Media Storm Raises Legal Ethics Questions for Stormy’s Lawyer

Photographer: Victor J. Blue/Bloomberg

Lawyer Michael Avenatti has generated a lot of media attention in representing Stormy Daniels in a lawsuit against President Donald Trump. But it’s his statements about Michael Cohen, the attorney behind payments to the adult film actress over an alleged affair with the president, and his disclosure of Cohen’s bank records that have sparked a legal ethics debate.

Avenatti told Bloomberg Law he doesn’t “believe there’s been any violation of any trial publicity rule or any other ethical rule in connection with our handling of these matters.”

A New York professional responsibility lawyer, a law professor who lectures about media and the law, and a criminal and civil attorney who has represented celebrities commented to Bloomberg Law on Avenatti’s conduct. They differ on whether legal ethics rules apply, those on trial publicity in particular. As in many areas of the law, legal ethics questions often contain shades of gray. And the rules don’t cover every situation.

Leslie C. Levin, who teaches on the legal profession and media and the law at the University of Connecticut School of Law, called Avenatti a “cowboy” who has skated on the edge, to some extent. But California attorney Mark Geragos, who represented the late Michael Jackson, former U.S. Rep. Gary Condit, and singer Chris Brown in criminal matters, said Avenatti “could make a compelling argument that he’s doing a public service.”

Anthony Davis, a professional responsibility partner with Hinshaw & Culbertson LLP in New York, said the “fundamental premise underlying the [ethical] rules is that, within the constraints of the law, lawyers owe a duty to look out for the interests of their clients.” Avenatti may say he’s been doing just that, Davis said.

A federal judge will determine if Avenatti’s media presence has negatively affected his attempt to intervene in Cohen’s civil case in the U.S. District Court for the Southern District of New York. That case challenges the FBI’s ability to review Cohen’s attorney-client privileged files. Before he can appear in the case, Avenatti, a California attorney, needs the court to admit him “pro hac vice,” or for one occasion only.

Avenatti filed his request for temporary admission, and Cohen objected. Avenatti responded, and on May 18, at the court’s direction, Cohen filed another brief stating that Avenatti’s “deliberate public dissemination of confidential nonpublic information speaks to his character and lack of fitness to appear before this Court.”

Cohen said Avenatti has created a “carnival atmosphere” and may have violated two ethics rules. Cohen also said “Avenatti has not explained why he failed to disclose the California Bar’s pending investigation into his conduct.” Avenatti responded with a supplemental affidavit and said “there are no disciplinary proceedings or charges pending against [him] in California,” and that he had “not been notified by the State Bar of California that any decision has been made to proceed with an investigation in any matter concerning [him].”

While Cohen conceded that requests to appear before a court in a discrete matter are “routinely granted,” he said Avenatti’s request should be denied because Avenatti’s conduct doesn’t comport with the federal court’s high standards.

Avenatti in the News 

A cable news fixture and constant Twitter user, Avenatti on May 8 posted on Twitter a report that lists numerous financial transactions to and from an account at First Republic Bank that was allegedly created by Cohen on behalf of his consulting company, Essential Consultants, LLC.

Avenatti told CNN’s Anderson Cooper that he’d been “working on this for some time” and that he was “100 percent confident in the accuracy of the information.”

A May 16 article by Ronan Farrow in The New Yorker says that a “law enforcement official” illegally leaked a Suspicious Activity Report, which is a highly confidential report made by a bank to a government database to flag activities deemed “suspicious.”

According to The New Yorker article, the SAR contained payments to and from the account of Cohen’s consulting company. That official now potentially faces criminal prosecution for the illegal disclosure of the information, and he told The New Yorker he was “terrified.”

This revelation helped fuel Cohen’s most recent objection to Avenatti’s attempt to appear in Cohen’s case. Cohen said it is “vital that the Court inquire as to where Mr. Avenatti obtained the SAR report(s) and related nonpublic bank records of Mr. Cohen.” Avenatti’s response said Cohen didn’t present evidence that he: received information from the source in The New Yorker article; had access to a SAR about Cohen; or that he “purposely released any information contained within any [SAR] related to Mr. Cohen.” In March, Avenatti filed suit in California on behalf of Stephanie Clifford, whose stage name is Stormy Daniels, to have her non-disparagement and settlement agreement declared invalid. That agreement provided that Clifford would receive some $130,000 and refrain from disclosing her alleged affair with Trump. The report Avenatti released on May 8, claims that “Cohen caused a wire of $130,000 from Essential Consultants’ account at First Republic Bank” to Clifford’s lawyer’s trust account.

Smear Campaign or Safe Harbor? 

The ethics rules of the jurisdiction where a case is being litigated usually control. Here, those are the New York Rules of Professional Conduct and the California Rules of Professional Conduct.

Cohen said Avenatti may have violated the New York ethics rule on trial publicity, Rule 3.6, which prohibits a lawyer from making public statements that have a “substantial likelihood of materially prejudicing” a court proceeding.

In his latest objection, Cohen says Avenatti has “appeared on national television and made statements regarding Mr. Cohen 147 times over the past ten weeks, and many of these statements concerned nonpublic information and misrepresentations regarding Mr. Cohen.” Cohen argued that Avenatti “appears to be primarily focused on smearing Mr. Cohen publicly.”

Avenatti told Bloomberg Law he couldn’t “think of any misstatement or inaccuracy that would have any material impact on any of the cases [he’s] involved in or Mr. Cohen.”

Davis said Avenatti’s statements in the media already implicate New York Rule 3.6. But Levin told Bloomberg Law that Avenatti would become subject to that rule if he actually intervenes in Cohen’s matter. California currently has a trial publicity rule, 5-120, but its rules are changing effective Nov. 1.

Avenatti offered yet another position to Bloomberg Law based on his preliminary analysis: the New York trial publicity rule doesn’t apply here because a jury will not be deciding how the documents seized from Cohen should be handled for privilege purposes, which is the focus of Cohen’s matter. Levin said that a primary concern that Rule 3.6 is meant to address is to avoid influencing the jury pool in a criminal case.

If he intervenes and is involved in the case, Avenatti has “got to think about toning down what he says,” Levin said. But Davis said Avenatti could also argue everything he does is to protect his client, “and is therefore permissible under 3.6(d).” That section says a lawyer may make a statement to protect a client against adverse publicity that isn’t initiated by the lawyer or his client.

Geragos echoed that sentiment. Geragos told Bloomberg Law there is U.S. Supreme Court precedent that gives lawyers a safe harbor to respond when a client is under attack. “[C]learly [Avenatti’s] client was under attack,” Geragos said.

Avenatti responded to Cohen’s initial objections by saying he is protected by the First Amendment right to free speech. But Davis told Bloomberg Law there are situations, including prohibitions under Rule 3.6, where the “regulations governing lawyers overpower the First Amendment.” “Courts have frequently determined that lawyers’ First Amendment rights may be limited in connection with their actions as lawyers,” Davis said.

Disclosing Cohen’s Confidential Records 

More questions include whether Avenatti’s report was based, at least in part, on illegally disclosed documents. Even if Avenatti had no role in obtaining illegally disclosed documents, did he violate any ethics rules by publishing a report based on them? Or even by publishing Cohen’s confidential bank records that weren’t illegally disclosed by a law enforcement official?

Cohen said Avenatti’s “conduct in publishing confidential nonpublic bank records-without concern for the lawfulness of their disclosure or their accuracy-was inappropriate and was intended to unfairly prejudice Mr. Cohen.” He also argued that Avenatti made inaccurate statements about Cohen and published his bank records that “he either solicited or obtained under circumstances in which he knew or should have known” that their disclosure by the source was “unlawful.”

Levin told Bloomberg Law that she doesn’t “think that there is an ethical duty that’s recognized in the rules of professional conduct or the law” to preclude a lawyer from publishing a non-client’s confidential records. Avenatti also said he wasn’t aware of a blanket rule that would apply in that instance.

Avenatti told Bloomberg Law that “we’ve never stolen any information, we’ve never hacked into any computer systems to obtain information and whatever information we would have received was not inadvertently produced or produced by accident by anyone.” He otherwise wouldn’t discuss the source of the information contained in the May 8 report he published.

Davis told Bloomberg Law that “[i]n New York, and many (but not all) states, the ethics rules only apply to inadvertently sent and received material.” New York Rule 4.4(b) gives a lawyer guidance about what to do after inadvertently receiving a document, but doesn’t address a lawyer’s duty if confidential information is sent to a lawyer on purpose.

So what if someone deliberately gave Avenatti the documents in the proverbial “blank envelope” and he had no part in obtaining the material? Those circumstances would put Avenatti in “no man’s land,” Davis said, because it’s not settled what he should do with the information he received about Cohen. Davis said the New York ethics opinions and commentators suggest “if in doubt, ask the court.”

Geragos told Bloomberg Law it’s “entirely possible” that Avenatti received a blank envelope from an anonymous source, which is a “common occurrence on every high profile case.” He said there is “no bell or whistle that would go off” if he had received a SAR involving something in the news. Geragos said he wouldn’t assume it was stolen.

Even if the SAR was illegally obtained, Avenatti may not necessarily face legal repercussions for disseminating it. In 2001, the Supreme Court said a radio host was protected from civil liability under wire tap statutes for disseminating a tape of a private conversation that the radio host had obtained legally, but had been recorded illegally.

In response to a request from the court, the government said it took no position on Avenatti’s motion for temporary admission.

Counsel for Mr. Cohen did not respond to Bloomberg Law’s request for an interview.

The case is In the Matter of Search Warrants Executed on April 9, 2018, SDNY, No. 1:18-mj-03161.