United States v. Avenatti

433 F.Supp.3d 552

UNITED STATES of America

v.Michael AVENATTI, Defendant.

S1 19 Cr. 373 (PGG)

United States District Court, S.D. New York.

Signed January 14, 2020

Filed January 15, 2020

Matthew D. Podolsky, Robert Benjamin Sobelman, Daniel Charles Richenthal, United States Attorney's Office, New York, NY, for United States of America.

Jose Manuel Quinon, Jose M. Quinon, P.A., Scott Alan Srebnick, Scott A. Srebnick, P.A., Howard M. Srebnick, Pro Hac Vice, Black, Srebnick, Kornspan & Stumpf, P.A., Miami, FL, E. Danya Perry, Perry Guha LLP, New York, NY, for Defendant.

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, U.S.D.J.:

Indictment (S1) 19 Cr. 373 charges Michael Avenatti with transmitting interstate communications with intent to extort, in violation of 18 U.S.C. § 875(d) (Count One); Hobbs Act extortion, in violation of 18 U.S.C. § 1951 (Count Two); and honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346 (Count Three). The Government charges that Avenatti – who is licensed to practice law in California – transmitted in interstate commerce threats "to cause financial harm to Nike and its reputation if Nike did not agree to make multimillion dollar payments to Avenatti"; "used threats of economic and reputational harm in an attempt to obtain multimillion dollar payments from Nike"; and used interstate communications to "engage[ ] in a scheme to obtain payments for himself from Nike based on confidential information provided to AVENATTI by Client-1 for the purpose of furthering AVENATTI's representation of Client-1, without Client-1's knowledge or approval," thereby depriving Client-1 of the "duty of honest services" he was owed. ((S1) Indictment (Dkt. No. 72) ¶¶ 20, 22, 24) (emphasis in original).

Avenatti has moved to dismiss all three counts of the (S1) Indictment on the grounds that "that he was targeted for prosecution in this case for unconstitutionally vindictive and selective reasons." In the alternative, Avenatti seeks discovery and an evidentiary hearing concerning these defenses. (Def. Br. (Dkt. No. 29) at 7, 48-49; see also Def. Mot. (Dkt. No. 28))¹

For the reasons stated below, Avenatti's motion to dismiss will be denied.

BACKGROUND

I. THE (S1) INDICTMENT'S FACTUAL ALLEGATIONS AND CHARGES

The (S1) Indictment alleges that Client-1 – since identified as Gary Franklin – is the director and head coach of an amateur youth basketball program (the "Basketball Program") based in California. "For a number of years, the Basketball Program ... had a sponsorship program with Nike[,] pursuant to which Nike paid the program approximately $72,000 annually." ((S1) Indictment (Dkt. No. 72) ¶ 5) In March 2019, Franklin sought legal assistance from Avenatti "after [Nike informed] the Basketball Program ... that its annual contractual sponsorship would not be renewed." (Id. ¶ 8)

Avenatti and Franklin met on March 5, 2019. "During that meeting and in subsequent meetings and communications, [Franklin] informed AVENATTI ... that [he] wanted Nike to reinstate its $72,000 annual contractual sponsorship of the Basketball Program." "During the [March 5, 2019] meeting, [Franklin] [also] provided AVENATTI with information regarding what [Franklin] believed to be misconduct by certain employees of Nike involving the alleged funneling of illicit payments from Nike to the families of certain highly ranked high school basketball prospects." (Id. ¶ 9) (emphasis in original).

At the March 5, 2019 meeting, Avenatti told Franklin "that [he] believed that he would be able to obtain a $1 million settlement for [Franklin] from Nike...." However,

at no time during the March 5, 2019 meeting or otherwise did AVENATTI inform [Franklin] that AVENATTI also would and did seek or demand payments from Nike for himself in exchange for resolving any potential claims made by [Franklin] and not causing financial and reputational harm to Nike, or that AVENATTI would and did seek to make any agreement with Nike contingent upon Nike making payments to AVENATTI himself. Furthermore, at no time did AVENATTI inform [Franklin] that AVENATTI intended to threaten to publicize the confidential information that [Franklin] had provided to AVENATTI, nor did AVENATTI obtain [Franklin's] permission to publicize any such information.

(Id. ¶ 10) (emphasis in original).

The Indictment goes on to allege that during a March 19, 2019 meeting with Nike's lawyers, Avenatti told Nike that

he represented Franklin, "a youth basketball coach, whose team had previously had a contractual relationship with Nike, but whose contract Nike had recently decided not to renew";

Franklin "had evidence that one or more Nike employees had authorized and funded payments to the families of top high school basketball players and attempted to conceal those payments";

Avenatti "intended to hold a press conference the following day to publicize the asserted misconduct at Nike, which would negatively affect Nike's market value"; and

Avenatti "would refrain from holding that press conference and damaging Nike if Nike agreed to two demands: (1) Nike must pay $1.5 million to [Franklin] as a settlement for any claims [Franklin] might have regarding Nike's decision not to renew its contract with the Basketball Program; and (2) Nike must hire AVENATTI and Attorney-1 to conduct an internal investigation of Nike, with a provision that if Nike hired another firm to conduct such an internal investigation, Nike would still be required to pay AVENATTI and Attorney-1 at least twice the fees of any other firm hired."

(Id. ¶ 11) (emphasis in original).

In a March 20, 2019 telephone call with Nike's counsel, Avenatti reiterated that he expected to "get a million five for [Franklin]" and to be "hired to handle the internal investigation," for which he demanded a "multimillion dollar retainer" in exchange for not holding a press conference. (Id. ¶ 13(a)-(b)) According to Avenatti, "3 or 5 or 7 million dollars" would not be sufficient for his retainer. Unless Nike agreed to a larger retainer, Avenatti would hold a press conference that would "take ten billion dollars off [Nike's] market cap" (Id. ¶ 13(c)) Avenatti also stated that "he expected to be paid more than $9 million" by Nike. (Id. ¶ 13(d)) At the end of the call, Avenatti agreed to meet with Nike's lawyers the next day. (Id. ¶ 13(e))

On March 21, 2019, Avenatti met with Nike's lawyers in Manhattan. (Id. ¶ 14) At that meeting, Avenatti demanded "a $12 million retainer to be paid immediately and to be ‘deemed earned when paid,’ with a minimum guarantee of $15 million in billings and a maximum of $25 million, ‘unless the scope changes.’ " (Id. ¶ 14(a)) Nike's counsel asked Avenatti whether Nike could simply pay Franklin, "rather than retaining AVENATTI. AVENATTI responded that he did not think it made sense for Nike to pay [Franklin] an ‘exorbitant sum of money ... in light of his role in this.’ " (Id. ¶ 14(b)) (emphasis in original) Avenatti agreed to meet with Nike's counsel "on March 25, 2019, to hear whether Nike was willing to make the demanded payments. AVENATTI stated that Nike would have to agree to his demands at that meeting or he would hold his threatened press conference." (Id. ¶ 14(f)) (emphasis in original).

According to the (S1) Indictment, Avenatti did not "inform [Franklin] that Nike had offered to resolve [Franklin's] claims without paying AVENATTI. Nor did AVENATTI inform [Franklin] that AVENATTI had continued to threaten to publicize confidential information provided to AVENATTI by [Franklin], or that AVENATTI had continued to use that information to demand a multimillion dollar payment for himself." (Id. ¶ 14(g)) (emphasis in original).

About two hours after the March 21, 2019 meeting, and without consulting Franklin, Avenatti posted the following message on Twitter:

(Id. ¶ 15; see also @MichaelAvenatti, Twitter (Mar. 21, 2019, 3:52 p.m.), https://twitter.com/MichaelAvenatti/status/1108818722767163392) The article linked in the March 21, 2019 tweet refers to a prosecution brought by the Government against employees of Adidas – a competitor of Nike. (Id. ¶ 16)

On March 25, 2019, after Avenatti learned that law enforcement officers had approached Franklin, Avenatti posted the following message to Twitter:

(Id. ¶ 18; see also @MichaelAvenatti, Twitter (Mar. 25, 2019, 12:16 p.m.), https://twitter.com/MichaelAvenatti/status/1110213957170749440)

Later that day, Avenatti was arrested as he approached Nike's counsel's office complex in Manhattan for the scheduled March 25, 2019 meeting. (Id. ¶ 17)

The (S1) Indictment charges Avenatti with: (1) transmitting interstate communications with intent to extort, in violation of 18 U.S.C. § 875(d), in that "AVENATTI, during an interstate telephone call, threatened to cause financial harm to Nike and its reputation if Nike did not agree to make multimillion dollar payments to AVENATTI"; (2) attempted extortion, in violation of 18 U.S.C. § 1951, in that "AVENATTI used threats of economic and reputational harm in an attempt to obtain multimillion dollar payments from Nike, a multinational public corporation"; and (3) honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346, in that he "engaged in a scheme to obtain payments for himself from Nike based on confidential information provided to AVENATTI by [Franklin] ... without [Franklin's] knowledge or approval, and used and caused the use of interstate communications to effect the scheme." (Id. ¶¶ 20, 22, 24) (emphasis in original).

II. DEFENDANT'S MOTION TO DISMISS ON GROUNDS OF VINDICTIVE AND SELECTIVE PROSECUTION

Avenatti contends that the charges against him must be dismissed because "he was targeted for prosecution in this case for unconstitutionally vindictive and selective reasons." (Def. Br. (Dkt. No. 29) at 7) In support of his motion, Avenatti makes the following arguments:

1. The initial charges against Avenatti were premised on an inadequate investigation "that lasted less than four business days" and that was conducted at "breakneck

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