The Conviction of Michael Avenatti: a ‘Lessons Learned’ Analysis for Hardball Litigators
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LOS ANGELES & SAN FRANCISCO www.dailyjournal.com FRIDAY, MARCH 13, 2020 PERSPECTIVE The conviction of Michael Avenatti: A ‘lessons learned’ analysis for hardball litigators By Mathew Rosengart or her adversary. It is, in fact, fundamental that threats to file ess than 15 months non-sham civil suits are typ- ago, attorney Michael ically “not within the scope L Avenatti was a me- of the extortion statutes, even dia darling, a fixture on ca- though [counsel’s] execution of ble television, and a self-pro- the threat could result in public claimed potential presidential disgrace or prosecution.” “A candidate. Although it was his Rationale of the Law of Aggra- representation of adult film vated Theft,” 54 Colum. L. Rev. actress Stephanie Clifford, 84, at 94 (1954). Where, then, aka “Stormy Daniels,” which did Avenatti cross the line? brought him national attention New York Times News Service Why was his conduct criminal, (and later, a separate indict- and what lessons can litigators Michael Avenatti outside the federal courthouse in Manhattan after a series ment for fraud), he previously of hearings on Tuesday, May 28, 2019. learn from his misconduct? obtained awards against large Although there is no clear, corporations that reportedly brightline test, an examination exceeded $100 million and Although Avenatti’s misconduct appears especially of the facts in United States v. appeared in two positive “60 obvious in hindsight, many practitioners undoubtedly Avenatti is instructive and will Minutes” segments featuring come closer to the line than they might think. help ensure that good lawyers his clients. stay on the right side of the line, Today, he is a disgraced fed- representing their clients zeal- eral convict, incarcerated and “substantial financial and repu- in the complaint, Avenatti was ously — and equally important, awaiting sentencing and prob- tational harm” on Nike if his fi- not acting as an attorney. A suit of course, also ethically. able disbarment after a New nancial demands were not met. and tie doesn’t mask the fact Initially, although Avenatti’s York jury found him guilty last Anticipating Avenatti’s trial that, at its core, this was an old counsel mustered a potential- month of criminal extortion. defense — that Avenatti was fashioned shake down.” ly-viable trial defense — that While many political and other merely acting as an aggressive, The charges were obviously Avenatti was a lawyer, retained commentators have observed “hard-ball” litigator engaged in serious, but the case was not by his client for precisely the Avenatti’s downfall with glee, the type of settlement negotia- a slam dunk. Unlike Avenat- brash, aggressive tactics that or horror, there are lessons tions that often occur in high- ti’s upcoming criminal case in made him famous, and he was litigators can draw from his stakes cases — United States California involving charges only doing his job as a lawyer misconduct, particularly those Attorney Geoffrey Berman an- for fraud and embezzlement by employing those tactics in who, like Avenatti, might be nounced at the time of Avenat- (the type of garden variety seeking a settlement from Nike tempted to fly too close to the ti’s arrest that although Avenatti charges routinely brought by — the facts in Avenatti (and sun. used legal terms like “claims,” federal prosecutors), many Avenatti’s own, law enforce- The government’s extor- “fees” and “settlements” practitioners were surprised ment-recorded, statements) tion case against Avenatti was during his allegedly-extortion- by the charges brought in the were egregious. According to based on his efforts to extract ate scheme, Avenatti was, in New York case. Indeed, law- the charging documents, in more than $20 million from a fact, “not acting as an attorney” yers often make implicit or direct exchange for refraining public company (Nike), pur- and these terms were “mere de- even explicit threats to oppos- from holding his threatened portedly on behalf of his client vices to provide cover” for his ing counsel that in the absence press conference, Avenatti not who coached an amateur youth criminal misconduct. As Ber- of a confidential settlement, only demanded $1.5 million for basketball team sponsored by man pointedly stated, “By en- a public lawsuit will gener- his client, he also demanded to Nike, by threatening to inflict gaging in the conduct alleged ate negative publicity for his be retained by Nike to conduct an “internal investigation” and evidently emanated from greed represent clients zealously. In See ABA, Canon of Profes- personally paid (along with his and desperation (he was al- so doing, they must commu- sional Ethics No. 15; see also co-counsel) between $15 and legedly millions of dollars in nicate with opposing counsel, ABA Canons of Profession- $25 million. He also threat- debt, in the midst of fending sometimes aggressively — and al Conduct 15. But given in- ened, in a call recorded by off various civil claims and tax sometimes the preferred meth- creased scrutiny that will likely law enforcement, that if Nike debts, and had filed bankrupt- od of dispute resolution (for come with the Avenatti convic- failed to agree to his financial cy) — was primarily his naked both sides) is pre-litigation set- tion, thoughtful counsel should demands immediately, “I’ll go threats to expose sensational tlement, before a case gets to take heed and act with caution ... take ten billion dollars off information unrelated to the court. As a leading California and care, learning the lessons [Nike’s] market cap.” putative litigation in order to case observed more than 40 from that case. Ratcheting up his threats, damage Nike, both civilly and years ago, commencing liti- Avenatti later demanded, this criminally; an explicit quid pro gation is “only one means to Mathew Rosengart is a for- time during a surreptitious- quo concerning his looming achieve satisfaction for a cli- mer supervisory assistant ly-recorded in-person meet- press conference designed to ent.” To avoid litigation, it is United States attorney and ing, an immediate $12 million cost Nike “billions;” and seek- a “well established legal prac- U.S. Department of Justice retainer to be “deemed earned ing a massive “legal fee” from tice to communicate promptly Trial Attorney, where he re- when paid,” with a minimum his opponent. Even putting with a potential adversary [in a ceived the Justice Depart- guarantee of $15 million. aside his bombastic language demand letter], setting out the ment’s Special Achievement When Nike’s counsel balked, and lack of nuance, as the gov- claims made upon him, urging Award, among other honors, Avenatti responded by asking, ernment alleged and the jury settlement, and warning of the and is now a litigation partner in part, whether that attorney determined, Avenatti misused alternative of judicial action.” with Greenberg Traurig, LLP. had ever “held the balls of his client’s information in an Lerette v. Dean Witter Organi- Rosengart has been recog- the client in your hand where effort to engage in what the zation Inc., 60 Cal.App.3d 573, nized as one of the nation’s you could take five or six bil- U.S. Attorney labelled an “old 577 (1976). Those “warnings,” leading entertainment litiga- lion dollars market cap off of fashioned shakedown.” While not unlike (but certainly more tors in The Hollywood Report- them?” As part of this “nego- seeking a $1.5 settlement for subtle than) Avenatti’s, often er’s “Power Lawyer Report” tiation” discussion, Avenatti his client, Avenatti seemed far reference economic or other and Variety’s “Legal Impact then told opposing counsel more fixated on extracting an costs associated with litigation. Report,” and he represents that “If [Nike] wants to have inflexible $15-$25 “fee” for Had Avenatti sent a demand an array of high-profile clients one confidential settlement and himself (and co-counsel), from letter stripped of his outrageous in entertainment and com- we’re done, they can buy that his adversary. And if his fi- threats, which was nuanced and plex commercial and busi- for twenty-two and half million nancial demands were not met professional — even one that ness disputes. Rosengart pre- dollars and we’re done ... Full immediately, he would, in his erred on the side of aggressive- viously served as an adjunct confidentiality, we ride off into own words and without “f-g ness — he likely would have professor of law at Fordham the sunset,” adding that “I just around,” hold a press confer- avoided indictment. He might Law School where he taught wanna share with you what’s ence disclosing unrelated in- have even obtained a hand- “Criminal Procedure and gonna happen, if we don’t formation, which would “take some settlement for his client Grand Jury Law & Practice.” reach a resolution,” stating that ten billion dollars off your cli- and proportional legal fees for “as soon as this becomes pub- ent’s market cap.” himself. lic, I am going to receive calls While Avenatti’s misconduct For various reasons, includ- from all over the country ... and appears especially egregious in ing its necessity to the adver- the company will die — not hindsight and, as such, might sarial system, to save judicial die, but they are going to incur seem easy to dismiss, his case resources, and having been en- cut after cut after cut, and that’s is actually very relevant be- dorsed by courts and scholars, what’s going to happen as soon cause many practitioners un- the demand letter-paradigm as this thing becomes public.” doubtedly come closer to the will likely not change any time Avenatti’s own statements line than they might think. soon. When practiced prudent- speak for themselves. The crux Indeed, competent litigators ly and ethically, it may well of his misconduct — which understand their obligation to serve the clients’ best interests.