United States v. Brazile

• Decision Date: 15 September 2020
• Docket Number: Case No. 4:18-cv-00056 SEP
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. STEVEN M. BRAZILE and LORRAINE BRAZILE, Defendants.
• Court: U.S. District Court — Eastern District of Missouri

UNITED STATES OF AMERICA, Plaintiff,
v.
STEVEN M. BRAZILE and LORRAINE BRAZILE, Defendants.

Case No. 4:18-cv-00056 SEP

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

September 15, 2020

MEMORANDUM AND ORDER

This matter is before the Court on Plaintiff United States of America's Motion for Summary Judgment (Doc. [64]); Defendant Steven Brazile's Motion to Dismiss Party or, in the alternative, Motion for Summary Judgment (Doc. [72]); and three motions from Defendant Lorraine Brazile: Motion to Exclude Testimony of Summary Witness James Appelbaum (Doc. [68]), Motion to Exclude the Testimony of Maia Brodie (Doc. [69]), and Motion for Summary Judgment (Doc. [70]). These motions are all fully briefed and ripe for disposition.

I. BACKGROUND

On July 30, 2013, Steven Brazile ("Steven") pleaded guilty to one count of transportation of securities obtained by fraud, in violation of 18 U.S.C. § 2314. Doc [1] ¶ 8; United States v. Brazile, No. 1:13-CR-00560 (N.D. Ill.). Steven previously worked as a vice-president at the Sara Lee Corporation ("Sara Lee") where he approved false and fraudulent invoices for goods and services which were diverted to accounts he controlled. Doc. [1] ¶ 9. As part of Steven's plea agreement with the Government, he acknowledged that he owed restitution in the amount of $3,902,880.85. Id. The Government has a lien against Steven's property and rights to property under 18 U.S.C. § 3613(c) as a result of the judgment entered against him on November 13,

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2013, in the Northern District of Illinois. Id. ¶ 10. Upon completion of his term of imprisonment, the Northern District of Illinois transferred the criminal case to the Eastern District of Missouri, where Steven is on supervised release. Id. ¶ 12; United States v. Brazile, No. 4:17CR344 RLW (E.D. Mo.). According to the Government, Steven still owed $3,108,221.98 when the present case was initiated. Id. ¶ 11.

Before the entry of Steven's sentence and judgment, Lorraine Brazile ("Lorraine"), Steven's then-wife, filed a suit for dissolution of marriage in the Circuit Court of St. Louis County, Missouri, on July 25, 2013. Id. ¶ 16. On August 29, 2013, Defendants entered into a voluntary Property Settlement and Separation Agreement ("Agreement"), and the circuit court entered a final judgment of dissolution awarding Lorraine child support and a portion of Steven's pension benefits. Id. ¶¶ 17-18. On August 24, 2016, Defendants submitted a qualified domestic relations order ("QDRO") to the divorce court, which assigned Lorraine 100% of Steven's lump sum benefit amount and monthly annuity benefits. Id. ¶ 19. The QDRO similarly awarded Lorraine 100% of the Braziles' marital home on Vienna Avenue (the "Vienna property"). Id. ¶ 20.

In this case, the Government alleges that the state court judgment awarded Lorraine all the marital assets that were not subject to forfeiture, and that Defendants made that arrangement in order to avoid paying restitution in Steven's criminal case. Id. ¶¶ 16, 19-20, 22-24. In September of 2017—four years after their marital dissolution and 13 months after they submitted their QDRO assigning the disputed assets to Lorraine—probation officers conducted a home visit and discovered that Steven and Lorraine were living together with their children and were raising their kids together as a "family." Id. ¶ 28. The Government contends that this demonstrates the Defendants entered into a "sham divorce" to transfer assets to Lorraine that could otherwise have

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been used to pay victim restitution. Id. ¶ 29. The Government alleges fraudulent transfer in violation of 28 U.S.C. § 3304(a)(2) (Count I); fraudulent transfer in violation of 28 U.S.C. § 3304(b)(1)(A) (Count II); and fraudulent transfer in violation of 28 U.S.C. § 3304(b)(1)(B) (Count III).

On September 30, 2019, the parties filed dispositive motions and motions in limine. Steven moved to be dismissed as a party; Lorraine moved to exclude testimony from two of the Government's witnesses; and Steven, Lorraine, and the Government each moved for summary judgment.

II. DISCUSSION

A. Steven's Motion to Dismiss (Doc. [72])

Steven asks this Court to drop him as a party under Federal Rule of Civil Procedure 21. Rule 21 provides that "the court may at any time, on just terms, add or drop a party." Fed. R. Civ. P. 21. According to Steven, dropping him from this action would be just and appropriate because "[n]o relief is requested against [him]," and "[h]e claims no interest in this proceeding." Doc. [72] at 4. The Court disagrees.

The Government alleges that Steven has violated three provisions of the Federal Debt Collection Procedures Act ("FDCPA"). As a remedy, it asks this Court to void the final judgment and dissolution of property in Defendants' divorce case, enter judgment for the United States for the full value of the property transferred from Steven to Lorraine, and grant the United States a lien against all fraudulently transferred property such that it can seize that property immediately to pay Steven's restitution. By seeking dissolution of agreements to which he is a party, reversal of his transfer of assets to Lorraine, and seizure of the house he lives in as well as

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other assets that allegedly support him and his family—all in satisfaction of Steven's own debt—the Government most certainly seeks relief against Steven.

The Government also asks for "such other relief as may be appropriate and just." Doc. [1] at 9-11. The remedies section of the FDCPA, Section 3306, provides that the Court may award:

(1) avoidance of the transfer or obligation to the extent necessary to satisfy the debt to the United States;

(2) a remedy under this chapter against the asset transferred or other property of the transferee; or

(3) any other relief the circumstances may require.

28 U.S.C. § 3306(a)(1)-(3). Two of those three categories of remedy could directly implicate Steven. Section 3306(1) permits the Court to void the transfer of property from Steven to Lorraine, restoring Steven's rights in that property, which the Government could then seize. 28 U.S.C. §§ 3306(a)(1), 3613(c)). Alternatively, under Section 3306(3), this Court could order additional relief against Steven. See e.g., United States v. Sheehan, No. Civ.A.03-CV-6331, 2004 WL 2700348, at *6-7 (E.D. Pa. Nov. 23, 2004) (ordering under § 3306(3) that defendants execute documents to re-establish ownership rights as they existed prior to the fraudulent transfer). Because the United States's complaint seeks genuine relief against Steven, and the Court is empowered by statute to grant it if warranted, the suggestion that he has no interest in this litigation, or is somehow a nominal defendant, is baseless.

Steven contests this conclusion by arguing that transferors are not indispensable parties to fraudulent transfer actions. See Doc. [72] at 4; Doc. [90] at 2-3. That argument conflates two different questions: (1) whether the Court should exercise its discretion to dismiss Steven from

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the lawsuit under Rule 21; and (2) whether he is an indispensable party under Rule 19(b). Only (1) is at issue here; therefore, Steven's arguments related to Rule 19(b) are inapposite.¹

Given Steven's interest in the effect of this lawsuit on the amount of restitution he owes and how the Government collects it—not to mention his interest in the future ownership of his current residence—his claim to "no interest" in this litigation is implausible. Moreover, the Government's action arises from a series of events that Steven's own fraudulent misconduct set in motion. He is the central figure in the dispute. See Coan v. Dunne, No. 3:15-cv-00050 (JAM), 2019 WL 1513461, at *2 (D. Conn. Apr. 8, 2019) (refusing to drop defendant who was "a prime participant" in an allegedly fraudulent transfer).

Rule 21 is permissive and "gives the trial court a broad discretion in the matter of dropping or adding parties." Lohman v. Gen. Am. Life Ins. Co., 478 F.2d 719, 728 (8th Cir. 1973). This discretion is limited by the rule's requirement that it be exercised justly. See Standlund v. Hawley, 532 F.3d 741, 745 (8th Cir. 2008) ("[T]he 'discretion delegated to the trial judge to dismiss under Rule 21 is restricted to what is "just."'") (quoting DirecTV, Inc. v. Leto, 467 F.3d 842, 845 (3d Cir. 2006)). It is manifestly in the interest of justice that Steven remain a defendant in this lawsuit, and the Court sees no basis for dismissing him.²

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B. Lorraine's Motions in Limine

Lorraine filed two motions in limine to exclude testimony from the Government's witnesses. The first motion (Doc. [68]) seeks to exclude testimony from the Government's summary witness, James Appelbaum ("Mr. Appelbaum"), while the second (Doc. [69]) seeks to exclude testimony from the Government's expert witness, Maia Brodie ("Ms. Brodie").

1. James Appelbaum (Doc. [68])

The Government intends to call James Appelbaum as a summary witness. Mr. Appelbaum is a senior financial investigator who works on a contractual basis with the FBI. See Doc. [88-1] at 4:24-25.

The Government hired Mr. Appelbaum to review and summarize documents gathered from the Braziles' financial records. Id. at 10-11. Mr. Appelbaum divided these documents into three categories. Id. at 12. The first set consists of transaction details from accounts Steven and Lorraine maintained from 2006 to 2011, including accounts Steven used to defraud his former employer. Id. These documents are called the "Chicago Documents." Id. The second set consists of transaction details from the Braziles' "Oppenheimer accounts." Id. at 13. And the third set consists of transactions details from accounts the Braziles maintained from 2011 to 2019, which Mr. Appelbaum called the "Brazile accounts." Id. To aid his testimony, Mr. Appelbaum created summary exhibits of the underlying documents.

Lorraine poses two challenges to Mr. Appelbaum's expected testimony. First, she claims Mr. Appelbaum's summary exhibits of...