Eagan Avenatti, the longtime firm of lawyer Michael Avenatti, filed late Thursday for federal bankruptcy protection. It’s the second time in two years that it has sought court protection from its creditors.
The move came three weeks after Jason Frank, a former lawyer at the firm, filed court papers accusing Avenatti of hiding millions of dollars from the court that oversaw its previous bankruptcy.
Frank, who is trying to collect a $10-million judgment that he won against the firm, withdrew those papers after Avenatti agreed to the appointment of a receiver to take control of its financial affairs.
Under a federal court order, only the receiver can authorize a bankruptcy filing. Nonetheless, Avenatti, who is personally liable for nearly half of the $10-million judgment, filed the bankruptcy petition without the receiver’s consent.
Asked by email to explain the new bankruptcy, Avenatti responded: “Who cares? Old firm that we have not operated under for a very long time. We want to ensure the proper distribution of assets to creditors — it means nothing to our current law practice. Onward and upward.”
Avenatti now identifies his Los Angeles law practice as Avenatti & Associates. Its lawyers and office staff are largely the same people who worked at Eagan Avenatti. Avenatti & Associates, his personal corporation, owns Eagan Avenatti, according to court filings.
The bankruptcy filing came on the eve of Avenatti’s scheduled testimony in federal court in Orange County on Eagan Avenatti’s finances. Frank’s lawyers were planning to interrogate him on the whereabouts of the firm’s assets.
Avenatti filed court papers saying the latest bankruptcy puts a temporary stop to Frank’s case, including his testimony Friday.
Frank’s lawyer Eric George called the petition a maneuver to delay the testimony, “which would have exposed his financial shenanigans.”
“That Mr. Avenatti would try something so desperate speaks volumes about how bad the evidence is against him,” George said.
Avenatti said: “I haven’t done anything wrong.”
Frank lawyer Andrew Stolper filed an emergency motion early Friday morning to dismiss the bankruptcy petition, saying it was “null and void” and “fraudulently filed.”
Attached to his court papers was an email exchange with Avenatti, who is serving as his law firm’s attorney in the dispute. Stolper warned Avenatti that the judge might issue a bench warrant for his arrest if he fails to show up to testify.
“I will not be appearing,” Avenatti responded. “If you have any issues, you can take them up with the bankruptcy judge.”
“I understand you disagree,” Stolper told Avenatti. “But in the event the court sees things our way you may face arrest on a Friday — which is pretty much the worst day of the week to be arrested.”
Avenatti replied: “If you want to have me arrested and do further damage to the assets of the firm, good luck.”
When Avenatti did not show up at the court hearing Friday morning in Santa Ana, U.S. Magistrate Judge Karen E. Scott declined to take any immediate action. It was unclear how soon the U.S. Bankruptcy Court might rule on Frank’s motion to dismiss the petition.
Eagan Avenatti’s first bankruptcy filing, in 2017, also came on the eve of Avenatti’s scheduled testimony in his dispute with Frank, who claimed it owed him more than $15 million in back pay. Avenatti has denied the allegation.
In that case, Jerry Tobin, a Florida man with a long arrest record, filed a petition to put Eagan Avenatti into involuntary bankruptcy for failure to pay his $28,700 bill for private investigative work. Tobin’s petition automatically halted Frank’s plan to take Avenatti’s testimony.
A Florida bankruptcy judge questioned whether Avenatti and Tobin colluded in filing the petition so the lawyer could dodge testifying, saying the petition had the “stench of impropriety — nothing to do with the debtor necessarily.” She said she could not immediately tell whether they were in cahoots or Avenatti “just got plain lucky” that the timing of the petition stalled the Frank case.
Avenatti and Tobin denied any collusion. Within days, Eagan Avenatti agreed to go into bankruptcy, blocking Frank from pursuing his case until the firm emerged from bankruptcy a year later.
The bankruptcy case was dismissed just as Avenatti’s representation of porn actress Stormy Daniels vaulted him to fame. She sued President Trump in a sex scandal that continues to cause legal and political trouble for the White House.