United States v. All Assets Held at Bank Julius, Civil Action No. 04–0798 (PLF)

• Decision Date: 10 January 2017
• Docket Number: Civil Action No. 04–0798 (PLF)
• Citation: 229 F.Supp.3d 62
• Court: U.S. District Court — District of Columbia
• Parties: UNITED STATES of America, Plaintiff, v. ALL ASSETS HELD AT BANK JULIUS, Baer & Company, Ltd., Guernsey Branch, account number XXXXXX, in the Name of Pavlo Lazarenko et al., Defendants In Rem.

229 F.Supp.3d 62

UNITED STATES of America, Plaintiff,

v.ALL ASSETS HELD AT BANK JULIUS, Baer & Company, Ltd., Guernsey Branch, account number XXXXXX, in the Name of Pavlo Lazarenko et al., Defendants In Rem.

Civil Action No. 04–0798 (PLF)

United States District Court, District of Columbia.

Signed January 10, 2017

Daniel Hocker Claman, Hector G. Bladuell, Allison Ickovic, Della Grace Sentilles, Mara Vanessa Jessica Senn, Teresa Carol Turner–Jones, U.S. Department of Justice, Washington, DC, for Plaintiff.

Bryant Everett Gardner, Winston & Strawn LLP, Washington, DC, Doron Weinberg, Weinberg & Wilder, San Francisco, CA, for Defendants In Rem.

OPINION AND ORDER

PAUL L. FRIEDMAN, United States District Judge

This matter is before the Court on two motions of Claimant Pavel Lazarenko, a.k.a. Pavlo Lazarenko ("Lazarenko"), for leave to amend his answer to the amended complaint to make four changes: (1) admit rather than deny one allegation; (2) supplement his due process affirmative defense; (3) add five new affirmative defenses: excessive fine, judicial estoppel, undue delay, collateral estoppel, and "estoppel/unclean hands"; and (4) supplement his response to paragraph 62 relating to the Guernsey assets. The United States opposes the first and third changes, but not the second or fourth. Upon consideration of the parties' written submissions, the relevant case law, and the entire record in this case, the Court will grant the motions in part and deny them in part. Specifically, the Court will permit Lazarenko to amend his answer to admit rather than deny one allegation, supplement his due process defense, and supplement his response to paragraph 62. The Court will not permit him to add the five new affirmative defenses because such an amendment would be futile.¹

I. FACTUAL AND PROCEDURAL BACKGROUND

This is a civil in rem action in which the United Sates seeks forfeiture of over $250 million dollars scattered throughout bank accounts located in Antigua, Barbuda, Guernsey, Liechtenstein, Lithuania, and Switzerland. See Am. Compl. ¶ 1. This Court's prior opinions summarize the procedural history of this case, starting with the criminal prosecution of Lazarenko, and continuing through this civil forfeiture proceeding. See , e.g. , United States v. All Assets Held at Bank Julius Baer & Co., Ltd. , 571 F.Supp.2d 1, 3–6 (D.D.C. 2008) ("All Assets I "); United States v. All Assets Held at Bank Julius Baer & Co., Ltd. , 959 F.Supp.2d 81, 84–94 (D.D.C. 2013) ("All Assets V "); United States v. All Assets Held at Bank Julius Baer & Co., Ltd. , 307 F.R.D. 249, 250–51 (D.D.C. 2014) ("All Assets VI "). In brief, Lazarenko is "a prominent Ukrainian politician who, with the aid of various associates, was ‘able to acquire hundreds of millions of United States dollars through a variety of acts of fraud, extortion, bribery, misappropriation and/or embezzlement’ committed during the 1990s." All Assets V , 959 F.Supp.2d at 85 (quoting Am. Compl. ¶¶ 1, 10).

As relevant to the present motions for leave to amend, the United States filed its First Amended Complaint on June 30, 2005, alleging, inter alia , that:

Lazarenko[ ] is the Settlor and Protector of the Balford Trust and is the beneficial owner of the assets maintained in accounts XXXXX, XXXXX, and XXXXX at Credit Suisse (Guernsey) Limited. Other nominal beneficiaries of the trust are members of Lazarenko's family.

Am. Compl. ¶ 81. Lazarenko filed a verified answer that responded:

Claimant admits the allegations that he is the Settlor and Protector of the Balford Trust, maintained in account XXXXX at Credit Suisse (Guernsey) and that the beneficiaries of the trust are members of his family. Claimant denies the further allegation the [sic] members of his family are "nominal beneficiaries."

Answer ¶ 81. Lazarenko also asserted several affirmative defenses in his answer, including that "the forfeiture of defendant property and currency should be barred by the Due Process Clause of the Fifth Amendment to the U.S. Constitution." Id. ¶ 160.

On May 1, 2015, Lazarenko moved under Rule 15(a) of the Federal Rules of Civil Procedure for leave to file an amended answer that would make several changes: (1) changing his response to paragraph 81 so that he "admits the further allegation the members of his family are ‘nominal’ beneficiaries," Proposed First Am. Answer ¶ 81; (2) appending to the existing due process affirmative defense an explanation that "[t]he due process violations stem from the involvement of the Ukrainian General Prosecutors Office in the collection of documents and witness testimony that will be used in this matter," id. ¶ 160; and (3) adding four new affirmative defenses: excessive fine, judicial estoppel, undue delay, and collateral estoppel. Id. ¶¶ 161–64. Lazarenko's full proposed answer to paragraph 81 now would read:

Claimant admits the allegations that he is the Settlor and Protector of the Balford Trust, maintained in account XXXXX at Credit Suisse (Guernsey) and that the beneficiaries of the trust are members of his family. Claimant admits the further allegation the [sic] members of his family are "nominal" beneficiaries.

Proposed First Am. Answer ¶ 81. Notably, it would not respond to the government's allegation that Lazarenko "is the beneficial owner of the assets maintained in accounts XXXXX, XXXXX, and XXXXX at Credit Suisse (Guernsey) Limited." Am. Compl. ¶ 81. Lazarenko's "excessive fine" affirmative defense is that the forfeiture "is prohibited by the Excessive Fines Clause of the Eighth Amendment and 18 U.S.C. § 983(g)," id. ¶ 161; his "judicial estoppel" affirmative defense is that the United States cannot deviate from its legal positions during his criminal prosecution, id. ¶ 162; his "undue delay" affirmative defense is that the United States' delay in the "filing of the Amended Complaint and the subsequent delay in commencing discovery" bar forfeiture, id. ¶ 163; and his "collateral estoppel" affirmative defense is that the United States cannot now raise arguments it could have raised but chose not to raise during his criminal prosecution. Id. ¶ 164.

On August 20, 2016, Lazarenko moved a second time to amend his answer to add the additional affirmative defense of "[e]stoppel/[u]nclean [h]ands," arguing that the United States is bound to certain promises that it made to him during failed plea discussions in 2002. Proposed Second Am. Answer ¶ 165. That affirmative defense is that the United States is estopped "from seeking forfeiture of any funds over and above $21,696,000, or alternatively any funds traceable to any crimes discussed in" the failed plea agreement between Lazarenko and the United States. Id. Lazarenko's second motion for leave to amend his answer also seeks to supplement his response to paragraph 62 of the complaint concerning the Guernsey assets, adding the following sentence: "Claimant further admits that he has control over the accounts in Guernsey in the name of Samante, including account numbers XXXXX, XXXXX, and XXXXX." Id. ¶ 62.

II. DISCUSSION

Under Rule 15(a)(2) of the Federal Rules of Civil Procedure, when unable to do so as of right, "a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires." FED. R. CIV. P. 15(a)(2). "[I]t is common ground that Rule 15 embodies a generally favorable policy toward amendments." Hill v. U.S. Dep't of Def. , 70 F.Supp.3d 17, 19 (D.D.C. 2014) (quoting Davis v. Liberty Mut. Ins. Co. , 871 F.2d 1134, 1136–37 (D.C. Cir. 1989) ); see also Harris v. Sec'y, U.S. Dep't of Veterans Affairs , 126 F.3d 339, 344 (D.C. Cir. 1997) (describing Rule 15(a)(2) as adopting a "generous standard"). In considering whether to grant leave to amend a pleading, a district court should consider factors "such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc." Foman v. Davis , 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).

As noted, the United States does not oppose two of the four proposed changes to Lazarenko's amended answer. The Court addresses each of Lazarenko's remaining proposed amendments in turn.

A. Changing a Denial to an Admission in Paragraph 81

The United States argues that Lazarenko waived any ability to admit to the allegation in paragraph 81 of the complaint that "the members of his family are ‘nominal’ beneficiaries" because he has disclaimed any beneficial ownership in the Balford Trust. First Opp. at 7–8. The United States also claims that Lazarenko's more than four-year delay in filing his motion for leave to amend his answer waived his opportunity to make the proposed changes, id. at 11–12, and that permitting the amendment would prejudice the United States by "unnecessarily broadening the scope of this litigation." Id. at 14. Finally, the United States argues that the amendment would be futile because no evidence adduced in discovery substantiates Lazarenko's beneficial interest in the Balford Trust.

The United States' waiver and futility arguments fail because Lazarenko's amendment does not assert his beneficial ownership in the Balford Trust. Rather, the amendment merely changes the statement, "[c]laimant denies the further allegation the [sic] members of his family are ‘nominal beneficiaries,’ " to the statement, "[c]laimant admits the further allegation the [sic] members of his family are ‘nominal’ beneficiaries." Compare Answer ¶ 81, with Proposed First Am. Answer ¶ 81. Indeed, both Lazarenko's original answer to paragraph 81 and his proposed amended answer omit any response to the United States' allegation in paragraph 81 in the complaint that alleges that "Lazarenko ... is the beneficial owner of the assets maintained in accounts XXXXX, XXXXX, and XXXXX at Credit Suisse (Guernsey) Limited." Am. Compl. ¶ 81 (...