The Perils of Fame and Greed

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It has been recently reported that Michael Avenatti, the lawyer who has become famous for representing Stormy Daniels, has been arrested and charged in New York with trying to extort millions of dollars from Nike, the giant shoe and apparel company.

The facts related to the charges involving Nike seem to be that Avenatti claimed to have a client, who was not a Nike employee, who had evidence that Nike employees were engaged in the illegal recruitment of college basket ballplayers. This would be similar to the scandalous allegations made against Adidas last year. Avenatti threatened Nike that he would make this evidence public unless Nike paid 22.5 million for his client’s silence and hired him to “investigate” wrongdoing at Nike. Nike would be paying to silence Avenatti’s client and Avenatti himself would be hired and paid by Nike for his legal services which, because of the attorney/client privilege, would ensure that Avenatti would stay quiet about these allegations as well as all allegations he might uncover in his so-called “investigation”. And, because he would become employed by Nike as an attorney to a limited degree, he would not be able to represent other clients who have claims against Nike.

These allegations, if true, paint a very ugly picture. However, Avenatti will probably raise a defense to the effect that this sort of deal happens all the time out of the public’s eye and outside the notice of the media. As we now know from continuous media reports over the last few years, people and businesses frequently buy silence. This is particularly true in sex-based claims, but it is not limited to that type of case. Indeed, there seems to be a veritable underground marketplace for nondisclosure or confidentiality agreements.

I am not and don’t pretend to be an expert in federal criminal law. Nevertheless, in all federal and state prosecutions it is necessary to prove that a defendant acted with criminal intent. That means the government will have to prove that Avenati intentionally or knowingly engaged in conduct that is defined by a federal statute as a crime. In this regard, it will be legally significant that Avenatti’s client was not a Nike employee and, according to media reports, does not seem to have a valid legal claim against Nike. In other words, the confidentiality (silence) would not be part of the settlement of a legitimate claim by a client, but would be a straightforward cash for silence deal which was being leveraged by Avenatti with threats of harm.

Avenatti will probably say that, as a lawyer, he had a duty to zealously represent his client by pointing out to Nike and its lawyers that there was certain to be a lot of negative publicity and financial harm for Nike if another scandal became public. Nevertheless, zealous representation has its limits and this case will test those limits.

Over and above Avenatti’s potential criminal liability, you can expect to see the bar associations wherever he is licensed try to disbar him for violations of their rules of professional ethics. If the media reports are true, it is probable Avenatti committed ethical violations, but not all violations of ethical rules are crimes. On the other hand, if Avenatti is convicted of the crimes with which he is charged, he is certain to lose his license.

It is highly likely that there will be evidence of secretly recorded conversations between Avenatti and officials at Nike or Nike’s lawyers. Knowing Avenatti’s attacking style, those could be explosive and embarrassing for Avenatti and the legal profession.