United States Securities and Exchange Commission v. Collector's Coffee Inc.

Background

On March 10, 2025, the court granted in part and denied in part the United States Securities and Exchange Commission’s motion for remedies against Collector’s Coffee Inc. and Mykalai Kontilai, and against Veronica Kontilai as the relief defendant. The court entered the corresponding final judgment on March 14, 2025. On March 27, 2025, the court denied Veronica Kontilai’s request to file a proposed motion under Federal Rule of Civil Procedure 59(e), which permits a party to ask the court to alter or amend a recently entered judgment.

Collector’s Coffee then asked for permission to file its own proposed Rule 59(e) motion. The court construed that request as the motion itself and considered it without additional briefing because it found the motion clearly lacked merit.

The Court’s Analysis

The court explained that Rule 59(e) reconsideration is an extraordinary remedy. It is generally unavailable unless the moving party identifies an overlooked controlling decision or information that could reasonably change the court’s conclusion. The rule is not a vehicle for repeating arguments, presenting new theories, seeking a new hearing on issues already decided, or challenging older rulings outside the rule’s 28-day period.

Collector’s Coffee argued that the Second Circuit’s February 26, 2025 summary order required the district court to treat an expert report by Stefano Vranca as reliable evidence of the company’s legitimate business expenses, or to treat the expenses as obviously legitimate. The court rejected that reading. It said the Second Circuit had recognized that defendants bear the burden, even at the remedies stage, of identifying legitimate business expenses that should be deducted from a disgorgement amount. The court had previously found that the defendants offered no reliable evidence of those expenses and therefore were not entitled to deduct them from the Commission’s disgorgement figure.

Collector’s Coffee also newly argued that it should not be jointly and severally liable for civil penalties because the company’s investors held preferred stock. The court declined to consider that argument because it could have been raised before the judgment. The court additionally noted that it had not imposed civil penalties jointly and severally against the defendants.

The court identified several other arguments as repetitions of issues previously decided: whether additional briefing about SEC v. Jarkesy was necessary; whether the defendants were entitled to a jury trial at the remedies stage; whether a $6.1 million criminal restitution order limited disgorgement; whether issue preclusion or claim preclusion limited disgorgement; whether Vranca’s report was reliable; whether the company’s expenses were obviously legitimate; and whether joint and several liability was proper. The court declined to reconsider those issues because Collector’s Coffee was seeking another opportunity to litigate them.

Collector’s Coffee also listed “enhancing points” challenging rulings issued before the remedies decision, including the court’s November 17, 2021 grant of summary judgment to the Commission. The court held that those challenges were untimely and unsupported by a legal basis for reconsideration. It therefore did not consider them.

Disposition

Judge Marrero denied Collector’s Coffee’s Rule 59(e) motion. The court directed the defendants and Veronica Kontilai, who were represented by the same counsel, to refrain from filing additional motions based on legal theories, claims, or requests for relief that the court had already rejected. The court stated that such filings would be considered frivolous and wasteful and could warrant sanctions. The Clerk of Court was directed to close docket entries 1621 and 1623.