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UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 11-17802 SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, HAROLD P. GEWERTER, Objector-Appellant, v. CMKM DIAMONDS, INC.; 1ST GLOBAL STOCK TRANSFER LLC; HELEN BAGLEY; SERGEY RUMYANTSEV; BRIAN DVORAK, Defendants.

On Appeal from the United States District Court for the District of Nevada SECURITIES AND EXCHANGE COMMISSIONS MOTION TO DISMISS AS MOOT RICHARD M. HUMES Associate General Counsel THOMAS J. KARR Assistant General Counsel KAREN J. SHIMP Senior Counsel Securities and Exchange Commission 100 F Street NE Washington, DC 20549-9612 Tel: 202 / 551-5007 (Ms. Shimp) Fax: 202 / 772-9263 February 16, 2012

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The Securities and Exchange Commission (Commission) moves the Court to dismiss the appeal of Howard P. Gewerter, Esq. Ltd. for lack of jurisdiction because Bank of the Wests compliance with the subpoena at issue has rendered the appeal moot. BACKGROUND In June 2009, the Commission obtained a final judgment against John Edwards (Edwards) in Securities and Exchange Commission v. CMKM Diamonds, Inc. et al. 1 for the unregistered offer and sale of securities in violation of Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. 77e(a) and 77e(c). The Commission later learned that, shortly after it filed its action against Edwards, Edwards wired funds from one of his international bank accounts to the client trust account of Harold P. Gewerter Esq. Ltd. at Bank of the West. Accordingly, on January 13, 2010, the Commission issued a subpoena on Bank of the West requesting all records of Harold P. Gewerter, Esq. Ltds client trust account from January 1, 2008 to the present. Although the subpoena was issued by the United States District Court for the Northern District of California, Gewerter moved to quash the subpoena in the United States District Court for the District of Nevada. The Nevada district court,

Case No. 2:01-CV-00437 (D. Nev.). 2

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noting that it was not the issuing court, denied Gewerter's motion without prejudice. This Court affirmed on August 26, 2011. SEC v. CMKM Diamonds, Inc., 656 F.3d 829 (9th Cir. 2011). On September 6, 2011, Gewerter filed a motion to quash the subpoena in the proper venue. On October 26, 2011, a magistrate judge denied the motion and ordered Bank of the West to produce the subpoenaed documents to the Commission, subject to certain restrictions on the documents use. The District Court affirmed the magistrate judges order on November 15, 2011. The instant appeal challenges that order. On November 21, 2011, Gewerter filed an Emergency Motion Under Circuit Rule 27-3 For a Stay of Enforcement of Subpoena Pending Appeal (Motion For Stay). On December 20, 2011 this Court denied that motion. Bank of the West produced the subpoenaed documents to the Commission on or about December 27, 2011 (Hakala Decl. at 4), and the Commission completed its initial review of the documents the first week of January 2012. Id. at 5. ARGUMENT This Court lacks jurisdiction over Gewerters appeal because production of the subpoenaed documents has rendered it moot. It has long been settled that a federal court has no authority to give opinions upon moot questions or abstract propositions, or to declare principles or
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rules of law which cannot affect the matter in issue in the case before it. Church of Scientology v. U.S., 506 U.S. 9, 12 (1992) (citing Mills v. Green, 159 U.S. 651, 653 (1895)). In that case, the Supreme Court went on to hold that an appeal challenging the validity of an order enforcing compliance with an administrative summons is not mooted by production of the documents at issue. However, the Church of Scientology decision addressed a final judgment where the challenging party had a right to appeal pursuant to 28 U.S.C. 1291. In this case, Gewerter is not challenging a final order.2 Instead, his right to appeal this otherwise interlocutory order is constrained by the concerns established in Perlman v. United States, 247 U.S. 7, 12-13 (1918). Perlman permits the holder of a (purported) privilege to immediately appeal a discovery order directed at a disinterested third-party custodian to prevent the third-party custodian from disclosing the documents at issue. See U.S. v. Krane, 625 F.3d 658, 572 (9th Cir. 2010). But once the cat is out of the bag, the order ceases to be immediately appealable because the choice between disclosing and standing in contempt has already been made, and the Court of Appeals cannot restore that choice. Wilson v. OBrien, 621 F.3d 641, 643 (7th Cir. 2010) (The
2

This Court has long recognized that post-judgment discovery orders are interlocutory and not subject to appeal. See, e.g., Richmark Corp. v. Timber Falling Consultants, Inc., 937 F.2d 1444, 1449 (9th Cir. 1991); Estate of Domingo v. Republic of the Philippines, 808 F.2d 1349, 1350 (9th Cir. 1987) (recognizing general rule that orders denying non-parties protection from discovery are not final orders appealable under 28 U.S.C. 1291). 4

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premise of an interlocutory appeal in a case such as Perlman . . . is that the holder of the information has yet to comply with the order). At least twice in recent years more than a decade after Church of Scientology was decided this Court has noted that production in an interlocutory setting moots the appeal. The Court has thus implicitly recognized a distinction between final judgments and Perlman interlocutory appeals. In 2008 the Court held that after assertedly privileged documents have been disclosed, an interlocutory appeal is no longer appropriate because the irreparable harm from the disclosure of the allegedly privileged material has already taken place . . . Truckstop.net LLC v. Sprint Corp., 547 F.3d 1065, 1068 (9th Cir. 2008).3 Most recently, in a case where interlocutory appeal over a subpoena depended on Perlman, the Court indicated that if production had been made then the appeal would have been moot: If Skadden had produced the documents, Quellos would have been deprived of the opportunity to challenge the subpoena. See Federal Ins. Co. v. Maine Yankee Atomic Power Co., 311 F.3d 79, 81 (1st Cir. 2002) (production of documents by third party renders objection moot).

In Truckstop.net, the Court was presented with an interlocutory appeal pursuant to the collateral order doctrine rather than the analogous but distinct Perlman doctrine. The Supreme Courts subsequent decision in Mohawk Industries, Inc. v. Carpenter, ___ U.S. ___, 130 S.Ct. 599 (2009) eliminated collateral-order based interlocutory appeals over purportedly privileged documents, but this Court held that Perlman-based challenges survive Mohawk. Krane, 625 F.3d at 572. The underlying principle of mootness in interlocutory appeals that the Court outlined in Truckstop thus continues to apply with full force to Perlman-based appeals. 5

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Krane, 625 F.3d at 573. Indeed, Gewerter has admitted that production moots his appeal, repeatedly asserting that [f]ailure to grant a stay will entirely destroy [appellants] right [] to secure meaningful review by rendering their appeal moot. Providence Journal Co. v. FBI, 595 F.2d 889, 890 (1st Cir. 1979) (noting that the confidentiality [of disclosed records] will be lost for all time). Mot. for Stay at p. ii.4 Most recently, counsel noted that [o]nce appellants emergency motion for stay of enforcement of the subpoena was denied, the subpoenaed documents were turned over to the Plaintiff. Therefore there is really nothing left to settle. Mediation Questionnaire, Docket Entry 12-1, filed January 12, 2012.5

See also id. at p. 1 (will be irreparably harmed . . . because the appeal may be rendered moot); at p. 4 (Movants will be deprived of their right to meaningful appellate review of their motion to quash); at p. 5 (Appellants appeal would be a fruitless effort, because there would be no further point in quashing the subpoena since the harm will have already been done. Even if the SEC were required to return or destroy the documents, the information contained therein would forever been in the governments possession . . .); at p. 6 (Movants will lose their right to meaningful appellate review . . .). Counsel for the SEC conferred with counsel for Gewerter before filing this motion, and was advised that he would not agree to voluntarily withdraw the appeal. 6
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CONCLUSION For the foregoing reasons, the Court should dismiss this appeal as moot.

Respectfully submitted, RICHARD M. HUMES Associate General Counsel THOMAS J. KARR Assistant General Counsel /s/ KAREN J. SHIMP Senior Counsel
Karen J. Shimp
Digitally signed by Karen J. Shimp DN: cn=Karen J. Shimp, o=U.S. Securities and Exchange Commission, ou=Office of the General Counsel, email=shimpk@sec.gov, c=US Date: 2012.02.16 18:19:45 -05'00'

Securities and Exchange Commission 100 F Street NE Washington, DC 20549-9612 Tel: 202 / 551-5007 (Ms. Shimp) Fax: 202 / 772-9263 February 16, 2012

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UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 11-17802 SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, HAROLD P. GEWERTER, Objector-Appellant, v. CMKM DIAMONDS, INC.; 1ST GLOBAL STOCK TRANSFER LLC; HELEN BAGLEY; SERGEY RUMYANTSEV; BRIAN DVORAK, Defendants.

On Appeal from the United States District Court for the District of Nevada

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9th Circuit Case Number(s) 11-17802

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