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5/6/2019 Bid To Drop Avenatti From Class Action Fails Over Procedure - Law360

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Bid To Drop Avenatti From Class Action Fails Over


Procedure
By Emma Cueto

Law360 (April 3, 2019, 6:11 PM EDT) -- A California federal judge declined to kick indicted attorney
Michael Avenatti and his now-defunct firm Eagan Avenatti LLP off a $450 million class action over
defective surgical gowns despite Avenatti himself agreeing to hand over the reins, saying the move to
replace him did not follow proper procedure.

U.S. District Judge Dolly M. Gee said Tuesday that under the district’s rules for civil procedure, former
Eagan Avenatti attorney Ahmed Ibrahim, who was co-counsel at the onset of the case and at trial,
should have conferred with Avenatti a week before filing his Monday motion to replace him, but she
left open the possibility that he and his proposed co-counsel could refile the motion in the future.

Although the attorneys admitted they did not consult with Avenatti as outlined in the rules, the
motion did include an affidavit from Avenatti that said, “I believe it is in the best interests of the class
to relinquish my role as lead class counsel at this time.” The affidavit did not elaborate on Avenatti's
reasoning.

In addition to the motion filed by Ibrahim, the receiver in a separate Eagan Avenatti bankruptcy
matter on Sunday filed a motion stating Avenatti should be replaced in that case because his firm no
longer had any resources, calling his continued representation “untenable.” The receiver, Brian Weiss,
sought to replace Avenatti and his firm with Frank Sims & Stolper, which was founded by former
Eagan Avenatti attorneys.

The class action case, which is currently on appeal, accused Kimberly-Clark Corp. and its spinoff
Halyard Health Inc. of falsely representing that their MicroCool surgical gowns provided the highest
level of liquid barrier protection. While the gowns are marketed as "impermeable" and effective
against pathogens like Ebola, they put health care workers at substantial risk, the suit said.

The jury’s April 2017 award called for Kimberly-Clark to pay $350 million in punitive damages and for
Halyard to pay $100 million, but the judge in the case ruled that the award was unconstitutionally
high and reduced it to $20 million. The appeal challenging that ruling is still pending before the Ninth
Circuit.

The embattled Avenatti, who rose to prominence while representing adult film actress Stormy Daniels
in her suit against President Donald Trump over a hush-money agreement, is currently facing
criminal charges in both New York and California.

The New York case alleges that he plotted to extort $20 million from Nike. According to
prosecutors, Avenatti pressed Nike to pay him millions of dollars as an "internal investigator" in
addition to a smaller figure he demanded from the sports gear giant for his youth basketball coach
client.

Prosecutors in California have accused Avenatti of embezzling $1.6 million in client money and
committing bank fraud. Authorities say that after negotiating a $1.6 million settlement for a client
identified as GB, Avenatti allegedly gave the client a false settlement agreement stating the funds
were to be paid three months later than the actual settlement agreement called for. Avenatti then
allegedly used the settlement funds to pay for his expenses and those of his coffee business, Global
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5/6/2019 Bid To Drop Avenatti From Class Action Fails Over Procedure - Law360

Baristas US LLC.

He also defrauded a Mississippi bank by giving it fake tax returns in order to get three loans for his
law firm and coffee business in 2014, prosecutors say.

In his motion to replace Avenatti, Weiss attested that the California claims related to GB were
consistent with evidence from Eagan Avenatti financials relating to a settlement for Greg Barela in a
suit against sports equipment maker Brock USA LLC. Barela earlier this year publicly accused
Avenatti of operating his firm like a Ponzi scheme.

Avenatti is currently free on a $300,000 personal recognizance bond and cannot have any contact
with victims or witnesses related to the separate cases. He was also ordered to surrender both his
U.S. and Italian passports.

Frank Sims & Stolper declined to comment. Avenatti, Ibrahim and counsel for Weiss and the parties
did not respond Wednesday to a request for comment.

The class is represented by Michael Avenatti.

Kimberly-Clark is represented by Theodore J. Boutrous Jr., Julian W. Poon and Theane Evangelis of
Gibson Dunn & Crutcher LLP. Halyard is represented by Donald B. Verrilli Jr. and Daniel P. Collins of
Munger Tolles & Olson LLP. Both companies are also represented by Alexander G. Calfo, Julia
Romano, Chilton D. Varner, Stephen B. Devereaux and Madison H. Kitchens of King & Spalding LLP.

Weiss is represented by Jack A. Reitman of Landau Gottfried & Berger LLP.

The case is Bahamas Surgery Center LLC v. Kimberly-Clark Corporation et al., case number 2:14-cv-
08390, in the U.S. District Court for the Central District of California.

--Additional reporting by Lauren Berg, Andrew Strickler and Dani Kass. Editing by Alanna Weissman.

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