Ex-Avenatti client files claim for jet in California as attorney is convicted of extortion in New York

A woman in a multi-party insurance suit who said attorney Michael Avenatti embezzled $2.75 million from her to buy a $4.4 million jet argued she was not consulted before a federal judge stayed the case pending the result of other actions the now-convicted lawyer faces throughout California.

The suit in the Central District of California involves a litany of parties dealing with the fallout caused by Avenatti's purchase of a Honda HA-420 jet with money he is accused of embezzling from a $2.75 million settlement intended for his then-client and cross-claimant Alexis Gardner. Meanwhile, the jet has been confiscated by the IRS.

In the motion filed in Santa Ana on Friday, Gardner said none of the other parties consulted with her or her attorney, Filippo Marchino of The X-Law Group PC, before asking U.S. District Judge David O. Carter to stay the case.

The moving parties "did not meet and confer with Gardner or her counsel before filing the motion, which does not mention her anywhere except for the caption," the motion reads. "Likewise, they failed to serve the motion on her or her counsel even though she had not yet appeared in the action and was not in default. Because Gardner was never served with the motion to stay, she cannot be bound by it without her due process rights being violated."

On the same day Gardner filed, Avenatti was found guilty in New York of attempting to extort Nike Inc. of $20 million and also honest services fraud after three days of jury deliberations. He is scheduled to be sentenced June 17 and faces up to 40 years in prison in the case. Meanwhile, he is set to stand trial in a separate federal criminal case on May 19.

Avenatti was charged last spring with an array of federal crimes in New York and California, where he lived. Though he spent much of last year free on bail, a judge revoked that deal in January in the midst of his hearing before the California State Bar -- after prosecutors argued that he was continuing to engage in criminal activity.

In Santa Ana, the original complaint regarding ownership of the jet was filed last September by insurance company Starr Indemnity & Liability Co.. It claims the insurance policies issued on the jet should be rescinded if allegations in a 36-count federal indictment in California are proven. The indictment includes charges Avenatti purchased the jet with embezzled and ill-gotten money. Starr Indemnity and Liability Company v. Michael J. Avenatti, 19-cv-01704., (C.D. Cal., filed Sept. 6, 2019).

The jet -- also claimed by another Avenatti former client, technology executive William Parrish -- was confiscated by the Internal Revenue Service as collateral for taxes allegedly due and unpaid.

Parrish, who says he is the majority owner of the jet, claims in another suit filed in Santa Barbara County Superior Court that Starr should pay him under a provision of the insurance policy which he says covers the loss of the plane.

Parrish and his company, Passport 420 LLC, which he co-owned with Avenatti and is a party in the case claiming ownership of the jet, filed the motion to stay.

Gardner, among other claims, says she should be considered the de facto owner of the jet, considering it was allegedly purchased with money stolen from her and other clients. She, like Parrish, also seeks declaratory relief regarding her entitlement to any payment made pursuant to Starr's insurance policies. That is to say, if Starr does issue a check, she would be the rightful recipient.

In deciding to grant the stay, Carter applied the Colorado River doctrine, which among other effects attempts to avoid piecemeal litigation. He said since the Santa Barbara County Superior Court action brought by Parrish deals with almost identical legal issues, it has the potential to eliminate the federal action altogether.

"If both actions continue in parallel, there is a substantial risk of inconsistent judgments," he wrote in his order.

However, Marchino argued that since Gardner is not a party to the state court action, there is no way for her claims to be adjudicated there.

Since there is a "substantial doubt that the state court action will resolve the federal action," it is unnecessary to weigh the other factors included in the Colorado River analysis and his client's claims should be unstayed, Marchino wrote.

The New York Times News Service contributed to this report.