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

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

, 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

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

(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.”

(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

(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

registered in Delaware with its principal place of

business in Westport, Connecticut; and

o Anholt (USA) LLC, a limited liability company

registered in Delaware operating primarily in

Westport, Connecticut, as an affiliate of Anholt

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.,

, 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,

(2d Cir. 2012).

Once a court determines that the statutory prerequisites are

met, it is “free to grant discovery in its discretion.”

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.,

(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.,

(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,

. We review the district court’s decision at the second step for

abuse of discretion. In re Application,

. “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.”

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,

(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.,

(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,

. 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,

(“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,

. 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,

. 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,

. And

the ability “to pass on information to parties in a proceeding, without

more, cannot confer ‘interested person’ status.”

. 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.’”

(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,

(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.

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,

, 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,

. 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,

.

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,

(“[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,

.

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

.

35