Avenatti Unauthorized Bankruptcy Case 8:19-bk-10822-CB
Avenatti Unauthorized Bankruptcy Case 8:19-bk-10822-CB
Attorney or Party Name, Address, Telephone & FAX Nos., State Bar No. & FOR COURT USE ONLY
Email Address
THE TRIAL GROUP LLP; dba TRIAL GROUP; dba TRG CHAPTER: 11
LLP; dba EAGAN O’MALLEY & AVENATTI LLP; dba
EAGAN AVENATTI LLP, NOTICE OF MOTION FOR:
MICHAEL J. AVENATTI’S MOTION TO STAY
CONTEMPT PROCEEDINGS PENDING RESOLUTION
OF RELATED CRIMINAL ACTION
DATE: 05/08/2019
TIME: 10:00 am
COURTROOM: 5D
PLACE: 411 W Fourth Street
Santa Ana, CA 92701
Debtor(s).
United States Trustee and All Other Parties in Interest and respective counsel
1. TO (specify name): _____________________________________________________________________________
2. NOTICE IS HEREBY GIVEN that on the following date and time and in the indicated courtroom, Movant in the above-
captioned matter will move this court for an Order granting the relief sought as set forth in the Motion and
accompanying supporting documents served and filed herewith. Said Motion is based upon the grounds set forth in
the attached Motion and accompanying documents.
3. Your rights may be affected. You should read these papers carefully and discuss them with your attorney, if you
have one. (If you do not have an attorney, you may wish to consult one.)
This form is mandatory. It has been approved for use in the United States Bankruptcy Court for the Central District of California.
4. Deadline for Opposition Papers: This Motion is being heard on regular notice pursuant to LBR 9013-1. If you wish
to oppose this Motion, you must file a written response with the court and serve a copy of it upon the Movant or
Movant’s attorney at the address set forth above no less than fourteen (14) days prior to the above hearing date. If
you fail to file a written response to this Motion within such time period, the court may treat such failure as a waiver of
your right to oppose the Motion and may grant the requested relief.
5. Hearing Date Obtained Pursuant to Judge’s Self-Calendaring Procedure: The undersigned hereby verifies that
the above hearing date and time were available for this type of Motion according to the judge’s self-calendaring
procedures.
This form is mandatory. It has been approved for use in the United States Bankruptcy Court for the Central District of California.
17 Hearing:
Date: May 8, 2019
18 Time: 10:00 a.m.
Place: Courtroom 5D
19 411 W. Fourth Street
Santa Ana, CA 92701
20
23 Michael J. Avenatti (“Avenatti”) hereby submits his Motion to Stay Contempt Proceedings
25 I. SUMMARY OF ARGUMENT
26 The personal and legal landscape for Avenatti has materially changed since he was last
27 before this Court – changes which necessitate the immediate stay of the instant contempt proceeding.
28 Most recently, on April 10, 2019, a federal grand jury in the Central District of California returned
SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\56\1355719.1 1
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1 an indictment against him on claims including tax fraud and bankruptcy fraud in Case No. SACR19-
2 00061 (“Indictment”). Due to the Indictment and the serious impact of the allegations contained
3 therein, Avenatti is faced with the untenable position of defending the criminal proceedings while
4 at the same time defending this Court’s Order to Show Cause re Sanctions For Filing Case in
5 Violation of the Joint Stipulation re Order Appointing Receiver and Issuing Restraining Order
6 (“OSC”). Given the ongoing criminal investigation and the recent Indictment, Avenatti must assert
7 his Fifth Amendment right not to incriminate himself. As a direct result of Avenatti exercising his
9 himself in this Court’s pending OSC, let alone develop any evidence that may exonerate him in this
10 case.
11 If the instant contempt proceeding is permitted to proceed concurrently with the criminal
12 investigation, Avenatti will be forced into the unfair and inequitable position of choosing between
13 asserting his Fifth Amendment constitutional right against self-incrimination, which would impair
14 his ability to defend himself in the OSC, on the one hand, and waiving his constitutional rights,
15 which would damage his ability to defend himself in the criminal case. In either event, Avenattii is
17 Moreover, a stay of the OSC would result in the most efficient use of judicial resources, as
18 this Court’s resources utilized during a stay would be nominal. Allowing the criminal case to
19 proceed while the OSC is stayed appears to be the best way to ensure this Court’s time and resources
21 In the interest of affording Avenatti the opportunity for a fair trial in both the OSC and the
22 criminal proceedings and to ensure the best and most efficient use of judicial resources, Avenatti
23 respectfully requests that this Court stay the OSC pending resolution of the criminal case.
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SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\56\1355719.1 2
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4 Avenatti LLP (the “Firm”) in the Middle District of Florida was transferred to the Central District
5 of California, Santa Ana Division, commencing Case No. 8:17-bk-11961-CB (“Involuntary Case”). 1
6 On March 15, 2018, this Court entered an Order Granting Motion Approving Settlement and
7 Dismissing Case and Related Relief (“Dismissal Order”) in the Involuntary Case.
8 The Dismissal Order approved a settlement reached between the Firm and Jason Frank Law,
9 PLC (the “Judgment Creditor”) which provided terms for a restructure and payment of the Firm’s
10 creditors over time, and dismissed the case. Essentially, the Firm planned to restructure its debts
12 The Firm began making payments under the settlement which was approved by the
13 Dismissal Order but ultimately, was unable to fully comply with the payment terms.
14 B. Receivership Proceedings
15 On September 4, 2018, the Judgment Creditor registered a judgment entered against the Firm
16 with the District Court for the Central District of California, commencing Case No. 8:18-CV-01644-
18 On February 12, 2019, Judgment Creditor filed a motion to appoint a receiver over the Firm
20 The parties discussed the Judgment Creditor’s motion and how to possibly resolve it. The
21 Firm ultimately agreed to the appointment of a receiver, based at least in part on the parties agreeing
22 to attend mediation and to attempt to resolve the Judgment Creditor’s judgment against the Firm
23 and to continue a judgment debtor examination (“JDE”) of Avenatti and the Firm scheduled for
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27 1
A true and correct copy of the docket for the Involuntary Case is attached to the Request for Judicial Notice (“RJN”)
as Exhibit “1.”
28 2
SHULMAN HODGES &
A true and correct copy of the docket for the District Court Case is attached to the RJN as Exhibit “2.”
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\56\1355719.1 3
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1 On February 13, 2019, the District Court entered the Order Appointing Receiver and Issuing
2 Restraining Order (“Receiver Order”) in the District Court Case. The Receiver Order was based on
3 a Joint Stipulation entered into between the Judgment Creditor, the Firm, and Avenatti individually.
4 As part of the Receiver Order, and because the parties had agreed to attend mediation and attempt
5 to resolve their disputes, the JDE scheduled for Avenatti and the Firm was continued from February
9 of The Trial Group LLP; dba Trial Group; dba TRG LLP; dba Eagan O’Malley & Avenatti LLP;
10 dba Eagan Avenatti LLP (the “Debtor”), commencing the instant case.
11 On March 8, 2019, Judgment Creditor filed an Emergency Motion to Dismiss Case or in the
13 A hearing on the Motion was held on March 13, 2019 at which time the Court granted the
14 Motion. At the hearing, the Court also noted that it would issue an Order to Show Cause.
15 On March 15, 2019, the Court entered the OSC. A true and correct copy of the OSC is
16 attached to the RJN as Exhibit “3.” Avenatti’s response to the OSC is due no later than April 17,
17 2019 and a hearing on the OSC is set to take place on May 8, 2019. A true and correct copy of the
19 The JDE took place on April 11, 2019. At that time, Avenatti pled his Fifth Amendment
22 On or about March 25, 2019, claims were filed by the U.S. Attorney’s Office of the Southern
23 District of New York against Avenatti relating to wire fraud, bank fraud, and extortion.
24 On April 10, 2019, a federal grand jury in the Central District of California returned the
26 While Avenatti contests the OSC, in light of the criminal case, he intends, upon the advice
27 of counsel, to assert his Fifth Amendment privilege until the criminal case is concluded.
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SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\56\1355719.1 4
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1 III. ARGUMENT
3 The Fifth Amendment privilege against self-incrimination extends to “any matter that may
4 tend to incriminate him.” Cal. Evid. Code § 940. The privilege “can be asserted in any proceeding,
5 civil or criminal, administrative or judicial, investigatory or adjudicatory; and it protects against any
6 disclosures that the witness reasonably believes could be used in a criminal prosecution or could
7 lead to other evidence that might be so used.” Kastigar v. United States, 406 U.S. 441, 444-445
8 (1972). “To sustain the privilege, it need only be evident from the implications of the question, in
9 the setting in which it is asked, that a responsive answer to the question or an explanation of why it
10 cannot be answered might be dangerous because injurious disclosure could result.” Blackburn v.
11 Superior Court, 21 Cal.App.4th 414, 427 (1993) (quoting Hoffman v. United States, 341 U.S.
12 479,486 (1951)).
13 The Constitution does not ordinarily require a stay of civil proceedings pending the outcome
14 of criminal proceedings. Federal Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir.
15 1989); SEC v. Dresser Indus., 628 F.2d 1368, 1375 (D.C. Cir. 1980) (cert. denied, 449 U.S. 993
16 (1980)). “In the absence of substantial prejudice to the rights of the parties involved, [simultaneous]
17 parallel [civil and criminal] proceedings are unobjectionable under our jurisprudence.” Dresser, 628
18 F.2d at 1374. “Nevertheless, a court may decide in its discretion to stay civil proceedings . . . ‘when
19 the interests of justice seem[] to require such action.’“ Id. at 1375 (quoting United States v. Kordel,
21 “The decision whether to stay civil proceedings in the face of a parallel criminal proceeding
22 should be made ‘in light of the particular circumstances and competing interests involved in the
23 case.’” Keating v. Office of Thrift Supervision, 45 F.3d 322, 325 (9th Cir. Jan. 18, 1995) (quoting
24 Molinaro, 889 F.2d at 902). The court’s primary consideration in deciding whether or not to stay
25 an action is “the extent to which the defendant’s fifth amendment rights are implicated.” Id. at 324.
1 the convenience of the court in the management of its cases, and the
efficient use of judicial resources; (4) the interests of persons not
2 parties to the civil litigation; and (5) the interest of the public in the
pending civil and criminal litigation.
3
Id.
4
Where, as here, a party is under indictment on serious charges involving overlapping facts,
5
there is a strong case for stay. See generally, SEC v. Alexander, 2010 WL 5388000 *3 (N.D. Cal
6
Dec. 22, 2010) (staying SEC action alleging fraud on investors in light of parallel criminal case
7
based on related allegations). This is because allowing a civil action to proceed against a party
8
under indictment risks undermining the defendant’s Fifth Amendment privilege, expanding criminal
9
discovery beyond the limits of Federal Rule of Criminal Procedure 16(b), exposing the defense
10
strategy to the prosecution before the criminal trial, and causing other prejudice. Id.
11
As established below, a review of the totality of the Keating factors warrants a stay of the
12
OSC against Avenatti.
13
B. The Facts of this Case Warrant a Stay of the OSC Under the Keating Factors
14
1. Courts Routinely Issue Stays of a Civil Action Where a Party is Under Indictment
15
for a Serious Offense
16
In Dresser, the Court set forth the rationale for staying parallel civil actions in light of
17
pending criminal cases:
18
…the strongest case for deferring civil proceedings until the
19 completion of criminal proceedings is where a party under indictment
for a serious offense is required to defend a civil or administrative
20 action involving the same matter. The non-criminal proceeding, if
not deferred, may undermine the party’s 5th Amendment privilege
21 against self-incrimination, expand rights of criminal discovery
beyond the limits of Federal Rule of Criminal Procedure 16(b),
22 expose the basis of the defense to the prosecution in advance of
criminal trial, or otherwise prejudice the case.
23
SEC v. Dresser Industries, Inc., 628 F.2d at 1375-76.
24
Here, all of the risks outlined by the court in Dresser are present. The criminal proceedings
25
implicate testimony regarding the alleged misappropriation of funds by the Firm, the Debtor and/or
26
Avenatti; the assets and liabilities of the Firm and the Debtor; statements made by Avenatti under
27
oath in pleadings and documents filed in the Involuntary Case; and the actions taken by Avenatti in
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SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\56\1355719.1 6
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1 the Involuntary Case. The instant bankruptcy case and the OSC involve and relate directly to those
2 same issues and to the facts of the Involuntary Case. Because of the overlapping facts, Avenatti
3 intends to assert his Fifth Amendment privilege and will not provide any declaration in response to
4 the OSC.
5 If the OSC proceeds, Avenatti will be put in the unfair position of having to choose between
6 asserting his Constitutional rights to protect him in the criminal case or waiving those rights to
7 defend the OSC. Instead, Avenatti should be allowed to assert his constitutional rights without fear
8 of adverse inferences. Accordingly, this Keating factor supports that a stay of the OSC is necessary.
9 2. The Court and the Opposing Parties Will Not Be Prejudiced by a Stay of the OSC
10 The Court and the Judgment Creditor will not be prejudiced by a stay. To establish
11 prejudice, parties must do more than simply claim delay in expeditiously pursuing claims. In re
12 Adelphia Communications Securities Litigation, 2003 WL 22358819, at *4 (E.D. Pa. May 13, 2003)
13 (stay granted where plaintiff failed to demonstrate sufficient prejudice). No party can establish that
15 As will be discussed in Avenatti’s response to the OSC, attorneys fees and compensatory
16 damages are not available to the Judgment Creditor. See, Fed.R.Bankr.Proc. 9011(c)(2); Barbara
17 v. Miller, 146 F.3d 707, 711 (9th Cir. 1988) (quoting Fed. R. Civ. P. 11, Adv. Comm. Notes, 1993
18 Amended (“monetary sanction imposed after a court-initiated show cause order [is] limited to a
20 Further, the fact that the criminal case is proceeding vitiates against a claim that memories
21 will fade or facts will be forgotten during a stay of the civil case. As the court in Alexander
22 recognized, concerns about fading memories are “mitigated by the fact that the criminal prosecution
23 is already underway, and key witnesses in the civil case are also likely to provide testimony or
24 documents in the criminal proceeding. The active criminal case may help keep witnesses’ memories
25 fresh, preserve the testimony of witnesses who later become unavailable, and ensure the retention
27 The Court and the Judgment Creditor will thus not be prejudiced by a stay of the OSC
2 The burden on Avenatti in defending the OSC while simultaneously defending the criminal
3 case is significant. The hearing on the OSC is set for May 8, 2019 with Avenatti’s response due on
4 April 17, 2019. As discussed above, absent a stay, Avenatti will be forced to choose between
5 preserving or waiving his right to remain silent during the OSC proceedings.
6 Moreover, absent a stay, Avenatti will be forced to divide his time and resources between
7 the criminal case and the OSC proceeding. As such, a stay of the OSC is necessary.
8 4. Staying the OSC Will Preserve Judicial Resources and Ensure the Efficient Use of
10 Avenatti’s counsel is well aware that one of the goals of many, if not all, of the bankruptcy
11 courts within the Central District of California is to move its cases along in an efficient and
12 expeditious manner. Avenatti will make no assumptions as to what this Court will deem convenient
13 in the management of its cases. That said, Avenatti believes a stay of the OSC will avoid prospective
14 discovery motions brought by the parties arising out of an assertion of the Fifth Amendment. To be
15 sure, Avenatti will not declare to anything in response to the OSC. He will simply plead the Fifth
16 Amendment.
17 While Avenatti appreciates a court’s desire to keep its cases moving in an efficient manner,
18 the desire to keep a case moving should not be to the material detriment of a litigant – as such a
19 result would elevate form over substance. Avenatti believes a stay of the OSC while the criminal
20 action proceeds would result in an efficient use of judicial resources, as Court resources utilized
21 during a stay would be nominal. As such, this Keating factor weighs in favor of staying the OSC.
22 5. The Interest of Persons Not Parties to the Civil Litigation Will Not Be Negatively
23 Impacted by a Stay
24 The only non-party that has any interest in the OSC is the government. The government has
25 no appropriate compelling interest in seeing that the OSC proceed alongside the criminal case.
26 Instead, the criminal proceedings should take precedence. As noted in SEC v. Nicholas, allowing
27 the civil and criminal cases to proceed simultaneously “would undermine the public’s right to fair
28 and efficient prosecution of its criminal laws, distract the [criminal] Defendants and the USAO from
SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\56\1355719.1 8
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1 fully preparing their respective cases, and divert the Court’s attention with burdensome discovery
2 litigation and duplicative law and motion.” SEC v. Nicholas, 569 F. Supp. 2d 1065, 1067 (C.D. Cal.
3 2008).
5 6. The Interest of the Public in the Pending Civil and Criminal Litigation Favor a Stay
6 Courts have confirmed that the rights of the public are greater in a criminal case than in a
7 civil case. Alexander, 2010 WL 53880004 at *6 (citing Nicholas, 569 F.Supp.2d at 1072 (while
8 interest of the public in an action brought by a government are more serious than in a private civil
9 action, the public’s interest in a criminal action takes precedence)). Here, the public interest is best
10 served by giving precedence to the criminal case and staying the OSC.
11 Based on all of the above, the Keating factors weigh in favor of staying the OSC.
12 IV. CONCLUSION
13 Based on the foregoing, Avenatti respectfully requests the Court enter an order staying the
14 OSC to allow the criminal case to proceed and for any other and further relief as is appropriate.
16
By:
17 DATED: April 17, 2019 /s/ Melissa Davis Lowe
James C. Bastian, Jr.
18 Melissa Davis Lowe
Attorneys for Michael J. Avenatti
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SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\56\1355719.1 9
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A true and correct copy of the foregoing document entitled: NOTICE OF MOTION FOR (specify name of motion)
Michael J. Avenatti's Motion to Stay Proceedings Pending Resolution of Related Criminal Action
_______________________________________________________________________________________________
_______________________________________________________________________________________________
will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in
the manner stated below:
1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General
Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On (date)
04/17/2019 , I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the
following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below:
Hon Catherine Bauer, US Bankruptcy Court, Ronald Reagan Fed Bld, 411 W. Fourth St #5165, Santa Ana, CA 92701
United States Trustee, Ronald Regan Fed Bldb, 411 W. Fourth St, #9041, Santa Ana, CA 92701
3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method
for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on (date) , I served the
following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to
such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration
that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is
filed.
I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.
This form is mandatory. It has been approved for use in the United States Bankruptcy Court for the Central District of California.
R Gibson Pagter, Jr. on behalf of Creditor 520 Newport Center Drive, LLC
[email protected], [email protected];[email protected]
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23 PLEASE TAKE NOTICE that Michael J. Avenatti hereby requests that the Court take
24 judicial notice pursuant to Federal Rule of Evidence 201 of the following documents in connection
25 with the concurrently filed Motion to Stay Contempt Proceedings Pending Resolution of Related
26 Criminal Action.
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SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618 6020-000\1355129.1
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2 1. Docket of Case No. 8:17-bk-11961-CB, a true and correct copy of which is attached
4 2. Docket of District Court for the Central District of California, Case No. 8:18-CV-
5 01644-VAP-KES, a true and correct copy of which is attached hereto as Exhibit “2.”
6 3. Order to Show Cause re Sanctions For Filing Case in Violation of the Joint
7 Stipulation re Order Appointing Receiver and Issuing Restraining Order entered by this Court on
8 March 15, 2019, a true and correct copy of which is attached hereto as Exhibit “3.”
9 4. Docket for Bankruptcy Case No. 8:19-bk-10822-CB as of April 16, 2019, a true and
12 Evidence 201. Federal courts may take judicial notice of facts which are “capable of accurate and
13 ready determination by resort to sources whose accuracy cannot reasonably be questioned.” Federal
14 Rule of Evidence 201(c)(2). Judicial notice may be taken of documents filed and orders or decisions
15 entered in any federal or state court proceeding. See, ReadyLink Healthcare, Inc. v. State
16 Compensation Ins. Fund, 754 F.3d 754, 756, fn. 1 (9th Cir. 2014). Federal courts may take notice
17 of materials in their own files. United States v. Wilson, 631 F.2d 118, 119 (9th Cir. 1980) (court
18 may take judicial notice of its own records in other cases); Kinnett Dairies, Inc. v. Farrow, 580 F.2d
19 1260, 1277-78 n. 33 (5th Cir. 1978) (“courts are particularly apt to take notice of material in court
20 files”).
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SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\1355129.1 2
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Exhibit "1"
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Fahim Farivar
Legal & Tax Consulting Group
18653 Ventura Blvd
Ste 362
Tarzana, CA 91356
818-731-1322
Fax : 818-812-7868
Email: [email protected]
Elizabeth A Green
Baker & Hostetler LLP
200 S Orange Ave
Suntrust Center Ste 2300
Orlando, Fl 32801-3432
407-649-4000
Fax : 407-841-0168
Email: [email protected]
TERMINATED: 05/24/2017
James KT Hunter
Pachulski Stang Ziehl & Jones LLP
10100 Santa Monica Blvd 13th Fl
Los Angeles, CA 90067
310-277-6910
Fax : (310) 201-0760
Email: [email protected]
Exhibit "1"
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Ashley M McDow
Foley & Lardner LLP
555 South Flower Street
Suite 3300
Los Angeles, CA 90071
213-972-4615
Fax : 213-486-0065
Email: [email protected]
Malhar S Pagay
Pachulski Stang Ziehl & Jones LLP
10100 Santa Monica Blvd 13th Flr
Los Angeles, CA 90067
310-277-6910
Fax : 310-201-0760
Email: [email protected]
Tiffany D Payne
Baker Hostetler
PO Box 112
Orlando, FL 32801
407-646-4079
Email: [email protected]
Hamid R Rafatjoo
Raines Feldman, LLP
1800 Avenue of the Stars
12th Floor
Los Angeles, CA 90067
310-440-4100
Email: [email protected]
Robert M Saunders
Pachulski Stang Ziehl & Jones LLP
10100 Santa Monica Blvd 13th Fl
Los Angeles, CA 90067
310-277-6910
Fax : 310-201-0760
Email: [email protected]
Petitioning Creditor
Gerald Tobin
2014 Edgewater Dr #169
Orlando, FL 32804
407-367-8631
Christopher Celentino
Dinsmore & Shohl LLP
655 W. Broadway
Suite 800
San Diego, CA 92101
619-400-0519
Fax : 619-400-0501
Email: [email protected]
Exhibit "1"
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05/16/2017
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07/26/2017
Exhibit "1"
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08/02/2017
Exhibit "1"
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198 Notice of motion and motion for relief from automatic stay
(10 pgs) with supporting declarations ACTION IN NON-
BANKRUPTCY FORUM RE: Filippo Marchino, Eagan
Avenatti et al. Court of Appeals; with Proof of Service. Fee
Amount $181, Filed by Creditor Stoll, Nussbaum &
08/07/2017 Polakov, APC (Polis, Thomas) (Entered: 08/07/2017)
Exhibit "1"
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Exhibit "1"
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09/14/2017 226
Exhibit "1"
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10/02/2017
Exhibit "1"
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Exhibit "1"
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10/18/2017 261 Status report Debtor's Third Chapter 11 Status Report Filed
(14 pgs) by Debtor Eagan Avenatti LLP (RE: related document(s)3
Order on Generic Motion (BNC-PDF), 182 Hearing (Bk
Exhibit "1"
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10/25/2017 267
Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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12/13/2017 304
Exhibit "1"
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01/23/2018
Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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05/18/2018
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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Exhibit "1"
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08/09/2018 535 Hearing Set on Motion of Jason Frank Law, PLC for
Entry of Order (1) Finding Judgement Debtor in
Contempt for violating this Court's July 11, 2018
Restraining Order, or in the Alternative, Request for
additional terms to the restraining order, and (2)
Directing partial payment of monthly fees payable to
judgment debtor 534. The Hearing date is set for
8/27/2018 at 11:00 AM at Crtrm 5D, 411 W Fourth
St., Santa Ana, CA 92701. The case judge is
Catherine E. Bauer (Le, James) (Entered:
08/09/2018)
Exhibit "1"
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09/01/2018
Exhibit "1"
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Exhibit "1"
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10/10/2018 581 Hearing Held - Abstain: Off calendar as moot (RE: related
document(s)534 CONT Motion of Jason Frank Law, PLC for
Exhibit "1"
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01/31/2019 587
Exhibit "1"
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Exhibit "1"
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Exhibit "2"
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ACCO,(KESx),CLOSED,DISCOVERY,PROTORD
Receiver
Brian Weiss
V.
Interested Party
Michael J. Avenatti represented by Leonard M Shulman
Shulman Hodges and Bastian
100 Spectrum Center Drive Suite 600
Irvine, CA 92618
949-340-3400
Fax: 949-340-3000
Email: [email protected]
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Ronald S Hodges
Shulman Hodges & Bastian LLP
100 Spectrum Center Drive, Suite 600
Irvine, CA 92618
949-340-3400
Exhibit "2"
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Fax: 949-340-3000
Email: [email protected]
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
V.
Creditor
Jason Frank Law, PLC represented by James R Selth
Weintraub and Selth APC
11766 Wilshire Boulevard Suite 1170
Los Angeles, CA 90025
310-207-1494
Fax: 310-442-0660
Email: [email protected]
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Andrew D Stolper
Frank Sims and Stolper LLP
19800 MacArthur Boulevard Suite 855
Irvine, CA 92612
949-201-2400
Fax: 949-201-2405
Email: [email protected]
ATTORNEY TO BE NOTICED
Sara L Chenetz
Perkins Coie LLP
1888 Century Park East
Suite 1700
Los Angeles, CA 90067
310-788-9900
Fax: 310-788-3399
Email: [email protected]
ATTORNEY TO BE NOTICED
Exhibit "2"
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Exhibit "2"
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10/10/2018 18 MINUTES OF Hearing re Motion for Protective Order 6 held before Magistrate
Judge Karen E. Scott: Case is called. Counsel state their appearances. Oral
arguments are heard. The Court takes the motion under submission. Court
Recorder: CS 10/10/18. (sbou) (Entered: 10/10/2018)
10/11/2018 19 ORDER Denying Judgment Creditor Jason Frank Law, PLC's Ex Parte
Application for Order Shortening Time on Hearing on Motion for Withdrawal of
the Reference from the Bankruptcy Court (Doc. No. 13) by Judge Virginia A.
Phillips: For the foregoing reasons, the Court DENIES JFL's Ex Parte
Application and schedules a hearing on the Motion for Withdrawal of the
Reference from the Bankruptcy Court for Monday, October 22, 2018 at 2:00
p.m. Opposition to the Motion shall be filed and served no later than noon on
October 18, 2018. (see document for further details) (bm) (Entered: 10/11/2018)
10/22/2018 20 MINUTES OF MOTION FOR WITHDRAWAL OF THE REFERENCE FROM
THE BANKRUPTCY COURT 12 Hearing held before Judge Virginia A.
Phillips. The Court having heard from counsel, takes the matter under
submission. Court will issue final ruling. Court Reporter: Myra Ponce. (lom)
(Entered: 10/24/2018)
10/25/2018 21 ORDER Granting Judgment Creditor Jason Frank Law, PLC's Motion for
Withdrawal of the Reference from the Bankruptcy Court (Doc. No. 12) by Judge
Virginia A. Phillips: For the foregoing reasons, the Court GRANTS JFLs
Motion for Withdrawal of the Reference from the Bankruptcy Court (see
document for further details) (bm) (Entered: 10/26/2018)
10/30/2018 22 NOTICE OF ENTRY OF ORDER GRANTING JUDGMENT CREDITOR
JASON FRANK LAW, PLCS MOTION FOR WITHDRAWAL OF
REFERENCE FROM THE BANKRUPTCY COURT (DOC. NO. 12) Jason
Frank Law, PLC. (Chenetz, Sara) (Entered: 10/30/2018)
10/30/2018 23 MINUTE ORDER IN CHAMBERS by Magistrate Judge Karen E. Scott
GRANTING Judgment Creditor' Motion to Set Hearing Date 6 . The Court will
hold a hearing on Debtor's motion for protective order on Wednesday,
November 28, 2018 at 10:00 a.m. in Courtroom 6D. IT IS FURTHER
ORDERED that, on Monday, November 26, 2018, the Creditor shall file a status
report (see order). (jdo) (Entered: 10/30/2018)
11/26/2018 24 STATUS REPORT filed by Creditor Jason Frank Law, PLC. (Attachments: # 1
Exhibit s A - F)(Sims, Scott) (Entered: 11/26/2018)
11/28/2018 25 MINUTES OF Motion Hearing held before Magistrate Judge Karen E. Scott re
Motion for Protective Order 6 . The Court rules on the motion as stated on the
record. Judgment Debtor Examination is scheduled for Friday, January 4, 2019,
at 10:00am in Courtroom 6D. Court Recorder: CS 11/28/18. (jdo) (Entered:
11/28/2018)
11/29/2018 26 TRANSCRIPT ORDER as to Creditor Jason Frank Law, PLC for Court Smart
(CS). Court will contact Maritza Nowowiejski at [email protected]
with further instructions regarding this order. Transcript preparation will not
begin until payment has been satisfied with the transcription company. (Sims,
Scott) (Entered: 11/29/2018)
Exhibit "2"
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Exhibit "2"
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Exhibit "2"
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not proceed as scheduled for any reason, and (b) any argument as to why the
entire examination, or any part of the examination, should not be conducted
publicly. (See order) (jdo) (Entered: 03/19/2019)
03/20/2019 61 OBJECTIONS to Minutes of In Chambers Order/Directive - no proceeding
held,,, Set/Reset Hearing,, 60 [Michael Avenatti's Objection to Judgment Debtor
Examination] filed by In re Debtor Eagan Avenatti, LLP. (O'Dea, Ryan)
(Entered: 03/20/2019)
03/21/2019 62 MINUTE ORDER (IN CHAMBERS): Order Partially Overruling Objections to
Judgment Debtor Exam (Dkt. 61) by Judge Virginia A. Phillips: A judgment
debtor exam of Michael Avenatti, as representative of debtor Eagan Avenatti,
LLP ("EA"), is set for Friday, March 22, 2019. The Court invited EA and/or Mr.
Avenatti to file written objections setting forth (a) any argument that the exam
should not proceed as scheduled for any reason, and (b) any argument as to why
the entire exam, or any part of the exam, should not be conducted publicly. (Dkt.
60.) Mr. Avenatti, through counsel representing him personally, has now done
so. (Dkt. 61.) As further explained below, the Court finds that the objections are
not grounds for cancelling the exam, which shall proceed as scheduled. (see
document for further details) (bm) (Entered: 03/21/2019)
03/22/2019 63 MINUTES OF JUDGMENT DEBTOR EXAM held before Magistrate Judge
Karen E. Scott: Matter called. Counsel for the respective parties are present as
referenced above. Court sets preliminary schedule. Judgment debtor sworn and
examined off the record. Matter re-called and further judgment debtor
examination conducted on the record. Court Reporters: Myra Ponce/Lisa
Gonzalez. (bm) (Entered: 03/26/2019)
03/29/2019 64 Notice of Motion and Motion for Order Quashing Subpoena and/or for
Protective Order; Declaration of Ryan D. O'Dea in Support Thereof filed by
Interested Party Michael J. Avenatti (O'Dea, Ryan) (Entered: 03/29/2019)
03/29/2019 66 REDACTED NOTICE OF MOTION AND MOTION FOR ORDER
QUASHING SUBPOENA AND/OR FOR PROTECTIVE ORDER;
DECLARATION OF RYAN D. O'DEA IN SUPPORT THEREOF filed by
Interested Party Michael J. Avenatti. Motion set for hearing on 4/30/2019 at
10:00 AM before Magistrate Judge Karen E. Scott. (sbou) (Entered: 04/01/2019)
04/01/2019 65 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents
RE: Miscellaneous Document 64 . The following error(s) was/were found:
Incorrect event selected. Correct event to be used is: Discovery Motions; Quash
Subpoena. In response to this notice, the Court may: (1) order an amended or
correct document to be filed; (2) order the document stricken; or (3) take other
action as the Court deems appropriate. You need not take any action in response
to this notice unless and until the Court directs you to do so. (sbou) (Entered:
04/01/2019)
04/01/2019 67 Interim REPORT of Receiver's First Interim Report filed by Receiver Brian
Weiss. (Reitman, Jack) (Entered: 04/01/2019)
04/01/2019 68 TEXT ONLY ENTRY. To comply with Federal Rule of Civil Procedure 5.2,
Judgment Debtor's motion to quash (Dkt. 64) has been sealed and re-docketed
Exhibit "2"
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Exhibit "2"
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Exhibit "3"
Case 8:19-bk-10822-CB Doc 35
47 Filed 03/15/19
04/17/19 Entered 03/15/19
04/17/19 14:36:50
14:18:30 Desc
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2
FILED & ENTERED
3
4 MAR 15 2019
10
20
21 On March 7, 2019, Michael Avenatti (“Avenatti”) filed this bankruptcy case as attorney
22 for the debtor and its purported dbas and/or fkas. In doing so, he violated the terms of the
23 Joint Stipulation re Order Appointing Receiver and Issuing Restraining Order (“Order”) entered
24 by Judge Karen E. Scott on February 13, 2019 in the case of In Re Eagan Avenatti LLP,
26 //
27 //
28
Exhibit "3"
Case 8:19-bk-10822-CB Doc 47
35 Filed 04/17/19
03/15/19 Entered 04/17/19
03/15/19 14:18:30
14:36:50 Desc
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1 Paragraph 14(s) of the Order states that “The Receiver shall…(h)ave the sole authority
4 authorized to file a bankruptcy on behalf of Eagan Avenatti LLP, Avenatti filed this case.
5 IT IS ORDERED:
6 1.) Avenatti shall personally appear on May 8, 2019 at 10:00 a.m. in Courtroom 5D,
8 2.) Avenatti shall show cause, if any, why he should not be sanctioned for filing this
10 Bankruptcy Rule 9011 in that it appears this bankruptcy case was presented for an
11 improper purpose and to cause unnecessary delay or needless increase in the cost
13
14 ###
15
16
17
18
19
20
21
22
23
Date: March 15, 2019
24
25
26
27
28
Exhibit
2
"3"
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Exhibit "4"
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Exhibit "4"
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03/07/2019
Exhibit "4"
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Exhibit "4"
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03/08/2019
Exhibit "4"
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03/10/2019
Exhibit "4"
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Exhibit "4"
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PROOF OF SERVICE OF DOCUMENT
I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 100 Spectrum
Center Drive, Suite 600, Irvine, California 92618
A true and correct copy of the foregoing document entitled (specify): REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF
MICHAEL J. AVENATTI’S MOTION TO STAY CONTEMPT PROCEEDINGS PENDING RESOLUTION OF
RELATED CRIMINAL ACTION will be served or was served (a) on the judge in chambers in the form and manner required by
LBR 5005-2(d); and (b) in the manner stated below:
1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General
Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On (date)
April 17, 2019, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following
persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below:
Judge’s Copy: Hon Catherine E Bauer, US Bankruptcy Court, Ronald Reagan Federal Building, 411 W. Fourth Street, Suite
5165, Santa Ana, CA 92701
Interested Party: United States Trustee, Ronald Reagan Federal Building and United States Courthouse, 411 West Fourth
Street, #9041, Santa Ana, California 92701-8000
3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method
for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on (date) Not Applicable, I served the following
persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method),
by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or
overnight mail to, the judge will be completed no later than 24 hours after the document is filed.
I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.
This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
R Gibson Pagter, Jr. on behalf of Creditor 520 Newport Center Drive, LLC
[email protected], [email protected];[email protected]
This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
Avenatti, LLP
12
RECEIVER’S REPLY TO AVENATTI’S
LOS ANGELES, CALIFORNIA
ATTORNEYS AT LAW
22
23
24
25
26
27
28
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1 Brian Weiss, the court appointed receiver (the “Receiver”) for the estate of Trial Group,
2 LLP, f/k/a Eagan Avenatti, LLP (“EA”) submits this reply (the “Reply”) to “Michael J. Avenatti’s
3 Response To Order To Show Cause In Violation Of The Joint Stipulation Re Order Appointing
5 Avenatti’s Response lacks any legal or factual basis – it simply rehashes arguments that
6 were rejected by the Court in dismissing the EA second bankruptcy case filed March 8, 2019
7 retroactive to the date of that filing. Indeed, Avenatti’s only colorable argument is that the Court
8 should not move forward with the hearing and rule on its Order to Show Cause re Sanction (the
9 “OSC”), based on a 36-count federal Grand Jury indictment against him and Avenatti claimed
10 “intention” to assert his Fifth Amendment rights and refuse to testify at the OSC hearing. Bankr.
& B ERGER LLP
11 Dkt., Doc. 45 (Motion to Stay Contempt Proceedings Pending Resolution of Related Criminal
LOS ANGELES, CALIFORNIA
ATTORNEYS AT LAW
12 Action (the “Stay Motion”), at p. 2 of 11, ll. 6-10). But that argument, too, lacks merit and should
GOTTFRIE D
13 be rejected.
14 I. RELEVANT FACTS
L ANDAU
15 EA is the judgment debtor in In re Eagan Avenatti, LLP, pending in the United States
16 District Court, Central District of California, Case No. 8:18-CV-01644-VAP-KES (the “DC
17 Case”). The judgment creditor who initiated that case is Jason Frank Law, PLC (“JFL”).
18 On February 13, 2019, Avenatti on behalf of his law firm, EA, and JFL stipulated to the
19 appointment of Mr. Weiss as the Receiver of EA and consented to the jurisdiction of Magistrate
20 Judge Karen E. Scott to enter an order (the “Restraining Order”) appointing Mr. Weiss as the
21 Receiver for EA in the DC Case. DC Case Dkt., Doc. 52. Paragraph 14(s) of the Restraining
22 Order granted the Receiver “the sole authority regarding whether to file a petition for bankruptcy”
23 on behalf of EA. Id. p. 8, ¶ 14(s). The Order further provided the judgment debtor examination of
24 EA (through Avenatti) would be continued to March 8, 2019 before Magistrate Judge Scott. Id. p.
25 4, ¶ 2.
26 On March 7, 2019, the evening before Avenatti was required to appear for EA’s debtor
27 examination in the DC Case, Avenatti telephoned the Receiver at approximately 8:14 p.m. to tell
28 him that he (Avenatti) was going to file a bankruptcy petition for EA. The Receiver referenced
2
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2 14. Additional Powers and Duties of the Receiver. The Receiver shall be authorized
3 to and shall perform the following duties and functions: . . . s. Have the sole
5 Bankr. Dkt. Doc. 28 (Joinder to JFL Emergency Motion to Dismiss Case or in the Alternative
6 Relief from the Automatic Stay (the “Receiver’s Joinder”); Receiver’s Declaration, Ex. 1,
8 The Receiver also told Avenatti during that telephone conversation that, based on the
9 Receivership Order, he (the Receiver) did not believe Avenatti had the authority to file a
10 bankruptcy for EA, only he (the Receiver) had that power, and he (the Receiver) would not file a
& B ERGER LLP
11 bankruptcy for EA or authorize Avenatti to do so. Nevertheless, Avenatti chose to violate the
LOS ANGELES, CALIFORNIA
ATTORNEYS AT LAW
12 Restraining Order filed the bankruptcy petition for EA less than 30 minutes after that conversation
GOTTFRIE D
13 -- at 8:41 p.m. Bankr. Dkt. Doc. 28 (Receiver’s Joinder, p. 5 of 24, ¶¶ 2-3, ll. 9-20). Less than 30
14 minutes after that telephone conversation, Avenatti filed a voluntary bankruptcy petition – at 8:47
L ANDAU
15 p.m; purportedly as the attorney for EA. Id. Avenatti also did not appear for EA’s debtor
17 On March 13, 2019, the Court conducted a hearing on JFL’s emergency motion to dismiss
18 the EA bankruptcy case that Avenatti had filed for EA on March 8. At that hearing, the Court
19 ordered the case dismissed retroactive to the date it was filed (that order was entered March 19, as
20 Doc. 39) and issued its OSC re Sanctions against Avenatti (that order was entered March 15, as
22 “On or about March 25, 2019, claims were filed by the U.S. Attorney’s Office of the
23 Southern District of New York against Avenatti relating to wire fraud, bank fraud, and extortion.”
25 On April 10, 2019, the Grand Jury Indictment against Avenatti was filed, commencing
26 United States of America v. Michael John Avenatti, SA CR No. 19-00061, in the United States
27 District Court, Central District of California, Southern Division. The indictment alleges 36
28 criminal counts against Avenatti for Wire Fraud; Willful Failure to Collect and Pay Over Withheld
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1 Taxes; Endeavoring to Obstruct the Administration of the Internal Revenue Code; Failure to File
2 Tax Return; Bank Fraud; Aggravated Identity Theft; False Declaration in Bankruptcy [in
3 connection with the involuntary case filed against EA]; False Declaration on Bankruptcy [same];
4 False Testimony Under Oath in Bankruptcy [same]; Causing an Act to be Done; and Criminal
6 II. ARGUMENT
8 The OSC re Sanctions is straight forward: was Avenatti justified in filing EA’s voluntary
9 bankruptcy petition despite (i) personally and for EA having stipulated to the Restraining Order
10 which made clear that only the Receiver had that right; and (ii) the Receiver having read ¶ 14(s) of
& B ERGER LLP
11 the Restraining Order to Avenatti and having told Avenatti that he (the Receiver) did not believe
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12 Avenatti had the authority to file a bankruptcy petition for EA, that only he (the Receiver) had that
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13 power, and that he (the Receiver) would not file a bankruptcy petition for EA or authorize Avenatti
14 to do so. Bankr. Dkt. Doc. 28 (Receiver’s Declaration, p. 5 of 24, ¶¶ 2-3, ll. 9-20). Avenatti
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15 ignored the Restraining Order and the Receiver’s warnings and filed a voluntary bankruptcy
16 petition for EA, purportedly as its attorney, less than 30 minutes after that discussion. Id.
17 As is evident from comparting the OSC re Sanctions to the Indictment against Avenatti,
18 the criminal charges against him are wholly unrelated to the OSC. The Indictment relates solely to
19 Avenatti’s conduct in connection with bank loans and the operation of EA prior to and during its
20 involuntary bankruptcy. The OSC has nothing to do with that prior conduct and, instead, is based
21 on a single act: filing a voluntary bankruptcy petition for EA without proper authorization.
22 Avenatti also has made no showing in his Motion to Stay the OSC (the “Stay Motion”) of
23 how the OSC and the above-facts might implicate his Fifth Amendment rights, nor can he do so.
24 Instead, he simply throws out a series of random and unsupportable claims, as follows:
26 misappropriation of funds by the Firm [EA], the Debtor and/or Avenatti; the assets and liabilities
27 of the Firm and the Debtor; statements made by Avenatti under oath in pleadings and documents
28 filed in the Involuntary Case; and the actions taken by Avenatti in the Involuntary Case. The
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1 instant bankruptcy case and the OSC involve and relate directly to those same issues and to the
2 facts of the Involuntary Case.” Bankr. Dkt. Doc. 46 (Stay Motion, pp. 6, l 22 – p.7, ll. 24-2).
3 Avenatti describes these as “overlapping facts” which allow him to invoke his Fifth Amendment
4 rights. Id. p. 7, ll. 2-4. Than assertion is nonsense. The OSC has nothing to do with the
5 misappropriation of assets, the assets or liabilities of EA, or Avenatti’s actions in EA’s involuntary
6 bankruptcy case.
7 (ii) “Avenatti believes a stay of the OSC will avoid prospective discovery motions
8 brought by the parties arising out of an assertion of the Fifth Amendment.” Bankr. Dkt. Doc. 46
9 (Stay Motion, p. 8 of 11, ll. 13-14). But the OSC hearing does not contemplate any further
10 discovery. Either Avenatti will have a convincing explanation for the filing or he won’t.
& B ERGER LLP
11 (iii) “[A]llowing the civil and criminal cases to proceed simultaneously “would
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12 undermine the public’s right to fair and efficient prosecution of its criminal laws, distract the
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13 [criminal] Defendants and the USAO from fully preparing their respective cases, and divert the
14 Court’s attention with burdensome discovery litigation and duplicative law and motion. [Citation
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15 omitted].” Bankr. Dkt. Doc. 46 (Stay Motion, at pp. 8-9 of 11, ll. 26-2. But all Avenatti will be
16 called upon to do at the OSC hearing is explain why he filed the EA bankruptcy.
17 The case law citied by Avenatti also does not support a continuance of the OSC hearing
18 and ruling. The Receiver agrees with Avenatti’s assertion that the Constitution does not ordinarily
19 require a stay of civil proceedings pending the outcome of criminal proceedings. Federal Sav. &
20 Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir. 1989); SEC v. Dresser Indus., 628 F.2d
21 1368, 1375 (D.C. Cir. 1980) (cert. denied, 449 U.S. 993 (1980)). “In the absence of substantial
22 prejudice to the rights of the parties involved, [simultaneous] parallel [civil and criminal]
23 proceedings are unobjectionable under our jurisprudence.” Dresser, 628 F.2d at 1374. But that is
24 not the end of the analysis, and Avenatti ignores the import of the remainder of his legal analysis.
25 Here, “the interests of justice [do not] seem to [and do not] require such action.” 628 F.2d
26 Id. at 1375 (quoting United States v. Kordel, 397 U.S. 1, 12 n.27 (1970)). That is so because there
27 are no competing interests between resolving the OSC and the federal Indictment against Avenatti
28 that would implicate his Fifth Amendment rights. As the Court explained in Keating v. Office of
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1 Thrift Supervision, 45 F.3d 322, 324 (9th Cir. Jan. 18, 1995):
2 In addition, the decision maker should generally consider the following factors: (1)
3 the interest of the plaintiffs in proceeding expeditiously with this litigation or any
4 particular aspect of it, and the potential prejudice to plaintiffs of a delay; (2) the
5 burden which any particular aspect of the proceedings may impose on defendants;
6 (3) the convenience of the court in the management of its cases, and the efficient use
7 of judicial resources; (4) the interests of persons not parties to the civil litigation; and
8 (5) the interest of the public in the pending civil and criminal litigation.
9 In this case, delay does prejudice the Court, JFL and the Receiver. All three of them were
10 required to expend time and resources in dealing with the unauthorized bankruptcy. Avenatti’s
& B ERGER LLP
11 conduct also was an attack on a District Court order and the integrity of the judicial system at both
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12 the District Court and Bankruptcy Court level. To indefinitely postpone the day of reckoning
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13 without good reason for doing so should not be countenanced – it is “justice delayed is justice
14 denied.”
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15 Second, resolution of the OSC re Sanction places no undue burden on Avenatti. The Court
16 can address his Fifth Amendment concerns, if any, on a question by question basis as they arise.
17 But that is not likely to happen because the only question here is why Avenatti ignored the
18 Restraining Order and the Receiver’s warnings. Moreover, that conduct, as explained above, is
19 unrelated to the criminal charges against Avenatti. If Avenatti believes he had a legitimate reason
21 The third factor, convenience of the Court in the management of its cases and the efficient
22 use of judicial resources, also do not support Avenatti’s position. Instead, if Avenatti succeeds in
23 delaying the OSC hearing, the Court is again inconvenienced, and judicial resources are again
24 wasted. Moreover, Avenatti will again have gotten away with thumbing his nose at the judicial
25 system.
26 The fourth factor is not implicated by the OSC. The Court, JFL, the Receiver and Avenatti
28 Finally, because the facts and law in issue in the OSC re Sanctions and Avenatti’s
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1 Indictment have no factual or legal relationship to each other, the public interest in the pending
2 criminal proceeding will not be impacted by adjudicating the OSC. At the same time, however,
3 the public, in general, does have an interest in insuring that all parties receive equal treatment
4 under the law and that violation of the bankruptcy laws (or any other federal laws) will not be
8 a. Bankruptcy was not necessary to protect EA’s assets and its creditors.
9 Avenatti claims that he was justified in filing bankruptcy for EA to protect its assets and
10 creditors is nonsense. The District Court entered the Restraining Order and appointed the
& B ERGER LLP
11 Receiver to protect those assets and creditors – from Avenatti. And Avenatti expressly read,
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12 agreed to and then signed the Stipulation appointing the Receiver, which included the Restraining
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13 Order. After agreeing to that remedy, Avenatti repeatedly violated the restraining order to such an
14 extent that the Receiver has instructed his counsel to seek an OSC re Contempt against Avenatti in
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16 It also seems apparent that Avenatti filed EA’s bankruptcy in bad faith. As soon as
17 Avenetti placed EA into bankruptcy, he notified the Receiver and counsel for JFL that (i) he
18 would not be appearing for the judgment debtor examination (to which he had stipulated) and (ii)
19 no bench warrant would be effective against him because “The court is divested of jurisdiction. It
20 lacks authority to do anything BY LAW!” See Bankr. Dkt. Doc. 14, (Emergency Motion to
21 Dismiss, Ex. D; Debtor’s Request for Standard Hearing and Briefing Schedule, p. 3, ll. 13-16). As
22 discussed in the Emergency Motion to Dismiss, Avenatti is dead wrong. The Ninth Circuit’s
23 opinion in Oil & Gas Co. v. Duryee, 9 F.3d 771, 772-73 (9th Cir. 1993) states that a bankruptcy
24 filed by a company’s former president while that company has a “state appointed rehabilitator
26 Moreover, this bankruptcy was clearly filed to delay the judgment debtor exam set for
27 March 8, 2019. EA was in bankruptcy before this Court within the last year, which was then
28 dismissed. The only conceivable reason why Avenatti would, without any authority to do so,
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1 place EA into bankruptcy was to waylay JFL’s judgment debtor examination of EA (through
2 Avenatti). Courts have determined that a bankruptcy that is filed seeking to achieve objectives
3 outside the legitimate scope of the bankruptcy laws (for a variety of tactical reasons) should be
4 dismissed. In re Marsch, 36 F.3d 825, 828 (9th Cir. 1994). For example, courts have found bad
5 faith in instances where debtors have filed multiple bankruptcies to delay foreclosure proceedings.
6 See e.g., In re Casse, 219 B.R. 657 (Bankr. E.D.N.Y 1998), aff’d, 198 F.3d 327 (2nd Cir. 1999).
7 Swap “foreclosure proceedings” with “debtor examination” and the exact same instance is present
8 here.
10 Avenatti disingenuously claims that the pendency of a receivership does not normally
& B ERGER LLP
11 prevent a bankruptcy filing. Bankr. Dkt. Doc. 43 (OSC Response at p. 10 of 15, l. 10). True or
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13 Avenatti agreed to the Restraining Order which provides that that only the Receiver was
14 authorized to commence a voluntary bankruptcy case for EA. Bankr. Dkt. Doc. 28 (Receiver’s
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15 Declaration, Ex. 1 Receivership Order, p. 15 of 24, l. 26). Worse yet, the Receiver pointed that
16 clause out to Avenatti and warned him not to violate that order in a phone conversation less than
17 30 minute before Avenatti filed EA’s bankruptcy petition. Id. (Receiver’s Declaration, p. 5 of 24,
19 c. Avenatti did not file EA’s bankruptcy to invoke the Court’s retained jurisdiction.
20 Avenatti apparently now asserts (he did not do so through his counsel at the hearing at
21 which the Court dismissed EA’s voluntary petition for relief) that he filed EA’s voluntary
22 bankruptcy petition to restructure the payment agreement with JFL that was a basis for the
24 As set forth in the Stipulation Avenatti signed, he agreed to the appointment of the
25 Receiver and the Restraining Order to temporarily stop JFL’s continuing collection efforts against
26 him and with the hope that the parties might reach a further agreement by which Avenatti and EA
27 would pay JFL. JFL was under no obligation to acquiesce to terms which it found unacceptable
28 and refused to accept those terms. Simply stated, Avenatti had no reason to file EA’s second
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1 bankruptcy other than to avoid EA’s debtor examination which was scheduled for the following
2 morning and to thwart JFL’s and the Receiver’s efforts to enforce the Restraining Order.
3 III. CONCLUSION
4 For the foregoing reasons, the Receiver respectfully requests that the Court move forward
5 with the OSC hearing and, if warranted, issue appropriate sanctions against Avenatti.
8
By_/s/ John P. Reitman_______
9
John P. Reitman
10 Attorneys for Brian Weiss, Receiver for Eagan
Avenatti, LLP
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11
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3 1. Except as otherwise stated, I have personal knowledge of the facts set forth herein;
4 and, if called as a witness, I could and would competently testify thereto under oath. I am an
5 attorney at law licensed to practice law in the State of California and before this Court. I am a
6 limited liability partner in Landau Gottfried & Berger LLP, counsel to Brian Weiss in his capacity
7 as the court appointed receiver for Eagan Avenatti, LLP in In re Eagan Avenatti, LLP, Case No.
10 2. I was present at the March 13, 2019, Court hearing on Jason Frank Law’s
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11 emergency motion to dismiss the bankruptcy case that Mr. Avenatti had filed for EA on March 8.
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12 Counsel for Mr. Avenatti also was present at that hearing. At that hearing, the Court ordered the
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13 case dismissed retroactive to the date it was filed (that order was entered March 19, as Doc. 39)
14 and issued its OSC re Sanctions against Avenatti (that order was entered March 15, as Doc 35).
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15 3. Exhibit 1 hereto is a true and correct copy of the Grand Jury Indictment
16 commencing United States of America v. Michael John Avenatti, SA CR No. 19-00061, in the
17 United States District Court, Central District of California, Southern Division. I obtained this
20 Avenatt and communications received from Mr. Avenatti’s counsel, I am informed and believe
21 that Mr. Avenatti has repeatedly violated the Restraining Order entered in the Receivership Case.
22 I have been instructed by the Receiver to seek an OSC re Contempt against Mr. Avenatti for
24 I declare under penalty of perjury under the laws of the United States of America that the
25 foregoing is true and correct and that this declaration was executed in Los Angeles, California on
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A true and correct copy of the foregoing document entitled: Receiver’s Reply to Avenatti’s Response to Order to
Show Cause Re Sanctions Filing Case in Violation of the Joint Stipulation Re Order Appointing Receiver and
Issuing Restraining Order; Declaration of John P. Reitman, with Exhibit will be served or was served (a) on the judge
in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below:
1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General
Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On (date)
04/24/19, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the
following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below:
2. SERVED BY UNITED STATES MAIL: On (date) 04/24/19 I served the following persons and/or entities at the last
known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed
envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here
constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed.
The Honorable Catherine Bauer Frank Sims & Stolper LLP United States Trustee Michael Avenatti
Central District of California 19800 MacArthur 411 W. Fourth St. 450 Newport Ctr. Dr.
Ronald Reagan Federal Boulevard, Suite 855 Suite 7160 2nd Floor
Building and Courthouse Irvine, CA 92612 Santa Ana, CA 92701 Newport Beach, CA 92660
411 West Fourth Street, Suite
5165 / Courtroom 5D
Santa Ana, CA 92701-4593
3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method
for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on (date) ________, I served the
following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to
such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration
that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is
filed.
Service information continued on attached page
I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.
This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
December 2012
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17 Hearing:
Date: May 8, 2019
18 Time: 10:00 a.m.
Place: 411 West Fourth Street
19 Santa Ana, CA 92701
Courtroom 5D
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SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600 1
Irvine, CA 92618 6020-000\1360307.1
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3 Michael J. Avenatti (“Avenatti”) hereby submits his Reply to the Receiver’s Reply
4 (“Receiver Reply”) to Avenatti’s Response (“Response”)1 to the Court’s Order to Show Cause Re
5 Sanctions For Filing Case in Violation of the Joint Stipulation re Order Appointing Receiver and
7 I. SUMMARY OF ARGUMENT
8 The Receiver Reply fails to address the Response other than to cite to cases requiring
9 dismissal for a bad faith filing and to state that the arguments raised in the Response were already
10 raised at the hearing on the Motion to Dismiss. The instant case has already been dismissed making
11 the case law cited by the Receiver irrelevant. Moreover, the Reply cites no authority to contradict
12 the plethora of authority presented by Avenatti that sanctions are not warranted in this instance –
13 the Receiver Reply is silent as to whether sanctions should be issued. Also, the Court did not reject
14 the arguments made by Avenatti at the hearing as they relate to the OSC. To the contrary, the Court
15 specifically requested that Avenatti’s reasons for filing the bankruptcy as stated at the hearing be
16 put on the record so that the Court could evaluate whether sanctions were appropriate.
17 The Receiver Reply instead focuses on whether the OSC should go forward and appears to
19 Resolution of Related Criminal Action (“Stay Motion”) [Docket 45]. The Receiver’s arguments
20 relating to the Stay Motion fail because the severe prejudice to Avenatti that would result by him
21 having to choose between asserting his Constitutional rights to protect him in the criminal case or
22 waiving those rights to defend the OSC is not outweighed by the delay to the Court and parties that
24 Finally, and perhaps most importantly, the time, effort and cost related to the OSC appears
25 to be that which related to responding to the Petition in the first place. This concern was expressed
26 by Avenatti’s counsel at the hearing on the Motion to Dismiss when the subject of setting an OSC
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SHULMAN HODGES &
All capitalized terms not otherwise defined herein shall have the meaning set forth in the Response.
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\1360307.1 2
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1 was first presented. The concern expressed then as now is that the OSC will only invite more
2 litigation and expense, especially in light of the extremely short time the Chapter 11 case was
3 pending and the fairly simple grounds on which the Court dismissed the case. Moreover, given the
4 serious issues Avenatti has to now address in the pending criminal action, which may very well
5 involve the prior and most recent bankruptcy filings, the OSC and possible sanctions do not appear
6 necessary or appropriate.
7 For all these reasons which will be discussed in greater detail below, Avenatti requests the
8 OSC be stayed or that if the OSC goes forward, that the Court vacate the OSC in its entirety.
10 A. The OSC Does Implicate Avenatti’s Fifth Amendment Rights Because the Criminal
11 Proceedings Speak Directly to the Involuntary Case
12 The Receiver Reply is captioned as a reply to Avenatti’s Response to the OSC yet the
13 Receiver Reply speaks more to the Stay Motion. On the issues raised by the Receiver related to the
14 Stay Motion, the OSC certainly implicates Avenatti’s Fifth Amendment rights.
15 Particularly, while the Indictment does not directly cite or discuss the instant case, it does
16 relate directly to the Involuntary Case and “the operation of EA prior to and during its involuntary
17 bankruptcy” as stated by the Receiver. (See, Receiver Reply at page 4, lines 19-20.) The instant
18 case also involves the Involuntary Case and the operation of the Debtor during the Involuntary Case
19 because the dismissal and the Court’s retained jurisdiction of the Involuntary Case is at issue here.
20 Further, the assets and debts of the Debtor are certainly relevant to both this case and the Involuntary
21 Case. Finally, the Indictment cites directly to statements made and documents signed under penalty
22 of perjury in the Involuntary Case that may be at issue here and may require Avenatti’s explanation.
23 Because the Involuntary Case affects the OSC and the pending criminal matter, statements made by
24 Avenatti in this proceeding could prejudice him in the criminal matter. Avenatti faces severe
25 consequences in the criminal matter and he should be allowed to assert his Fifth Amendment rights
27 ///
28 ///
SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\1360307.1 3
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1 On the other hand, the only prejudice to the Court, the Judgment Creditor and the Receiver
2 is delay,2 as noted by the Receiver. (See, Receiver Reply at pg. 6, line 9.) To establish prejudice,
3 however, the Receiver must show more than mere delay. The Receiver failed to do so.
4 If the OSC is not stayed, judicial resources will not be used efficiently. The Receiver
5 suggests that the “Court can address his Fifth Amendment concerns, if any, on a question by
6 question basis as they arise.” (See, Receiver Reply at pg. 6, lines 15-16.) Addressing Avenatti’s
7 concerns on a question by question basis will waste the Court’s and other parties’ time with no
8 resolution because Avenatti will not answer any questions. The likely result of Avenatti not
9 answering questions based on his Fifth Amendment rights is that the hearing on the OSC would be
10 continued. Avenatti filed the Stay Motion to try to avoid the need for appearances at the currently
12 Finally, as to the public interest, there can be no question based on the almost daily news
13 stories that the public is interested in the criminal case pending against Avenatti. As such, the
15 For all these reasons, if the Court is not inclined to vacate the OSC as discussed below, the
16 OSC should be continued for at least six (6) months to allow the criminal case to continue and so
17 that Avenatti is not be placed in a position of choosing between asserting his Constitutional rights
18 to protect him in the criminal case or waiving those rights to defend the OSC.
19 B. The Receiver Reply Does Not Dispute the Law Cited by Avenatti that Rule 9011(b)(1)
23 Receiver Reply does not dispute any of Avenatti’s law or facts in support of his position that
24 sanctions are not appropriate. Instead, the Receiver Reply merely states that the arguments raised
25 were already raised at the hearing on the Dismissal Motion but that is exactly what the Court
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28 It should be noted that the OSC need not be postponed indefinitely. The Court could postpone the OSC for six (6)
SHULMAN HODGES &
months or so until further information is known regarding the Indictment.
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\1360307.1 4
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1 1. The Bankruptcy Was Necessary to Protect the Debtor and Its Assets
2 Despite the Receiver Reply’s assertion to the contrary, Avenatti has never stated or admitted
3 that the only reason he filed the bankruptcy was to avoid the JDE. While it may have been one of
4 the factors considered, Avenatti also took into account the Debtor’s various creditors and that the
5 bankruptcy was necessary to treat all creditors equally. Further, avoidance of the JDE was to protect
6 the Debtor and its creditors as the JDE potentially (and in fact did) provide a very public forum that
7 had the potential to hurt the value of estate assets (i.e. contingency fee matters where the Debtor
8 was counsel.)
9 The Receiver fails to cite even one case where dismissal for a bad faith filing resulted in the
10 issuance of sanctions under Rule 9011(b)(1). Instead, the Receiver Reply merely cites case law for
11 the proposition that cases filed in bad faith must be dismissed. The Receiver’s Motion to Dismiss
12 has already been decided here, and dismissal has already been ordered by this Court. The Receiver
13 Reply does nothing to contradict the plethora of authority presented by Avenatti that sanctions are
15 2. Avenatti Believed He Had the Absolute Right to File the Bankruptcy Petition
16 Moreover, whether or not the Receiver advised Avenatti not to file the bankruptcy is frankly
17 irrelevant. Avenatti believed he had the absolute right to file the bankruptcy. Further, the language
18 of the Stipulation does not strip Avenatti of the general right to file for bankruptcy protection.
19 Avenatti’s interpretation of the Stipulation is clearly different from that of the Receiver, but that is
20 not too difficult to understand when Avenatti did not draft the Stipulation.
21 Like above, the Receiver does not dispute or provide any authority contradicting the case
22 law cited by Avenatti that a debtor generally has the absolute right to file a bankruptcy despite a
23 pending federal receivership, subject to some limited exceptions not present here.
27 cannot possibly know Avenatti’s reasons for filing the bankruptcy. It cannot be disputed, however,
28 that the Involuntary Case was dismissed based upon an agreement to a payment plan of the Judgment
SHULMAN HODGES &
BASTIAN LLP
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618
6020-000\1360307.1 5
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1 Creditor’s debt and that the dismissal of that case included the Bankruptcy Court’s retained
2 jurisdiction. Avenatti agreed to the appointment of a receiver because he believed the Judgment
3 Creditor would attend mediation and attempt to resolve its judgment against the Debtor. When it
4 became clear the Judgment Creditor would not do so, Avenatti invoked the Court’s retained
6 III. CONCLUSION
7 In summary, the Receiver does not dispute that the bankruptcy was not filed to harass or to
8 cause unnecessary delay or a needless increase in the cost of litigation and as such, sanctions are not
9 warranted. In addition, the prejudice to the Court and other parties by a delay in the OSC
10 proceedings is severely outweighed by the prejudice to Avenatti if the OSC is not stayed because
11 he would be denied his Constitutional rights. For all these reasons, Avenatti respectfully requests
12 that the Court stay the OSC proceeding or that if it does not, that the Court vacate the OSC and not
15
By:
16 DATED: May 1, 2019 /s/ Melissa Davis Lowe
James C. Bastian, Jr.
17 Melissa Davis Lowe
Attorneys for Michael J. Avenatti
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100 Spectrum Center Drive
Suite 600
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PROOF OF SERVICE OF DOCUMENT
I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 100
Spectrum Center Drive, Suite 600, Irvine, California 92618
A true and correct copy of the foregoing document entitled (specify): MICHAEL J. AVENATTI’S REPLY TO
RECEIVER’S REPLY TO ORDER TO SHOW CAUSE RE SANCTIONS FOR FILING CASE IN VIOLATION OF THE
JOINT STIPULATION RE ORDER APPOINTING RECEIVER AND ISSUING RESTRAINING ORDER will be served or
was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner
stated below:
1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General
Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On (date)
May 1, 2019, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the
following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below:
Judge’s Copy: Hon Catherine E Bauer, US Bankruptcy Court, Ronald Reagan Federal Building, 411 W. Fourth
Street, Suite 5165, Santa Ana, CA 92701
Interested Party: United States Trustee, Ronald Reagan Federal Building and United States Courthouse, 411
West Fourth Street, #9041, Santa Ana, California 92701-8000
3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method
for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on (date) Not Applicable, I served
the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing
to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a
declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the
document is filed.
I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.
This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
R Gibson Pagter, Jr. on behalf of Creditor 520 Newport Center Drive, LLC
[email protected], [email protected];[email protected]
This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
Avenatti, LLP
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RECEIVER’S SUR-REPLY IN
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1 Brian Weiss, the court appointed receiver (the “Receiver”) for the estate of Trial Group,
2 LLP, f/k/a Eagan Avenatti, LLP (“EA”) submits his sur-reply in support of this Court’s Order To
3 Show Cause In Violation Of The Joint Stipulation Re Order Appointing Receiver And Issuing
5 In his purported reply (the “Reply”) to the OSC, Avenatti argues that “the Receiver does
6 not dispute or provide any authority contradicting the case law cited by Avenatti that a debtor
7 generally has the absolute right to file a bankruptcy despite a pending federal receivership…”
8 Reply at 5:21-23. This is, to be charitable, a straw man argument: The Receiver is not claiming
9 that the debtor EA lacked the authority to go into bankruptcy, he is claiming that Avenatti lacked
10 the authority to place EA into bankruptcy. In fact, Avenatti’s failure to acknowledge controlling
& B E RGER LLP
11 law in this Circuit is far worse. Cal. Rules of Professional Conduct, Rule 3.3(a)(1) and (2).
LOS ANGELES, CALIFO RNIA
12 In re Sino Clean Energy, Inc., 901 F.3d 1139 (9th Cir. 2018) discusses the issue of who
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13 has authority to file a bankruptcy petition on behalf of a legal entity. In Sino, the debtor (Sino)
14 had a receiver appointed in May 2014, prior to the filing of bankruptcy. The order appointing that
L ANDAU
15 receiver granted the receiver, inter alia, the power to reconstitute Sino’s board of directors, which
16 he did, replacing the board with a sole director. Id. at 1140-41. In July 2015, the former chairman
17 and CEO (Baowen Ren) purported to “reconstitute” the former Sino board of directors, and
18 thereafter filed a voluntary petition for Chapter 11 relief on behalf of Sino. The bankruptcy court
19 dismissed that action in August of 2015, holding that, at the time the petition was filed by Ren and
20 the former board members, the petition was filed without corporate authority because the Sino
21 board of directors had been replaced by the Receiver under state law (per the receivership order).
22 The Ninth Circuit affirmed, citing to Oil & Gas Co. v. Duryee, 9 F.3d 771 (9th Cir. 1993),
23 and stating the following:
3 ....
4 We ruled that, pursuant to the rehabilitation order, the rehabilitator was the only
5 person authorized to commence bankruptcy proceedings on behalf of Oil & Gas. Id.
6 As a result, we held that the individual not authorized by the rehabilitation order who
8 and the action was “null and void” as “fraudulently filed.” Id. That same logic applies
9 in this instance.
10 Id. at 1141-42.
& B E RGER LLP
11 El Torero Licores v. Raile (In re El Torero Licores), No. SACV 13-00875-VAP, 2013 U.S.
LOS ANGELES, CALIFO RNIA
12 Dist. LEXIS 179953 (C.D. Cal. Dec. 20, 2013) 1 dealt with a similar issue. The debtor, El Toro
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13 Licores, was placed into a receivership by the Orange County Superior Court in September 2011.
14 In September 2012, the superior court granted the receiver’s ex parte application, vesting her with
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15 the sole authority to file a bankruptcy petition on behalf of the debtor. Licores, 2013 U.S. Dist.
16 LEXIS 179953 *2-3. On January 22, 2013, the Bonilla Brothers (who formally ran the debtor)
17 filed a Chapter 11 petition on behalf of El Toro Licores. On February 8, 2013, the bankruptcy
18 court (on the Receiver’s motion) dismissed the bankruptcy stating, “Debtor lacked authorization to
19 file bankruptcy in view of the vesting in the Receiver of the exclusive authority to file.” Id. at *3.
21 Here, the state court entered an order on September 13, 2012 vesting Receiver with
22 the sole authority to file a bankruptcy petition on behalf of Debtor. (AER at 231-32.)
23 The order also explicitly deprived the Bonilla Brothers of any power to file
24 bankruptcy on behalf of Debtor. (Id.) Therefore, under state law, none of the Bonilla
26 ....
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Virginia A. Phillips, Chief Judge for the United States District Court for the Central District of California presiding.
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1 The Receivership Order . . . does not divest Debtor from the its power to seek
2 bankruptcy protection; rather, the order identifies who has the power to file the
4 in Price, "nowhere is there any indication that Congress bestowed on the bankruptcy
5 court jurisdiction to determine that those who in fact do not have the authority to
6 speak for the corporation as a matter of local law are entitled to be given such
8 corporation." Price, 324 U.S. at 107. Thus, the Receivership Order does not run
11 The Bonilla Brothers also cite In re Cash Currency Exch., 762 F.2d 542, 552 (7th Cir.
LOS ANGELES, CALIFO RNIA
12 1985) for the proposition that "the exclusivity of an administrative receiver's title to
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13 all assets under state law is irrelevant in the determination whether a particular entity
14 may file for bankruptcy relief . . . a corporation may not be precluded by state law
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15 from availing itself of federal bankruptcy law." (Appellant Br. at 6) (quoting Cash
16 Currency, 762 F.2d at 552). As stated above, however, the Receivership Order
17 does not preclude Debtor from availing itself of bankruptcy protection but only
18 restricts who may file the petition on its behalf. If Receiver determines that it is
19 in the best interest of Debtor to file bankruptcy, Receiver has the power to do
20 so.
21 Id. at *16-19 (emphasis added). This is precisely the same issue that is currently before the Court
22 (and was before the Court in dismissing the bankruptcy case that Avenatti filed for “the Trial
23 Group”). Regardless of Avenatti’s perceived “authority”, the reality was that he (i) had no such
24 authority; (ii) was on actual notice that he had no such authority; and (iii) had voluntarily agreed to
26 Lastly, Avenatti argues in his “Reply” that he believed he could exercise the reserved
27 jurisdiction of this Court from the 2017 EA bankruptcy case. Avenatti apparently has forgotten
28 that this Court abstained from this case in the fall of 2018 and divested itself of jurisdiction
4
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1 entirely. Docket No. 585 from In re Eagan Avenatti, 8:17-bk-11961-CB states the following:
3 case was entered and notice was provided to parties in interest. Since it appears that
4 no further matters are required that this case remain open, or that the jurisdiction of
5 this Court continue, it is ordered that the case is closed. (Daniels, Sally) (Entered:
6 10/23/2018)
7 In re Eagan Avenatti, 8:17-bk-11961-CB, Docket No. 585 Entry (text only) (emphasis added).
8 Regardless of what Avenatti believed he could do, the reality was (i) he could not do so
9 and (ii) he was on actual notice that he could not do so. Moreover, if Avenatti truly believed this
10 was what he was doing, he would have moved to re-open the prior case, not file a new bankruptcy
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A true and correct copy of the foregoing document entitled: Receiver’s Sur-Reply in Support of Order to Show Cause
Re Sanctions: Filing Case in Violation of the Joint Stipulation Re Order Appointing Receiver and Issuing
Restraining Order will be served or was served (a) on the judge in chambers in the form and manner required by LBR
5005-2(d); and (b) in the manner stated below:
1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General
Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On (date)
05/02/19, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the
following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below:
2. SERVED BY UNITED STATES MAIL: On (date) 05/02/19 I served the following persons and/or entities at the last
known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed
envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here
constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed.
The Honorable Catherine Bauer Frank Sims & Stolper LLP United States Trustee Michael Avenatti
Central District of California 19800 MacArthur 411 W. Fourth St. 450 Newport Ctr. Dr.
Ronald Reagan Federal Boulevard, Suite 855 Suite 7160 2nd Floor
Building and Courthouse Irvine, CA 92612 Santa Ana, CA 92701 Newport Beach, CA 92660
411 West Fourth Street, Suite
5165 / Courtroom 5D
Santa Ana, CA 92701-4593
3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method
for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on (date) ________, I served the
following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to
such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration
that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is
filed.
Service information continued on attached page
I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.
This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
December 2012