Certain Funds, Accounts And/Or Investment Vehicles v. KPMG, L.L.P., 798 F.3d 113

Background

Fortress-managed investment funds (the Funds) held significant stakes (~$380M total; $129M in GB1 sukuk) in Saudi conglomerates Saad and AHAB that defaulted after alleged fraud by owner Maan Al Sanea.
Multiple foreign proceedings arose: a Saudi action by the GB1 Delegate (moved between Saudi quasi-judicial committees), liquidation proceedings in the Cayman Islands, and liquidation in Bahrain.
Five years after the default the Funds filed an ex parte 28 U.S.C. § 1782 application in S.D.N.Y. seeking documents from U.S. and international accounting firms (KPMG and PwC entities) relating to audits by their Middle Eastern affiliates.
The district court denied the § 1782 application, finding among other things that the Funds had not shown the requested evidence was "for use" in the foreign proceedings and that contemplated proceedings were not "within reasonable contemplation." The district court also questioned whether the international firms were "found" in the district.
On appeal the Second Circuit assumed arguendo the Funds could be "interested persons" but affirmed, holding the Funds failed to show how the sought evidence would be used in the pending foreign proceedings and that planned actions were not within reasonable contemplation when the application was filed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether discovery sought was "for use" in ongoing foreign proceedings	Funds: documents about audits are highly relevant and would be used to aid foreign proceedings	Firms: Funds lack procedural ability to introduce or use documents in those tribunals	Held: No — relevance alone insufficient; Funds failed to show any mechanism to employ evidence in pending proceedings, so not "for use"
Whether the Funds are "interested person[s]" under § 1782 for ongoing proceedings	Funds: significant financial stake and creditor/committee roles give them a reasonable interest and potential participation	Firms: Funds lack participation rights (no ability to present evidence or appeal) and mere financial stake is insufficient	Held: Court assumed arguendo they might be interested persons but ruled outcome against Funds on "for use" ground; financial interest alone likely insufficient
Whether contemplated (prospective) proceedings were "within reasonable contemplation" when application filed	Funds: retained counsel and intended to bring direct claims in Saudi and England and seek relief from Saudi agencies	Firms: plans were speculative and lacked objective indicia of imminent proceedings	Held: No — objective indicia lacking given long delay since default; planned actions not within reasonable contemplation at filing date
Whether international firms were "found" in S.D.N.Y. for subpoena purposes	Funds: asserted contacts and officials in Manhattan show firms are found there	Firms: corporate entities are not "found" merely because some executives reside in district	Held: District court questioned and rejected that theory, but Second Circuit did not need to decide because it affirmed on "for use" grounds

Key Cases Cited

Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) (interpreting § 1782; evidence must be "for use" in foreign proceeding; proceedings need only be within "reasonable contemplation")
Brandi-Dohrn v. IKB Deutsche Industriebank AG, 673 F.3d 76 (2d Cir. 2012) (summarizes § 1782 statutory requirements)
In re Metallgesellschaft, 121 F.3d 77 (2d Cir. 1997) (discussing discretionary aims of § 1782)
In re Edelman, 295 F.3d 171 (2d Cir. 2002) (standard of review for § 1782 denials)
Lancaster Factoring Co. Ltd. v. Mangone, 90 F.3d 38 (2d Cir. 1996) (agent of bankruptcy trustee can be an "interested person")
In re Ishihara Chemical Co., 251 F.3d 120 (2d Cir. 2001) (distinguishes concluded proceedings from those anticipated for § 1782 use)
Esses v. Hanania, 101 F.3d 873 (2d Cir. 1996) (beneficiary as party to foreign proceedings recognized as an interested person)