A federal appeals court on Oct. 23 vacated lawyer Michael Avenatti’s prison sentence for defrauding clients and ordered that a new sentence be handed down.
The U.S. judge who sentenced Avenatti failed to adequately support enhancing Avenatti’s sentence based on obstruction of justice and also did not accurately calculate the losses from the fraud, according to a panel of the U.S. Court of Appeals for the Ninth Circuit.
The court also added another enhancement based on the calculation that Avenatti’s fraud led to $12.3 million in losses, but the judge did not account for the value of Avenatti’s legal services, costs, and payments he made to victims, according to the ruling.
“Reasoning that Avenatti had forfeited his fees and costs by his fraudulent conduct, the district court did not reduce the settlement values to account for Avenatti’s legal services and costs,” the appeals court said. “The district court erred. Forfeiture is a sanction that does not approximate the pecuniary harm caused by an attorney’s misconduct. It has no place in calculating ‘actual loss’ for the purposes of enhancing a criminal defendant’s sentence.”
The court added: “Avenatti’s clients were never entitled to receive the full settlement values—they hired Avenatti on a contingency fee basis and agreed, by contract, to pay him a portion of any settlement as his fees and to reimburse him for his costs. Thus, even if Avenatti acted lawfully, his clients would not have received the full settlement amounts.”
The three judges on the panel vacated the sentence and ordered Selna to hand down a new sentence.
Avenatti became well known while representing adult performer Stephanie Clifford, also known as Stormy Daniels. He was later convicted of stealing book proceeds from Clifford and attempting to extort Nike.
Avenatti argued that the sentence in the fraud case should run concurrently with the sentences he received for his other crimes. The appeals court said the conduct in the Nike case was not relevant but that the crimes relating to Clifford were similar enough that the district court erred in concluding it was not relevant for sentencing purposes.
“The sentence was always grossly unjust and violative of my most basic constitutional rights, but the government sought it anyway solely because of who I am,” he said. “We ALL deserve due process.”
The court sided with Selna on other aspects of the sentencing, including the application of several other sentencing enhancements.
The panel consisted of U.S. Circuit Judge Michelle T. Friedland, U.S. Circuit Judge Roopali H. Desai, and U.S. District Judge Karen Schreier.
