Porn Star's Lawyer Faces Setbacks

For weeks, California lawyer Michael Avenatti has seized a starring role in the hush-money scandal unfolding around President Donald Trump.
 Inside a courtroom in New York on Wednesday, a federal judge decided she had heard enough from Mr. Avenatti, telling him to take his “publicity tour” elsewhere.
 “You are entitled to publicity so long as--that is, I can't stop you, unless you are participating in this matter before me,” U.S. District Judge Kimba Wood told the square-jawed, 47-year-old lawyer.
 By the evening, Mr. Avenatti had bowed out of the case involving Michael Cohen, Mr. Trump's personal lawyer, and the federal probe into payments Mr. Cohen made to Mr. Avenatti's client, Stephanie Clifford, the pornographic actress known as Stormy Daniels who says she was paid off to keep quiet about a sexual relationship with Mr. Trump. Mr. Cohen and the White House have said there was no such relationship.
 The setback for Mr. Avenatti-- who after the hearing appeared on at least four cable- news television shows-- represented the latest in a string of blows for the celebrity lawyer, who has become a hero for many who are pressing for Mr. Trump's downfall.
 On a single day last week, his law firm, Eagan Avenatti LLP, and a company he started were hit with back-to-back court judgments ordering them to repay millions of dollars in outstanding debts. In the past year alone, more than a dozen creditors--including a former colleague, a law firm and former landlords--have gone to court to collect millions of dollars more in debts they allege are owed them by Mr. Avenatti, his law practice or his corporate entities. Most of these cases remain open.
 In those and other recent lawsuits, opposing litigants have raised questions about tactics used by Mr. Avenatti against adversaries, some of whom have voiced suspicions that he or entities he controls have manipulated the court process and played shell games with creditors.
 In an interview Tuesday, Mr. Avenatti dismissed any allegations that he behaved unethically as “hogwash.”
 Some who have worked with Mr. Avenatti described him as a skilled lawyer, and he has won some significant judgments.
 Some of the litigation Mr. Avenatti faces stems from a risky bet he made in 2012 on a struggling Seattle coffee company, Tully's Coffee. By 2017, Global Baristas, the company Mr. Avenatti formed to buy Tully's, had accumulated a string of civil judgments for nonpayment of debts and a $5 million federal tax lien. Creditors said the company has made conflicting representations about its corporate structure, frustrating their efforts to collect debts.

Opposing litigants have raised questions about Mr. Avenatti's tactics.

Mr. Avenatti said he sold the company but declined to say when or to whom. The company's annual report, filed with Washington state authorities in January, lists him as its authorized representative, and his wife said in a divorce filing that month that he has “ownership interests” in the company.
 Eagan Avenatti--which shares an address in Newport Beach, Calif., with Avenatti & Associates APC, the entity through which Mr. Avenatti represents Ms. Clifford--has also clashed in court over alleged debts. In early 2017, Jason Frank, a lawyer who had been under contract with the firm, claimed before an arbitration panel that the firm hadn't paid him an agreed upon percentage of profits.
 Ahead of the arbitration trial set for March last year, the panel ordered Mr. Avenatti and the firm's office manager to appear for depositions by March 3 or face sanctions, citing what it described as a “pattern of delay, obfuscation and unresponsiveness.”
 On the eve of that scheduled questioning, Eagan Avenatti's lawyer, Phillip A. Baker, emailed Mr. Frank that the depositions wouldn't occur because of a petition filed the day before in Orlando, Fla., by a 48-year-old man named Gerald Tobin to have the law firm declared bankrupt.
 Without legal representation, Mr. Tobin had lodged the petition under a little-used federal provision, seeking to put Eagan Avenatti into bankruptcy over a claim that the firm owed him $28,700 for unspecified services.
 Mr. Tobin couldn't be reached for comment. A lawyer representing him in a pending criminal domestic-assault case in Orange County, Fla., to which Mr. Tobin pleaded not guilty in March, declined to comment.
 Mr. Avenatti provided The Wall Street Journal with what he said was a sworn declaration from Mr. Tobin--dated in July 2017 but never filed in court or notarized--saying Mr. Avenatti's law firm had hired Mr. Tobin to find victims of the June 2016 Orlando Pulse nightclub shooting for a case that was never filed.
 An involuntary bankruptcy would normally halt other collection efforts against a debtor.
 A judge at a bankruptcy hearing in Orlando, however, refused to halt the Eagan Avenatti arbitration, saying Mr. Tobin's petition had a “stench of impropriety. Nothing to do with the debtor, necessarily.” Mr. Avenatti said the judge's criticism wasn't directed at him or his firm.
 Two days later, Mr. Avenatti halted the arbitration anyway by placing Eagan Avenatti into Chapter 11 bankruptcy protection.
 He later struck a settlement with Mr. Frank that dismissed the bankruptcy and required Mr. Avenatti to personally guarantee a payment of $4.8 million to Mr. Frank's new law firm. In May, Mr. Frank sued Mr. Avenatti for allegedly failing to pay the first $2 million installment by a court-approved deadline. Mr. Avenatti contests the debt.


Michael Avenatti, lawyer for Stormy Daniels, talking to reporters outside court in New York Wednesday.


BY JACOB GERSHMAN AND ALEXANDRA BERZON

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