UNITED STATES OF AMERICA v. ALL FUNDS ON DEPOSIT AT
OPINION AND ORDER 367 granting in part and denying in part Claimant Pavel Lazarenko's Motion for Leave to Amend Answer to Amended Complaint; granting in part and denying in part 775 Claimant Lazarenko's Second Motion for Leave to Amend His Answer to the Amended Complaint; and Claimant Pavel Lazarenko shall file on the public docket on or before February 3, 2017 an amended answer consistent with this Opinion that includes changes to paragraphs 62, 81 and 160 but no new affirmative defenses. Signed by Judge Paul L. Friedman on January 10, 2017. (MA)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ALL ASSETS HELD AT BANK JULIUS, )
Baer & Company, Ltd., Guernsey
Branch, account number 121128, in the
Name of Pavlo Lazarenko et al.,
Defendants In Rem.
UNITED STATES OF AMERICA,
Civil Action No. 04-0798 (PLF)
OPINION AND ORDER
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
II. 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
The documents reviewed by the Court in resolving the pending motion include the
following: Complaint [Dkt. 1]; Amended Complaint (“Am. Compl.”) [Dkt. 20]; Pavel
Lazarenko’s Verified Claim and Statement of Interest or Right in Property Subject to Forfeiture
In Rem (“Claim”) [Dkt. 29]; Claimant Pavel Lazarenko’s Verified Answer to First Amended
Verified Complaint for Forfeiture In Rem (“Answer”) [Dkt. 268]; Claimant Pavel Lazarenko’s
Motion for Leave to Amend Answer to Amended Complaint (“First Mot.”) [Dkt. 367]; Claimant
Pavel Lazarenko’s Amended Answer (“Proposed First Am. Answer”) [Dkt. 367-1]; Plaintiff’s
Opposition to Claimant Pavel Lazarenko’s Motion for Leave to Amend Answer to Amended
Complaint (“First Opp.”) [Dkt. 401]; Claimant Pavel Lazarenko’s Reply in Support of His
Motion for Leave to Amend His Answer to the Amended Complaint (“First Reply”) [Dkt. 408];
July 29, 2016 Memorandum Opinion of Magistrate Judge G. Michael Harvey [Dkt. 751];
Claimant Pavel Lazarenko’s Second Motion for Leave to Amend His Answer to the Amended
Complaint (“Second Mot.”) [Dkt. 775]; Claimant Pavel Lazarenko’s Second Amended Answer
(“Proposed Second Am. Answer”) [Dkt. 775-1]; United States’ Opposition to Claimant Pavel
Lazarenko’s Second Motion for Leave to Amend His Answer to the Amended Complaint
(“Second Opp.”) [Dkt. 791]; and Claimant Pavel Lazarenko’s Reply in Support of His Motion
for Leave to Amend His Answer to the Amended Complaint (“Second Reply”) [Dkt. 833].
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 41610, 41950, and 41843 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 41610 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 41610 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 41610, 41950, and
41843 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 41610, 41950, and 41843.”
Id. ¶ 62.
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 (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 41610, 41950, and 41843 at Credit Suisse (Guernsey)
Limited.” Am. Compl. ¶ 81 (emphasis added). The question of whether Lazarenko has
“beneficial ownership” in the Balford Trust if his children are “nominal” beneficiaries of it has
not been resolved and is not addressed by the parties’ briefing on the instant motion. That legal
question is one that the parties should confront, if at all, in dispositive motions following
completion of discovery. For the time being, however, the Court reads Lazarenko’s proposed
amendment to paragraph 81 as continuing to not respond to the complaint’s allegation about his
own beneficial ownership, or not, in the Balford Trust. The United States’ waiver and futility
arguments therefore are inapposite.
With respect to undue delay and prejudice, the question is whether Lazarenko’s
decision to wait more than four years to seek to amend his answer constitutes undue delay
sufficient to deny leave to amend. “Perhaps in colloquial terms, [his decision] did.” United
States v. Honeywell Int’l, Inc., --- F.R.D. ----, 2016 WL 4074127, at *3 (D.D.C. July 29, 2016).
But the D.C. Circuit has held that “[t]he district court may not deny” a motion for leave to amend
a pleading “based solely on timeliness unless the defendants can [also] show undue prejudice.”
In re APA Assessment Fee Litig., 766 F.3d 39, 56–57 (D.C. Cir. 2014); see also Harrison v.
Rubin, 174 F.3d 249, 253 (D.C. Cir. 1999); In re Vitamins Antitrust Litig., 217 F.R.D. 30, 33
(D.D.C. 2003) (“[D]elay without resulting prejudice to [the non-moving party] is not sufficient to
warrant denial of [a] motion [to amend a pleading].”); CHARLES ALAN WRIGHT, ARTHUR R.
MILLER & MARY KAY KANE, 6 FED. PRAC. & PROC. CIVIL § 1488 (3d ed. April 2016) (“In most
cases, delay alone is not a sufficient reason for denying leave.”).
In order for a court to determine if the threat of prejudice to the opposing party is
“undue,” courts should consider “the hardship to the moving party if leave to amend is denied,
the reasons for the moving party failing to include the material to be added in the original
pleading, and the injustice resulting to the party opposing the motion should it be granted.”
CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, 6 FED. PRAC. & PROC. CIVIL
§ 1487 (3d ed. April 2016). “[T]he grant of leave to amend [a pleading] might often occasion
some degree of delay and additional expense, but leave still should be freely given unless
prejudice or delay is undue[.]” Barkley v. U.S. Marshals Serv. ex rel. Hylton, 766 F.3d 25, 39
(D.C. Cir. 2014) (internal quotation marks omitted). “Undue prejudice is not mere harm to the
non-movant but a denial of the opportunity to present facts or evidence which would have been
offered had the amendment been timely.” Does I through III v. District of Columbia, 815 F.
Supp. 2d 208, 215 (D.D.C. 2011) (internal quotation marks omitted). “[A]n amendment is not
automatically deemed prejudicial if it causes the non-movant to expend additional resources.
Any amendment will require some expenditure of resources on the part of the non-moving party.
‘Inconvenience or additional cost to a defendant is not necessarily undue prejudice.’” United
States ex rel. Westrick v. Second Chance Body Armor, Inc., 301 F.R.D. 5, 9 (D.D.C. 2013)
(quoting City of Moundridge v. Exxon Mobil Corp., 250 F.R.D. 1, 6-7 (D.D.C. 2008)). Indeed,
“if [a] court were to employ a policy of denying  leave to amend in every situation where an
amended [pleading] may result in additional discovery or expense, then [the] court would fail to
abide by the legal standard of granting leave ‘freely . . . when justice so requires.’” Hisler v.
Gallaudet Univ., 206 F.R.D. 11, 14 (D.D.C. 2002) (quoting FED. R. CIV. P. 15(a)(2)).
Here, allowing Lazarenko to amend his answer to change a denial to an admission
will not cause the United States undue prejudice. The United States does not suggest that
Lazarenko’s more than four-year delay (from November 21, 2011, when he filed his answer,
Dkt. 268, to May 1, 2015, when he moved for leave to amend) prejudiced it — let alone unduly
prejudiced it — for example, because key witnesses are no longer available, it cannot conduct
discovery, etc. Rather, it suggests that the undue prejudice results from the fact that it will
“hav[e] to take discovery on Plaintiff’s new meritless allegations.” First Opp. at 14. The Court
assumes that by “plaintiff” the United States means Lazarenko, but does not understand
Lazarenko’s proposed change to introduce any “new allegations.” Indeed, the Court fails to see
how Lazarenko admitting the United States’ own allegation could surprise or appear “new” to
the United States. Cf. Nwachukwu v. Karl, 216 F.R.D. 176, 180 (D.D.C. 2003) (“The plaintiff,
however, fails to realize that this change results in an admission by the defendant to the
allegation at issue, thereby causing no prejudice to the plaintiff.”) The parties will continue to
conduct discovery about Lazarenko’s beneficial ownership, or not, in the Balford Trust. The
voluminous amount of material already adduced in discovery on this issue (and appended to the
motion papers at issue here), however, is strong evidence that additional discovery on
Lazarenko’s change to paragraph 81 will not be nearly as burdensome as the United States
suggests. Whatever burden it occasions on the United States is not undue. See Butler v. White,
67 F. Supp. 3d 59, 68-69 (D.D.C. 2014).
In sum, the United States’ waiver and futility objections to Lazarenko’s change of
a denial to an admission in paragraph 81 fail because the change is not an assertion of beneficial
ownership in the Balford Trust. Lazarenko’s answer continues to remain silent in response to
that allegation in paragraph 81. Lazarenko’s change (and his delay in making it) will not cause
the United States undue prejudice, only the garden-variety prejudice that attends a party choosing
to concede an argument it previously contested during the course of litigation. The Court
therefore will grant Lazarenko’s motion for leave to amend his answer to change a denial to an
admission in paragraph 81. 2
The Court also will grant Lazarenko’s motions with respect to two changes the
United States does not oppose: (1) supplementing his existing due process affirmative defense
contained at paragraph 160 of the complaint; and (2) supplementing his response to paragraph 62
of the complaint.
With respect to paragraph 160, the United States contends only that Lazarenko
has “no facts to support this allegation and to show that it is plausible on its face.” First Opp. at
19. This contention mistakes the posture of the Lazarenko’s due process affirmative defense.
Lazarenko included this affirmative defense in his answer in 2011, Answer ¶ 160, and the United
States has not moved to strike the affirmative defense as insufficient under Rule 12(f) of the
Federal Rules of Civil Procedure. If anything, Lazarenko’s proposed supplement to his due
process affirmative defense makes it more plausible and less susceptible to a motion to strike.
See United States ex rel. Head v. Kane Co., 668 F. Supp. 2d 146, 150 (D.D.C. 2009) (district
courts should grant motions to strike affirmative defenses only “‘where it is clear that the
affirmative defense is irrelevant and frivolous and its removal from the case would avoid wasting
unnecessary time and money litigating the invalid defense’” (quoting Sec. & Exch. Comm’n v.
Gulf & Western Indus., Inc., 502 F. Supp. 343, 344 (D.D.C. 1980))).
B. Futility of Amendment to Add Affirmative Defenses
The D.C. Circuit has not addressed the standard by which judges in this district
should determine whether affirmative defenses in an answer are futile under Foman v. Davis.
With respect to the futility of claims in a complaint, however, it is clear that “[a] district court
may deny a motion to amend a complaint as futile if the proposed claim would not survive a
motion to dismiss.” Hettinga v. United States, 677 F.3d 471, 480 (D.C. Cir. 2012). Where a
plaintiff “‘could not allege additional facts that would cure the deficiencies in her complaint,’” a
district court acts within its discretion in denying leave to amend the complaint as futile. Rollins
v. Wackenhut Servs., Inc., 703 F.3d 122, 131 (D.C. Cir. 2012) (quoting Belizan v. Hershon, 434
F.3d 579, 584 (D.C. Cir. 2006)). In order to survive a motion to dismiss, a plaintiff must allege
enough facts in the complaint to show that each claim is “plausible,” as defined in Bell Atlantic
v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009). See Jewler v.
District of Columbia, --- F. Supp. 3d ----, 2016 WL 4098596, at *1 (D.D.C. July 28, 2016).
It is an open question in this circuit (and almost every other circuit) whether the
heightened plausibility pleading standard announced in Twombly and Iqbal applies to
affirmative defenses. See Paleteria La Michoacana v. Productos Lacteos, 905 F. Supp. 2d 189,
190 & n.1 (D.D.C. 2012). 3 Before Twombly and Iqbal, the so-called “notice pleading” standard
demanded that a complaint simply “give the defendant fair notice of what the plaintiff’s claim is
and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957) (quoting FED.
R. CIV. P. 8(a)(2)). At least two circuits recently have acknowledged the question but found it
Only the Seventh Circuit has issued a precedential holding on the question,
finding that Twombly and Iqbal only “restated the requirements of FED. R. CIV. P. 8” and “did
not revise the allocation of burdens concerning affirmative defenses” because neither case
“mentions affirmative defenses.” Davis v. Indiana State Police, 541 F.3d 760, 763-64 (7th Cir.
unnecessary to decide whether to apply the heightened plausibility pleading standard or the
former notice pleading standard to affirmative defenses as well as to claims. See, e.g., Jones v.
Bryant Park Mkt. Events, LLC, --- Fed. Appx. ---, 2016 WL 4258948, at *2 (2d Cir. Aug. 12,
2016); Depositors Ins. Co. v. Estate of Ryan, 637 F. App’x 864, 869 (6th Cir. 2016). Judge
Rudolph Contreras of this Court has thoroughly explained the various legal and policy arguments
surrounding whether to apply the heightened plausibility pleading requirement to affirmative
defenses; he concluded it was not appropriate to do so. Paleteria La Michoacana v. Productos
Lacteos, 905 F. Supp. 2d at 190-93.
The Court need not decide that question in this case. Because some of
Lazarenko’s new affirmative defenses are meritless as a matter of law, there is no need for the
Court to consider whether Lazarenko has pled sufficient facts to substantiate them. Where not
legally meritless, Lazarenko’s proposed affirmative defenses fail under either the heightened
plausibility pleading standard or the former notice pleading standard. As a result, it would be
futile to permit him to amend his answer to add those affirmative defenses.
1. Excessive Fine
The Eighth Amendment prohibits, among other things, the imposition of
excessive fines by the government. U.S. CONST. amend. VIII. “The touchstone of the
constitutional inquiry under the Excessive Fines Clause is the principle of proportionality: The
amount of the forfeiture must bear some relationship to the gravity of the offense that it is
designed to punish.” United States v. Bajakajian, 524 U.S. 321, 334 (1998). “‘A civil penalty
violates the Excessive Fines Clause [of the Eighth Amendment] if it ‘is grossly disproportional to
the gravity of’ the offense.’” Collins v. Sec. & Exch. Comm’n, 736 F.3d 521, 526 (D.C. Cir.
2013) (quoting United States v. Bajakajian, 524 U.S. at 334). In United States v. Bajakajian, the
Supreme Court considered four factors in weighing the gravity of the defendant’s offense:
“(1) the essence of the crime and its relation to other criminal activity; (2) whether the defendant
fit into the class of persons for whom the statute was principally designed; (3) the maximum
sentence and fine that could have been imposed; and (4) the nature of the harm caused by the
defendant's conduct.” Collins v. S.E.C., 736 F.3d 521, 526 (D.C. Cir. 2013).
There is no reasonable argument that the amount of forfeiture in this case is
“grossly disproportional” to the crimes of which Lazarenko was convicted in the Northern
District of California. The United States’ complaint seeks forfeiture of roughly $250 million
scattered throughout bank accounts located in Guernsey, Antigua & Barbuda, Switzerland,
Lithuania, and Liechtenstein. See All Assets I, 571 F. Supp. 2d at 2. In 2004, Lazarenko was
convicted of “eight counts of money laundering and money laundering conspiracy, five counts of
wire fraud, and one count of interstate transportation of property stolen, converted or taken by
fraud,” id. at 5, which resulted in him “receiv[ing] more than $326 million in payments from
various individuals and businesses through wire transfers occurring in the United States, while
reporting an income of less than $6,000 per year in 1996 and 1997,” id. at 3. Whether Lazarenko
still possesses any of that $326 million is not relevant because his “ability to pay is not a
component of the Eighth Amendment proportionality analysis.” Duckworth v. United States ex
rel. Locke, 705 F.Supp.2d 30, 48 (D.D.C. 2010). There are no facts that Lazarenko could add to
his excessive fine affirmative defense to convince the Court that the potential amount of the
forfeiture in this in rem proceeding (approximately $250 million) is “grossly disproportional” to
his criminal offenses because a jury has found that he received proceeds from his criminal
activity that are well in excess of the amount of forfeiture. The Court therefore concludes that it
would be futile to permit an amendment to add Lazarenko’s excessive fine affirmative defense.
2. Judicial Estoppel
“Judicial estoppel ‘prevents a party from asserting a claim in a legal proceeding
that is inconsistent with a claim taken by that party in a previous proceeding.’” Marshall v.
Honeywell Tech. Sys. Inc., 828 F.3d 923, 928 (D.C. Cir. 2016) (quoting New Hampshire v.
Maine, 532 U.S. 742, 749 (2001)). “Because the rule is intended to prevent improper use of
judicial machinery, judicial estoppel is an equitable doctrine invoked by a court at its discretion.”
New Hampshire v. Maine, 532 U.S. at 750 (internal quotation marks omitted). The Supreme
Court has enumerated three non-exhaustive factors that inform the Court’s decision of whether to
invoke the rule: (1) “a party’s later position must be clearly inconsistent with its earlier
position”; (2) “whether the party has succeeded in persuading a court to accept that party’s
earlier position, so that judicial acceptance of an inconsistent position in a later proceeding
would create the perception that either the first or the second court was misled”; and
(3) “whether the party seeking to assert an inconsistent position would derive an unfair
advantage or impose an unfair detriment on the opposing party if not estopped.” Id. at 750-51
(internal quotation marks omitted).
Unlike Lazarenko’s excessive fine affirmative defense, his judicial estoppel
offense may not be legally meritless. Lazarenko’s amended answer pleads it in such a bare
bones fashion, however, that it fails under either the heightened plausibility pleading standard or
the former notice pleading standard. Lazarenko’s motion in support of leave to file his amended
answer suggests but one concrete example of judicial estoppel: the United States claims now, in
alleged contradiction with its position in Lazarenko’s criminal case, “that the prices that the
Ukrainian Cabinet of Ministers paid in the prefabricated home sales ‘scheme’ were grossly
inflated.” Mot. at 4 n.4. As an initial matter, Lazarenko should have pled this example in his
proposed answer and not in the motion in support of leave to file. Even so, this assertion does
not demonstrate that the United States has taken “clearly inconsistent” positions because, by
Lazarenko’s own admission, “the government had previously not raised that issue in the criminal
case.” Mot. at 4 n.4. The Court concludes that it would be futile to permit Lazarenko to amend
his answer to add his bare bones judicial estoppel affirmative defense, which fails to identify
even one instance where the United States has taken inconsistent litigation positions between
Lazarenko’s criminal case and the present in rem action. 4
3. Undue Delay
Lazarenko’s undue delay affirmative defense fails as legally meritless because
there are no facts that Lazarenko could add that would support a claim that the United States has
engaged in undue delay in the filing of the complaint or in commencing discovery. The United
States filed this in rem action on May 14, 2004, roughly one month before a jury in United States
District Court for the Northern District of California found Lazarenko guilty of a variety of
criminal offenses. See All Assets I, 571 F. Supp. 2d at 4. The United States then filed its
amended complaint on June 30, 2005, see generally Am. Compl., more than a year before Judge
Charles Breyer of the United States District Court for the Northern District of California
sentenced Lazarenko for his crimes on August 25, 2006. See N.D. Cal. No. 00-cr-00284 [Dkt.
1054]. The United States therefore did not engage in undue delay in “the filing of the Amended
Complaint,” as Lazarenko pleads in his proposed amended answer. Proposed First Am. Answer
It is possible that Lazarenko could properly plead such inconsistencies, if they
exist, but he has not done so in either of the two pending motions to amend.
Lazarenko’s allegation that that the United States has unduly delayed in
“commencing discovery” also lacks merit. Lazarenko provides no supporting explanation for
this claim, and the Court is not inclined to comb the record for itself to document how the United
States has litigated discovery in this case. Suffice it to say that both parties have made strategic
choices about how to litigate this case that delayed the commencement of discovery and
lengthened the duration of discovery. Even if Lazarenko had pled more about how the United
States delayed in commencing discovery, he has not alleged that the delay prejudiced him in any
way. The Court therefore denies as futile Lazarenko’s motion for leave to amend his answer to
assert the affirmative defense of undue delay.
4. Collateral Estoppel
Under the collateral estoppel form of issue preclusion, “‘once a court has decided
an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the
issue in a suit on a different cause of action involving a party to the first case.’” Sheppard v.
District of Columbia, 791 F. Supp. 2d 1, 5 (D.D.C. 2011) (quoting Yamaha Corp. of Am. v.
United States, 961 F.2d 245, 254 (D.C. Cir. 1992)). This form of issue preclusion applies if three
conditions are met:
First, the issue must have been actually litigated, that is, contested by the parties
and submitted for determination by the court. Second, the issue must have been
actually and necessarily determined by a court of competent jurisdiction in the
first . . . [case]. Third, preclusion in the second . . . [case] must not work an
Otherson v. Dep’t of Justice, 711 F.2d 267, 273 (D.C. Cir. 1983) (internal citations and quotation
Lazarenko’s collateral estoppel affirmative defense has the same defects as his
judicial estoppel affirmative defense: he has pled it in such a bare bones fashion that it fails
under either the heightened plausibility pleading standard or the former notice pleading standard.
Lazarenko’s motion for leave to file his amended answer suggests that “the government seeks to
use Claimant’s Swiss conviction as evidence of his guilt in this case. [The Judge in Lazarenko’s
criminal trial] held that the conviction was inadmissible, and the government did not appeal that
decision.” Mot. at 4 n.3. Again, Lazarenko should have pled this example in his answer and not
in his motion for leave to file. Nonetheless, the Court is not persuaded that a decision in
Lazarenko’s criminal case precluding the United States from using a prior foreign conviction as
substantive evidence before the jury has any bearing on whether the United States can reference
that conviction in this in rem proceeding. The issue of whether the prior foreign conviction is
relevant in this proceeding is different from whether it is appropriate as substantive evidence in a
criminal jury trial. The Court therefore finds that permitting an amendment to the answer for
Lazarenko to add a collateral estoppel affirmative defense would be futile because he fails to
identify even one instance where the United States is seeking in the present in rem action to
relitigate an issue decided against it during Lazarenko’s criminal case.
5. Estoppel/Unclean Hands
Magistrate Judge G. Michael Harvey recently denied Lazarenko discovery of
“records of intergovernmental communications regarding [his] resettlement” because Lazarenko
never pleaded in his answer “unclean hands and specific performance defenses.” See United
States v. All Assets Held at Bank Julius Baer & Co., Ltd., --- F. Supp. 3d ----, 2016 WL
4082617, at *5-6 (D.D.C. July 29, 2016). Lazarenko’s second motion for leave to amend his
answer to assert the affirmative defense of “estoppel/unclean hands” is in direct response to that
Unclean hands “is a self-imposed ordinance that closes the doors of a court of
equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks
relief” and originates from “the equitable maxim that ‘he who comes into equity must come with
clean hands.’” Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814
(1945). “Essentially, the doctrine ‘really just means that in equity as in law the plaintiff’s fault,
like the defendant’s, may be relevant to the question of what if any remedy the plaintiff is
entitled to.’” Paleteria La Michoacana, Inc. v. Productos Lacteos Tocumbo S.A. DE C.V.,
--- F. Supp. 3d ----, 2016 WL 3034150, at *52 (D.D.C. May 27, 2016) (quoting Shondel v.
McDermott, 775 F.2d 859, 868 (7th Cir. 1985)).
It would be futile to permit Lazarenko to amend his answer to add an
estoppel/unclean hands defense because, as he readily admits, neither the United States nor his
attorneys signed the plea agreement and no agreement was reached. See United States v. All
Assets Held at Bank Julius Baer & Co., Ltd., --- F. Supp. 3d ----, 2016 WL 4082617, at *2 (“The
record contains a draft plea agreement signed by Claimant on November 22, 2002, but the
document was not signed by his attorneys or the government.”). Whatever representations the
government made during plea negotiations or in the plea agreement are a nullity because the
parties ultimately chose not to enter into the plea agreement and proceeded to trial. The Court
therefore denies as futile Lazarenko’s motion for leave to amend his answer to assert the
affirmative defense of estoppel/unclean hands. 5
The Court need not address, inter alia, the four additional reasons that Judge
Harvey posited as to why Lazarenko’s estoppel/unclean hands defense may be futile. United
States v. All Assets Held at Bank Julius Baer & Co., Ltd., --- F. Supp. 3d ----, 2016 WL
4082617, at *6-7.
For the foregoing reasons, it is hereby
ORDERED that Claimant Pavel Lazarenko’s Motion for Leave to Amend Answer
to Amended Complaint [Dkt. 367] is GRANTED IN PART and DENIED IN PART; it is
FURTHER ORDERED that Claimant Lazarenko’s Second Motion for Leave to
Amend His Answer to the Amended Complaint [Dkt. 775] is GRANTED IN PART and
DENIED IN PART; and it is
FURTHER ORDERED that on or before February 3, 2017, Claimant Pavel
Lazarenko shall file on the public docket, an amended answer consistent with this Opinion that
includes changes to paragraphs 62, 81, and 160 but no new affirmative defenses.
PAUL L. FRIEDMAN
United States District Judge
DATE: January 10, 2017
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?