Avenatti Loses 'Meritless' 2nd Circ. Appeal Of Nike Conviction

Law360, New York (August 30, 2023, 11:09 AM EDT) -- The Second Circuit on Wednesday declined to overturn Michael Avenatti's conviction for trying to extort more than $20 million from Nike Inc., ruling that the disbarred lawyer's appeal was "meritless."

Michael Avenatti, seen in 2022, was convicted in 2020 of fraud and extortion for allegedly demanding that Nike pay millions of dollars or be exposed to negative press coverage over corruption claims from his client, California Supreme Elite Basketball Program founder Gary Franklin Sr. (AP Photo/John Minchillo, File)

A three-judge panel said a Manhattan federal jury had sufficient evidence to convict Avenatti, who is serving prison time for convictions in the Nike matter and two other cases alleging he stole from clients, including porn star Stormy Daniels, whom he represented in a defamation suit against former President Donald Trump.

In the Nike case, Avenatti appealed the district court's denial of his motion for acquittal, challenging the sufficiency of the evidence against him, the trial judge's refusal to give his proposed honest-services fraud instruction regarding an attorney's duties to a client under California law, and a nearly $260,000 restitution award to Nike.

"After careful review, we conclude that these challenges are meritless," the unanimous panel ruled.

White collar criminal defense lawyer Nina Marino of Kaplan Marino PC told Law360 that the trial evidence against Avenatti "depicts a pretty classic shakedown and total disregard of an attorney's duty to achieve his client's goals as opposed to his own goals."

"The court's affirming of the conviction is therefore not surprising," added Marino, who was not involved in the case.

A jury found Avenatti guilty in 2020 of fraud and extortion for allegedly demanding that Nike pay millions of dollars or be exposed to negative press coverage over corruption claims from his client, California Supreme Elite Basketball Program founder Gary Franklin Sr.

During Avenatti's trial, Franklin testified that two Nike employees pressured him to pay the families of top-ranked young basketball prospects and later ended its sponsorship of his program, which had been called the Nike Elite Youth Basketball League.

Franklin told jurors he turned to Avenatti for help reconciling with Nike and reaching a monetary settlement with the Nike employees in question. But he said he didn't want his claims to be publicized and wasn't aware that Avenatti had threatened to go public with his allegations against Nike unless the company paid up.

Avenatti requested that Nike pay Franklin a $1.5 million settlement. Avenatti also demanded that Nike fork over another $15 million to $25 million for his retainer to conduct an internal investigation of the company, according to prosecutors.

In upholding Avenatti's conviction on the extortion charges, the Second Circuit held that the trial evidence was sufficient to support a jury finding that Avenatti's demand for a retainer from Nike was self-serving and that he never actually intended to conduct a "bona fide internal investigation" of the company.

The court noted that Avenatti provided scant details about how he planned to handle the probe and, in rejecting a retainer payment of less than $10 million, told the company, "it's worth more in exposure to me to just blow the lid on this thing."

The jury heard a recording during trial in which Avenatti threatened that he'd "take 5, 6 billion dollars in market cap off" the company if he went public with Franklin's corruption claims. He also said he would hold multiple press conferences that would result in "cut after cut after cut after cut" to Nike, according to the decision.

"When considered in light of Avenatti's failure to pursue Franklin's goals, his other actions also support a jury finding that he did not reasonably believe that his retainer demand aligned with Franklin's goals," U.S. Circuit Court Judge Reena Raggi wrote in the opinion. "Specifically, what Avenatti threatened to disclose if his demand was not met was information that Franklin considered, and had sometimes even expressly marked, confidential."

Marc Scholl of Lewis Baach Kaufmann Middlemiss PLLC, who was not involved in the case, told Law360 that because the "evidence could be viewed to show that Avenatti threatened to ruin Nike's reputation for personal gain, the extortion counts were necessarily affirmed."

The Second Circuit held that the evidence was sufficient to show that Avenatti committed honest-services fraud when he solicited a bribe from Nike in exchange for him violating his duties to Franklin by "influencing his client to accept a settlement of potential claims without realizing that he was receiving only a small fraction of the many millions of dollars that Nike would be paying Avenatti."

"In this way, he not only leveraged his client's claim to his own advantage but also effectively held Franklin's acceptance of a $1.5 million settlement hostage to Avenatti's personal receipt of a larger payout," Judge Raggi wrote.

The court went on to reject Avenatti's argument that the trial court wrongly failed to give his proposed jury instructions on an attorney's general authority to act on his client's behalf and specifically to settle claims, finding that the jury instructions were adequate.

The court also upheld Nike's restitution award, which Avenatti was ordered to pay seven months after he was sentenced in the case, finding that there was no abuse of discretion from the trial judge.

Marino described the delayed restitution order as "odd, but not fatal," adding that "Avenatti missed his opportunity to object at the trial level and he failed to demonstrate prejudice."

Avenatti's attorney has not responded to a request for comment.

Avenatti is serving a 2 ½-year prison sentence in the Nike extortion case along with a four-year sentence for defrauding Daniels out of nearly $300,00 from a book deal. Last year, he was sentenced to 14 years in prison for stealing from four other clients to fund his "extravagant lifestyle," to be served consecutively after completing the sentences in the Nike and Daniels cases.

U.S. Circuit Judges Reena Raggi, John M. Walker and Michael H. Park sat on the panel for the Second Circuit.

Avenatti is represented on appeal by Daniel Habib of the Federal Defenders of New York Inc.

The government is represented by Matthew Podolsky of the U.S. Attorney's Office for the Southern District of New York.

The appeal is USA v. Avenatti, case number 21-1778, in the U.S. Court of Appeals for the Second Circuit.

--Additional reporting by Stewart Bishop, Pete Brush and Gina Kim. Editing by Alyssa Miller.

Update: This story has been updated with more details.