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United States v. Avenatti

United States District Court, S.D. New York

January 6, 2020

UNITED STATES OF AMERICA
v.
MICHAEL AVENATTI, Defendant.

          ORDER

          PAUL G. GARDEPHE, U.S.D.J.

         Indictment (S1) 19 Cr. 373 charges Defendant Michael Avenatti with transmitting interstate communications with intent to extort, extortion, and honest services wire fraud. The Government charges that Avenatti - who is licensed to practice law in the state of California - transmitted in interstate commerce threats “to cause financial harm to Nike and its reputation if Nike did not agree to make multimillion dollar payments to AVENATTI”; used “threats of economic and reputational harm in an attempt to obtain multimillion dollar payments from Nike”; and used interstate communications to “engage[] in a scheme to obtain payments for himself from Nike based on confidential information provided to AVENATTI by Client-1 for the purpose of furthering AVENATTI's representation of Client-1, without Client-1's knowledge or approval, ” thereby depriving Client-1 of the “duty of honest services” he was owed. ((S1) Indictment (Dkt. No. 72) ¶¶ 3, 20, 22, 24)

         Avenatti has moved for issuance of a Rule 17(c) subpoena duces tecum to Gary Franklin, Sr. The Court understands Franklin to be the “Client-1” referenced in the (S1) Indictment. (See Sept. 6, 2019 Srebnick Decl., Ex. 1; Sept. 6, 2019 Def. Br.) Avenatti seeks production of the following materials:

1. All audio recordings (and transcripts thereof) that Gary Franklin, Sr., or Jeffrey Auerbach made of conversations or meetings with Nike executives, including Jamal James, Carlton DeBose, Nico Harrison, Bryan Freedman; Mel McDonald; and/or with Michael Avenatti, discussing or referencing Franklin's potential claims against Nike, Nike's conduct directed at Franklin, and/or the payment to amateur basketball players and/or their families or agents between January 1, 2016, and March 25, 2019.
2. Unredacted versions of all text messages and e-mails between Gary Franklin, Sr., and Jeffrey Auerbach, produced by Franklin to the FBI or USAO-SDNY;
3. The “recording” referenced in the text message with the Bates-stamp “Franklin 1017.”

(Sept. 6, 2019 Def. Br. at 1)

         Both Franklin and the Government have filed objections to Avenatti's motion. (See Sept. 23, 2019 Franklin Obj.; Sept. 23, 2019 Govt. Ltr.) Franklin argues that the proposed subpoena is “an improper fishing expedition, ” while the Government contends that Defendant's proposed subpoena “is precisely the kind of blanket request that courts uniformly hold is insufficient.” (Sept. 23, 2019 Franklin Obj. at 4; Sept. 23, 2019 Govt. Ltr. at 3).

         In his Reply, Defendant responds to these arguments by stating that he seeks sixteen recordings made by Franklin, along with transcripts of these communications. Defendant provides the filenames of the recordings he seeks, along with Bates number cites to Rule 16 discovery in which these recordings are referenced. (Sept. 25, 2019 Def. Reply Ltr. at 2-3)

         Because the discovery materials cited by Defendant had not been provided to the Court, the Court issued an order on October 25, 2019 directing Avenatti to provide copies of the discovery materials that he relied on. (Oct. 25, 2019 Sealed Order) Because Defendant's proposed subpoena seeks unredacted versions of certain text messages and emails produced by Franklin to the Government, the October 25, 2019 Order also directs the Government to inform the Court whether it has access to unredacted versions of the text messages and emails sought by Avenatti. (Id.) On October 27, 2019, the Government submitted a letter stating that it does not have unredacted versions of the text messages and emails sought by Defendant. (Oct. 27, 2019 Govt. Ltr.)

         BACKGROUND

         I. THE (S1) INDICTMENT'S FACTUAL ALLEGATIONS AND CHARGES

         Franklin - “Client-1” in the (S1) Indictment - is the director and head coach of an amateur youth basketball program (the “Basketball Program”) based in California. “For a number of years, the Basketball Program . . . had a sponsorship program with Nike[, ] pursuant to which Nike paid Client-1's program approximately $72, 000 annually.” ((S1) Indictment (Dkt. No. 72) ¶ 5) In March 2019, Franklin contacted Avenatti seeking “legal assistance after [Nike informed] the Basketball Program . . . that its annual contractual sponsorship would not be renewed.” (Id. ¶ 8)

         Avenatti and Franklin met on March 5, 2019. “During that meeting and in subsequent meetings and communications, [Franklin] informed AVENATTI . . . that [he] wanted Nike to reinstate its $72, 000 annual contractual sponsorship of the Basketball Program.” “During the [March 5, 2019] meeting, [Franklin] provided AVENATTI with information regarding what [Franklin] believed to be misconduct by certain employees of Nike involving the alleged funneling of illicit payments from Nike to the families of certain highly ranked high school basketball prospects.” (Id. ¶ 9)

         At the March 5, 2019 meeting, Avenatti “told [Franklin] that [he] believed that he would be able to obtain a $1 million settlement for [Franklin] from Nike. . . .” However,

at no time during the March 5, 2019 meeting or otherwise did AVENATTI inform [Franklin] that AVENATTI also would and did seek or demand payments from Nike for himself in exchange for resolving any potential claims made by [Franklin] and not causing financial and reputational harm to Nike, or that AVENATTI would and did seek to make any agreement with Nike contingent upon Nike making payments to AVENATTI himself. Furthermore, at no time did AVENATTI inform [Franklin] that AVENATTI intended to threaten to publicize the confidential information that [Franklin] had provided to AVENATT, nor did AVENATTI obtain [Franklin's] permission to publicize any such information.

(Id. ¶ 10)

         The Indictment goes on to allege that during a March 19, 2019 meeting with Nike's lawyers, Avenatti told Nike that

he represented Franklin, “a youth basketball coach, whose team had previously had a contractual relationship with Nike, but whose contract Nike had recently decided not to renew”;
Franklin “had evidence that one or more Nike employees had authorized and funded payments to the families of top high school basketball players and attempted to conceal those payments”;
“he intended to hold a press conference the following day to publicize the asserted misconduct at Nike, which would negatively affect Nike's market value”; and
he “would refrain from holding that press conference and damaging Nike if Nike agreed to two demands: (1) Nike must pay $1.5 million to [Franklin] as a settlement for any claims [Franklin] might have regarding Nike's decision not to renew its contract with the Basketball Program; and (2) Nike must hire AVENATTI and Attorney-1 to conduct an internal investigation of Nike, with a provision that if Nike hired another firm to conduct such an internal ...

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