20-3963 IJK Palm LLC v. Anholt Services USA, Inc. et al.
In the United States Court of Appeals For the Second Circuit
August Term, 2021 No. 20-3963
IJK PALM LLC, Movant-Appellee,
v.
ANHOLT SERVICES USA, INC., ANHOLT CAPITAL PARTNERS (USA), INC., ANHOLT (USA) LLC, I. JOSEPH MASSOUD, RUDOLPH KREDIET, Intervenors-Appellants. *
On Appeal from the United States District Court for the District of Connecticut
ARGUED: FEBRUARY 11, 2022 DECIDED: MAY 6, 2022
Before: PARK, NARDINI, and PÉREZ, Circuit Judges.
* The Clerk of the Court is directed to amend the caption as set forth above. IJK Palm LLC filed a motion in the United States District Court for the District of Connecticut (Robert N. Chatigny, Judge) seeking discovery under 28 U.S.C. § 1782 from several companies and individuals for use in a suit it intended to file in the Cayman Islands. After IJK filed its request under § 1782, United Oils Limited, SEZC, the company on behalf of which IJK intended to sue, entered liquidation proceedings. In the Cayman Islands, only a company’s official liquidator may ordinarily sue on the company’s behalf. IJK proposes three avenues through which it might nevertheless use the material it requests: (1) it could persuade the Cayman Islands liquidators to bring suit on behalf of the company in liquidation; (2) it could bring its own suit on behalf of the company if the liquidators refused; or (3) it could sue the directors of the investment vehicle through which it invested in the company in liquidation. The district court granted IJK’s discovery request. We hold that IJK has not established that it is an “interested person” with respect to its first proposed suit, and that it has not established that the material it requests is “for use” in any of its proposed suits within the meaning of § 1782. Accordingly, we REVERSE the order of the district court.
ZACHARY R. WILLENBRINK (Daniel J. Blinka, Godfrey & Kahn, S.C., Milwaukee, WI, Frank J. Silvestri, Jr., Verrill Dana LLP, Westport, CT, on the brief), Godfrey & Kahn, S.C., for Movant-Appellee.
SEAN C. SHEELY (Qian Shen, on the brief), Holland & Knight LLP, New York, NY, for Intervenors-Appellants.
2 WILLIAM J. NARDINI, Circuit Judge:
In this appeal, we consider the scope of a federal district court’s
authority to order discovery in aid of litigation abroad. Under 28
U.S.C. § 1782, United States courts may grant discovery “for use in a
proceeding in a foreign or international tribunal.” The Supreme
Court has counseled that the “proceeding” need not have been filed
at the time a request is made so long as it is “within reasonable
contemplation.” The question in this case is whether a party may
obtain discovery under § 1782 when there are significant procedural
barriers under foreign law that might prevent the party from filing
suit or using the material it receives.
IJK Palm LLC (“IJK”) filed a motion in the United States District
Court for the District of Connecticut (Robert N. Chatigny, Judge)
seeking discovery under 28 U.S.C. § 1782 from several companies and
individuals for use in a suit it planned to file in the Cayman Islands
on behalf of a company in which it had invested. After IJK filed its
3 request, the company entered liquidation proceedings. In the
Cayman Islands, only a company’s official liquidators may ordinarily
sue on the company’s behalf. IJK proposes three avenues through
which it might nevertheless use the material it requests: (1) it could
persuade the Cayman Islands liquidators to bring suit on behalf of the
company in liquidation; (2) it could bring its own suit on behalf of the
company if the liquidators refused; or (3) it could sue the directors of
the investment vehicle through which it invested in the company.
The district court granted IJK’s discovery request. We hold that IJK
has not established that it is an “interested person” with respect to its
first proposed suit, and that it has not established that the material it
requests is “for use” in any of its proposed suits within the meaning
of § 1782. Accordingly, we REVERSE the order of the district court.
4 I. BACKGROUND
A. IJK’s investment in United Oils Limited, SEZC
On June 13, 2016, IJK filed an ex parte motion seeking discovery
under 28 U.S.C. § 1782(a) 1 for a suit it purportedly intended to file in
the Cayman Islands related to its indirect investment in United Oils
Limited, SEZC (“UOL”). IJK invested in an investment fund, Palm
Investment Partners (“PIP”), which in turn held a minority stake in
UOL. UOL operated palm oil plantations in Peru.
UOL began experiencing serious financial troubles in late 2015.
IJK asserts that UOL’s directors knew that it would need additional
debt to fund its operations, but they failed to take steps to obtain debt
funding. UOL defaulted on its existing debt on February 15, 2016.
One of UOL’s creditors, Southern Harvest, requested leave from other
1 As relevant here, that statute provides: “The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation.” 28 U.S.C. § 1782(a). 5 noteholders to act as their agent in post-default negotiations with
UOL. Southern Harvest proposed that debtholders would provide
additional funding to cure UOL’s default in exchange for 400 million
new shares at $0.01 each. The proposal would have diluted IJK’s
equity stake in UOL from 11.15% to 1.02%. UOL’s board ultimately
approved a plan that resulted in less dilution, issuing 220 million new
shares at $0.02 each. When IJK invested in UOL through PIP, it had
done so at a price above $2.00 per share.
UOL CEO Dennis Melka owns 0.19% of UOL’s equity and 15%
of its debt. IJK asserts that “[m]any other board members
simultaneously own equity together with a larger amount of debt.”
Joint App’x at 177. As a result of these alleged conflicts, IJK asserts
that it intends to sue Melka and UOL’s board of directors on behalf of
UOL in the Cayman Islands.
B. IJK’s discovery request
On June 13, 2016, IJK filed an ex parte application for an order
permitting it to take discovery for use in a foreign proceeding under 6 28 U.S.C. § 1782(a). It requested discovery from the following
interrelated individuals and entities:
• Three Bermuda-based companies (collectively, the
“Bermuda Entities”):
o Kattegat Limited, a Bermuda limited partnership
operating primarily in Westport, Connecticut,
through its investment advisor, Anholt Services
(USA), Inc. and its affiliates;
o Anholt Investments Limited, a limited partnership
registered in Bermuda operating primarily in
Westport, Connecticut, as an affiliate of Anholt
Services (USA), Inc.; and
o Southern Harvest Partners, LP, a limited
partnership registered in Bermuda operating
primarily in Westport, Connecticut, as an affiliate
of Anholt Services (USA), Inc.
7 • Three U.S.-based companies:
o Anholt Services (USA), Inc., a corporation
registered in Delaware with its principal place of
business in Westport, Connecticut;
o Anholt Capital Partners (USA), Inc., a corporation
business in Westport, Connecticut; and
o Anholt (USA) LLC, a limited liability company
registered in Delaware operating primarily in
Services (USA), Inc.
• And two Connecticut residents:
o I. Joseph Massoud, managing director of Anholt
Services (USA), Inc., who resides in Westport,
Connecticut; and
8 o Rudolph Krediet, a resident of Norwalk,
Connecticut, who is a partner in Anholt Services
(USA), Inc. and who is in charge of managing
Southern Harvest Partners, LP .
IJK alleged that Kattegat owns the four “Anholt” entities and
operates through them. In turn, the Anholt entities own Southern
Harvest.
The district court referred IJK’s application to a magistrate
judge (Donna F. Martinez, Magistrate Judge), who granted the
application in full. She reasoned that (1) the target entities and
individuals were all “found” in Connecticut; (2) IJK reasonably
contemplated filing suit against UOL in the Cayman Islands using the
documents it obtained through the request; and (3) IJK was an
“interested person” under the statute as a shareholder in UOL. The
magistrate judge then balanced the discretionary factors articulated
in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264–65
9 (2004), concluding that they weighed in favor of granting IJK’s
request.
Five targets of IJK’s application moved to intervene and to
vacate the magistrate judge’s order: Anholt Services (USA), Inc.;
Anholt Capital Partners (USA), Inc.; Anholt (USA) LLC; I. Joseph
Massoud; and Rudolph Krediet (collectively, “Intervenors”). The
Intervenors argued that IJK had not established that it met any of the
statutory factors under § 1782 and that the balance of the
discretionary factors under Intel weighed against granting discovery.
They also explained that UOL had entered liquidation proceedings in
the Cayman Islands. As a result, IJK’s application was moot because,
under Cayman law, only the court-appointed liquidator could pursue
derivative claims on behalf of UOL. Thus, they argued, IJK could no
longer assert that the requested discovery was “for use” in a
derivative suit on UOL’s behalf.
10 IJK responded that the case was not moot because it could
provide the requested discovery to the liquidators to persuade them
to bring a claim, or it could bring a claim on its own if the liquidators
refused. IJK filed a letter from the Cayman Islands liquidators, which
explained that, under Cayman law, they are “empowered to
investigate the causes of the failure of UOL and the promotion,
business, dealings and affairs of the Company and make such reports
to the Court as they think fit.” Joint App’x at 1342. The liquidators
reported that they were not financially able to pursue discovery
through § 1782 on their own and would “be grateful if the material
recovered under any action undertaken by IJK Palm LLC would be
available” for their review. Id. IJK also argued that it was
contemplating bringing a derivative action against PIP’s directors in
which it could use the requested discovery.
The Intervenors in turn filed a declaration by their Cayman
counsel asserting that the ordinary procedure would be for interested
11 parties like IJK to fund the liquidator’s derivative suit rather than
bringing their own.
The magistrate judge issued a report and recommendation,
again recommending that the court grant IJK’s application for
discovery. She concluded that IJK’s suit was “within reasonable
contemplation” notwithstanding UOL’s liquidation because IJK had
pointed to a case from the Cayman Islands Grand Court’s Financial
Services Division suggesting that shareholders may still bring a
derivative suit on behalf of a company in liquidation if the liquidator
is unwilling to do so. The magistrate judge explained that the
Cayman liquidators had filed a declaration supporting IJK’s
application for discovery and noting that they lacked the funding to
bring such an action independently. Finally, the magistrate judge
recommended holding that IJK was an “interested person” under the
statute because it was a shareholder in UOL through PIP. With
12 respect to the Intel factors, the magistrate judge again concluded that
the balance tipped in favor of granting IJK’s application.
The Intervenors filed objections to the magistrate judge’s report
and recommendation, but the district court adopted the magistrate
judge’s recommended ruling over their objections. First, the court
explained that IJK was an “interested person” under the statute even
if the Cayman suit could be brought only by the liquidator because
the record supported that the requested discovery could persuade the
liquidator to pursue a derivative claim and because the liquidator had
expressed an interest in investigating possible claims. Even if IJK was
not an interested person with respect to an action against UOL, it was
an interested person with respect to its own potential derivative suit
against PIP’s directors.
Next, the district court concluded that the Intervenors were all
“found” within the district as Connecticut residents or corporations
operating primarily in the state. And the court found that the
13 Intervenors had not “seriously disputed IJK Palm’s allegations that
the Bermuda entities are shell corporations operated by Mr. Massoud
in Connecticut, such that the exercise of general jurisdiction would be
appropriate as to them.” Special App’x at 2.
Finally, the court addressed the Intervenor’s sole argument
with respect to the discretionary Intel factors—that IJK’s request was
an attempt to circumvent Cayman law. The court concluded that IJK
had shown its request was necessary to allow it to satisfy the
heightened pleading standard that a Cayman court would apply to
the actions. As a result, the district court granted IJK’s application in
full. The Intervenors timely appealed.
II. DISCUSSION
Section 1782(a) of Title 28 of the United States Code authorizes
federal district courts to order discovery in aid of foreign proceedings.
The party seeking discovery must establish three statutory
prerequisites: (1) the person or entity from whom discovery is sought
14 “resides” or is “found” in the district where the application is made;
(2) the requested material is “for use” in a foreign proceeding; and (3)
“the application is made by a foreign or international tribunal or any
interested person.” Brandi-Dohrn v. IKB Deutsche Industriebank AG,
673 F.3d 76, 80 (2d Cir. 2012).
Once a court determines that the statutory prerequisites are
met, it is “free to grant discovery in its discretion.” Id. Courts
exercising their discretion must take “into consideration the twin
aims of the statute, namely, providing efficient means of assistance to
participants in international litigation in our federal courts and
encouraging foreign countries by example to provide similar means
of assistance to our courts.” Certain Funds, Accts. &/or Inv. Vehicles v.
KPMG, L.L.P., 798 F.3d 113, 117 (2d Cir. 2015) (internal quotation
marks omitted). The Supreme Court has also laid out factors that
“bear consideration” by district courts:
15 (1) Whether the “person from whom discovery is sought is
a participant in the foreign proceeding,” in which case
“the need for § 1782(a) aid generally is not as apparent”
because a foreign tribunal presumably has authority to
order discovery on its own;
(2) “[T]he nature of the foreign tribunal, the character of the
proceedings underway abroad, and the receptivity of the
foreign government or the court or agency abroad to U.S.
federal-court judicial assistance”;
(3) Whether the discovery request “conceals an attempt to
circumvent foreign proof-gathering restrictions or other
policies of a foreign country or the United States”; and
(4) Whether the requests are unduly intrusive or
burdensome.
Intel, 542 U.S. at 264–65.
16 Our review of a district court’s decision to grant § 1782
discovery involves two inquiries: “whether (1) as a matter of law, the
District Court erred in its interpretation of the language of the statute;
and (2) if not, whether the District Court’s decision to grant discovery
on the facts before it was in excess of its discretion.” In re Application
for an Ord. Pursuant to 28 U.S.C. 1782 to Conduct Discovery for Use in
Foreign Proc., 773 F.3d 456, 459 (2d Cir. 2014) (internal quotation marks
and alterations omitted). We review the district court’s construction
of the statute at the first step de novo. See Certain Funds, 798 F.3d at
117. We review the district court’s decision at the second step for
abuse of discretion. In re Application, 773 F.3d at 459. “A district court
is said to ‘abuse its discretion’ if it bases its ruling on an erroneous
view of the law or on a clearly erroneous assessment of the evidence,
or rendered a decision that cannot be located within the range of
permissible decisions.” Id. at 459–60 (internal quotation marks and
alterations omitted). Because we conclude that IJK has not
17 established that it is an “interested person” or that the materials it
requests are “for use” in a foreign proceeding, we do not address the
remaining statutory factor or the district court’s discussion of the
discretionary factors under Intel.
IJK asserts it is an “interested person” and the information it
requests is “for use” in three possible foreign proceedings. First, IJK
could assist the liquidators in pursuing an action against UOL’s CEO
and directors. Second, as it asserted in its initial application, IJK could
pursue a double-derivative action against UOL’s CEO and directors
through PIP if the liquidators refuse to file suit. Third, IJK could use
the discovery in its own derivative action against a director of PIP.
We hold that IJK has not established that it meets the statutory
requirements under § 1782 with respect to any of its proposed suits.
A. Suits against UOL’s CEO and directors
IJK argues first that it intends to bring suit on behalf of UOL
against the company’s CEO and directors. The parties agree that,
when a company is in liquidation under Cayman law, only the 18 liquidators may ordinarily bring suit on behalf of the company in the
first instance. IJK argues that Cayman courts recognize an exception
to this rule. In the Cayman case, In re Sphinx [2014] (2) CILR 131, the
Financial Services Division of the Cayman Islands Grand Court
explained that, once a company is in liquidation, the “proper
plaintiff” is the liquidator, “who should, if willing, sue in the name of
the company . . . .” Id. at 144. If the liquidator is unwilling, however,
“the aggrieved shareholder should sue in the name of the company
subject to the approval of the court.” Id. IJK thus posits two potential
paths to suit. First, it could present the information it gains through
its § 1782 application to the official liquidators in UOL’s Cayman
Islands liquidation who could in turn sue UOL’s conflicted CEO and
directors on behalf of the company. Second, if the liquidators refuse
to sue, IJK could bring its own derivative suit on behalf of PIP, which
could in turn sue on behalf of UOL. Neither path is sufficiently
definite to support IJK’s application under § 1782.
19 1. Suit by UOL’s liquidators
IJK has not established that the information it requests is “for
use” by the liquidators, or that it would be an “interested person”
with respect to such a suit.
Under § 1782, a movant seeking discovery need not show that
the “foreign proceeding” on which it relies is pending or even
imminent in order to meet the “for use” requirement. Intel, 542 U.S.
at 258–59. But the proceeding must be “within reasonable
contemplation.” Id. at 259. This requires a petitioner to show “reliable
indications of the likelihood that proceedings will be instituted within
a reasonable time.” Certain Funds, 798 F.3d at 123 (citation omitted).
While we have not delineated “what precisely an applicant must
show to establish such indications . . . [a]t a minimum, a § 1782
applicant must present to the district court some concrete basis from
which it can determine that the contemplated proceeding is more than
just a twinkle in counsel’s eye.” Id. at 123–24. And “a Section 1782
applicant must establish that [it] has the practical ability to inject the 20 requested information into [the] foreign proceeding” that it
contemplates. In re Accent Delight Int'l Ltd., 869 F.3d 121, 132 (2d Cir.
2017) (emphasis added).
IJK has failed to establish that the liquidators’ lawsuit against
UOL’s CEO and directors is “within reasonable contemplation.” Intel,
542 U.S. at 259. IJK filed a letter from the liquidators in the district
court, which explained that the liquidators had “no objection” to IJK’s
application under § 1782. Joint App’x at 1343. The letter also stated
that the liquidators could not bring suit themselves “given the
impecuniosity of the UOL estate.” Id. at 1342. Nowhere have the
liquidators stated that they have any plan to bring suit in the Cayman
Islands. The letter instead suggests that the liquidators would use the
requested material in the liquidation proceedings themselves. 2 At
2 IJK implies that the liquidation proceedings themselves are another avenue by which it might use the material it seeks. But the liquidators filed an application with the Grand Court of the Cayman Islands to end the liquidation
21 most, the liquidators’ letter supports an inference that they would
consider suing on behalf of UOL depending on the contents of the
evidence that IJK seeks. But discovery material is not “for use” in a
foreign proceeding if it must first be used to persuade a third party to
initiate that proceeding. See Certain Funds, 798 F.3d at 121 (“Even
assuming that the Funds have the ability to submit information to the
Delegate, who can then decide whether or not to use that information,
that does not establish that the information is ‘for use’ in a foreign
proceeding; it establishes, at best, that the Funds can furnish
information in the hope that it might be used.”).
IJK urges that its situation is analogous to the movant in Intel,
542 U.S. at 246. There, the movant sought discovery under § 1782 of
material that it planned to present to the Directorate-General for
proceedings by dissolving UOL, which they withdrew only at IJK’s request. Thus, it is not clear what, if any, additional liquidation proceedings have yet to occur beyond the potential suit against UOL’s directors that IJK hopes the liquidators will bring. 22 Competition (DG-Competition) of the Commission of the European
Communities (European Commission). Id. The DG-Competition
enforces European competition laws on behalf of the European
Commission. Id. at 254. When it receives a complaint, it is responsible
for conducting a preliminary investigation and making a
recommendation about whether to pursue the complaint further. Id.
The European Commission’s final decision is subject to judicial
review. Id. The question then arose whether the European
Commission was a “tribunal” within the meaning of the statute. Id.
at 257. The Supreme Court held that it was, explaining that § 1782
“authorizes . . . a federal district court to provide assistance to a
complainant in a European Commission proceeding that leads to a
dispositive ruling, i.e., a final administrative action both responsive to
the complaint and reviewable in court.” Id. at 255.
IJK argues that, like the movant in Intel, it seeks discovery that
it intends to submit to the liquidators, who may in turn sue UOL’s
23 CEO and directors. But the liquidators in this case are far different
from the DG-Competition in Intel. In Intel, the movant’s complaint to
the DG-Competition triggered an investigation and recommendation
to the European Commission. Id. at 255. The Supreme Court held
that that process itself comprised a “foreign proceeding” within the
meaning of § 1782. Id. at 258. Here, no “proceeding” would begin if
IJK presented materials to the liquidators. The “proceeding” on
which IJK relies is the potential action that the liquidators would have
discretion to file in a Cayman court. The mere opportunity to present
material to a party to a potential future lawsuit does not satisfy the
requirement of § 1782 that the material be “for use” in a foreign
proceeding. Accordingly, IJK has not carried its burden to show that
the material it requests is “for use” in a hypothetical suit brought by
the liquidators.
Even if IJK could satisfy the “for use” requirement through the
liquidator’s potential suit, it has not established that it would be an
24 “interested person” with respect to that suit. “The text of § 1782(a),
‘upon the application of any interested person,’ plainly reaches
beyond the universe of persons designated ‘litigant.’” Intel, 542 U.S.
at 256. But we have explained that “financial interest in the outcome
of the foreign proceedings alone” is insufficient “to confer ‘interested
person’ status under the statute.” Certain Funds, 798 F.3d at 119. And
the ability “to pass on information to parties in a proceeding, without
more, cannot confer ‘interested person’ status.” Id. at 120. On the
other hand, when a person has “an established right to provide
evidence and have the party [to the foreign proceeding] consider it . . .
or a recognized relationship, such as that of an agent and principal,
[that] may be sufficient to make an otherwise stranger to the
proceeding an ‘interested person.’” Id. (internal citation and
quotation marks omitted).
IJK argues that it is an “interested person” under the statute
because it has a “‘mechanism’ through which [it] could provide the
25 discovery to the liquidators.” IJK Br. at 45. Again, though, the
opportunity to present evidence to a party to a potential lawsuit does
not render a movant under § 1782 an “interested party.” The
liquidators’ letter states that they are “empowered”—not required—
to “investigate the causes of the failure of UOL . . . and make such
reports to the Court as they think fit.” Joint App’x at 1342. And they
state that they would be “grateful if the material recovered . . . by IJK
. . . would be available for [their] review.” Id. The liquidators have
not provided IJK with any assurance that they will act on any
information that they receive. By contrast, in Intel, the movant was
an “interested person” because its complaint triggered a mandatory,
formal process beginning with an investigation by the DG-
Competition and culminating in a judicial review of the European
Commission’s final action. Intel, 542 U.S. at 254–56. The complainant
was vested with “significant procedural rights,” including the right
to submit information to the DG-Competition and to “seek judicial
26 review of the Commission’s disposition of a complaint.” Id. at 255.
Here, the liquidators’ general indication of interest in the material that
IJK might obtain is not sufficient to render IJK an “interested person”
with respect to the suit that it hopes the liquidators will decide to
bring.
2. IJK’s double-derivative suit
IJK next argues that it may use the material it obtains through
its § 1782 request in a suit it could bring on behalf of PIP, which would
in turn sue UOL’s CEO and directors on behalf of that company.
It is undisputed that IJK would be an “interested person” with
respect to this hypothetical suit. Indeed, there is “[n]o doubt litigants
are included among, and may be the most common example of, the
interested persons who may invoke § 1782.” Intel, 542 U.S. at 256
(quotation marks and alterations omitted). IJK’s theory falters,
however, because it has not established that it has a sufficiently
definite path to bring its proposed double-derivative suit. As a result,
27 it cannot show that the requested discovery is “for use” in a foreign
proceeding.
Both parties acknowledge that the Cayman decision in Sphinx
illustrates that, when a company is in liquidation, the “proper
plaintiff” in a suit on behalf of the company is the court-appointed
liquidator. [2014] (2) CILR 144. If the liquidator refuses to sue, then
an “aggrieved shareholder” may instead sue in the name of the
company with approval of the court. Id. Therein lie two problems for
IJK.
First, Sphinx makes clear that the liquidators are the
appropriate plaintiffs to pursue claims on behalf of a company in
liquidation in the first instance. In their letter, the liquidators take no
position on the possibility of pursuing a claim against UOL’s CEO
and directors. They state only that they are unable to pursue their
own action for discovery under § 1782 due to “the impecuniosity of
the UOL estate.” Joint App’x at 1342. As discussed above, IJK would
28 not be an “interested party” with respect to the liquidators’ potential
suit. If the liquidators decide to sue, IJK has identified no formal
mechanism by which it could inject the material it seeks into that
proceeding. Thus, IJK’s ability to use the material it seeks is
contingent on the liquidators’ deciding not to sue on their own. IJK
has not provided a sufficient basis to evaluate the likelihood of that
eventuality.
Second, Sphinx identifies substantial steps that IJK would have
to take before it could bring its proposed suit. Even if the liquidators
declined to pursue an action on their own, IJK would need to seek
leave of the Cayman court to proceed once the liquidators refused.
IJK’s chances of success in that endeavor are uncertain at best. As the
Intervenors point out, the Sphinx court considered only a derivative
action, not the type of double-derivative suit that IJK proposes.
In sum, there are significant procedural hurdles that IJK would
have to clear before bringing its suit against UOL’s CEO and directors
29 in the Cayman Islands. Where a movant seeks discovery for a suit
that has not yet been filed, it must “provide sufficiently reliable
indications of the likelihood that proceedings will be instituted within
a reasonable time.” Mangouras v. Squire Patton Boggs, 980 F.3d 88, 101
(2d Cir. 2020) (internal quotation marks omitted). Thus, if a movant’s
ability to initiate a proceeding depends on some intervening event or
decision, it must provide an objective basis on which to conclude that
the event will occur or the requisite decision will be favorable. Here,
IJK has not provided an objective basis on which to conclude that it
can bring its double-derivative suit against UOL’s CEO and directors.
Accordingly, it has not carried its burden to show that the proposed
suit is “within reasonable contemplation,” and it is not entitled to
discovery under § 1782.
We have explained that “it is not fatal” to an application that
the movant “lacks a claim for relief before the foreign tribunal,
whether for damages or otherwise.” In re Accent Delight Int’l Ltd., 869
30 F.3d at 132. A district court’s focus in considering a request under
§ 1782 is not on the merits of the proposed claim, but on the movant’s
“practical ability to inject the requested information into a foreign
proceeding.” Id. Thus, a district court may need to undertake a
limited foray into foreign law to assess the procedural mechanism by
which a movant may inject the discovery it seeks into foreign
proceedings. Here, IJK must clear a series of procedural hurdles
under Cayman law before it can present any evidence to a Cayman
court in a suit against UOL’s CEO and directors. It has not provided
a sufficient basis to conclude that it would be able to do so.
B. Suit against PIP’s directors
IJK next posits a third avenue by which it might use the
discovery it seeks: a derivative suit against PIP’s directors. Before the
district court, IJK reported that “in the weeks since [it] filed its § 1782
Application, [it] ha[d] learned more facts regarding” the actions of
31 PIP’s officers and directors, and as a result, “intends to file suit”
against them. Joint App’x at 1187–88. 3
As a litigant in the proceeding, IJK would certainly be an
“interested person” within the meaning of the statute. See Intel, 542
U.S. at 256. But IJK has not established that the discovery it seeks
would be “for use” in a suit against PIP’s directors because it has not
pointed to objective indicia that the action is being contemplated.
Certain Funds, 798 F.3d at 123.
IJK’s claims with respect to its proposed suit against PIP’s
directors are vague and undeveloped. It states that one PIP director
“inexplicably delayed taking several actions, damaging PIP and, thus,
IJK Palm.” Joint App’x at 1188. It offers no suggestion as to what
3 The district court relied on IJK’s proposed suit against PIP’s directors in granting its request for discovery. Accordingly, we assume on appeal that the late addition of a fallback basis for IJK’s § 1782 application was proper. But see Certain Funds, 798 F.3d at 124 (“[T]he relevant question is whether at the time the evidence is sought, the evidence is eventually to be used in a foreign proceeding. In other words, we assess the indicia of whether the contemplated proceedings were within reasonable contemplation at the time the § 1782 application was filed.” (cleaned up)). 32 those “actions” might have been, nor does it further elucidate its legal
theory. The only concrete step IJK has taken toward initiating its
proposed suit is to obtain funding for, and to retain, counsel. That
simple action, we have held, is not sufficient to make an objective
showing that the planned proceedings are within reasonable
contemplation. See Certain Funds, 798 F.3d at 124.
III. CONCLUSION
In sum, we hold as follows:
(1) The opportunity to present material to a party to a
potential lawsuit does not satisfy the requirement of
§ 1782 that the material be “for use” in a foreign
proceeding. Here, even if the liquidators agree to
consider the evidence that IJK obtains, there is an
insufficient basis to conclude that they would sue UOL’s
CEO and directors, or that they would otherwise use the
information that IJK provided in a foreign proceeding.
33 (2) The anticipated ability to pass information to one party
to a suit, without more, also does not render a movant
under § 1782 an “interested person” with respect to that
suit. Here, IJK’s only direct interest in the liquidators’
potential suit is financial, which is insufficient to meet the
requirement to be an “interested person” within the
meaning of § 1782.
(3) The movant must establish that it has the practical ability
to inject the requested information into a foreign
proceeding, even if doing so would be contingent on an
intervening event or decision. IJK has not provided a
sufficient basis to conclude that it could bring a double-
derivative suit on behalf of UOL in the Cayman Islands.
As a result, the requested discovery material is not “for
use” with respect to that potential double-derivative suit.
34 (4) A movant under § 1782 must show objective indicia that
the proceedings on which it relies are within reasonable
contemplation. Merely retaining counsel and sketching
a vague outline of a proposed suit does not meet that
requirement. IJK has thus failed to meet its burden to
establish that its proposed suit against PIP’s directors is
within reasonable contemplation, and therefore that the
requested discovery material is “for use” with respect to
such suit.
We therefore REVERSE the order of the district court granting
IJK’s application for discovery under 28 U.S.C. § 1782.