Loyola University Chicago School of Law, JD 2019
By now, Michael Avenatti is a household name. He shot to fame in 2018 while relentlessly representing adult film actress Stormy Daniels in her pursuit of the invalidation of a 2016 non-disclosure agreement regarding an alleged affair with President Donald Trump. Avenatti is famously brash and confrontational, and since his rapid rise to fame, numerous allegations of professional misconduct have come to the public’s attention. While he has avoided formal discipline thus far, it seems like only a matter of time until Avenatti faces some consequences for his actions.
In November 2018, the California State Bar cleared Avenatti of claims of fraudulent and unethical business dealings while he ran the Seattle-based coffee chain, Tully’s. David Nold, an attorney who represents landlords and other creditors of the failed coffee chain, filed a complaint in April 2018. He alleged that while Avenatti ran Tully’s parent company, Global Baristas, Avenatti stole millions in state and federal tax withholdings from employee paychecks and fraudulently transferred $100,000 from the business to hire lawyers for his law firm’s unrelated bankruptcy case. The Bar notified Nold that it “did not believe it had clear and convincing evidence of violations of the state’s ethics rules.”
Avenatti denied all allegations, and blasted Nold as dishonest, saying “Mr. Nold is widely known as an unethical hack of a lawyer who routinely files baseless complaints.” Avenatti provided no evidence for this attack against Nold, who has no record of disciplinary actions or ethical violations.
In a statement to Fox News, Nold said that “A license to practice law is a sacred privilege, and one that I still believe imposes duties of morality inconsistent with what has transpired in connection with Global [Baristas].” Other creditors of Global Baristas have commenced an involuntary bankruptcy against the company, and Nold says that “the bankruptcy will shed light on many of the issues because no longer will those who were running the company be able to hide their identity or conduct.”
Another major issue for Avenatti has arisen from his dealings with a former client. Gregory Barela alleges that Avenatti illegally withheld settlement funds in a “Ponzi-like” scheme and then repeatedly lied about it. Emails and texts document Barela’s extensive efforts last year to obtain the settlement funds that had resulted from his intellectual property dispute.
Financial documents show that the settlement funds had been wired to Avenatti’s client trust account on January 5, 2018, but Avenatti failed to communicate this to Barela. Instead, Barela sent increasingly desperate emails to Avenatti throughout the year inquiring about the status of the funds, most of which went unanswered. Finally, in November, Barela hired another law firm to demand answers.
Adjunct professor at UCLA School of Law and former chairman of the California State Bar’s Committee of Professional Responsibility and Conduct, Neil Wertlieb, said that losing client funds is a very sensitive area that could lead to disbarment. Wertlieb says, “Attorneys act in a fiduciary capacity with their clients, and as it pertains to receipt of settlement proceeds, they have to act in accordance with their fiduciary responsibility.”
The combination of the allegations made by Barela, including the failure to pay the client, lying about the receipt of funds, and entering into a business relationship with a client via a loan, strike Werlieb as serious enough offenses that could lead to disbarment.
Avenatti even became involved in the contentious issue of Brett Kavanaugh’s appointment to the Supreme Court of the United States. Avenatti’s involvement with Judge Kavanaugh’s confirmation as Supreme Court Justice began with a cryptic tweet stating that he represents “a woman with credible information regarding Judge Kavanaugh and Mark Judge.” He then proceeded to make a series of serious statements about Kavanaugh, which to many, raised professional and ethical implications.
All attorneys in the US are subject to the ethics rules followed by state bars in which he or she is admitted. Although the rules can differ from state to state, they all restrict what lawyers can say about judges in the interest of maintaining the integrity of the legal profession. Rule 8.2 of the ABA Model Rules of Professional Conduct states that “a lawyer shall not make a statement that the lawyer knows to be false or with reckless disregard as to its truth or falsity concerning the…integrity of a judge…or of a candidate for election or appointment to judicial or legal office.” The Rule only applies to statements of fact, not opinion, but to the extent they are unsubstantiated or false, Avenatti risked facing yet another ethics violation.
Finally, last November, Stormy Daniels claimed that Avenatti launched the (now dismissed) defamation lawsuit against President Trump in direct opposition to her own requests. Stephen Gillers, a New York University Law professor and legal ethics expert, noted that by filing a case with her name when it was clearly against her wishes, he could be sued for malpractice and be subject to discipline.
Daniels also claims that Avenatti started a crowdfunding on her behalf without informing her about it and had repeatedly refused to provide her with information about funds raised and spent on her behalf. Rules 1.2 and 1.4 of the California Rules of Professional Conduct together make it clear that a lawyer cannot make significant decisions about a potential legal case without the client’s informed consent. An attorney’s job is to abide by the client’s wishes, and the attorney cannot make decisions without consulting the client. However, this issue may be moot considering it appears that Daniels and Avenatti have since appeared to reconcile.
What happens next?
The aforementioned accusations are only a few of the allegations made against Avenatti. Of course, he has denied all of them. As an attorney, Avenatti should have a firm grasp on the ethical obligations that require his compliance, but these repeated violations demonstrate that he is either unable or unwilling to comply. The California Bar is perfectly able to initiate an ethics investigation without a third-party complaint, and it should not be a surprise if it chooses to do so in the near future.
Avenatti is one of the best known attorneys in the media, and this is problematic when it comes to ethical compliance for the legal profession. His ethical gaffes, while perhaps not recognized by the non-attorney public, are widely seen by other attorneys across the country. Should Avenatti continue with his usual antics without serious consequences, the rules of professional responsibility and the entities that regulate them may lose some credibility.