United States District Court, District of Columbia
L. FRIEDMAN United States District Judge.
matter is before the Court on two separate but related
motions: (1) the motion of Claimant Pavel Lazarenko, a.k.a.
Pavlo Lazarenko (“Lazarenko”), for
reconsideration of the Court's January 10, 2017 Opinion
and Order that, inter alia, denied Lazarenko leave
to amend his answer to assert an Eighth Amendment excessive
fines affirmative defense, see United States v. All
Assets Held at Bank Julius, 229 F.Supp.3d 62 (D.D.C.
2017); and (2) the motion of Lazarenko's children,
Claimants Alexander, Ekaterina, and Lecia Lazarenko
(collectively, “children”), for leave to file an
Answer to the Amended Complaint, as permitted by the Court in
its January 6, 2017 Opinion. See United States v. All
Assets Held at Bank Julius, Baer & Co., Ltd., 228
F.Supp.3d 118 (D.D.C. 2017). The Court addresses the motions
together because both Lazarenko and the children seek to
assert an Eighth Amendment excessive fines affirmative
defense in their answers. See Lazarenko Proposed
Amended Answer ¶ 161 (May 1, 2015) [Dkt. 367-1];
Children's Proposed Answer ¶ 161 (Feb. 3, 2017)
[Dkt. 877-2]. The children also seek leave to supplement the
language they used in pleading two existing affirmative
defenses. The United States opposes both motions.
consideration of the parties' written submissions, the
relevant case law, and the entire record in this case, the
Court will grant Lazarenko's motion for reconsideration
and permit him to plead an Eighth Amendment excessive fines
affirmative defense and will grant the children's motion
for leave to file an Answer in part and deny it in part. It
will not permit the children to plead both the Eighth
Amendment excessive fines affirmative defense and the failure
to state a claim affirmative defense, but will permit them to
add supplemental language to their jurisdiction and probable
cause affirmative defenses.
FACTUAL AND PROCEDURAL BACKGROUND
Court has previously explained the facts relevant to
Lazarenko's attempts to amend his Answer in the January
10, 2017 Opinion and Order of which he seeks reconsideration.
See United States v. All Assets Held at Bank Julius,
229 F.Supp.3d at 66-67. Likewise, the facts relevant to the
United States' attempt to strike the children's claim
(and thereby foreclose them from filing an answer) are
contained in the Court's January 6, 2017 Opinion. See
United States v. All Assets Held at Bank Julius, Baer &
Co., Ltd., 228 F.Supp.3d at 120-22. Nonetheless, the
Count will review those facts central to resolving the
History Prior to the Instant Motions
14, 2004, the United States filed its initial Complaint in
this case, seeking forfeiture of, inter alia,
“[a]ll funds on deposit at Credit Suisse (Guernsey)
Limited, in account number 41610 in the name of Samante
Limited as Trustees of the Balford Trust.” Compl.
¶ 5(b) [Dkt. 1]. The Court will refer to the funds the
United States identified in paragraph 5(b) of the Complaint -
and the same funds with an additional account number in the
United States' Amended Complaint (June 30, 2005) [Dkt.
20] - as the “Samante assets.” On June 29, 2004,
the children filed a claim asserting their beneficial or
ownership interest only in the Samante assets. Children's
Verified Claim and Statement of Interest [Dkt. 4]. On the
same day, Lazarenko filed a claim asserting his ownership
interest in other assets. Lazarenko's Verified Claim and
Statement of Interest [Dkt. 5]. On August 13, 2004, the
children filed an Answer to the Complaint asserting five
affirmative defenses: (1) lack of jurisdiction, (2) failure
to state a claim, (3) lack of probable cause, (4) statute of
limitations, and (5) innocent interest - due process.
See Children's First Verified Answer
¶¶ 127-131 [Dkt. 8]. Lazarenko also filed his
Answer that same day. See Lazarenko's First
Verified Answer [Dkt. 9].
30, 2005, the United States filed its Amended Complaint as of
right, which remains the controlling complaint in this case.
See Amended Complaint [Dkt. 20]. On July 25, 2005,
Lazarenko's children filed a second Claim, again
asserting an interest only in the Samante assets.
See Children's Second Verified Claim and
Statement of Interest [Dkt. 28]. They never filed an answer
to the United States' Amended Complaint. United
States v. All Assets Held at Bank Julius, Baer & Co.,
Ltd., 228 F.Supp.3d at 121. On July 26, 2005, Lazarenko
filed a second Claim, see Lazarenko's Second
Verified Claim and Statement of Interest [Dkt. 29], and, on
November 21, 2011, filed his Answer to the United States'
Amended Complaint. See Lazarenko's Second
Verified Answer [Dkt. 268].
April 17, 2015 - almost ten years later - the United States
moved to strike the children's second Claim for lack of
standing and failure to file an answer. See United
States' Motion to Strike the Claim of Alexander Lazarenko
for Himself and as Agent for Lecia Lazarenko and Ekaterina
Lazareko [Dkt. 363]. On May 1, 2015, Lazarenko moved for
leave to amend his Answer to make several changes and add
affirmative defenses, one of which was an affirmative defense
that the forfeiture amount in this case represented an
excessive fine in violation of the Eighth Amendment to the
Constitution. See Claimant Lazarenko's Motion
for Leave to Amend Answer to Amended Complaint at 4 [Dkt.
367]. On April 21, 2016, the United States completed and
produced the expert report of Michael J. Petron, which
“analyze[s] the defendant properties in rem in
the First Amended Complaint, and trace[s] the source of
funds for each property through the international banking
system.” See Expert Report of Michael J.
Petron ¶ 1 at PDF page 59 [Dkt. 844-4] (hereafter,
“tracing report”); see also Lazarenko
Mot. at 2 (“[The United States] produced its expert
tracing report in April 2016.”). Lazarenko never sought
leave to file a supplemental brief concerning this tracing
report in support of his motion for leave to amend his
January 6, 2017, the Court denied the United States'
motion to strike the children's second Claim, finding
that “it should excuse claimants' failure to file
an answer to the amended complaint in this case because that
failure has not at all prejudiced the United States.”
United States v. All Assets Held at Bank Julius, Baer
& Co., Ltd., 228 F.Supp.3d at 126. The Court noted
that the United States in its Amended Complaint did not
substantially vary how it pleaded its claims related to the
Samante assets in its original complaint, adding only a
single bank account number; because the children had filed an
Answer to the original complaint there was no prejudice.
Id. The children's “failure to file an
answer to the amended complaint, therefore, did not cause the
United States to guess whether claimants asserted an interest
in any of the assets that appear only in the [A]mended
[C]omplaint.” Id. Finding no prejudice to the
United States by the children's' inaction, the Court
permitted the children to move for leave to file an answer,
but cautioned them as follows:
The United States is free to again raise the issue of
prejudice in its opposition to claimants' motion for
leave to file if, for example, claimants' answer (1)
varies the responses claimants made in their answer to the
original complaint for paragraphs that are identical in the
amended complaint, or (2) asserts an interest in the funds in
the three additional jurisdictions that the United States
added in the amended complaint.
Id. at 126 n.2.
January 10, 2017, the Court denied Lazarenko's motion for
leave to amend his Answer to, inter alia, assert an
Eighth Amendment excessive fines affirmative defense because
it concluded that such an amendment would be futile.
United States v. All Assets Held at Bank Julius
Baer & Co., Ltd., 229 F.Supp.3d at 71. The Court
first recounted the relevant legal principles governing the
Excessive Fines Clause of the Eighth Amendment. Id.
It then concluded that Lazarenko's proposed Eighth
Amendment excessive fines affirmative defense was futile
because the “forfeiture of roughly $250 million”
that the United States seeks in its Amended Complaint is not
grossly disproportional to the “‘more than $326
million in payments'” Lazarenko received as a
result of the criminal offenses of which he was convicted in
2004 following a jury trial in the United States District
Court for the Northern District of California. Id.
(quoting United States v. All Assets Held at Bank Julius
Baer & Co., Ltd., 571 F.Supp.2d 1, 3 (D.D.C. 2008)
(Opinion denying Lazarenko's motion to dismiss)).
The Instant Motions
moves for reconsideration of the Court's January 10, 2017
Opinion and Order because it (1) “relied on 
now-dated allegations” concerning the $326 million
amount of payments Lazarenko received from his crimes, and
(2) “did not have the benefit of the Government's
April 2016 tracing report.” Lazarenko Mot. at 2.
Lazarenko argues that the source of the $326 million figure -
this Court's 2008 Opinion denying Lazarenko's motion
to dismiss - preceded the Ninth Circuit's 2009 decision
vacating Lazarenko's convictions on six of 14 counts of
conviction, United States v. Lazarenko, 564 F.3d
1026 (9th Cir. 2009), as well as the 2009 determination of
Lazarenko's criminal fine and forfeiture in the United
States District Court for the Northern District of
California. Lazarenko Mot. at 2-3. Lazarenko also suggests
that the United States' tracing report - the accuracy of
which Lazarenko disputes - demonstrates that the in
rem defendant funds in this case contain only a fraction
of the allegedly “tainted” proceeds of
Lazarenko's crimes. Id. at 3-4.
United States concedes that this Court's January 10, 2017
Opinion and Order “inaccurately described the value of
the counts of conviction sustained on appeal, ” but
argues that the “severity and scale” of those
sustained convictions mean that a forfeiture of $250 million
is nevertheless not grossly disproportional. Opp. Lazarenko
at 4. The United States also states that Lazarenko waived any
excessive fines arguments beyond those related to the money
laundering counts. Id. at 5 n.1. With respect to the
tracing report, the United States contends that
Lazarenko's “commingled funds, ” Opp.
Lazarenko at 4-5, are forfeitable under 18 U.S.C. §
981(a)(1)(A), which permits civil forfeiture of “[a]ny
property, real or personal, involved in a transaction or
attempted transaction in violation of” specific federal
criminal statutes including the money laundering statute
contained at 18 U.S.C. §§ 1956-57. See United
States v. All Assets Held at Bank Julius, ___ F.Supp.3d
___, 2017 WL 1508608, at *2 (D.D.C. Apr. 27, 2017)
(explaining all of the United States' forfeiture claims
in greater detail). The United States argues that a
forfeiture of $250 million is “substantially
less” than the potential criminal fine Lazarenko faced
for money laundering and therefore is not grossly
disproportional. Opp. Lazarenko at 8.
children move for leave to file an answer to the United
States' Amended Complaint. Children Mot. at 2. Their
proposed answer includes an Eighth Amendment excessive fines
affirmative defense that did not appear in the children's
Answer to the United States' initial complaint in 2004,
as well as supplemental language they seek to add to the
jurisdiction and probable cause affirmative defenses ...