Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

IN RE HILL

June 2, 2005.

IN RE: APPLICATION OF NICHOLAS T.C. HILL, et al.,


The opinion of the court was delivered by: RICHARD HOLWELL, District Judge

MEMORANDUM OPINION AND ORDER

Ernst & Young LLP, a Delaware partnership, and two of its current and former partners, Peter Holloway and William Kennedy, (collectively "Ernst & Young USA") have moved to vacate this Court's Order issued ex parte on December 15, 2004 (the "December 15, 2004 Order") granting judicial assistance pursuant to 28 U.S.C. § 1782. Ernst & Young USA further move to quash the subpoenas dated December 22, 2004 (the December 22, 2004 subpoenas") and served upon them by the court-appointed liquidators of Akai Holdings Limited ("Akai") and Kong Wah Holdings Limited ("Kong Wah") (collectively, the "Liquidators") pursuant to the December 15, 2004 Order.*fn1 For the reasons set forth below, the Court denies both motions in their entirety.

BACKGROUND

  Akai is the holding company of a number of entities, including Kong Wah, and is incorporated under the laws of Bermuda with its principal place of business in Hong Kong. (Declaration of Nicholas Timothy Cornforth Hill ("Hill Decl.") ¶¶ 1,6.) In 2001, Akai and Kong Wah became subject to a liquidation proceeding under the coordinated supervision of the High Court of Hong Kong Special Administrative Region (the "High Court of Hong Kong") and the Supreme Court of Bermuda. (Liquidators Mem. in Opp'n to Mot. to Vacate the December 15, 2004 Order or Quash the December 22, 2004 subpoenas ("Liquidators Opp'n Mem.") at 2.) Pursuant to that proceeding, the High Court of Hong Kong designated the Liquidators as court-appointed officers charged with the responsibility of locating and distributing the assets of the companies to their creditors. (Id.)

  In the course of discharging these duties, the Liquidators discovered that many of the records concerning transactions and key assets of Akai and Kong Wah had disappeared. (Hill Decl. ¶ 16.) The Liquidators thus sought to obtain information from Ernst & Young's Hong Kong branch ("Ernst & Young HK"), which was the local auditor of both entities, to aid in reconstructing these financial records. (Id.) Beginning from August 29, 2000, the Liquidators repeatedly submitted discovery requests to Ernst & Young HK to provide certain documents relating to Akai and Kong Wah. (Declaration of Eric L. Lewis ("Lewis Decl."), Ex. G ¶¶ 26-41.) When these efforts proved unsuccessful, the Liquidators applied to the High Court of Hong Kong for an order directing Ernst & Young HK to produce copies of financial documents related to the audits of Akai and Kong Wah between 1996 and 1999. The Court ordered the requested relief on October 23, 2003 (the "October 23, 2003 Hong Kong Order"). (Lewis Decl., Ex. H.) In its subsequent memorandum opinion setting forth the reasons for its decision, the court explained that "the documents sought are reasonably required to permit [the Liquidators] to carry out their functions" in light of: the massive scale of the liquidations, the highly unusual or doubtful transactions which had taken place not long before petitions were presented to wind up the Companies, the important gaps in the liquidators' knowledge of the affairs of the Companies, the specific substantial transactions identified by the liquidators as requiring investigation, and the refusal of former directors, officers and related companies to provide meaningful assistance.

 (Lewis Decl., Ex. G ¶ 51.)

  The documents released by Ernst & Young HK subsequently led the Liquidators to believe that Ernst & Young International and Ernst & Young USA had engaged in extensive interoffice communications regarding the debtor companies and possessed "critical information" relevant to the financial condition of the companies. (Liquidators Opp'n Mem. at 9; Lewis Decl., Exs. E and F.) On December 14, 2004, the Liquidators thus filed an ex parte application before this Court, seeking to be appointed as commissioners authorized to take discovery from Ernst & Young USA and Ernst & Young International pursuant to 28 U.S.C. § 1782. On December 15, 2004, the Court issued an order appointing the Liquidators as commissioners. The Liquidators subsequently issued subpoenas to Ernst & Young USA on December 22, 2004, which Ernst & Young USA now seek to quash.

  DISCUSSION

  I. Judicial Assistance Pursuant to 28 U.S.C. § 1782

  28 U.S.C. § 1782 provides, in relevant part, that "the district court . . . may . . . order [discovery] for use in a proceeding in a foreign or international tribunal." 28 U.S.C. § 1782. The statute "is the product of congressional efforts, over the span of nearly 150 years, to provide federal-court assistance in gathering evidence for use in foreign tribunals." Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, ___, 124 S.Ct. 2466, 2473 (2004). The twin aims of the statute are to provide "equitable and efficacious procedures in United States courts for the benefit of tribunals and litigants involved in foreign litigation" and "to encourag[e] foreign countries by example to provide similar assistance to our courts." In the Matter of Lancaster Factoring Co., Limited, 90 F.3d 38, 41 (2d Cir. 1996) (internal citations omitted). In light of these goals, the section has become amenable to "increasingly broad applicability." Id. (internal citations omitted).

  The party seeking discovery pursuant to § 1782 must satisfy a three-part test:
(1) that the person from whom discovery is sought reside (or be found) in the district of the district court to which the application is made, (2) that the discovery be for use in a proceeding before a foreign tribunal, and (3) that the application be made by a foreign or international tribunal or "any interested person."
In the Matter of Euromepa, 154 F.3d 24, 27 (2d Cir. 1998) (quoting In re Esses, 101 F.3d 873, 875 (2d Cir. 1996)). Ernst & Young USA concede that the Liquidators have satisfied the first and third elements of the statute. They contend, however, that the Liquidators have failed to show that the discovery authorized by the December 15, 2004 Order and specifically sought through the December 22, 2004 subpoenas is "for use" in a proceeding in a foreign or international tribunal. (Ernst & Young USA Mem. in Supp. of Mot. to Vacate the December 15, 2004 Order and to Quash the December 22, 2004 subpoenas ("Ernst & Young USA Mem.") at 5.) In response, the Liquidators contend that the liquidation proceedings in Hong Kong and Bermuda are adjudicative proceedings within the meaning of § 1782, and that the requested discovery is "for use" in those proceedings. (Liquidators Opp'n Mem. at 10.)

  A. Adjudicative Proceeding

  The "principal requirement imposed by § 1782 is that the requested discovery be for use in `a proceeding'" in which "an adjudicative function is being exercised." Lancaster Factoring, 90 F.3d at 41 (citing In re Letters Rogatory Issued by the Director of Inspection of the Government of India, 385 F.2d 1017, 1021 (2d Cir. 1967)). In Lancaster Factoring, the Second Circuit explicitly stated that "[a] bankruptcy proceeding, by its nature, is one in which the value of the debtor's estate is adjudicated," and therefore falls "within the intended scope of § 1782." Lancaster Factoring, 90 F.3d at 42.

  Following Lancaster Factoring, however, the Second Circuit qualified that while a bankruptcy proceeding may, in many instances, be considered an adjudicative proceeding, there are some instances in which the proceeding will not be adjudicative in nature (and therefore, § 1782 discovery will not be available). See Euromepa, 154 F.3d at 28. Thus, in Euromepa, a French bankruptcy proceeding was deemed to be merely an enforcement proceeding enabling a corporation to enforce an extant judgment against its insurer already rendered by the French Supreme Court against the insurer's bankrupt estate. Id. Because the prior judgment of the French Supreme Court acted "as res judicata with respect to the merits of the dispute in the French bankruptcy proceeding," the pending French bankruptcy proceeding did not involve the adjudication of any claims or rights vis-à-vis the insurer and insured. Id. Accordingly, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.