Thread by @meghanncuniff

OK, about yesterday: Michael Avenatti was in a Zoom hearing (via phone) in his old law firm’s bankruptcy case, regarding subpoenas recently issued to the firm’s court-appointed trustee. I listened in, and here’s a thread of what went down. ⚖️🧵⚖️

I wasn’t sure what I was getting into by listening in, as it was an emergency motion with few details. (Read it here: bit.ly/3Fp5qMQ) So I just took a lot of notes and am now putting them into tweets that I'll send in somewhat real time. (Hearing was about an hour.)

The hearing happened before U.S. Bankruptcy Judge Scott Clarkson (who sat in on a bit of the Avenatti trial with U.S. District Judge James Selna last summer.) The trustee is Richard Marshack, a longtime bankruptcy court trustee.

Marshack's lawyer Matt Murphey opens by saying they got subpoenas in the @StormyDaniels case from both New York prosecutors and Avenatti’s public defenders. They need to present the applicable information to the court, and they want to do so through a sealed motion.

Clarkson asks what subpoenas are seeking. Murphey says it’s accounting data. “There’s software and there is data entries on ledgers. That’s specifically what we’ve been asked to provide.”

Judge Clarkson asks how the trustee got the server data, confirming he got it all from the receiver. He asks who created the receiver. Was it Judge Selna? No, it wasn’t. (Selna only has the criminal case. The law firm bankruptcy has been going on a lot longer.)

Receivership was part of proceeding related to ex Avenatti partner Jason Frank’s $10M judgment against firm. Bankruptcy Judge Catherine Bauer planned to abstain, so case went to U.S. District Judge Virginia Phillips, with Brian Weiss as the receiver for Eagan Avenatti.

Clarkson is wondering about chain of custody. The judge says, “I want to have a full understanding of what has been subpoenaed and I don’t have that yet, because I don’t have your motion…

.... But the fact is I’m trying to understand the chain of custody and how the Chapter 7 trustee now has possession of it. Not for any other reason than I want a history,” the judge says.

Lawyers say trustee doesn’t have actual possession of server forensic images. Those are w/ Weiss. Trustee hired Weiss’ Force 10 firm as electronic document manager. So anytime there’s a need to search servers, trustee requests info through Weiss who goes through Force 10.

“That pretty well jives with my understanding, too,” Clarkson says. Recalls he approved the employment of Force 10 by the trustee. He also remembers a saga I remember as well: A former client of Eagan Avenatti requesting through the court his law firm file.

Clarkson says trustee arranged to provide file through Force 10. “Do I recall that right?” Yes, he does, Marshack lawyer Ed Hays says. (it’s Matt Murphey of Murphey & Murphey and Hays of Marshack’s firm talking. Both are on video.)
themurpheylawyers.com/matthew-murphey
marshackhays.com/our-profession…

Avenatti’s on the phone. “Your honor, this is Michael Avenatti.” Clarkson cuts him off. “Mr. Avenatti, Mr. Avenatti. Can you wait until I’m finished?” Clarkson asks. “Most certainly, your honor. I’m wanted to..” Avenatti says.

Judge Clarkson: “Do you have to be somewhere? Because I don’t want to cut you off. But I’m not going to give anybody unlimited time.”
Avenatti: “Understood. I apologize the court. I was just trying to provide some clarification for your honor, but I’ll wait.”

Clarkson asks if it’s the first time they’ve gotten a subpoena for the trustee. Murphey says they got one last year through the other case in the Southern District of New York (aka the @Nike case). Clarkson says that’s his next point -

- you’ve previously responded to subpoenas without court hearings, is that correct? Murphey says no, they went through similar proceedings, but w/ Judge Bauer. (Clarkson took over the case when Bauer left the bench. See this thread:

https://twitter.com/meghanncuniff/status/1291194181906337792

)

Clarkson asks for a docket number for Bauer’s order approving that request, also their request. That’s not sealed? Murphey says no, he thinks it is sealed. Hays says yes, it’s sealed. Docket 50 on Dec. 12, 2019.

Clarkson asks if the motion is sealed, how would interested parties like Avenatti and his lawyer Ryan O’Dea (O’Dea has part of Shulman, who has been working wtih Avenatti on this bankruptcy case for a long time) shulmanbastian.com/attorney/ryan-…

Hays and Murphey says SDNY prosecutors asked for subpoena to be sealed. Clarkson: Are they looking for permission? A “comfort order”? “Approval of your action? Uh, or, perhaps indemnification of some sort?” Clarkson says with a sly smile. “I don’t know what you’re looking for.”

Because the estate would incur expense, Hays says, they need approval. Clarkson essentially has the power to say no, they don’t have to comply with the subpoena because it adversely affects the estate. Clarkson isn’t so sure.

“I think what I can say is you can’t pay for it,” the judge says. Says there’s a distinction between that and him saying “you can’t comply with a subpoena.”
“This is such an interesting and serious matter that I do want to consider all of the aspects,” Clarkson said.

“I am a person who believes you really have a burden to file something under seal, and the court has a burden to make sure…that requiring something to be filed under seal doens’t infringe on transparency issues to the public,” Judge Clarkson says.

With that, he wants to hear from Avenatti. O’Dea says, “I have no problem during the floor over the Michael Avenatti” but wants to address a few points first. He said he had concerns about the first motion back in 2019 being sealed, but he was never given a chance to see it.

Says the judge’s concerns now “are very appropriate.” O’Dea says he doesn’t want it to happen “all over again.” Says he’s not aware of anything in pending criminal matters that would require this to be done under seal. Clarkson wants to “amplify the value of what you just said.”

Clarkson says he doesn’t know the “sanctity or privilege issues are” with respect to the documents Murphey and Hays want to deliver to the SDNY and Avenatti’s federal defenders. “Are we talking about pleadings? Are we talking about attorney-work product?”

O’Dea says the issue right now is the motion itself being sealed - doesn’t want that to happen. Clarkson says by being very careful “they’re giving me very little information” regarding the standard for sealing. “It’s a chicken and the egg problem.”

Clarkson brings up a summary judgment I’ve been meaning to tweet — an adversary action related to Avenatti’s coffee venture Global Barista. Aledmi, LLC. Defendants won their summary judgment motion pretty recently.

Aledmi transferred money to law firm Foster Pepper’s trust accounts to Eagan Avenatti, then Eagan Avenatti paid it back to Aledmi. Clarkson says trustee provided firm accounting information in public court. (He's basically pointing out hypocrisy regarding sealing.)

Defense subpoena doesn't just seek Tabs data - it seeks communications between Avenatti and @StormyDaniels, as well as former Avenatti paralegal Judy Regnier. (Clarkson asks how to spell Regnier.) Hays says Stephanie Clifford then says “she has an alias of Stormy Daniels.”

“I appreciate the fact that Stephanie Clifford was I believe a client of Eagan Avenatti at one time,” Clarkson says. Clarkson is really wrestling with this. We’re now 40 minutes in. And here comes Avenatti. Clarkson finally gives him the floor.

Avenatti backs up to the March 25, 2019, federal search of Regnier’s home. Federal agents and a prosecutors interviewed her as they searched her home “with a helicopter overhead. Highly unusual, I might add,” Avenatti tells Judge Clarkson.

Avenatti says Regnier told them the servers were stored at a data warehouse. Agents went there and seized servers of the law firm. They contacted Weiss (the receiver), who Avenatti says was appointed by Magistrate Judge Karen Scott.

Avenatti says Weiss “in complete degradation of his obligation as receiver and his oblation to protect the privilege held by thousands of clients of the law firm” told the agents they could copy the servers.

Avenatti says the 19 terabytes of server data is “enough to hold the Library of Congress twice.” (c.c. @librarycongress)

“My belief is Mr. Weiss was more concerned in making sure I was charged and criminally convicted” than protecting clients' privilege, Avenatti tells Judge Clarkson.

Clients can waive their privilege in California, but they do not waive the work-product protection,” Avenatti says. That belongs to the attorney in California, and Avenatti says the majority of the data - the work product - is his, and he never waived any protections.

“So fast forward to where we are today,” Avenatti says. He informs Judge Clarkson that Regnier was a witness in Nike case and Judge Selna’s case (Clarkson had asked earlier and no one else was sure.)

Avenatti says he tried to get his servers because he needed them to defend himself. He says Weiss and his lawyer Mr. Reitman (part of the uncle-nephew duo I mention here:

https://twitter.com/meghanncuniff/status/1429979648704737280

) "took a very aggressive position and made it very difficult for us."

Avenatti didn’t get access for 2.5 years, which culminated with Judge Selna declaring the mistrial “because he realized what had transpired.”
Avenatti says he hasn’t seen the subpoena from prosecutors that was served on Marshack, but he knows about the defense’s subpoena.

He says it’s likely Marshack has shared that subpoena with prosecutors. “Nothing wrong with that, because these subpoenas are not confidential by nature. They’re not subject to confidentiality, there’s nothing preventing their public disclosure.”

Avenatti says if prosecutors have requested their subpoena not be shared, "I find that quite curious, quite frankly, and that may rise additional issues... I don’t quite understand what confidentiality would apply to these subpoenas."

Avenatti says the previous process in 2019 was improper, as it involved not only a sealed motion but one submitted in camera. Says it should be unsealed. “That’s perhaps for another day, but I don’t know what the continued interest in keeping that under seal would be.”

Avenatti: “This is a public courtroom, and a public proceeding, as your honor referenced. Transparency is paramount.” He says the trustee have a high burden for sealing, and “I don’t think they can meet the standard, frankly, under the circumstances.”

"All of that is a very longwinded way of saying that I object to any sealing of any filing. I think the subpoenas should be filed on the public record," Avenatti says. "I remain extremely concerned about what’s happened in this case" in connection to the data.

Judge Clarkson tells Avenatti: “First of all, I don’t think you were longwinded. I thought you gave me a better understanding of your viewpoint, and I appreciate that.”

Clarkson says he doens’t want to interfere in the New York or California case, and he said when he took the case that he would entertain requests to stay the case. “I said that and nobody came to me.”

But during the recent Aledmi adversary proceedings, Clarkson said Marshack’s lawyer Reitman made what Clarkson called “an unusual comment” that he could get more info and defend against motion, but Central District prosecutors told him not to.

Judge Clarkson said they had every opportunity to come here and seek some sort of relief if the bankruptcy case was getting in the way of the district court, but all he heard “was the chirping of crickets.”

With that, Clarkson says he doesn’t have enough info to grant the motion allowing them to file a sealed motion. Says it isn’t their fault, they’re being careful and taking instructions from prosecutors.

Clarkson says he’s aware that Marshack as a appointed trustee is “an adjunct” of @TheJusticeDept. “He can be removed at any moment from the very important job that he does.”

So that’s it. Judge Clarkson is rejecting the motion to seal. Says the high standards for sealing just aren’t being met here. “I have no information that any of those levels of requirements to seal a motion have been met.”

Before they go, Avenatti asks Clarkson for clarification on the comments he references from Reitman about prosecutors telling him not to defend against a motion. Clarkson now says it might have occurred in the X-Law adversary action with ex-Eagan Avenatti lawyer Filippo Marchino.

"I don't feel like being anybody's paralegal today, so you'll have to..." Judge Clarkson says.
"No problem. Mr. O'Dea will help me locate that. I appreciate that," Avenatti says.

"Well he's an excellent lawyer. Someone trained him well," Clarkson said. (Clarkson said earlier that O'Dea is his former clerk.)
And with that, we're done. Thanks for following along. I hope it wasn't too boring.

Re: Clarkson's summary judgment. It rejects trustee's case against an LLC over a $1.8M to Avenatti's coffee venture. Trustee said Avenatti repaid w/ firm money that didn't benefit firm, which Clarkson said "appears to be entirely unsupported by evidence." bit.ly/34QeSMA

Here's the issue though, according to Clarkson's order: Trustee's counsel admits she "failed to distinguish between transfers to and from ‘Global Baristas, LLC,’ and transfers to and from ‘Global Baristas US, LLC." So Clarkson said he couldn't rely on her evidence.

Trustee is appealing Clarkson's order to U.S. District Court, it's been assigned to Judge Stephen Wilson. This is the second appeal in the trustee's Avenatti-related adversary actions, following ex-Avenatti lawyer Filippo Marchino's X-Law Group appeal. law.com/therecorder/20…

@threadreaderapp Unroll, please. Thank you! 🚀