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#:43995
DEFENDANTS’ RESPONSE TO MOTION TO APPOINT INTERIM CLASS COUNSEL AND MOTION FOR INDICATIVE RULING
CASE NO. 2:14-CV-08390-DMG-PLA
Case 2:14-cv-08390-DMG-PLA Document 618 Filed 05/03/19 Page 2 of 10 Page ID
#:43996
DEFENDANTS’ RESPONSE TO MOTION TO APPOINT INTERIM CLASS COUNSEL AND MOTION FOR INDICATIVE RULING
CASE NO. 2:14-CV-08390-DMG-PLA
Case 2:14-cv-08390-DMG-PLA Document 618 Filed 05/03/19 Page 3 of 10 Page ID
#:43997
4 submit this Response to (i) Plaintiff Bahamas Surgery Center LLC’s “Motion to Appoint
5 Interim Class Counsel” (Dkt. 609) (the “Hearon and Ibrahim Motion”); and (ii) the
6 Eagan Avenatti LLP Receiver’s “Motion for ‘Indicative Ruling’ (1) Removing Eagan
7 Avenatti LLP and Michael Avenatti as Class Counsel and (2) Appointing Jason M.
8 Frank, Scott H. Sims and Andrew D. Stolper of Frank, Sims & Stolper, LLP as Lead
9 Class Counsel” (Dkt. 610) (the “Frank Motion”). Although Defendants ultimately take
10 no position on these Motions beyond agreeing that Avenatti should be removed as class
11 counsel, they submit this Response to note several issues the Court may wish to consider
1 plain that under no circumstances can Avenatti remain as Class Counsel.”). Although
2 Avenatti is entitled to the “constitutional presumption of innocence” in his criminal
3 proceedings, the Court’s authority to appoint and remove counsel for the class under
4 Fed. R. Civ. P. 23(g) “is a separate and distinct question” that implicates the Court’s
5 “fiduciary obligation to the plaintiff class,” and the Court should therefore formally
6 remove Avenatti as class counsel. In re New Motor Vehicles Canadian Export Antitrust
7 Litig., 466 F. Supp. 2d 364, 367–68 (D. Me. 2006) (removing Milberg Weiss as class
8 counsel after the firm’s indictment). 3
9 II. In Evaluating Candidates for Appointment as Replacement Counsel, the
Court Should Consider Whether the Candidates Can Properly Exercise
10 Counsel’s Fiduciary Duties to the Class
11 Although Defendants take no position as to who should be appointed to serve as
12 replacement class counsel after Avenatti has been removed, the Court should carefully
13 consider whether the various candidates can properly exercise counsel’s fiduciary duties
14 to the class. With respect to these particular candidates, that will likely require an inquiry
15 into (1) the candidates’ respective connections to Avenatti and the potential effect such
16 connections might have on their ability to serve; and (2) the extent to which their ability
17 to serve as class counsel might be affected by their asserted interests in any potential
18 fees, including fees for work already performed.
19 A. The Court Should Require Any Candidate for Class Counsel to
20 Disclose What Role, if Any, Such Counsel Envisions for Avenatti
21 The documents that have recently been filed with the Court leave some confusion
22 as to what, if any, role Avenatti may continue to have after he is removed as class
23 counsel. The Court should require the candidates to be very clear on this point before
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As Defendants have repeatedly explained, both in this Court and in the Court of
27 Appeals, Defendants adhere to their view that the class was improperly certified and
should be decertified. But so long as the class remains certified, the Court continues
28 to have authority to designate class counsel under Rule 23(g).
Gibson, Dunn &
Crutcher LLP
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DEFENDANTS’ RESPONSE TO MOTION TO APPOINT INTERIM CLASS COUNSEL AND MOTION FOR INDICATIVE RULING
CASE NO. 2:14-CV-08390-DMG-PLA
Case 2:14-cv-08390-DMG-PLA Document 618 Filed 05/03/19 Page 5 of 10 Page ID
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1 The Hearon and Ibrahim Motion notably does not list Avenatti as a continued co-
2 counsel of record for either Bahamas or the class. Likewise, in his most recent set of
3 filings in this case (Dkt. Nos. 608, 613, 615), Avenatti has identified himself only as
4 counsel for “Michael Avenatti” and for his present law firm, “Avenatti & Associates,
5 APC.” These documents strongly indicate that Avenatti will no longer serve as co-
6 counsel of record in this matter in any respect. On the other hand, the (unsigned)
7 declaration submitted by Avenatti in support of the Hearon and Ibrahim Motion is
8 narrowly worded to state only that Avenatti will step down as “lead class counsel at this
9 time” and that he will “continue to be available … for consultation and input” to his
10 designated successors, Hearon and Ibrahim. Dkt. 609-4 (emphases added). While
11 Hearon and Ibrahim represent that “Moving Parties do not presently expect to have any
12 continuing need for such consultation and input as the case progresses through the
13 appellate phase,” in the next two sentences they state that such consultation and input is
14 “unavoidable” given Avenatti’s “knowledge of historical information about the case”
15 and “his extensive involvement in this case from its inception.” Dkt. 609 at 1, n. 1.
16 Adding to the confusion, Avenatti’s other recent actions further suggest that he
17 intends to remain involved in this litigation even after stepping down as lead class
18 counsel. Avenatti filed a Notice of Lien on April 12, 2019 that purports to “obligate[]
19 all counsel in this matter to communicate with Michael Avenatti and Avenatti &
20 Associates, APC as to the subjects of this lawsuit as well as any related mediation and/or
21 settlement.” Dkt. 608 at 1 (emphasis added); see also Dkt. 613 (Notice of Lien for
22 Attorneys’ Fees and Costs by Edward M. Ricci and Edward M. Ricci, P.A., filed by
23 Avenatti on April 23, 2019). Similarly, on April 1, 2019, Avenatti sent an email to
24 Defendants’ counsel in which he stated his “support” for Hearon’s and Ibrahim’s motion
25 and warned that “any attempt to aid” “the Receiver for Eagan Avenatti and Messrs.
26 Frank and Stolper [in] attempting to ‘hijack’ the litigation away from me” could result
27 in a lawsuit from Avenatti against Defendants and their counsel. Declaration of Stephen
28 B. Devereaux, Ex. A (emphasis added).
Gibson, Dunn &
Crutcher LLP
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DEFENDANTS’ RESPONSE TO MOTION TO APPOINT INTERIM CLASS COUNSEL AND MOTION FOR INDICATIVE RULING
CASE NO. 2:14-CV-08390-DMG-PLA
Case 2:14-cv-08390-DMG-PLA Document 618 Filed 05/03/19 Page 6 of 10 Page ID
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1 “[i]f more than one adequate applicant seeks appointment, the court must appoint the
2 applicant best able to represent the interests of the class.” Fed. R. Civ. P. 23(g)(2)
3 (emphases added); see also Friedman v. Guthy-Renker LLC, No. 2:14-cv-06009-ODW,
4 2016 WL 2758240, at *2 (C.D. Cal. May 12, 2016). Although any actual allocation of
5 fees is obviously premature, the respective candidates’ fee-related motivations for
6 representing the class are properly considered by the Court in appointing class counsel
7 under Rule 23(g). Indeed, Rule 23(g) specifically identifies “propose[d] terms for
8 attorney’s fees and nontaxable costs” as a subject on which the Court “may order
9 potential class counsel to provide information.” Fed. R. Civ. P. 23(g)(1)(C).
10 Accordingly, the Court may wish to inquire as to the extent to which the respective
11 candidates’ ability to serve as class counsel might be affected by their asserted interests
12 in any potential fees, including fees for work already performed. As to Hearon and
13 Ibrahim, this inquiry may overlap with the subject of their continued relationship with
14 Avenatti.
15 C. If the Court Finds the Current Candidates to Be Inadequate, the
16 Court Has Authority to Solicit Other Applications
17 If the Court concludes that the Motions before it do not satisfactorily establish
18 that the candidates should be appointed as class counsel, the Court may wish to consider
19 inviting other counsel, with no prior associations or affiliations with Avenatti, to apply
20 to serve as replacement class counsel. See, e.g., Varela v. Indus., Prof’l & Technical
21 Workers, No. 08-cv-1012-SVW, 2009 WL 10670788, at *3 (C.D. Cal. Oct. 28, 2009)
22 (observing that “[i]f ‘the court determines that none would be satisfactory class counsel,
23 it may deny class certification, reject all applications, recommend that an application be
24 modified, invite new applications, or make any other appropriate order regarding
25 selection and appointment of class counsel’” (quoting Fed. R. Civ. P. 23(g)(1)(C), 2003
27
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Gibson, Dunn &
Crutcher LLP
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DEFENDANTS’ RESPONSE TO MOTION TO APPOINT INTERIM CLASS COUNSEL AND MOTION FOR INDICATIVE RULING
CASE NO. 2:14-CV-08390-DMG-PLA
Case 2:14-cv-08390-DMG-PLA Document 618 Filed 05/03/19 Page 9 of 10 Page ID
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1 III. As a Procedural Matter, the Court Should Invoke the Indicative Ruling
Procedure of Fed. R. Civ. P. 62.1
2
Finally, out of an abundance of caution, Defendants request that the Court resolve
3
the pending Motions by issuing an indicative ruling under Rule 62.1 and then awaiting
4
a limited remand from the Ninth Circuit, before formally replacing Avenatti as class
5
counsel. All parties agree that this procedural route would be appropriate, but the
6
Hearon and Ibrahim Motion suggests that, because the requested ruling would
7
supposedly “preserve the status quo,” the Court may also proceed directly to appoint
8
class counsel. Dkt. 609 at 4–5. But changing class counsel obviously constitutes a
9
change in the status quo, not a preservation of it. Moreover, the two cases that Ibrahim
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and Hearon cite—Mayweathers v. Newland, 258 F.3d 930, 935 (9th Cir. 2001), and Stein
11
v. Wood, 127 F.3d 1187, 1189 (9th Cir. 1997)—are distinguishable because they
12
involved rules that conferred authority on district courts to act during the pendency of
13
an appeal. Mayweathers involved Rule 62(c), which the court there held permits district
14
courts to renew an expired injunction after an appeal has been taken. 258 F.3d at 935.
15
And Stein involved Federal Rule of Appellate Procedure 23, which the court interpreted
16
as authorizing district courts to determine, during the pendency of an appeal, if “a
17
condition placed on a habeas petitioner’s custody has been met.” 127 F.3d at 1190.
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Here, there is no analogous provision under Federal Rule of Civil Procedure 23
19
vesting district courts with authority to substitute class counsel while a case is pending
20
on appeal. Accordingly, if the Court were to proceed to directly appoint replacement
21
class counsel, and if the Ninth Circuit later determined that proceeding in this manner
22
was jurisdictionally or otherwise improper, the result could be substantial uncertainty
23
and a potential significant waste of resources.
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Gibson, Dunn &
Crutcher LLP
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DEFENDANTS’ RESPONSE TO MOTION TO APPOINT INTERIM CLASS COUNSEL AND MOTION FOR INDICATIVE RULING
CASE NO. 2:14-CV-08390-DMG-PLA
Case 2:14-cv-08390-DMG-PLA Document 618 Filed 05/03/19 Page 10 of 10 Page ID
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Gibson, Dunn &
Crutcher LLP
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DEFENDANTS’ RESPONSE TO MOTION TO APPOINT INTERIM CLASS COUNSEL AND MOTION FOR INDICATIVE RULING
CASE NO. 2:14-CV-08390-DMG-PLA