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Funding agreement still hasn’t been released in proposed class action over gas explosion

By Jessica Karmasek | Sep 12, 2016

SAN FRANCISCO (Legal Newsline) - The plaintiff in a proposed class action brought over a gas explosion off the coast of Nigeria has yet to reveal the identity of his third-party funder.

On Aug. 5, Judge Susan Illston of the U.S. District Court for the Northern District of California granted Chevron Corp.’s motion requiring plaintiff Natta Iyela Gbarabe to produce his litigation funding agreement.

During a case management hearing a week later, on Aug. 12, Illston ordered the plaintiff to meet and confer in person regarding the agreement and related documents.

So far, a copy of the funding agreement has not been filed with the court, according to a recent search of the case docket.

Robert Mittelstaedt, of San Francisco-based Jones Day and lead attorney for Chevron, couldn’t immediately be reached for comment on the agreement and when it might be made available to his client.

It has become commonplace for third party-funders to pay the owner of a civil claim upfront in return for the claim owner’s promise to convey a portion of the potential recovery.

This brings tax advantages for both the third-party funders and class action plaintiffs attorneys, allowing them to defer tax liability on the monetary advancement until the claim pays off while the funders deduct expenses and pay taxes on profit accrued at the lower capital-gains rate. These agreements routinely are entered confidentially.

But Illston said in her ruling last month that considering the circumstances of the case, the litigation funding agreement was relevant.

“The confidentiality provision of the funding agreement does not prohibit plaintiff from producing the agreement, and instead simply states that ‘if at any time such a requirement [to produce the agreement] arises or to do so would be prudent... the lawyers will promptly take all such steps as reasonably practicable to make such disclosure…” the judge wrote in her seven-page order.

She noted that the plaintiff’s proposal for an in camera review of the agreement -- meaning a hearing would be held before the judge in her private chambers -- is “inadequate.”

“... it would deprive Chevron of the ability to make its own assessment and arguments regarding the funding agreement and its impact, if any, on plaintiff’s ability to adequately represent the class,” Illston continued.

Chevron requested that the plaintiff produce documents “reflecting or relating to the actual or potential financing or funding of the prosecution of this litigation.”

The oil giant contends that the funding agreement and related documents are relevant to determining adequacy of representation in the putative class action.

The company points out that the plaintiff does not dispute that his counsel, who appear to be solo practitioners, are dependent on outside funding to prosecute the case.

After initially refusing to produce the requested documents, the plaintiff produced a heavily redacted copy of the funding agreement. Chevron argued the redactions make it “impossible” to assess whether counsel can commit “adequate resources” to the class.

On Jan. 16, 2012, an explosion occurred on the KS Endeavor drilling rig, which was drilling for natural gas in the North Apoi Field off of the coast of Nigeria. The explosion caused a fire that burned for 46 days.

Gbarabe alleges that the KS Endeavor was operated by KS Drilling under the management of Chevron Nigeria Limited, which, in turn, acted at Chevron’s direction.

Gbarabe is a fisherman who lives in a coastal community of Bayelsa State in Nigeria who depends on fishing for his primary method of earning a living.

He alleges he suffered financial and personal losses, including health issues, as a result of the explosion.

He seeks to represent a class of individuals who live and work in communities and co-operatives located in the Niger Delta region.

In an Aug. 26 order, Illston granted, in part, Chevron’s motion for an order compelling the plaintiff to comply with its discovery requests.

The judge said the plaintiff shall provide “complete, verified responses” to the company’s interrogatories.

Documents were ordered to be produced and the privilege log and interrogatory responses to be provided by no later than Sept. 9.

Another case management conference is set for Sept. 30.

From Legal Newsline: Reach Jessica Karmasek by email at

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Chevron U.S.A. U.S. District Court for the Northern District of California

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