Discovery in aid of a foreign proceeding under 28 U.S.C. §1782 can be a powerful tool in the hands of litigants. The statute allows “any interested person” to seek an order from a district court compelling discovery from any person who “resides or is found” in the district “for use in a proceeding in a foreign or international tribunal.” Id. Recently, in Certain Funds, Accounts and/or Investment Vehicles v. KPMG,1 the U.S. Court of Appeals for the Second Circuit narrowly construed the statutory “for use” requirement. Under Certain Funds, a litigant’s subjective intent to initiate a foreign action is not enough to invoke §1782. An application must be supported by “objective indicium” that a foreign action will be brought.2 It is unclear what that means, but one thing is certain: a “twinkle in counsel’s eye” is not enough.3
Prerequisites for Discovery
In Certain Funds, the demise of two Saudi conglomerates following allegations of fraud and embezzlement spawned litigation in Saudi Arabia, Bahrain and the Cayman Islands. Affiliates of a U.S.-based investment fund were significant stakeholders in those proceedings, but not direct parties. The Funds also planned to initiate direct actions and claims against the conglomerates in England and Saudi Arabia, and retained counsel to do so. Approximately five years after the Saudi conglomerates’ default, but before the Funds actually commenced any direct litigation against them, the Funds sought discovery from the conglomerates’ accountants in the Southern District of New York under §1782.
