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United States District Court for the Southern District of New York
November 17, 2021, Decided; November 17, 2021, Filed
19 Civ. 4355 (VM)
DECISION AND ORDER
VICTOR MARRERO, United States District Judge.
In May 2019, the United States Securities and Exchange Commission ("SEC") brought civil fraud charges against Mykalai Kontilai ("Kontilai") and Collectors Coffee, Inc. ("CCI," and collectively with Kontilai, "Defendants"). Now before the Court are the parties' cross-motions for Summary Judgment on Count V of the Amended Complaint (Dkt. No. 134) pursuant to Federal Rule of Civil Procedure 56. (See "SEC Motion," Dkt. No. 879; "Kontilai Motion," Dkt. No. 887; "CCI Motion," Dkt. No. 888.) For the reasons stated herein, the Court GRANTS the SEC Motion [*4] for summary judgment and DENIES the Kontilai and CCI Motions for summary judgment.
A. RELEVANT PROCEDURAL BACKGROUND
Count V of the Amended Complaint alleges that the Defendants violated Rule 21F-17 of the Exchange Act by impeding individuals' communication with the SEC regarding potential securities laws violations by enforcing or threatening to enforce confidentiality agreements that would prevent individuals' communications thereof. On June 26, 2020, Defendants filed a motion to "dismiss, strike portions of, and enter judgment on the pleadings" of the Amended Complaint. (See "Motion," Dkt. No. 416.) On May 17, 2021, Magistrate Judge Gorenstein submitted a Report and Recommendation recommending the Court deny the Motion, specifically holding that Count V survived the Defendants' arguments related to its legal sufficiency. (See "R&R," Dkt. No. 918.) On May 24 and June 1, 2021, the Court received Defendants' short-form, (Dkt. No. 922.), and long-form, ("Objections," Dkt. No. 926), objections to Magistrate Judge Gorenstein's R&R. The SEC opposed the Objections on June 15, 2021. (See "Opposition," Dkt. No. 930.)
In their motion before Magistrate Judge Gorenstein, Defendants argued that [*5] the SEC's Rule 21F-17 claim should be dismissed as "barred by the litigation privilege" and outside the SEC's rulemaking authority. (See Motion at 3, 9.) Magistrate Judge Gorenstein rejected both arguments, finding that no litigation privilege had ever been applied to bar a federal cause of action, nor did Defendants' Rule 21F-17 arguments address the salient points regarding the SEC's rulemaking authority. (See R&R at 9-11.)
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2021 U.S. Dist. LEXIS 222163 *; 2021 WL 5360440
UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Plaintiff, - against - COLLECTOR'S COFFEE INC., et al., Defendants.
summary judgment, investors, communications, violates, summary judgment motion, rule making authority, promulgated