The Cayman Islands has been linked to many cross-border legal disputes, but few span the number of jurisdictions or the amount of time as an ongoing case in the United States that is pitting a British Virgin Islands-based attorney against a U.S. district court.
The U.S. case stems from a series of events that go back to 1989, when former Liberian exile Charles Taylor led several thousand rebels in an attempt to overthrow the country’s then-president, Samuel Doe.
When that bloody conflict started winding down in the mid-1990s – not before more than 200,000 Liberians died – a series of insurance disputes began in multiple courts. One case was initiated in Cayman by BVI attorney Martin Kenney, leading to allegations that Kenney and others violated a U.S. anti-suit injunction.
Now, U.S. authorities are attempting to arrest and extradite Kenney from the BVI to stand trial for contempt of court.
Kenney, however, paints the U.S. court’s actions as a drastic overstep of the court’s authority.
“While I fully respect the District Court, to me it is troubling from the perspective of the international rule of law and comity among countries if a lawyer who is foreign to the United States could be required to come to the U.S. to appear before a U.S. court to be sanctioned for doing his or her best to represent foreign clients in foreign proceedings against a foreign company – and where no person in the U.S. could be affected by our actions,” he said in an interview with this reporter.
Faced with starvation, in the summer of 1990 a crowd of war-ravaged Liberian civilians raided 18 stores and warehouses connected to the grocery store Azar Trading Company, which was owned by Lebanese businessman Abi Jaoudi.
Jaoudi’s property was insured by the U.S.-based Cigna Worldwide, but the company declined to pay out on his subsequent claim, according to court documents about the dispute.
With the Liberian courts in a state of disarray due to the ongoing civil war, Jaoudi sued Cigna in the jurisdiction where the company was based: the Eastern District of Pennsylvania. In 1994, that case went to trial by a jury, which found in favor of Jaoudi.
However, the case’s judge overturned the jury’s ruling in 1995 in a “judgment notwithstanding the jury’s verdict,” according to Kenney.
Basically, the attorney explained, the judge at the time found the case to be so clear cut that no reasonable jury would have found in favor of Jaoudi.
As such, he ruled in favor of Cigna, Kenney said.
“It’s an extraordinary power rarely used because it’s an exception to the right to a trial by an impartial jury guaranteed by the U.S. Constitution,” he said of the judge’s action.
The U.S. court’s ruling did not end the matter.
In 1998, Jaoudi filed a lawsuit against Cigna in Liberia, which found the 1995 U.S. judgment to be in violation of the Liberia Constitution’s absolute guarantee of the right to a trial by jury, according to court documents.
After Cigna refused to proceed in a jury trial in Liberia, the Liberian court entered a default judgment against the company, court documents state. And in October 2000, the Liberia court ordered Cigna to pay some $65 million in damages to Jaoudi.
But by the time the Liberia court had assessed those damages, the company had already sold its entire property and casualty insurance business to the offshore firm Ace Ltd. – which was then based in Cayman – for some $3.45 billion in January 1999.
After it sold its business to Ace and lost the case against Jaoudi in Liberia in 2000, Cigna filed for an anti-suit injunction in the U.S. in March 2001, and was granted the injunction a month later, according to court documents.
That injunction prohibited potential litigants from enforcing the 2000 Liberian judgment, documents state.
This, however, did not sit well with the Liberian court, which in 2002 reaffirmed its 2000 judgment and ruled that the U.S. injunction was unenforceable, court documents state.
“Therefore, as of April 2002, two conflicting injunctions had been entered: the 2001 U.S. injunction, which prohibited the litigants from filing an action attacking the 1995 U.S. judgment or enforcing the 2000 Liberian judgment, and the 2002 Liberian injunction, which reaffirmed that the 2000 Liberian judgment was valid and enforceable, and provided that anyone who interfered with attempts to enforce it would be in contempt of court,” states a court document filed by Kenney, which lays out his account of the facts of the case.
Meanwhile, in a separate matter, a group of 22 other Liberian property holders also sued Cigna in the Liberian courts, and won $29 million in 2005, according to court documents.
Two years later, court documents state, the Liberian government concluded an investigation into Cigna’s by-then-defunct operations in that country, and appointed the Liberian insurance commissioner to act as a receiver for the company.
With two outstanding judgments against Cigna in Liberia, the insurance commissioner sought to collect on those judgments on behalf of Jaoudi and the 22 other Liberian property holders. This is around the time Kenney entered into the picture, helping the Liberian insurance commissioner prepare a case against Ace, in what was then the company’s home jurisdiction, the Cayman Islands (Ace is now based in Switzerland).
“I was instructed as a foreign lawyer, based in the BVI and acting for the commissioner of insurance of Liberia, to assist in the launch of a civil action against a foreign insurance holding company, Ace Ltd., in a neutral forum, the Cayman Islands,” Kenney said. “My client was representing the interests of 23 insured Liberian businesses which had suffered calamitous losses to their property in the Liberian Civil War.”
Kenney said that, according to his understanding of the law, the Cayman Islands lawsuit, which was filed in July 2008, should not have triggered the U.S. injunction because no U.S. parties were involved in the case: The defendant was a Cayman company, the plaintiffs were Liberian, and he was a BVI-based attorney.
Nevertheless, Ace’s attorneys – acting in Cigna’s name – filed in the U.S. a motion for contempt against the Liberian insurance commissioner for violating the U.S. court’s injunction.
That motion for contempt was eventually dropped against the insurance commissioner.
However, Cigna filed another motion for contempt of the injunction in 2015 against Kenney and two other individuals involved in the litigation, and in July 2016, the U.S. court issued a “memorandum opinion and order” in favor of Cigna, documents state.
Even though the lawsuit in Cayman had been dismissed by then because the claimants had run out of funds to litigate the case – “a tragedy,” Kenney lamented – Cigna still sought some $10.4 million from Kenney in “compensatory sanctions,” according to court documents.
The U.S. court set a Dec. 14 hearing date “to determine the amount of damages suffered by Cigna,” and told Kenney that he could be subject to criminal prosecution if he did not attend, documents state.
The threat of criminal prosecution was not enough to compel Kenney’s attendance, though: He said he was advised by his attorney that attending could have caused him to forfeit certain rights afforded to him under the BVI legal system.
“Under the BVI legal system, if I have never submitted myself to U.S. court for the contempt case, then I wouldn’t have any legal liability here,” he said. “But if I mounted a jurisdictional defense [in the U.S.] and lost, I could not take another step in the proceedings without it being interpreted here as a voluntary submission to U.S. authority.”
About three months after the Dec. 14 hearing took place without Kenney, a U.S. judge ordered the arrest and extradition of the BVI attorney.
Kenney, however, said he was not worried about being extradited.
“There’s no way to extradite anyone for this level of contempt offense. It’s more than a parking ticket, but less than a felony. And therefore, it’s non-extraditable,” he said.
After Kenney missed his April 2017 trial date for that charge – “[Kenney’s] foreign counsel has advised him not to appear in this matter in order to avoid prejudicing his jurisdictional defenses under foreign law, and Mr. Kenney intends to heed that advice,” Kenney’s attorney wrote the district court that month – the judge involved with the case requested the Department of Justice to seek an indictment against Kenney.
The latest filing in the case’s docket is from last June, and states that Department of Justice indeed intends to seek an indictment against Kenney. That filing also states that Kenney’s lawyer asked the DoJ to reconsider, but doesn’t state when a final decision will be made.
While he awaits the U.S. government’s next action, Kenney also continues to fight the civil contempt sanction, which is the basis for Cigna seeking $10.4 million from him.
While Kenney said he is open to reaching a settlement with Cigna to avoid costly and time-consuming litigation, he is willing to litigate that civil case all the way to the U.S. Supreme Court if a settlement isn’t reached.
“The case could go to the U.S. Supreme Court because there are so many important issues at stake,” he said, adding in a written statement that he is “confident that, ultimately, the U.S. Court of Appeals for the Third Circuit will conclude that the District Court has gone beyond the limits of its powers in this matter.”
While Kenney’s involvement in the ongoing matter raises important questions about the ability of U.S. courts to extend their power into other jurisdictions, the attorney said that people should not forget the injustice allegedly done to the Liberian property holders who have yet to collect payouts from Cigna.