United States v. All Funds on Deposit At ( 2021 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
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UNITED STATES OF AMERICA, )
)
Plaintiff, )
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v. ) Civil Action No. 04-0798 (PLF)
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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. )
____________________________________)
OPINION
This matter is before the Court on the motion [Dkt. No. 1256] of the United States
to strike the claims of Ekaterina Lazarenko and Lecia Lazarenko to the Balford Trust assets.
Upon consideration of the parties’ written submissions, the relevant legal authorities, and the
entire record in this case, the Court will grant the United States’ motion to strike. 1
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The documents reviewed in connection with the United States’ motion to strike
include: the verified complaint for forfeiture in rem (“Complaint”) [Dkt. No. 1]; the verified
claim and statement of interest by Alexander Lazarenko for himself and as agent for Lecia
Lazarenko and Ekaterina Lazareko (“First Claim”) [Dkt. No. 4]; answer by the Lazarenko
children (“Answer”) [Dkt. No. 8]; the first amended verified complaint for forfeiture in rem
(“Amended Complaint”) [Dkt. No. 20]; second verified claim and statement of interest by the
Lazarenko children (“Second Claim”) [Dkt. No. 28]; the United States’ motion to strike claimant
Pavel Lazarenko’s claim to all assets held in the Balford Trust (“Mot. Strike Pavel Lazarenko”)
[Dkt. No. 554]; the declarations of Alasdair Davidson (“Davidson Decl.”) [Dkt. No. 554-2] and
Gavin Ferguson (“Ferguson Decl.”) [Dkt. No. 554-3]; the United States’ appendix to its motion
to strike Pavel Lazarenko’s claim to the Balford Trust (“US App’x”) [Dkt. Nos 554-8
through 554-13]; the declarations of Nicholas Le Poidevin (“Le Poidevin Decl.”) [Dkt.
No. 729-1] and Nicholas J. Barnes (“Barnes Decl.”) [Dkt. No. 730]; Ekaterina Lazarenko’s
verified claim and statement of interest (“Ekaterina Claim”) [Dkt. No. 873]; Lecia Lazarenko’s
verified claim and statement of interest (“Lecia Claim”) [Dkt. No. 874]; the United States’
I. FACTUAL AND PROCEDURAL BACKGROUND
A. History of this Civil Forfeiture Proceeding
The Court’s prior opinions summarize the factual and procedural history of this
case, starting with the criminal prosecution of Mr. Pavel Lazarenko, also known as Pavlo
Lazarenko, in 2004 and continuing through this long-running in rem civil forfeiture proceeding.
See United States v. All Assets Held at Bank Julius Baer & Co., Ltd. (“All Assets XI”), Civil
Action No. 04-0798, 2020 WL 7640213, at *2 (D.D.C. Nov. 23, 2020) (collecting prior
opinions). In brief, Mr. Lazarenko was “a prominent Ukrainian politician who, with the aid of
various associates, was ‘able to acquire hundreds of millions of United States dollars through a
variety of acts of fraud, extortion, bribery, misappropriation and/or embezzlement’ committed
during the 1990s.” United States v. All Assets Held at Bank Julius Baer & Co., Ltd. (“All Assets
IV”), 959 F. Supp. 2d 81, 85 (D.D.C. 2013) (quoting Amended Complaint ¶¶ 1, 10).
B. The United States’ Motion to Strike the Lazarenko Children’s Claim to the Balford Trust
In May 2004, the United States filed an in rem civil forfeiture complaint seeking
forfeiture of, among other things, “[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.”
motion to strike the claims of Ekaterina Lazarenko and Lecia Lazarenko to the Balford Trust
(“Mot. Strike”) [Dkt. No. 1256]; the United States’ memorandum in support of its motion to
strike the Lazarenko daughters (“Mem. Mot. Strike”) [Dkt. No. 1256-1]; supplemental
declaration of Alasdair Davidson (“Davidson Supp. Decl.”) [Dkt. No. 1256-5]; the Lazarenko
daughters’ memorandum in opposition to the United States’ motion to strike and cross-motion to
modify the restraining order (“Opp.”) [Dkt. No. 1327]; the third declaration of Nicholas J.
Barnes (“Third Barnes Decl.”) [Dkt. No. 1328-1]; the United States’ reply in support of its
motion to strike the Lazarenko daughters (“US Reply”) [Dkt. No. 1351]; the United States’
appendix to its reply (“US Reply App’x”) [Dkt. No. 1351-2]; the United States’ opposition to the
Lazarenko daughters’ motion to modify the restraining order (“Opp. Modify”) [Dkt. No. 1352];
and the Lazarenko daughters’ reply in support of their motion to modify the restraining order
(“Lazarenko Daughters’ Reply”) [Dkt. No. 1361].
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Complaint ¶ 5(b). The next year, in June 2005, the United States filed an amended complaint
identifying an additional bank account in Guernsey, account number 41950, and increasing the
total Balford Trust assets sought to be forfeited to $147,919,401.13. Amended Complaint ¶ 5(b).
The amended complaint also identified an escrow account for the Balford Trust, account
number 41843, with £ 14,308.52 pounds sterling of the United Kingdom. Id. ¶ 5(c).
Alexander, Lecia, and Ekaterina Lazarenko (collectively, the “Lazarenko
children”) are “the three adult children of Pavel Lazarenko.” United States v. All Assets Held at
Bank Julius, Baer & Company, Ltd. (“All Assets VI”), 228 F. Supp. 3d 118, 121 (D.D.C. 2017).
On June 29, 2004, Alexander Lazarenko, “for himself and as agent and attorney-in-fact for Lecia
Lazarenko and Ekaterina Lazareko,” filed a pro se verified claim stating their interest in the
Balford Trust assets. See First Claim at 1. Alexander Lazarenko attached signed and notarized
power of attorney forms to the claim, indicating that Lecia and Ekaterina Lazarenko (the
“Lazarenko daughters”) each empowered him to “represent all [of their] right, title and interest in
the Balford Trust” in this litigation. Id. at 5. The claim asserted that the claimants “have a
present beneficial interest in” the Balford Trust assets based on their status as “beneficiaries of
the Balford Trust.” Id. at 3. In addition to their claim, the Lazarenko children – with the
assistance of counsel – filed a verified answer to the complaint. Answer ¶ 73.
Following the filing of the 2005 amended complaint, the Lazarenko children filed
a second pro se verified claim. The claim stated their interest in “[a]ll assets held at Credit
Suisse (Guernsey) Limited account numbers 41610 and 41950” because they are “the
beneficiaries of the Balford Trust . . . and thereby have a present beneficial interest in and right
to all said currency.” Second Claim at 3. Alexander Lazarenko again attached signed and
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notarized power of attorney forms. The Lazarenko children did not, at that time, file an answer
to the amended complaint.
In April 2015, the United States moved to strike the Lazarenko children’s claims
to the Balford Trust. All Assets VI, 228 F. Supp. 3d at 122. The United States argued that the
Lazarenko children lacked statutory standing because they failed to file an answer to the
amended complaint. Id. It further argued that Lecia and Ekaterina Lazarenko lacked statutory
standing because they failed to verify their claim. Id. The Court denied the United States’
motion, concluding that “it should excuse [the Lazarenko children’s] failure to file an answer to
the amended complaint in this case because that failure [had] not at all prejudiced the United
States.” Id. at 126. The Court also declined to strike the claims of Lecia and Ekaterina
Lazarenko because they had filed their claim in accordance with the procedural rules in effect at
the time their claim was filed. Id. at 126-27. The Court ordered the Lazarenko children to refile
their claims in accordance with subsequently enacted procedural rules. Id. at 127.
On February 1, 2017, each of the Lazarenko children filed an amended verified
claim and statement of interest. The claims of the Lazarenko daughters assert their interest in
“[a]ll assets held at Credit Suisse (Guernsey) Limited, account numbers 41610, 41950,
and 41843 in the name of Samante Limited as Trustees of the Balford Trust . . . .” Ekaterina
Claim at 1; Lecia Claim at 1. They further assert that the Lazarenko daughters’ “rights in the
property are set forth in the Declaration of Trust.” Ekaterina Claim at 1; Lecia Claim at 1.
In July 2019, the United States filed a motion for sanctions against Alexander
Lazarenko for failing to appear for a noticed deposition. See United States v. All Assets Held at
Bank Julius Baer & Co., Ltd., Civil Action No. 04-0798, 2019 WL 6970727, at *5 (D.D.C.
Sept. 5, 2019). The United States requested that Alexander Lazarenko’s claim be dismissed or,
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in the alternative, that he be required to appear for a deposition in Ukraine. Id. at *2. Magistrate
Judge Harvey issued a report and recommendation that concluded that “no sanction other than
dismissal of Alexander Lazarenko’s claims would be effective.” He therefore recommended that
the government’s motion for sanctions be granted in part and that Alexander Lazarenko’s claims
be dismissed. Id. at *9. This Court adopted and approved Magistrate Judge Harvey’s
recommendation and dismissed Alexander Lazarenko’s claim to the Balford Trust. United States
v. All Assets Held at Bank Julius Baer & Co., Ltd. (“All Assets VIII”), Civil Action
No. 04-0798, 2019 WL 6910067, at *1 (D.D.C. Dec. 19, 2019).
In January 2016, the United States moved to strike Pavel Lazarenko’s claim to the
Balford Trust assets. See Mot. Strike Pavel Lazarenko. The Court granted the United States’
motion in April 2020. See United States v. All Assets Held at Bank Julius (“All Assets
IX”), 480 F. Supp. 3d 1, 6 (D.D.C. 2020). The Court later denied Mr. Lazarenko’s motion for
reconsideration of its opinion and order striking his claim to the Balford Trust. See United States
v. All Assets Held at Bank Julius Baer & Co., Ltd., Civil Action No. 04-0798, 2020
WL 6591391, at *7 (“All Assets X”) (D.D.C. Nov. 11, 2020). The Lazarenko daughters
therefore are the only remaining claimants to the Balford Trust.
II. LEGAL FRAMEWORK
A. Motion to Strike
In a forfeiture action brought in rem pursuant to a federal statute, at any time
before trial, the United States “may move to strike a claim or answer . . . because the claimant
lacks standing.” SUPP. R. G(8)(c)(i)(B). Such a challenge to a party’s claim and answer “may be
presented . . . as a motion to determine after a hearing or by summary judgment whether the
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claimant can carry the burden of establishing standing by a preponderance of the evidence.”
SUPP. R. G(8)(c)(ii)(B).
Summary judgment is appropriate only if “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the movant is entitled to judgment as a matter of
law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); see Baumann v. District of
Columbia, 795 F.3d 209, 215 (D.C. Cir. 2015); FED. R. CIV. P. 56(a), (c). In making that
determination, the Court must view the evidence in the light most favorable to the non-moving
party and draw all reasonable inferences in its favor. Baumann v. District of Columbia, 795 F.3d
at 215; Anderson v. Liberty Lobby, Inc., 477 U.S. at 255. A disputed fact is “material” if it
“might affect the outcome of the suit under the governing law.” Talavera v. Shah, 638
F.3d 303, 308 (D.C. Cir. 2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. at 248). A
dispute over a material fact is “genuine” if it could lead a reasonable jury to return a verdict in
favor of the non-moving party. See Scott v. Harris, 550 U.S. 372, 380 (2007); Grimes v. District
of Columbia, 794 F.3d 83, 94-95 (D.C. Cir. 2015).
Although all reasonable inferences must be drawn in favor of the non-moving
party, that party’s opposition to the summary judgment motion must consist of more than mere
unsupported allegations or denials, and must instead be supported by affidavits, declarations, or
other competent evidence, setting forth specific facts showing that there is a genuine issue for
trial. See FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The
non-moving party is required to provide evidence that would permit a reasonable jury to find in
her favor. Laningham v. U.S. Navy, 813 F.2d 1236, 1241 (D.C. Cir. 1987). For the purposes of
the summary judgment motion, the specific facts as presented by the non-moving party “will be
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taken to be true.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992). If the non-movant’s
evidence is “merely colorable” or “not significantly probative,” summary judgment may be
granted. Anderson v. Liberty Lobby, Inc., 477 U.S. at 249-50; see also Scott v. Harris, 550 U.S.
at 380 (“[W]here the record taken as a whole could not lead a rational trier of fact to find for the
nonmoving party, there is ‘no genuine issue for trial.’”) (quoting Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
“Credibility determinations, the weighing of the evidence, and the drawing of
legitimate inferences from the facts are jury functions, not those of a judge at summary
judgment.” Barnett v. PA Consulting Grp., Inc., 715 F.3d 354, 358 (D.C. Cir. 2013) (quoting
Pardo-Kronemann v. Donovan, 601 F.3d 599, 604 (D.C. Cir. 2010)). “The inquiry performed [at
this phase] is the threshold inquiry of determining whether there is the need for a trial – whether,
in other words, there are any genuine factual issues that properly can be resolved only by a finder
of fact because they may reasonably be resolved in favor of either party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. at 250.
B. Standing in Civil Forfeiture Actions
“Civil forfeiture actions are brought against property, not people. The owner of
the property may intervene to protect his interest.” United States v. All Funds in Account
Nos. 747.034/278, 747.009/278, & 747.714/278 in Banco Espanol de Credito, Spain, 295
F.3d 23, 25 (D.C. Cir. 2002). Because the United States, rather than the claimant, is the plaintiff
and bears the burden of proving the property’s forfeitability, “[t]he function of standing in a
forfeiture action is . . . truly threshold only—to ensure that the government is put to its proof
only where someone with a legitimate interest contests the forfeiture.” United States v.
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$557,933.89, More or Less, in U.S. Funds, 287 F.3d 66, 79 (2d Cir. 2002); see also United States
v. $17,900 in U.S. Currency, 859 F.3d 1085, 1089-90 (D.C. Cir. 2017).
Civil forfeiture actions are governed by the procedures set forth in 18
U.S.C. § 983 and the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture
Actions (“Supplemental Rules”), a subset of the Federal Rules of Civil Procedure. When the
government files a complaint for forfeiture, “any person claiming an interest in the seized
property may file a claim asserting such person’s interest in the property in the manner set forth
in the Supplemental Rules.” 18 U.S.C. § 983(a)(4)(A); see also SUPP. R. G(5)(a).
When the government moves to strike a claim for lack of standing pursuant to
Rule G(8)(c) of the Supplemental Rules, the claimant has the burden of “establishing standing by
a preponderance of the evidence.” SUPP. R. G(8)(c)(ii)(B). “To prevail, a claimant must meet
both Article III and statutory standing requirements.” United States v. $17,900 in U.S.
Currency, 859 F.3d 1085, 1089 (D.C. Cir. 2017) (internal quotations omitted). “The term
‘statutory standing’ relates to a claimant’s ability to show that he has satisfied whatever statutory
requirements Congress has imposed for contesting a civil forfeiture action in federal court, while
‘Article III standing’ [or ‘constitutional standing’] relates to the claimant’s ability to show that he
has a sufficient interest in the property to satisfy the case-or-controversy requirement of
Article III of the Constitution.” United States v. 8 Gilcrease Lane, Quincy Fla. 32351, 641 F.
Supp. 2d 1, 5-6 (D.D.C. 2009) (citing Stefan D. Cassella, ASSET FORFEITURE IN THE UNITED
STATES: A TREATISE ON FORFEITURE LAW § 9-4 at 326 (2006)). Here, the United States argues
that the Lazarenko daughters lack only Article III, constitutional standing to contest forfeiture of
the Balford Trust. See Mem. Mot. Strike at 13-14, 26.
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Constitutional standing is one of the three “inter-related judicial doctrines”
that – along with the requirements of mootness and ripeness – “ensure that federal courts assert
jurisdiction only over ‘Cases’ and ‘Controversies.’” Worth v. Jackson, 451 F.3d 854, 855 (D.C.
Cir. 2006) (quoting U.S. CONST. art. III, § 2). Standing is an Article III requirement under which
the plaintiffs must show, at an “irreducible constitutional minimum,” that: (1) they have suffered
an injury in fact – the invasion of a legally protected interest; (2) the injury is fairly traceable to
the defendant’s conduct (a causal connection); and (3) a favorable decision on the merits likely
will redress the injury. See Lujan v. Defs. of Wildlife, 504 U.S. at 560-61; Worth v. Jackson,451
F.3d at 858. The alleged injury must be concrete and particularized and actual or imminent, not
conjectural, hypothetical, or speculative. See Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548
(2016); Lujan v. Defs. of Wildlife, 504 U.S. at 560-61; Worth v. Jackson, 451 F.3d at 858.
“Standing is a threshold consideration in all cases, including civil forfeiture
cases.” United States v. One-Sixth Share of Mass Millions Lottery Ticket (“United States v.
One-Sixth Share”), 326 F.3d 36, 40 (1st Cir. 2003). In the civil forfeiture context, the D.C.
Circuit has explained that “the requirements for a claimant to demonstrate constitutional standing
to challenge a forfeiture are very forgiving.” United States v. $17,900 in U.S. Currency, 859
F.3d at 1089 (citing United States v. Emor, 785 F.3d 671, 676 (D.C. Cir. 2015)) (alterations
omitted). “While some courts have focused on whether a party had an ownership or possessory
interest under state law at the time of forfeiture, other courts have noted [that] it is the injury to
the party seeking standing that remains the ultimate focus.” United States v. Emor, 785 F.3d
at 676 (internal citations omitted); see also United States v. 8 Gilcrease Lane, Quincy
Fla. 32351, 641 F. Supp. 2d at 6 (“[I]n a civil forfeiture case, a claimant’s constitutional standing
turns upon whether the claimant has a sufficient interest in the property to create a case or
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controversy.”) (citation omitted) (internal quotation marks omitted). “In general, any colorable
claim on the property suffices, if the claim of injury is “redressable, at least in part, by a return of
the property.” United States v. Emor, 785 F.3d at 676 (citation omitted).
The nature of a claimant’s asserted property interest is “defined by the law of the
State” – or here, nation – “in which the interest arose.” United States v. One Lincoln
Navigator, 328 F.3d 1011, 1013 (8th Cir. 2003); see also United States v. $100,348 in U.S.
Currency, 354 F.3d 1110, 1119 (9th Cir. 2004); United States v. One-Sixth Share, 326 F.3d
at 45. But while state law defines a claimant’s interest in specific property, “federal law
determines the effect of [that] interest on [the claimant’s] right to bring a claim.” United
States v. U.S. Currency, $81,000.00, 189 F.3d 28, 33 (1st Cir. 1999) (citing United States v.
Nat’l Bank of Com., 472 U.S. 713, 722 (1985)); see also United States v. 5 S 351 Tuthill
Rd., 233 F.3d 1017, 1021 (7th Cir. 2000) (“State law defines and classifies property interests for
purposes of the forfeiture statutes, while federal law determines the effect of the property interest
on the claimant’s standing.”); United States v. BCCI Holdings, Luxembourg, S.A., 69 F.
Supp. 2d 36, 57 (D.D.C. 1999) (same).
At the summary judgment stage, the question is “whether a fairminded jury could
find that the claimant had standing on the evidence presented.” United States v. $133,420.00 in
U.S. Currency, 672 F.3d 629, 638 (9th Cir. 2012). “[A] claimant must prove by a preponderance
of the evidence that he has a facially colorable interest in the res such that he would be injured if
the property were forfeited to the United States; otherwise, no case or controversy exists capable
of federal court adjudication.” United States v. $148,840.00 in U.S. Currency, 521
F.3d 1268, 1273 (10th Cir. 2008). Each claimant must therefore “point to some evidence in the
record that would allow a reasonable factfinder to conclude” that the claimant has “a cognizable
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interest in the assets potentially subject to forfeiture.” United States v. All Assets Held at Bank
Julius Baer & Co. (“All Assets II”), 664 F. Supp. 2d 97, 104-05 (D.D.C. 2009). When the
government moves to strike a claim because the claimant lacks standing, courts must not conflate
the standing inquiry “with the merits determination that comes later.” United States v. One-Sixth
Share, 326 F.3d at 41; see also United States v. One Lincoln Navigator, 328 F.3d at 1013; United
States v. $17,900 in U.S. Currency, 859 F.3d at 1091. “Although a claimant must make an initial
evidentiary showing of such an interest, a claimant need not definitively prove the existence of
that interest.” United States v. $148,840 in U.S. Currency, 521 F.3d at 1273; see also United
States v. $557,933.89, More or Less, in U.S. Funds, 287 F.3d at 79; United States v. 116
Emerson St., 942 F.2d 74, 78 (1st Cir. 1991).
“[S]tanding ‘must be supported . . . with the manner and degree of evidence
required at [each] successive stage[] of litigation.’” United States v. $17,900 in U.S.
Currency, 859 F.3d at 1090 (citing Lujan v. Defs. of Wildlife, 504 U.S. at 561). Further, “[a]
variety of property interests may serve as the basis for a claimant’s entitlement to contest a civil
forfeiture, including not only ownership but also possessory and other lesser forms of interest.”
All Assets IV, 959 F. Supp. 2d at 99. Accordingly, “[t]he type of interest claimed dictates the
type of evidence required to establish standing.” Id. at 99-100 (citing United States v. $148,840
in U.S. Currency, 521 F.3d at 1274).
C. The Balford Trust
The parties agree that the Lazarenko daughters’ legal rights and limitations with
respect to the Balford Trust are set forth in the declaration of trust. See Mem. Mot. Strike at 9;
Ekaterina Claim at 1 (stating that her “rights in the property are set forth in the Declaration of
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Trust”); Lecia Claim at 1 (same). The Balford Trust Declaration states that Guernsey law
governs the trust. Balford Trust Declaration (“Trust Decl.”) ¶ 2(a) [US App’x 219].
Under Guernsey law, a trust exists when a trustee “holds or has vested in
him . . . property which does not form . . . part of his own estate” either “for the benefit of
another person” – a beneficiary – or “for any purpose, other than a purpose for the benefit only
of the trustee.” See The Trusts (Guernsey) Law, 2007 (“Guernsey Trust Law”) § 1(a) [US
App’x 346]. The trust is created when the settlor – the person creating the trust – “transfers
assets to another person (known as a trustee) who is entrusted with legal title to the trust assets.”
See Offshore trusts, OGIER (Feb. 26, 2018), https://www.ogier.com/publications/offshore-trusts.
Upon creation of a trust in Guernsey, the settlor “divest[s] himself of legal ownership of the trust
assets.” Id. Pavel Lazarenko is the settlor of the Balford Trust. All Assets IX, 480 F. Supp. 3d
at 9. The corporate trustee, Samante Limited, is the legal owner of the Balford Trust. See Trust
Decl., Establishment Checklist [US App’x 215].
The trust declaration states that the trustees “shall stand possessed of the Trust
Fund and the income thereof” during the trust period. Trust Decl. ¶ 3 [US App’x 220]. The
trustees hold the trust fund for the benefit of four beneficiaries: Alexander, Tamara, Lecia, and
Ekaterina Lazarenko. Id., Establishment Checklist [US App’x 215]. The Balford Trust is
irrevocable, so no person or entity has the power to revoke the trust and have the funds revert to
the settlor. See id. ¶ 27 [US App’x 227]; All Assets IX, 480 F. Supp. 3d at 9.
The Balford Trust is a discretionary trust. See Davidson Decl. ¶ 37; Ferguson
Decl. at 5; Le Poidevin Decl. ¶ 17; Barnes Decl. ¶ 21. Under Guernsey law, a discretionary trust
is a form of trust in which “the shares of the funds distributed to the beneficiaries, if any, is
determined by the trustees in their sole discretion.” Davidson Supp. Decl. ¶ 7; see also Ferguson
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Decl. at 6 (“A discretionary trust . . . is a trust where the trustee has complete discretion as to
which of the beneficiaries should benefit, when and to what extent.”); JAMIE GLISTER & JAMES
LEE, HANBURY & MARTIN: MODERN EQUITY (“GLISTER & JAMES”), § 9-006 at 193 (20th
ed. 2015) (“The essential feature of a discretionary trust is that the property is conveyed to the
trustees to . . . apply the income or the capital or both for the . . . beneficiaries in such
proportions as the trustees shall, in their absolute discretion, think fit.”).
Consistent with Guernsey law, Samante Limited has broad discretion as trustees
under the terms of the Balford Trust: the trust declaration refers to the trustees’ “absolute
discretion” throughout the founding document. See, e.g., Trust Decl. ¶ 11(a) [US App’x 223]
(“The Trustees shall exercise the powers and discretions vested in them as they shall think most
expedient for the benefit of any of the persons actually or prospectively interested hereunder.”);
id. ¶ 11(b) [US App’x 223] (“[E]very discretion vested in the Trustees shall be absolute and
uncontrolled and every power vested in them shall be exercisable at their absolute and
uncontrolled discretion and the Trustees shall have the same discretion in deciding whether or
not to exercise any such power.”). This broad discretion extends to any decision relating to the
beneficiaries. The trustees may, for example, “exercise (or refrain from exercising) any power or
discretion for the benefit or any one or more of [the beneficiaries] without being obliged to
consider the interest of the others or other.” Id. ¶ 11(a) [US App’x 223]. They may also “at any
time . . . declare that any person . . . shall cease to be a Beneficiary.” Id. ¶ 7(b) [US App’x 222].
And they may “add to the class of Beneficiaries such one or more persons or charities . . . as
[they] shall in their absolute discretion determine.” Id. ¶ 8(a) [US App’x 222]. The trustees’
ability to add beneficiaries means that the class of beneficiaries is an open class. See Le
Poidevin Decl. ¶ 18.
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The trustees’ vast discretion also extends to distributions of income and capital.
The trust declaration states that the trustees are empowered
to pay[,] appropriate[,] or apply the whole or such part of the income
of the Trust Fund as the Trustees may in their absolute discretion
think fit to or for the maintenance or otherwise for the benefit of all
or such one or more exclusive of the other or others of the
Beneficiaries in such shares and proportions if more than one and
generally in such manner as the Trustees shall in their absolute
discretion think fit.
Trust Decl. ¶ 3(a) [US App’x 220] (emphasis added). In other words, “it is in the Trustees’ sole
discretion to decide (in accordance with fiduciary obligations) what, if anything, any particular
beneficiary will enjoy whether during the existence of the Trust or at its termination.” Davidson
Decl. ¶ 38.
The Balford Trust is set to last for the maximum time permitted by Guernsey law,
a duration of 100 years. See Trust Decl. ¶ 1(m)(i) [US App’x 219]; Guernsey Trust Law § 16(2)
[US App’x 362]. The trustees may, in their discretion, fix an earlier date for the trust to expire.
See Trust Decl. ¶ 1(m)(ii) [US App’x 219]. At the expiration of the trust period, the trustees may
apply
both capital and income of the Trust Fund for all or such one or more
exclusive of the other or others of the Beneficiaries in such shares
and proportions if more than one and generally in such manner as
the Trustees shall prior to or on the date of such expiration in their
absolute discretion determine.
Trust Decl. ¶ 3(c) [US App’x 220] (emphasis added). To the extent that the trustees do not
distribute the trust assets before or at the end of the trust period, the assets go the beneficiaries
“in equal shares absolutely.” Id.; see also Le Poidevin Decl. ¶ 19(2) (“At the end of the Trust
Period, the capital and undistributed income is to go to one or more of the Beneficiaries, being
shared out as the trustee in its absolute discretion determines, or to the extent that the trustee does
14
not determine on such a distribution, then to all beneficiaries then in existence in equal shares
(clause 3(c)).”). Any trust property not distributed to the beneficiaries shall be distributed to
“such charities as the Trustees shall in their absolute discretion determine.” Trust Decl. ¶ 3(d)
[US App’x 220]. And any trust property not distributed to the beneficiaries or to the charities
determined by the trustees shall go to “[t]he United Nations Educational Scientific and Cultural
Organization” (UNESCO). Id. ¶ 3(e) [US App’x 220]. While “the trustee[s] may exhaust the
trust fund by exercising one or more of” these powers, “no beneficiary has a right to demand
such an exercise.” Le Poidevin Decl. ¶ 23.
“Notwithstanding anything . . . conferring an absolute or uncontrolled discretion
on the Trustees,” however, certain powers and discretions “shall only be exercisable by the
Trustees with the prior or simultaneous written consent of the Protector.” Trust Decl. ¶ 19(a)
[US App’x 225]. The trust declaration lists Pavel Lazarenko as the Protector of the Balford
Trust. Id., Fifth Schedule [US App’x 228]. Guernsey law does not reference a trust “protector,”
but both parties’ experts say this role likely falls under the Guernsey law’s “trust official”
definition, allowing for a person to have a function in the trust other than as settlor, trustee,
enforcer, or beneficiary. Guernsey Trust Law § 80(1) [US App’x 406]; see Davidson Decl. ¶ 18;
Le Poidevin Decl. ¶ 31. The Balford Trust specifies that certain “[p]owers and discretions of the
Trustees . . . require the consent of the Protector.” Trust Decl., Fourth Schedule [US App’x 228].
The specific powers for which the trustees must seek consent from the Protector before
exercising their discretion are:
Clause 1(m)(ii): bringing forward the end of the Trust period,
Clause 2(b): changing the governing law of the Trust,
Clause 3(a): appropriating the whole or part of the income of the
Trust fund to one or more of the beneficiaries,
15
Clause 3(c): determining which shares or proportions of the capital
income of the Trust fund should be held for the beneficiaries
upon the expiration of the Trust,
Clause 3(d): determining which charity capital and income of the
Trust should be held for,
Clause 4: appointing and advancing the Trust fund or any part of it
to the beneficiaries,
Clause 7: excluding beneficiaries,
Clause 8: adding beneficiaries,
Clause 15(a): appointing new or additional Trustees, and
Clause 24: varying all or any of the trust powers and provisions of
the Declaration of Trust.
See id., Fourth Schedule [US App’x 228]. If the trustees request consent in writing, but do not
receive “written consent or refusal of the Protector within 30 days . . . then the Protector shall be
deemed to have consented.” Id. ¶ 19(a) [US App’x 225].
The trustees, moreover, are still bound by a duty to exercise their discretion.
GLISTER & JAMES, § 9-020; see Third Barnes Decl. ¶ 28 (“Although their prospects of benefiting
from the Trust are dependent on the Trustees’ discretion, that discretion must be exercised
rationally and in the interest of the Beneficiaries.”). A beneficiary with an interest in a
discretionary trust, therefore, has a right to “compel the due administration of the trust; a prima
facie right to obtain information and accounts from the trustees; and a right to bring a claim for
breach of trust.” LYNTON TUCKER ET AL., LEWIN ON TRUSTS § 1-061 (20th ed. 2019). A
beneficiary, however, may not “necessarily benefit by the performance of the trustees’ duty; as it
is a duty, not to pay to that beneficiary, but to exercise their discretion.” Id.
16
D. Interests of Discretionary Beneficiaries Under Guernsey Law
“A beneficial interest under a trust is certainly personal property belonging to a
beneficiary that, subject to the terms of the trust concerned, can be disposed of how [the
beneficiary] wishes.” Davidson Supp. Decl. ¶ 16.
This means that, for example, a beneficiary with a beneficial fixed
or life interest in a trust could pledge the interest to secure a loan or
even sell it to a third party. That life interest though, would have a
readily assessable value (for example the right to the income from
an estate or other trust property for the life of the beneficiary) which
may be attractive to a third party purchaser. However, whilst a
discretionary interest may be similarly dealt with it would not have
the same readily assessable value.
Id. ¶ 18. This is because while the interest of a beneficiary of a discretionary trust may be
characterized as “personal property,” All Assets IX, 480 F. Supp. 3d at 9, the beneficiary’s
interest in such a trust under Guernsey law is a “mere ‘hope’ that a trustee may exercise its
discretion to make a distribution in favour of a beneficiary,” Davidson Supp. Decl. ¶ 18. See
also APPLEBY, GUIDE TO TRUSTS IN GUERNSEY ¶ 4.1 (2014) [Dkt. No. 554-10] (stating that
beneficiaries of a discretionary trust “have . . . merely a hope that the trustees will exercise their
discretion for their benefit”); Hon. Sir Anthony Mason, Discretionary Trusts and Their
Infirmities, 20 TRUSTS & TRUSTEES 1039, 1045 (2014) (“[B]y reason of the uncertain scope of
the distribution which may be made in favour of any given beneficiary, a beneficiary . . . [has
only] an expectancy or mere possibility of a distribution.’”).
A discretionary beneficiary’s interest therefore “does not amount to any form of
direct right or proprietary interest to the underlying assets irrespective of the fact that the
discretionary interest itself is personal property belonging to the beneficiary.” Davidson Supp.
Decl. ¶ 18; see also TUCKER ET AL., § 1-062. Instead, a discretionary beneficiary only has a right
“to be considered to benefit when the trustee exercises its discretion.” OGIER, Offshore Trusts;
17
see also TUCKER ET AL., § 1-061 (stating that a beneficiary “has a right to be considered as a
potential recipient of benefit by the trustees and a right to have his interest protected by a court of
equity”); see, e.g., United States v. All Assets Held in Account No. XXXXXXXX in name of
Doraville Properties Corp. (“United States v. Doraville Properties”), 299 F. Supp. 3d 121, 135
(D.D.C. 2018) (concluding that discretionary beneficiaries had only “an expectancy interest in
the favorable exercise of discretion by the trustee”).
III. DISCUSSION
The United States moves to strike the claims of the Lazarenko daughters to the
Balford Trust, arguing that they lack constitutional, Article III standing because they have no
property or proprietary interest in the Balford Trust. Mem. Mot. Strike at 2, 17. The United
States further argues that any interest the Lazarenko daughters may have in the Balford Trust is
too remote and contingent to satisfy Article III standing requirements. Id. at 2, 16. The
Lazarenko daughters contend that their status as discretionary beneficiaries gives them a
constitutionally cognizable interest in the Balford Trust. Opp. at 1-2.
To establish constitutional standing and defeat the United States’ motion to strike,
the Lazarenko daughters must show by a preponderance of the evidence that (1) their status as
beneficiaries of a discretionary trust confers on them an interest in the Balford Trust under
Guernsey law, and (2) a claimant with that interest in the Balford Trust has standing under U.S.
federal law. See All Assets IX, 480 F. Supp. 3d at 16. The Court will take each issue in turn.
A. The Lazarenko Daughters’ Interest in the Balford Trust
The Lazarenko daughters are discretionary beneficiaries of the Balford Trust. As
discretionary beneficiaries, during the life of the trust, the Lazarenko daughters have “no
proprietary right to the Trust property, only a right to be considered by the Trustees to benefit.”
18
Ferguson Decl. at 7 (citing Trust Decl. ¶ 3 [US App’x 220]); see also Third Barnes Decl. ¶ 21
(“None of the Beneficiaries has a right to a distribution of any particular amount . . . or to any
distribution.”). And because the trustees of the Balford Trust have broad discretion with regard
to distributions of income and capital, the Lazarenko daughters have only a “hope” of receiving
anything under the trust. See APPLEBY, GUIDE TO TRUSTS IN GUERNSEY ¶ 4.1. They have an
interest, therefore, not in the actual trust assets, but in “the favorable exercise of discretion by the
trustee.” See United States v. Doraville Properties, 299 F. Supp. 3d at 135. The Lazarenko
daughters therefore do not have a present, vested property interest in the Balford Trust. Instead,
they have an “expectancy interest” in the trustees’ discretion. See id.
The Lazarenko daughters also have an interest in the Balford Trust based on
paragraph 3(c) of the trust declaration. That provision provides:
At the expiration of the Trust Period[,] Upon Trust as to both capital
and income of the Trust Fund[,] for all or such one or more[,]
exclusive of the other or others of the Beneficiaries[,] in such shares
and proportions if more than one and generally in such manner as
the Trustees shall[,] prior to or on the date of such expiration in their
absolute discretion determine[,] and in default of and subject to such
determination Upon Trust for such of the Beneficiaries as shall then
be in existence[,] and if more than one[,] in equal shares
absolutely[.]
Trust Decl. ¶ 3(c) [US App’x 220]. In other words, at the end of the trust period, the remaining
trust funds must go to then-surviving beneficiaries in equal shares. See Le Poidevin Decl. ¶ 54;
Davidson Supp. Decl. ¶ 14. At the time this provision becomes operative, therefore, the
Lazarenko daughters’ interest in the defendant assets will be fixed. See Le Poidevin Decl. ¶ 54.
A beneficial interest is “fixed” when there is “no discretion in the trustee or any other person to
vary . . . the quantum of [the beneficiaries] interests.” Mason, supra, at 1044. Right now,
however,
19
[t]hose interests . . . are both remote and fragile. They are remote
because they fall into possession only at the end of the Trust Period.
They are fragile because, as to each Beneficiary, (i) the interest is
contingent on his or her survival to the end of the Trust Period, (ii)
the trust fund may by then have been partly or wholly distributed
under the trustee’s prior dispositive powers, (iii) the Beneficiary
may have been excluded by an exercise of the power of exclusion
and (iv) even at the end of the Trust Period the trustee has a prior
power to discriminate between the surviving Beneficiaries, so the
interest may be defeated by an exercise of that power.
Le Poidevin Decl. ¶ 54. The Balford Trust will not expire until 100 years after the date it was
settled, unless the trustees exercise their “absolute discretion” to fix an earlier expiration date or
to distribute all of the income of the trust fund before 100 years have elapsed. See Trust Decl.
¶¶ 1(m)(i)-(ii), 3(a) [US App’x 220]; Guernsey Trust Law § 16(2) [US App’x 362]. In sum, the
Lazarenko daughters must contend with numerous uncertainties to have even a chance of
receiving a distribution at the end of the life of the trust. The Lazarenko daughters’ interest
therefore is “no more than a contingent remainder, if that.” Mason, supra, at 1045.
The Lazarenko daughters also argue that they have an interest in the Balford Trust
based on their “substantive rights” under Guernsey law to (1) demand information from the
trustees, (2) send letters of wishes to the trustees, and (3) bring legal action regarding any aspect
of the trust. Opp. at 10-12 (citing Guernsey Trust Law §§ 26, 38, 69). They state that these
statutory rights empower them to “impact every conceivable issue of the Trust.” Id. at 10. But
the Lazarenko daughters’ ability to influence the trust pursuant to Sections 26, 38, and 69 of
Guernsey Trust Law does not give them an interest in the defendant assets.
This Court previously has concluded that “[t]he ability to write a letter of wishes
[is] . . . merely a ‘suggestion’ that does not constitute control over the Balford Trust indicative of
an ownership interest.” All Assets IX, 480 F. Supp. 3d at 21. And the Lazarenko daughters have
produced no evidence to show that the trustees have ever acquiesced to any letter of wishes,
20
much less that letters of wishes written by the Lazarenko daughters would be binding on the
trustees. See id. at 20-21 (concluding that Pavel Lazarenko did not have authority over the
Balford Trust based on his ability to write letters of wishes because those letters were not binding
on the trustees). The Court therefore sees no reason to vary from its earlier conclusion. The
Court has also previously concluded that having the right to sue under Section 69 of Guernsey
Trust Law does not support an interest in the Balford Trust. The Court reasoned that “[i]f the
ability to go to court under Section 69 conferred standing, anyone could legitimately claim to
have standing as a claimant for the Balford Trust.” Id. Again, the Court sees no reason why it
should vary from this conclusion now. Finally, the Court concludes that while the Lazarenko
daughters do have a right to demand information from the trustees, this right does not support an
interest in the defendant assets. Simply having access to information about the assets does not
mean that the Lazarenko daughters control those assets or the trustees’ discretion with regard to
the assets. Access to information merely guarantees that the beneficiaries can stay abreast of
how the trustees choose to exercise their control over the assets. See United States v. Doraville
Properties, 299 F. Supp. 3d at 134 (concluding that beneficiaries’ ability to demand information
and an accounting from the trustee “says nothing about whether claimants have any colorable
interest in specific assets of the trust”); see id. at 136 n.18. 2
2
The Lazarenko daughters note that, pursuant to an agreement between the United
States and Guernsey, the trustees of the Balford Trust have “reporting obligation to identify
Ekaterina and Lecia Lazarenko to the IRS, irrespective if they receive a distribution.” They
contend that the United States’ belief “that discretionary beneficiaries under Guernsey law have
sufficient property interests to require foreign financial institutions to turn over their names to the
IRS” establishes standing. Opp. at 18. As the Court previously held with respect to Pavel
Lazarenko, the Lazarenko daughters “cannot bypass the requirement to determine [their] interest
in the Balford Trust under Guernsey law – the nation in which the interest arose – by looking
instead at U.S. tax treatment of the Balford Trust.” All Assets IX, 480 F. Supp. 3d at 27.
21
This Court concludes that the Lazarenko daughters have two interests in the
Balford Trust. The first is an interest in a favorable exercise of discretion by the trustees. The
second is an interest in an equal share of any remaining trust corpus at the end of the trust term.
The Court will now turn to the question of whether these interests are too remote and contingent
to satisfy constitutional standing requirements.
B. Standing Under U.S. Law
Again, in the civil forfeiture context, a claimant may establish standing if she
asserts “any colorable claim on the property” as long as the claim of injury is “redressable, at
least in part, by a return of the property.” United States v. Emor, 785 F.3d at 676. The alleged
injury must be “concrete and particularized and actual or imminent, not conjectural, hypothetical
or speculative.” All Assets IX, 480 F. Supp. 3d at 12. Such colorable claims are “typically
[based on] an ownership or possessory interest.” United States v. $17,900 in U.S. Currency, 859
F.3d at 1090.
Some circuits have held that other lesser forms of interest “may serve as the basis
for a claimant’s entitlement to contest forfeiture.” All Assets IV, 959 F. Supp. 2d 81 at 99; see,
e.g., United States v. 5 S 351 Tuthill Rd., 233 F.3d at 1022 (holding that the beneficiary of a land
trust where the land could be sold “with or without consideration” had standing based on his
fixed interest in any future proceeds of unknown value); United States v. $515,060.42 in U.S.
Currency, 152 F.3d 491, 498 (6th Cir. 1998) (“A property interest less than ownership may also
be sufficient to create standing.”); United States v. $191,910.00 in U.S. Currency, 16 F.3d 1051,
1057 (9th Cir. 1994) (“In order to contest a forfeiture, a claimant . . . need not [have] an
ownership interest; it can be any type of interest, including a possessory interest.”). The D.C.
Circuit, however, has not yet said whether interests more remote than ownership or possessory
22
interests would be sufficient to establish standing under U.S. law. See All Assets IX, 480 F.
Supp. 3d at 16-17 (citing United States v. $17,900 in U.S. Currency, 859 F.3d at 1090).
The United States argues that the Lazarenko daughters’ interests are too
contingent and remote to support standing in this civil forfeiture action because the Lazarenko
daughters cannot show that they will ever receive a distribution from the Balford Trust. Mem.
Mot. Strike at 20-21; US Reply at 7. The United States relies in part upon United States v.
Doraville Properties, which also concerned an in rem civil forfeiture action. In that case, eight
claimants asserted an interest in the defendant assets pursuant to their status as the beneficiaries
of two trusts. United States v. Doraville Properties, 299 F. Supp. 2d at 124-25. The trusts were
irrevocable, discretionary trusts governed by the laws of Singapore. Under Singapore law, a
trustee of a discretionary trust “is typically given the authority in the trust deed to determine
whether to apply trust assets for the benefit of beneficiaries.” Id. at 125. And under the terms of
the trusts, the trustee was empowered to
pay or apply the income of the Trust Fund to or for the benefit of all
or such one or more of the Beneficiaries exclusive of the other or
others of them as shall for the time being be in existence and in such
shares if more than one and in such manner generally as the Trustees
shall in their absolute discretion from time to time think fit.
Id. at 126 (emphasis added). The trustee also had “discretion to decline to distribute income to
any of the beneficiaries.” Id. Finally, “the trustee could distribute all income and capital to some
combination of the non-claimant beneficiaries, leaving nothing for the claimants.” Id.
Judge Bates concluded that the claimants, as discretionary beneficiaries, had no
more than “an expectancy interest in the favorable exercise of discretion by the trustee” derived
from the beneficiaries’ “right to be considered for distributions, subject to the exercise of the
trustee’s discretion and in conformance with the trustee’s fiduciary duties.” United States v.
23
Doraville Properties, 299 F. Supp. 3d at 135. He held that, because claimants “failed to provide
the Court with any authority in which a claimant with a similar unvested, contingent interest in
property was found to have standing to contest forfeiture,” the claimants had “failed to satisfy
their burden of demonstrating standing by a preponderance of the evidence.” Id. at 137.
This Court agrees with Judge Bates’ analysis and likewise concludes that the
Lazarenko daughters’ interest is too contingent to support standing. Even if the Court ultimately
dismisses this forfeiture action as to the Balford Trust, it is merely speculative to assert that the
Lazarenko daughters will receive a distribution from the trust. The trustees have broad
discretion to distribute trust funds to any, some, or none of the beneficiaries during the life of the
trust. See Trust Decl. ¶ 3 [US App’x 220]; Trust Decl. ¶ 11 [US App’x 223]. The Lazarenko
daughters therefore are not entitled to any distributions but have merely a hope that the trustees
will exercise their discretion favorably at some point.
Moreover, the Balford Trust will not expire until 100 years from the date of its
creation. The trustees may change the trust’s expiration date in their own discretion, but they
have not yet done so. See Trust Decl. ¶ 1(m)(ii) [US App’x 219]. To be eligible for
distributions at the end of the trust period, therefore, the Lazarenko daughters must live
until 2097. Assuming they live that long, they are even then only entitled to an equal share of
whatever remains in the trust at the end of the trust period. But there is no guarantee that the
trustees will not have, in their discretion, dissipated the trust prior to the end of the trust period.
See Trust Decl. ¶ 3(a) [US App’x 220]; Davidson Decl. ¶ 38. Indeed, if some amount remains in
the trust at the end of the trust period, the trustees are empowered to “apply . . . both capital and
income of the Trust Fund for all or such one or more exclusive of the other or others of the
Beneficiaries in such shares and proportions . . . as the Trustees shall prior to or on the date of
24
such expiration in their absolute discretion determine.” Trust Decl. ¶ 3(c) [US App’x 220]
(emphasis added). The Lazarenko daughters’ opportunity to be eligible for an “equal share” at
the end of the trust period therefore is highly contingent on the trustees’ discretion as it is
exercised over the next seventy-six years.
The Lazarenko daughters’ attempts to distinguish United States v. Doraville
Properties fail. They point out that, unlike the beneficiaries in United States v. Doraville
Properties, they have a beneficial interest in the Balford Trust. Opp. at 16. As this Court has
already explained, the Lazarenko daughters’ interest is the right to be considered for distributions
by the trustees. See supra Section II(D). This is substantively the same interest considered by
Judge Bates. See United States v. Doraville Properties, 299 F. Supp. 3d at 135. They also argue
that this case is distinguishable because the class of beneficiaries here is smaller; no beneficiaries
have ever been added or removed; and the Balford Trust has a Protector who must consent to the
addition or removal of beneficiaries. Opp. at 16. These are immaterial distinctions. Here, the
Protector, Pavel Lazarenko, must consent to the addition or removal of beneficiaries. He might,
therefore, consent to the removal of his daughters or exercise his authority to block a distribution
to them. Or he could approve large distributions to one or more of the other trust beneficiaries,
thus leaving no money for his daughters. No one can reliably predict how Mr. Lazarenko will
act as Protector in the future. These examples simply illustrate that the trustees’ more fettered
discretion in this case does not detract from the contingency of the Lazarenko daughters’ interest.
Neither does the number of beneficiaries make their interest less contingent. Whether there are
two other beneficiaries or six, the trustees still have the discretion to make distributions “to one
or more [beneficiary] exclusive of the other or others.” Trust Decl. ¶ 3(a) [US App’x 220].
25
The Lazarenko daughters further contend that United States v. Doraville
Properties was wrongly decided. Opp. at 13. For support, they point to a line of authorities
establishing that “a plaintiff suffers a constitutionally cognizable injury by the loss of an
opportunity to pursue a benefit . . . even though the plaintiff may not be able to show that it was
certain to receive that benefit had it been accorded the lost opportunity.” CC Distribs., Inc. v.
United States, 883 F.2d 146, 150 (D.C. Cir. 1989); see also W. Va. Ass’n of Cmty. Health Ctrs.
v. Heckler, 734 F.2d 1570 (D.C. Cir. 1984); Regents of the Univ. of Cal. v. Bakke, 438 U.S. 365(1978); Nat’l Ass’n of Neighborhood Health Ctrs. v. Mathews, 551 F.2d 321 (D.C. Cir. 1976).
The Lazarenko daughters argue that these cases stand for the proposition that a “threatened
injury creates standing.” Opp. at 14. It is, of course, true that a threatened injury may be
sufficient to confer standing under some circumstances. See Clapper v. Amnesty Int’l USA, 568
U.S. 398, 409 (2013). But the Supreme Court has “repeatedly reiterated that ‘threatened injury
must be certainly impending to constitute injury in fact,’ and that ‘[a]llegations of possible future
injury’ are not sufficient.” Id. As discussed above, the Lazarenko daughters cannot show such
an imminent injury.
The Lazarenko daughters cite two other cases in support of their position:
Scanlan v. Eisenberg, 669 F.3d 838 (7th Cir. 2012) and Thole v. U.S. Bank N.A., 140 S.
Ct. 1615 (2020). See Opp. at 5-9, 13. These cases are inapposite. In Scanlan v. Eisenberg, the
Seventh Circuit concluded that a discretionary beneficiary had standing to enforce a trust. This
conclusion, however, was based on a principle of Illinois trust law that provided that “a
beneficiary has an equitable interest in trust property.” 669 F.3d at 843. The Lazarenko
daughters have not identified any similar equitable interest afforded to discretionary beneficiaries
under Guernsey law. Moreover, Scanlan v. Eisenberg concerned whether a discretionary
26
beneficiary has standing to sue a trustee in personam for breach of trust. Such a case has no
bearing on whether the Lazarenko daughters have standing to contest an in rem forfeiture action.
Thole v. U.S. Bank is similarly inapposite. In that case, the Lazarenko daughters argue, a
majority of the justices of the Supreme Court “recognized that beneficiaries have a legally
protected interest in protecting the trust corpus even without a concrete injury.” Opp. at 9. But
such an interest is based on U.S. law. Here, Guernsey law governs when identifying a
beneficiary’s interest in trust property.
Finally, the Lazarenko daughters argue that other courts in this district have
interpreted redressability “more broadly.” Opp. at 15 (citing In re $6,871,042.36, 217 F.
Supp. 3d 84, 87 (D.D.C. 2016) and In re Arelma, S.A., No. MC 16-1339, 2019 WL 3084706,
at *1 (D.D.C. July 15, 2019)). The parties seeking to establish standing in those cases, however,
are distinguishable from the Lazarenko daughters. In In re $6,871,042.36, the Court concluded
that bank liquidators seeking to intervene in a civil forfeiture action had standing to intervene
because the United States had named the liquidators as interpleader defendants in a separate
action filed to resolve competing claims to those same funds. 217 F. Supp. 3d at 92. In other
words, the United States had conceded that the bank liquidators had a present interest in the
defendant assets. And in In re Arelma, S.A., the class seeking to establish standing had already
obtained a secured judgment against the defendant assets, thus distinguishing it from “merely a
general unsecured creditor.” 2019 WL 3084706, at *3. The Lazarenko daughters, by contrast,
have no present, fixed interest in the Balford Trust, nor has the United States conceded that they
have any such interest.
The Court concludes that the Lazarenko daughters’ interest is insufficient to
confer standing because any alleged injury to such a contingent interest is simply too
27
hypothetical and speculative. See Lujan v. Defs. of Wildlife, 504 U.S. at 560-61. The lack of a
concrete, present interest precludes them from being able to establish that an injury to those
interests is “imminent.” See Spokeo, Inc. v. Robins, 136 S. Ct. at 1548. The Court further
concludes that any injury to such an interest would not be redressable by return of the property
because of the uncertainty that the Lazarenko daughters will ever receive a distribution. See
United States v. Emor, 785 F.3d at 676. The Court will strike their claim to the Balford Trust.
IV. LITIGATING ON BEHALF OF THIRD PARTIES
The Lazarenko daughters argue, in the alternative, that the Court should permit
them to bring suit either on behalf of the trustees or as next friend for their brother, Alexander
Lazarenko. Opp. at 23-24. The Court will take each argument in turn.
A. Derivative Claim on Behalf of Trustees
The Lazarenko daughters argue that they should be permitted to assert a claim on
behalf of the trustees because “well-established principle[s] of trust law” enable a beneficiary to
“bring suit in a derivative capacity to vindicate the trust’s interests when the trustee will not.”
Opp. at 23 (citation omitted). They contend that the trustees are precluded from asserting a claim
because of a plea agreement into which Credit Suisse AG – the parent company of Samante
Limited – entered in 2014. Opp. at 23-24. The United States responds that Samante Limited
was not precluded from filing a claim in 2004 when the complaint was filed or in 2006 when the
amended complaint was filed. US Reply at 18-19.
The Court agrees with the United States that the Lazarenko daughters cannot
show that the trustees were precluded from filing a claim at the commencement of this litigation.
Indeed, Credit Suisse AG did not enter into a plea agreement with the United States until ten
years after the complaint in this case was first filed. Moreover, as the Court has already
28
explained, Guernsey trust law governs this dispute. See supra Section III(A)(1). Principles of
trust law that are “well-established” in the United States therefore have no bearing here.
The Lazarenko daughters also point out that “Mr. Barnes has stated in his
affidavit that Guernsey has a procedure other than a ‘derivative proceeding’ that is used to
compel the Trustees to act.” Opp. at 23 n.1. But Mr. Barnes’ declaration states only that
Guernsey “procedures permit a beneficiary to institute proceedings against a trustee if they fail to
act.” Third Barnes Decl. ¶ 39. If the Lazarenko daughters believe that the trustees have failed in
their duties, the appropriate remedy would be to bring a separate action against the trustees in
Guernsey to compel proper administration of the trust. They have never done so, despite
knowing for almost seventeen years that the trustees had filed no claim to the Balford Trust in
this proceeding. And the Lazarenko daughters point to no provision of Guernsey law allowing
them to bring a suit in a derivative capacity when the trustees decline to bring suit. The Court
will not permit the Lazarenko daughters to assert a claim on behalf of the trustees.
B. Next Friend Standing on Behalf of Alexander Lazarenko
The Lazarenko daughters also argue that they have next friend standing to assert a
claim on behalf of their brother, Alexander Lazarenko, and their mother, Tamara Lazarenko,
because both are unable to litigate their cause due to lack of access to U.S. courts. Opp. at 24-26.
“‘Next friend’ standing originated in connection with petitions for habeas corpus,
as early American courts allowed ‘next friends’ to appear ‘on behalf of detained prisoners who
[were] unable, usually because of mental incompetence or inaccessibility, to seek relief
themselves.’” Al-Aulaqi v. Obama, 727 F. Supp. 2d 1, 16 (D.D.C. 2010) (quoting Whitmore v.
Arkansas, 495 U.S. 149, 162 (1990)). Courts in this district, however, have held that “next
friend standing is not limited to habeas cases, but instead may be invoked if plaintiffs can
29
sufficiently demonstrate its necessity.” Ali Jaber v. United States, 155 F. Supp. 3d 70, 76
(D.D.C. 2016), aff’d sub nom. Jaber v. United States, 861 F.3d 241 (D.C. Cir. 2017). To assert
next friend standing, a party must satisfy two “firmly rooted prerequisites.” Whitmore v.
Arkansas, 495 U.S. at 163. “First, a ‘next friend’ must provide an adequate explanation—such
as inaccessibility, mental incompetence, or other disability—why the real party in interest cannot
appear on his own behalf to prosecute the action. Second, the ‘next friend’ must be truly
dedicated to the best interests of the person on whose behalf he seeks to litigate . . . .” Id. It is
not clear whether next friend standing is properly applied in civil forfeiture actions. But even
assuming that it is, the Lazarenko daughters have failed to satisfy these two prerequisites.
First, the Lazarenko daughters have not shown that either Alexander or Tamara
Lazarenko is “unable to litigate [his or her] own cause due to mental incapacity, lack of access to
court, or other similar disability.” Whitmore v. Arkansas, 495 U.S. at 165. The Lazarenko
daughters argue that Alexander Lazarenko “cannot travel to the United States to participate in
this lawsuit because he cannot receive a visa from the Government” and cannot participate from
Ukraine because he “remains concerned that any open association with his father and others in
Ukraine may endanger his or his family’s physical safety.” Opp. at 25. They fail to mention,
however, that Alexander Lazarenko participated in this case from his home in Ukraine for over a
decade. See United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 2019
WL 6970727, at *3 (stating that Alexander Lazarenko has lived in Ukraine for “many, many
years”). More importantly, this Court has already struck the claim of Alexander Lazarenko to
the Balford Trust. See All Assets VIII, 2019 WL 6910067, at *1. The Court adopted the report
and recommendation of Magistrate Judge Harvey, who found that striking Alexander
Lazarenko’s claim was appropriate because, among other things, he had “flatly refus[ed] to
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appear [for a deposition] based on unsupported allegations that sitting for the noticed deposition
would endanger his safety and that of his family.” United States v. All Assets Held at Bank
Julius Baer & Co., Ltd., 2019 WL 6970727, at *7. The Court was not persuaded by that
explanation for failure to participate in 2019, and it continues to be unpersuaded in 2021. The
Lazarenko daughters cannot now assert next friend standing for their brother based on the same
facts that resulted in his exclusion from this litigation.
Likewise, the Lazarenko daughters have not demonstrated that their mother lacks
access to the courts in the United States. They state that she “has been unable to return to the
United States” since 1999 or 2000, when she was denied a visa. Opp. at 25. But that attempt to
enter the United States was over twenty years ago – and four years before this litigation
commenced. The Lazarenko daughters have not presented any evidence that Tamara Lazarenko
has since been denied entry to the United States. Moreover, Tamara Lazarenko has never
attempted to file a claim to the Balford Trust, despite that fact that physical presence in the
United States is not required to file such a claim. Finally, the Lazarenko daughters have not
explained why Tamara Lazarenko would be unable to participate in this litigation from Ukraine.
They have not argued, for example, that telephone or video participation in court proceedings
would be difficult or impossible. Cf. Ali Jaber v. United States, 155 F. Supp. 3d at 76 (finding
that residents of Yemen lacked consistent access to telephones and could therefore invoke next
friend standing). This Court need not accept the Lazarenko daughters’ bald assertions that their
mother lacks access to the courts. See Al-Aulaqi v. Obama, 727 F. Supp. 2d at 17 n.3 (collecting
cases where “courts have refused—even at the pleading stage—to accept unsubstantiated
allegations that the real party in interest . . . ‘lacks access to the courts’” and requiring that
“claims pertaining to . . . inaccessibility have some ‘support in the record.’”).
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Finally, the Lazarenko daughters cannot show that they are “truly dedicated to the
best interests” of Alexander and Tamara Lazarenko. Whitmore v. Arkansas, 495 U.S. at 163.
Generally, a putative “‘next friend’ must provide some evidence that [she] is acting in
accordance with the intentions or wishes of the real party in interest.” Al-Aulaqi v. Obama, 727
F. Supp. 2d at 20. No such evidence has been provided here. The Court is also doubtful that any
such evidence could be provided. The interests of the Lazarenko daughters are arguably at odds
with the interests of Alexander and Tamara Lazarenko. Each of these four individuals is a
beneficiary of the Balford Trust. As explained above, the trustees may at any time distribute
trust funds to one of the beneficiaries at the expense of the others. Thus, if the funds in the Trust
are not ultimately forfeited to the United States, “a distribution in favor of one of the [Lazarenko
daughters] would reduce the amount available to be distributed to the remaining beneficiaries.”
US Reply at 22. The Court therefore cannot be sure that the Lazarenko daughters will act in the
best interests of either Alexander or Lecia Lazarenko. The Court will not permit the Lazarenko
daughters to bring suit as next friend for Alexander Lazarenko or Tamara Lazarenko.
V. LITIGATING IN GUERNSEY
The Lazarenko daughters’ opposition brief includes a cross-motion to modify this
Court’s order restraining the Balford Trust assets. See Opp. at 26. They argue that, if this Court
strikes their claims to the Balford Trust, they should be permitted to “challenge the U.S.
forfeiture action [in Guernsey] through a declaratory judgment action.” Id. at 27. Their motion
“incorporat[es] . . . the motion filed by their father,” Pavel Lazarenko, to modify this Court’s
restraining order. Id. This Court has already denied Mr. Lazarenko’s motion. See All Assets
X, 2020 WL 6591391, at *7. For the reasons set forth in that opinion, this Court will deny the
Lazarenko daughters’ motion.
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VI. CONCLUSION
For the foregoing reasons, the Court will grant the United States’ motion [Dkt.
No. 1256] to strike the claims of Ekaterina Lazarenko and Lecia Lazarenko to the Balford Trust
and deny the cross-motion [Dkt. No. 1332] of Ekaterina Lazarenko and Lecia Lazarenko to
modify this Court’s restraining order. An Order consistent with this Opinion will issue this
same day.
SO ORDERED.
/s/
PAUL L. FRIEDMAN
United States District Judge
DATE: September 7, 2021
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