

The remark angered Kelleher, who argued that had that been the claimants’ aim, they would simply have demanded the insurer pay them to go away. “We never remotely did that,” he said.

Nevertheless, Ace’s move to Switzerland did pose a problem for the Liberians as, had they wanted to take action there, they would have had to lodge millions as security for costs with the local court. They could not afford to do this, and so pressed ahead in the Cayman Islands.

Ironically, the G22 action ran into a similar problem in Cayman, whose courts wanted them to put up $850,000 as security for costs should they lose their case. The receiver could not pay this, and Burford, a specialist litigation funder that he had recruited, decided not to put up its share of the security.

This left Kelleher’s money as the only other source of cash for the action, but a series of contempt hearings in the US district court was eating into his contribution.

Cigna Worldwide had gone back to the Pennsylvania court in 2001 and secured an order from Judge O’Neill barring anyone from taking any action in any jurisdiction to enforce the Liberian judgment in AJA’s favour.

The insurer maintained that the Cayman litigation breached the injunction. Not surprisingly, this led to plenty of legal debate.

One question is whether the US court had the jurisdiction in the first place to make the ruling. AJA and its advisers say that it did not, as no US interests were affected. The claim was to enforce a Liberian court’s judgment against a Cayman Islands-based company. On that basis it was questionable whether Cigna Worldwide should actually have sought the US order in the first place, it argued.

Arrest warrants

Chubb, on the other hand, maintains that the Cayman action affected two US interests. First, the integrity of the federal court, whose authority the company claims the Liberians and their supporters have violated. The argument is that AJA invoked the court’s authority initially but ignored a verdict that it did not like.

The second interest is that of Cigna Worldwide, which is still trading. By acting as receiver and bidding to recover from Ace, Chubb says that the Liberian commissioner is attempting to collect a debt on Cigna Worldwide's behalf that the insurer itself does not recognise. The US company went to court in Delaware to make this point, but discontinued the case when the Cayman Islands action halted.

The US authorities declared Senesei and his successor, Foday Sesay, immune from any contempt proceedings on diplomatic grounds, but this left Kelleher, Kenney and Lohman exposed.

In July, they were found in civil contempt and Chubb’s lawyers pledged to pursue them for costs. At a hearing to adjudicate those costs in December, Judge Diamond said he would consider asking the US attorney’s office to issue arrest warrants for Kelleher, Kenney and Lohman for criminal contempt.

As they are disputing the court’s jurisdiction in the matter, the two Irishmen did not appear though their lawyers were there.

Lohman did appear and ultimately settled his share of the $14 million costs sought by Chubb for $225,000. He cannot act in the AJA case again.

Kenney and Kelleher have vowed to appeal "all the way to the supreme court of the United States if necessary".

That means a few more chapters could yet be added a legal saga that has already dragged on for more than a quarter of a century.