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

Background

The SEC filed an application in limine—an advance request to limit evidence or witnesses at a hearing—to prevent Mykalai Kontilai from calling SEC trial and investigative counsel Terry Miller, Mark Williams, and Jacqueline Moessner as witnesses at an upcoming contempt hearing. Kontilai opposed the application.

Legal standard

The court explained that courts generally should not allow a party to call opposing lawyers as witnesses when the testimony can be avoided while still achieving justice. The court noted that testimony from government counsel ordinarily requires a compelling and legitimate need, a proper basis for impeachment, and exhaustion of other possible sources of testimony. Because the SEC and Kontilai proposed using the more generous standard applicable to attorney depositions, the court applied the factors from In re Subpoena Issued to Dennis Friedman: the need for the lawyer’s testimony, the lawyer’s role in the matter and litigation, the risk of attorney-client privilege and work-product problems, and the extent of discovery. The court found the discovery factor not relevant because the testimony was not sought for discovery.

Court’s analysis

The court addressed Kontilai’s proposed topics individually:

- Communications between SEC counsel and John Mark Dougan, including possible direction given to Dougan, could be explored by questioning Dougan if he testified. If he did not testify, Kontilai had not shown why an SEC lawyer was needed to explain the relevance of those communications. - The SEC’s efforts to determine whether evidence obtained by Dougan was legal under Russian law were irrelevant to the contempt hearing. - Any alleged agreements involving the SEC, other government agencies, Holt, and Dougan could be explored by questioning those witnesses if they testified. If Dougan denied an agreement, the court found no need to call an SEC lawyer because there was no evidence of one and the SEC had categorically denied that any existed. If Holt denied an agreement, Kontilai could renew the application at the hearing if counsel had a good-faith reason to believe an SEC attorney knew of one. - The SEC’s understanding of its duty of candor toward the tribunal was irrelevant to the issues at the contempt hearing. - Holt’s statements during the SEC investigation could be relevant for impeachment if Holt testified, but speculation that her testimony would be inaccurate did not justify calling an SEC lawyer. - Dougan’s statements implicating Kontilai in an alleged insurance-fraud scheme could be addressed in limited testimony if Dougan testified, but speculation that his testimony would be inaccurate did not justify calling an SEC lawyer. - Dougan’s background as a felon who admitted altering audio recordings could be addressed by questioning Dougan. The defendants already appeared to have evidence on that subject and had not explained why it could not be used as impeachment evidence instead of presenting an SEC lawyer. - Whether the SEC’s Washington, D.C., headquarters knew that its Denver office relied on Dougan was irrelevant to the contempt hearing. - Regarding the authenticity of an audio recording, if the SEC relied on Moessner’s affidavit to identify Kontilai’s voice, the court expected Moessner to be available for examination at the hearing. If the SEC disclaimed reliance on the affidavit, Moessner’s testimony on that issue was unnecessary, and the court would not consider the affidavit for that purpose.

Disposition

Judge Gabriel W. Gorenstein concluded that Kontilai had shown no need to examine an SEC lawyer except as described in the order. The court therefore granted the SEC’s application to preclude Kontilai from calling SEC lawyers as witnesses at the contempt hearing to the extent stated above. The court did not reach the other factors under the attorney-deposition standard.