United States v. All Assets Held At Credit Suisse (Guernsey) Ltd.

45 F.4th 426

UNITED STATES of America, Appellee

v.ALL ASSETS HELD AT CREDIT SUISSE (GUERNSEY) LIMITED, Account Numbers 41610 And 41950, in the name of Samante Limited as Trustees of The Balford Trust, Last Valued at Approximately $147.9 Million in United States Dollars, et al., Appellees

Pavel Lazarenko, Appellant

No. 20-5356

United States Court of Appeals, District of Columbia Circuit.

Argued December 2, 2021

Decided August 16, 2022

William H. Stassen argued the cause for appellant. With him on the briefs were Ian M. Comisky, Jed M. Silversmith, and David B. Smith. Barry W. Levine entered an appearance.

Emily Beckman was on the briefs for movant-intervenors in support of appellant.

Andrew C. Noll, Attorney, U.S. Department of Justice, argued the cause for appellee United States. With him on the brief was Daniel H. Claman, Attorney. Scott A. Meisler, Attorney, entered an appearance.

Before: Tatel,^* Katsas, and Jackson,^† Circuit Judges.

Katsas, Circuit Judge:

The government seeks the forfeiture of a trust established by Pavel Lazarenko, a former Prime Minister of Ukraine, located abroad on the island of Guernsey. Since 2004, a Guernsey court order has prohibited Lazarenko from accessing the trust, and a federal district court order has prohibited him from challenging the Guernsey order abroad. Lazarenko contends that the district court lacked statutory authority to issue the latter order and that, in any event, the order violated principles of international comity. We reject both challenges on procedural grounds.

I

A

Civil forfeiture actions allow the government to take property associated with criminal activity. Such actions are in rem : The property itself is named as the defendant and is, "by resort to a legal fiction, held guilty and condemned as though it were conscious." Various Items of Personal Prop. v. United States , 282 U.S. 577, 581, 51 S.Ct. 282, 75 L.Ed. 558 (1931). "Traditionally, the property had to be present within the court's territorial jurisdiction." United States v. All Funds in Acct. Nos. 747.034/278, 747.009/278, & 747.714/278 Banco Espanol de Credito , 295 F.3d 23, 25 (D.C. Cir. 2002) ( Banco Espanol ). Without possession of the property, a court would have "no power to enforce its decree." The Brig Ann , 13 U.S. (9 Cranch) 289, 291, 3 L.Ed. 734 (1815).

Congress altered this traditional rule in 1992. Now, if property located in a foreign country is subject to forfeiture under United States law, the federal government may bring a forfeiture action in our district court. 28 U.S.C. § 1355(b)(2). The district court thus may acquire in rem jurisdiction even if a forfeiture order would have no practical effect without cooperation by the foreign jurisdiction where the property is located. See Banco Espanol , 295 F.3d at 26–27.

In any civil forfeiture action, the government may seek interim relief to ensure that the property at issue remains available while the case is pending. Section 983(j)(1) of title 18 provides that in such an action, the district court "may enter a restraining order or injunction, require the execution of satisfactory performance bonds, create receiverships, appoint conservators, custodians, appraisers, accountants, or trustees, or take any other action to seize, secure, maintain, or preserve the availability of property subject to civil forfeiture."

Civil forfeiture proceedings are governed by the Supplemental Rules for Admiralty and Maritime Claims and Asset Forfeiture Actions (Supplemental Rules). Under these rules, a person asserting an interest in the property may file a claim in the forfeiture action, Supp. R. G(5)(a)(i), and the government may move to strike on the ground that the claimant lacks standing, id. G(8)(c)(i)(B). The Federal Rules of Civil Procedure do not apply to the extent that they are inconsistent with the Supplemental Rules. Id. A(2).

B

Pavel Lazarenko served in the Ukrainian government from 1992 to 1998, including as Prime Minister from 1996 to 1997. The government alleges that Lazarenko exploited his positions of authority to amass a $300 million fortune through fraud, extortion, bribery, misappropriation, and embezzlement. The government further alleges that Lazarenko laundered his illicitly obtained funds through United States financial institutions, in violation of U.S. law.

In 1997, Lazarenko established the irrevocable Balford Trust under the laws of Guernsey, a self-governing Crown Dependency of the United Kingdom. The trust beneficiaries are members of Lazarenko's family, including his daughters Ekaterina and Lecia. The government alleges that, by 1998, Lazarenko had transferred $121 million of ill-gotten funds to the trust. As of November 2017, the trust was worth over $176 million.

In 2001, a grand jury in the Northern District of California charged Lazarenko with 53 counts of money laundering, conspiracy, wire fraud, and transportation of stolen property. A jury convicted him on 14 counts, but the Ninth Circuit reversed as to six, leaving in place seven convictions for money laundering and one for conspiracy. United States v. Lazarenko , 564 F.3d 1026, 1047 (9th Cir. 2009).

In 2004, the government brought this civil action seeking the forfeiture of over $230 million held in overseas bank accounts, including the Balford Trust. The government invoked 18 U.S.C. § 981, which provides for the forfeiture of property traceable to federal money-laundering offenses. To preserve the defendant assets, the government sought a restraining order under section 983(j)(1). In May 2004, the district court found probable cause to believe that the assets were forfeitable, and it issued an order prohibiting Lazarenko and others "from attempting or completing any action that would affect the availability or value" of the Balford Trust and other defendant assets. Restraining Order, ECF Doc. 3, at 4–5. The United States then sought assistance from the Guernsey government, which applied to the Royal Court of Guernsey for an order restraining the Balford Trust and other defendant assets located in Guernsey. The Royal Court granted the application in July 2004, but its order provided that "any person affected by this Order may apply ... for the discharge or variation of this Order." App. to Mot. to Clarify Restraining Order, ECF Doc. 538-3, at 105.

Between 2004 and 2008, Lazarenko, his daughters, and others filed claims to the defendant property. Litigation dragged on for years. The government filed several motions to strike, and many discovery disputes arose.

In November 2015, Lazarenko asked the Guernsey court to lift its restraining order on the ground that the disputed assets were not forfeitable under Guernsey law. The government threatened Lazarenko with a contempt motion for violating the district court's restraining order. In response, Lazarenko asked the district court to clarify that its order did not bar him from challenging the Guernsey restraining order in Guernsey. The district court rejected the request, ruling that Lazarenko's filing in Guernsey violated "the plain language" of its order. United States v. All Assets Held at Bank Julius, Baer & Co., Guernsey Branch, Acct. No. 121128 , 244 F. Supp. 3d 188, 191 (D.D.C. 2017). Lazarenko stopped pursuing his Guernsey application.

In 2020, the district court struck Lazarenko's claim to the Balford Trust for lack of standing. United States v. All Assets Held at Bank Julius, Baer & Co., Guernsey Branch, Acct. No. 121128 , 480 F. Supp. 3d 1 (D.D.C. 2020). It reasoned that Lazarenko, as settlor of the irrevocable trust, had no concrete interest in the disposition of its assets. Id. at 16. In response to that ruling, Lazarenko moved to modify the district court's restraining order to allow him to litigate the forfeitability of the Balford Trust under Guernsey law in Guernsey. Lazarenko argued that the district court no longer had authority to restrain him because he was no longer a party with respect to the trust and that the order violated principles of international comity.

The district court denied the motion. The court held that its decision to strike Lazarenko's claim did not vitiate its power to enforce the restraining order. United States v. All Assets Held at Bank Julius, Baer & Co., Guernsey Branch, Acct. No. 121128 , 502 F. Supp. 3d 91, 102 (D.D.C. 2020). The purpose of the restraining order, the court explained, was "to preserve the availability of property subject to forfeiture during the pendency of the forfeiture proceedings." Id. (cleaned up). The court concluded that restraining Lazarenko still served that purpose because the Balford Trust would become unavailable to other claimants if he were to gain access to it through successful litigation in Guernsey. Id. Allowing Lazarenko to litigate abroad would thus prejudice the rights of other claimants. Id.

Lazarenko seeks review of the denial of his motion to modify the restraining order. Because that order has remained in effect for more than 14 days, it counts as an injunction immediately appealable under 28 U.S.C. § 1292(a)(1). In re Any & All Funds or Other Assets in Brown Bros. Harriman & Co. Acct. No. 8870792 , 613 F.3d 1122, 1125 (D.C. Cir. 2010). The district court's order refusing to modify the injunction was therefore itself immediately appealable.

C

Shortly after the district court struck Lazarenko's claim to the Balford Trust, the government moved to strike the daughters' claim as well. The daughters opposed the motion and filed a conditional cross-motion asking the district court to modify the restraining order to allow them to litigate in Guernsey should it strike their claim. The cross-motion raised the same arguments as Lazarenko's motion to modify, which the daughters incorporated by reference.

The district court granted the government's motion to strike, and it denied the daughters' cross-motion for the reasons set forth in its opinion denying their father's motion to modify. United States v. All Assets Held at Bank Julius Baer & Co., Guernsey...