United States v. All Assets Held at Bank Julius, Baer & Co., 268 F. Supp. 3d 135

Background

In 2004 the United States filed a civil forfeiture action seeking roughly $250 million in assets (the “Samante assets” and others) allegedly traceable to Pavlo (Pavel) Lazarenko’s crimes; Lazarenko and his three children filed claims.
Lazarenko was criminally convicted on multiple counts; on appeal the Ninth Circuit affirmed some counts (including one conspiracy and seven money‑laundering counts) and vacated others.
In 2015 Lazarenko sought leave to amend his answer to assert an Eighth Amendment excessive‑fines affirmative defense; the Government produced an expert tracing report in April 2016.
In January 2017 the Court denied Lazarenko leave to amend as futile, relying in part on an earlier $326 million figure tied to pre‑appeal allegations; the Court also permitted the children to move for leave to file a late answer.
Lazarenko moved for reconsideration, arguing the Court had relied on outdated criminal‑proceeds figures and had not considered the 2016 tracing report. The children moved for leave to file an Answer that would add an excessive‑fines defense and supplement other defenses.
The Court (Judge Paul L. Friedman) granted Lazarenko reconsideration and allowed him to plead an Eighth Amendment excessive‑fines defense (subject to more factual specificity), but denied the children leave to assert a new excessive‑fines defense or a failure‑to‑state claim defense; it allowed the children to supplement their jurisdiction and probable‑cause defenses.

Issues

Issue	United (Plaintiff) Argument	Lazarenko / Children (Defendants/Claimants) Argument	Held
Whether Court should reconsider denial of Lazarenko’s motion to add an Eighth Amendment excessive‑fines defense	Reconsideration unwarranted; even corrected figures show convictions sustain a large forfeiture and tracing/commingling permit broad forfeitability	Court relied on outdated $326M figure and ignored tracing report; corrected figures (post‑appeal convictions) support an excessive‑fines defense	Reconsideration granted. Court erred to rely on the $326M figure; excessive‑fines defense is not futile and Lazarenko may amend, but he must plead more factual specificity.
Whether the Government’s April 2016 tracing report is “new evidence” warranting reconsideration	Tracing report does not change the futility analysis; funds are traceable/forfeitable	Tracing report is new evidence that undermines Government’s claimed linkage and shows less tainted funds among in rem assets	Tracing report is not treated as new evidence for purposes of reconsideration because it was available before the original ruling; Court nevertheless found amendment non‑futile for other reasons.
Whether the children should be allowed to file a late Answer adding an excessive‑fines defense	Allowing children to add excessive‑fines defense would prejudice Government by expanding discovery and raising owner culpability issues the Government never explored	Children seek to assert excessive‑fines and to supplement jurisdiction/probable‑cause defenses; contend late filing should be permitted without prejudice	Children denied leave to add an excessive‑fines defense (prejudice/discovery burden); granted leave to file answer in part and to supplement jurisdiction and probable‑cause defenses; denied leave to assert failure‑to‑state defense.
Adequacy of children’s pleaded affirmative defenses (Twombly/Iqbal and waiver arguments)	Several defenses are boilerplate and fail plausibility standards; some defenses waived by not pleading earlier	Children say their pleadings provide notice and they seek only to supplement prior defenses	Court assumed (without deciding) Twombly/Iqbal need not apply to affirmative defenses; under notice pleading: failure‑to‑state is futile given prior 2008 ruling; probable‑cause defense is adequate; supplemental language to jurisdiction and probable‑cause allowed.

Key Cases Cited

Browning‑Ferris Indus. of Vermont, Inc. v. Kelco Disposal, 492 U.S. 257 (1989) (Eighth Amendment “fine” understood as payment to sovereign as punishment)
United States v. Lazarenko, 564 F.3d 1026 (9th Cir. 2009) (appellate disposition of Lazarenko’s criminal convictions)
United Mine Workers of Am. 1974 Pension v. Pittston Co., 984 F.2d 469 (D.C. Cir. 1993) (timeliness/new‑evidence standards in reconsideration context)
Foman v. Davis, 371 U.S. 178 (1962) (standards for leave to amend)
Bell Atlantic v. Twombly, 550 U.S. 544 (2007) (heightened pleading standard analyzed)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard clarified)
Conley v. Gibson, 355 U.S. 41 (1957) (notice‑pleading standard)
Kapche v. Holder, 677 F.3d 454 (D.C. Cir. 2012) (Rule 8(c) notice function for affirmative defenses)