Latest Avenatti lawsuit includes ex-partners as defendants

SANTA ANA -- A new $20 million lawsuit alleging theft of client money by Michael J. Avenatti accuses his former partners and current creditors of assisting in the scheme in the latest addition to sprawling litigation that's ensnared several California lawyers.

The complaint, filed by boutique litigation heavyweight Callahan & Blaine APLC, comes nearly three months after Jason M. Frank and Scott H. Sims' current partner Andrew D. Stolper publicly exposed the alleged theft from Geoffrey Johnson during day-long questioning of Avenatti related to $10 million his bankrupt firm Eagan Avenatti LLP owes Frank.

Lawyer Daniel J. Callahan, joined by Johnson at a press conference Thursday, said Frank brought Johnson to Avenatti as a client and was due a piece of the settlement.

Callahan acknowledged Frank's team first exposed the alleged theft, but he said Frank shares "vicarious liability because he's a member of the firm, and each and every one of those members of the firm had a duty and responsibility to their client, Mr. Johnson."

"I have a hard time believing he did not want to find out where his money was," Callahan said.

Frank has for years been fighting Avenatti for his share of Eagan Avenatti's money, and he secured two debt judgments last summer totaling $14.85 million that continue to accrue interest. That's what led to the March 22 judgment debtor exam, which included subpoenaed bank records revealing the deposited $4 million settlement and the subsequent small payments to Johnson.

Avenatti said Thursday Johnson's claims, which include professional negligence, intentional fraud and conversion, "are categorically false and frivolous, and his case will be thrown out." He included photos of a release and claims he said were signed by Johnson, which he said "completely destroy these bogus claims." Johnson v. Avenatti, 2019-01076162 (O.C. Super. Ct., filed June 11, 2019).

"Any claim that Mr. Johnson was 'tricked' into signing documents that he fully read and understood is absurd," Avenatti said. "We paid his medical expenses and living expenses for years prior to any settlement and we provided him with settlement monies after we deducted our contingency fee and the huge costs associated with his case as we were entitled to."

Johnson's lawsuit also names Sims as a defendant and describes a "see-no-evil, hear-no-evil' approach. He, Frank and Stolper are partners at Frank Sims & Stolper LLP in Irvine. In a statement Thursday, they referred to their "multi-year fight against" Avenatti and said they recently learned he'd stolen from Johnson.

"We promptly reported what we learned to federal authorities, confronted Mr. Avenatti in open court, and informed Mr. Johnson's family. We are appalled by Mr. Avenatti's conduct and hope that Mr. Johnson obtains justice against Mr. Avenatti," according to the statement.

Johnson hired Avenatti in 2012 to sue Los Angeles County after he became a paraplegic during a suicide attempt in jail after what he said was months of abuse by guards and inmates. Avenatti secured a $4 million settlement in 2015, but according to prosecutors and the lawsuit, he only paid Johnson $900 to $1,900 every month for four years while lying to him about the status of the settlement.

The plaintiff, who uses a wheelchair, said he lost his Social Security benefits after Avenatti didn't respond to the office's questions about the settlement, and he now no longer receives money from Avenatti either, Callahan said Thursday.

"It's below any standard of decency I've ever heard of, and we're going to do our very best to help Mr. Johnson recover," Callahan said.

Avenatti denied stealing from Johnson in response to Stolper's questions in the debtor exam. He then contacted Johnson shortly after the exam and told him the money would soon be available, and he had Johnson sign a confidentiality agreement that attested to his ethics as a lawyer, according to prosecutors.

Avenatti was arrested three days later, and a 36-count indictment returned April 10 accuses him of stealing $12 million from five clients, including Johnson.

Callahan & Blaine's lawsuit also names as defendants Avenatti's longtime paralegal, Judy Regnier, whois alleged to have overseen the payments to Johnson, as well as Michael Q. Eagan, the name partner in bankrupt Eagan Avenatti.

A lawyer for 40 years, Eagan "was supposed to be 'the adult in the room' providing stability and management to Eagan Avenatti while Avenatti acted as its more public face," according to the lawsuit.

Eagan is now in San Francisco and has never spoken publicly about his firm's collapse or his high-profile partner's tangled judicial odyssey.

Another former partner, John C. O'Malley, was represented by Callahan & Blaine in a breach of fiduciary duty lawsuit against Eagan Avenatti that resulted in an approximately $3 million settlement in 2015. O'Malley v. Avenatti et al., 2011-00491511 (O.C. Super. Ct., filed July 15, 2011). Callahan on Thursday differentiated between that money and the money that should have gone to Johnson. 1"Our receipt of that money preceded the theft by Mr. Avenatti of Mr. Johnson's funds," he said.