Avenatti: When tough lawyering becomes extortion

When a federal jury convicted celebrity attorney Michael Avenatti of attempted extortion last week, it sent a clear message: There are lines even the most aggressive attorneys should not cross. The verdict in U.S. v. Avenatti should be a wake-up call for lawyers across the country who like pushing the envelope.

Avenatti, famous for his bluster and bulldog tactics, had leverage over Nike. The athletic giant, according to the youth coach who retained Avenatti, was paying the families of college basketball recruits to gain their commitment to Nike-sponsored teams -- a violation of NCAA rules. Adidas had recently been implicated in a similar scheme and two Adidas employees had been sentenced to jail terms. Nike was next on the government's radar screen and Avenatti had the goods on them.

Let's be clear: Clients should be able to hire bulldog attorneys who will do whatever it takes to get results. Avenatti was probably hired specifically because of his aggressive tactics. So how did his efforts devolve from effective representation to extortion, and could he have handled things differently? Avenatti threatened to go public with Nike's alleged criminal misconduct unless the company paid him more than $20 million, ostensibly to conduct an internal investigation and help them clean up their act.

Good lawyers do it all the time. They pressure other parties to do whatever is demanded through the threat of litigation, with its attendant costs and headaches. It is a "well established legal practice to communicate promptly with a potential adversary, setting out the claims made upon him, urging settlement, and warning of the alternative of judicial action," and demand letters are "typical example[s] of such a missive" Lerette v. Dean Witter Organization Inc., 60 Cal. App. 3d 573, 577 (1976). These "prelitigation letters airing grievances and threatening litigation if they are not resolved are commonplace" Sussman v. Bank of Israel, 56 F.3d 450, 459 2d Cir. 1995), and are ordinarily "legitimate speech or petitioning activity," not extortionate threats. Malin v. Singer, 217 Cal. App. 4th 1293, 1294 (2013).

What California lawyers cannot do is threaten criminal or administrative disciplinary action against an adversary. The Rules of Professional Responsibility state as follows:

"Rule 3.10 Threatening Criminal, Administrative, or Disciplinary Charges

"(a) A lawyer shall not threaten to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute."

In Flatley v. Mauro, 39 Cal. 4th 299 (2006), Irish dance entertainer Michael Flatley sued an opposing attorney for extortion based on prelitigation communications that included not only a demand letter threatening a civil action against Flatley for alleged rape, but also repeated threats to publicize the alleged rape to "worldwide" media, threats to publicize unrelated (and unspecified) criminal activity having nothing to do with the attorney's client, and threats to pursue criminal charges against the plaintiff unless he paid an exorbitant settlement, a part of which the lawyer would have taken for himself. The California Supreme Court held that these threats crossed the boundaries of professional responsibility.

While demand letters threatening civil action are typically aligned with a party's constitutional right to seek monetary redress in court, threats to commence or support criminal prosecutions are generally not concerned with monetarily compensating injured persons. Avenatti's threat to instigate criminal action against Nike provided no recompense for the coach who had lost his lucrative ties with the company, and any hush money paid by Nike would have gone straight into Avenatti's bank account.

Avenatti, for all his bluster and bravado, made a grave error when he communicated his demand to Nike in a phone conversation. Had he detailed the allegations and proposed settlement in a lawsuit or complaint, the litigation document privilege would have attached, and these communications would have been protected. Similarly, had he asserted his demands within the context of a mediation proceeding, they would have been privileged.

Avenatti's case is unprecedented because it goes to the heart of effective advocacy. He has vowed to appeal the conviction, and the Second Circuit of Appeals and the Supreme Court may be asked to rule that the law is unconstitutional as applied, that strong lawyering should not be criminalized. Historically, courts have been reluctant to interpret extortion laws broadly for fear of unconstitutionally impinging on First Amendment rights. "Restricting such prelitigation conduct when the same demands asserted in a petition to the court is protected would render the entire litigation more onerous, imposing a substantial burden on a party's ability to seek redress from the courts" Sosa v. DirecTV, Inc., 437 F.3d 923, 936 (9th Cir. 2006).

Yes, clients deserve to hire aggressive attorneys. But attorneys cannot break the law. What Avenatti did crosses the boundaries of effective lawyering and professional responsibility. Avenatti is the object lesson for attorneys who seek to get what they want by whatever means possible: There are limits. 