[00:00:00] Speaker 05:
Good morning, Your Honors, and may it please the Court.

[00:00:01] Speaker 05:
My name is Margaret Farrin.

[00:00:02] Speaker 05:
I'm from the Federal Public Defender's Office, appearing today on behalf of the defendant and appellant, Michael Avenatti.

[00:00:08] Speaker 05:
I'd like to reserve three minutes for rebuttal, and I'll be sure to watch my time.

[00:00:13] Speaker 05:
This Court should vacate Michael Avenatti's 168-month prison sentence and remand for resentencing due to the individual and combined effect of numerous errors.

[00:00:23] Speaker 05:
Unless the Court would prefer otherwise, I would like to focus on two of their errors today.

[00:00:32] Speaker 05:
and second, the obstruction of justice enhancement under guideline 3C, one to one.

[00:00:38] Speaker 05:
First, regarding the loss calculation, whether the district court accurately calculated the loss in this case comes down to a simple question.

[00:00:46] Speaker 05:
Is it true that, but for Michael Avenatti's fraud, his four clients would have obtained $12.35 million more than they actually did?

[00:00:56] Speaker 05:
The answer is no.

[00:00:57] Speaker 05:
They did not contract to receive

[00:01:01] Speaker 05:
from their settlements.

[00:01:03] Speaker 05:
The actual amount that they would have received without the fraud would have been less than 9.5 million dollars so as to decrease the offense level and possibly below 3.5 million if we account for M Cosmetics because that is the amount of their settlements that they contracted to obtain.

[00:01:20] Speaker 05:
The government does not dispute the taking account of the fees and costs alone without any further adjustment for payments for healthcare or other things.

[00:01:29] Speaker 05:
Simply the fees and costs alone would bring the loss amount below 9.5 million so as to decrease the offense level at least two levels.

[00:01:37] Speaker 05:
And then the clients in addition received additional sums of money from Avanade that further decreased the loss.

[00:01:43] Speaker 05:
The district court committed legal error in calculating the loss here because it did not perform

[00:01:52] Speaker 05:
2B1.1's analysis is purely quantitative.

[00:01:55] Speaker 05:
It attempts to measure the loss or the harm to victims.

[00:01:58] Speaker 05:
That's all.

[00:01:59] Speaker 05:
Define as the difference between what the victims were left with after the fraud and what they would have had had the fraud not occurred.

[00:02:05] Speaker 05:
And that analysis proceeds in two steps.

[00:02:07] Speaker 05:
This court so held in Morris that's cited in the briefing, it says these two steps are compelled by the TEXO guideline 2B1.1.

[00:02:15] Speaker 05:
First, the court has to assess what is the actual loss.

[00:02:23] Speaker 05:
And that is a but for causation standards.

[00:02:25] Speaker 05:
Had the fraud not occurred, what would the defendants have had?

[00:02:28] Speaker 05:
And so in that first step alone, it is untenable to include fees and costs that the clients contracted not to receive.

[00:02:35] Speaker 03:
But in determining the amount of the loss, when you look at the commentary to the guideline, it says that the loss should be reduced by the fair market value of the services rendered.

[00:02:56] Speaker 03:
It does, Your Honor, and that's a step two, though.

[00:02:58] Speaker 05:
So I want to make sure we're not conflating two steps.

[00:03:01] Speaker 05:
So step one is, but for the fraud was the reasonable foreseeable punitary harm.

[00:03:06] Speaker 05:
And you can't include things that the clients wouldn't have obtained without, but for the fraud.

[00:03:11] Speaker 05:
So this brings us down to fees and costs that they wouldn't have obtained.

[00:03:15] Speaker 05:
Then at step two,

[00:03:18] Speaker 05:
services rendered.

[00:03:19] Speaker 05:
The district court didn't decide whether that was true, but that's the step at which you value whether there were any services provided.

[00:03:25] Speaker 05:
Did Mr. Avenatti provide any valuable services to these clients?

[00:03:28] Speaker 05:
That only comes in at step two after you've already seen what would they have received had he not committed the fraud.

[00:03:34] Speaker 05:
They would have gotten the

[00:03:36] Speaker 05:
the value of their settlements without those fees and costs.

[00:03:39] Speaker 05:
Then at step two, we can value his services.

[00:03:42] Speaker 05:
I think the government kind of conflates those two things and says that it was enough to just do evaluation analyses, but that's not what guideline 2B1.1 requires.

[00:03:50] Speaker 05:
At step one, you first look at the reasonably foreseeable fee beginning to harm.

[00:03:54] Speaker 05:
That brings you down below the 9.5 million at least.

[00:03:57] Speaker 05:
And then you have to do evaluation of the services.

[00:04:01] Speaker 05:
we do that though?

[00:04:02] Speaker 05:
Okay and I think here's another point at which we differ from the government.

[00:04:04] Speaker 05:
The government is saying that it's permissible at that point to turn to California law, equitable free recovery law, Rodriguez versus Disney restatement 37 which talks about forfeiture which doesn't actually require harm, doesn't really require any diminution in value.

[00:04:22] Speaker ?:
The Rodriguez versus Disney case again

[00:04:25] Speaker 04:
these class members didn't suffer any harm.

[00:04:52] Speaker 05:
What would they have received had no fraud occurred?

[00:04:54] Speaker 05:
Imagine a world where there was no fraud.

[00:04:57] Speaker 04:
Harper and Berger also talk about this.

[00:05:14] Speaker 05:
fees.

[00:05:14] Speaker 05:
We're just simply trying to drive into harm to clients, okay?

[00:05:17] Speaker 05:
So it might be possible to take into account that these services were worthless at step two.

[00:05:24] Speaker 05:
But we've already come down, just so your honors are clear, we can't include fees and

[00:05:31] Speaker 05:
If you know fraud had occurred, at step one you can't talk about the value of the services with the fraud, because that's not what step one under Morris requires.

[00:05:40] Speaker 04:
That's not my understanding why, when we're trying to figure out what the amount that should be calculated is, why does it matter whether we do that calculation in step one or step two?

[00:05:49] Speaker 05:
It matters, Your Honor, because I think what the government is saying is that if you do a valuation of step one, you don't have to consider what the clients would have gotten in a but for situation.

[00:05:59] Speaker ?:
You assume there was fraud.

[00:06:00] Speaker 05:
Under the government's analysis at step one, they consider a world where fraud has occurred.

[00:06:06] Speaker 04:
I understand that you disagree with that and maybe you're right, but if we're going to still then take out the fee amount at step two, why does it matter if we made that mistake at step one?

[00:06:14] Speaker 05:
You're not taking out the fee amount in step two, Your Honor.

[00:06:16] Speaker 05:
You're looking at what was the fair market value of the services that were rendered, and that's not- Because you're persuaded that the answer to that is zero.

[00:06:22] Speaker 05:
Okay, so say you're persuaded the answer to that is zero.

[00:06:25] Speaker 05:
Then at step one, what would the clients have obtained without the fraud?

[00:06:28] Speaker 05:
They would have gotten a loss amount below 9.5.

[00:06:31] Speaker 05:
And then at step two, you wouldn't offset anything, because you'd say the fair market value of the services that were provided to them was zero.

[00:06:38] Speaker 05:
I see why you're saying that matters.

[00:06:40] Speaker 05:
Except, in step two,

[00:06:44] Speaker 05:
So the only question here is how far, how much farther do we go?

[00:06:48] Speaker 05:
We know we have to go down two levels.

[00:06:50] Speaker 05:
And that in itself is a difference in the offense level.

[00:06:53] Speaker 05:
But, there was a significant amount of value here I'd like to talk about for a second, which is mCosmetics.

[00:07:00] Speaker 05:
The district court found that M Cosmetics was unrelated work.

[00:07:03] Speaker 05:
It didn't find that Michael Avenatti wasn't hired to perform that, or that he was compensated for it, or that he wasn't entitled to be compensated for it.

[00:07:13] Speaker 05:
He said, you know what?

[00:07:15] Speaker 05:
The district court didn't take issue with that.

[00:07:17] Speaker 05:
It just said you have to go seek that in a separate case because it's unrelated work.

[00:07:21] Speaker 05:
That was a clear error, Your Honors, because that was not unrelated work.

[00:07:24] Speaker 05:
The district court kind of lumped in the value of mCosmetics with other types of work that McLavernati asked to be remunerated for, such as other litigation for Mr. Barilla, reviewing LAX's gardener's music industry contracts, other things that really were outside of this case and not within their contracts.

[00:07:42] Speaker 05:
mCosmetics was not that way.

[00:07:43] Speaker 05:
mCosmetics was different.

[00:07:45] Speaker 05:
That was clearly within the scope of the

[00:07:51] Speaker 05:
Recovery was defined to include not just the cash, but the value of any business interest.

[00:07:56] Speaker 05:
There was a overall terms agreement that was sent out by Ipsi that talked about the asset recovery and the buyback of stocks.

[00:08:05] Speaker 05:
So they're gonna buy back some of her stocks, some additional shares of stocks will be canceled, and then she'll get in cosmetics, she'll get some trademarks.

[00:08:12] Speaker 05:
This was all one.

[00:08:13] Speaker 05:
And they happened contemporaneously around the end of 2017 and early 2018 is when all of this took place.

[00:08:19] Speaker 05:
And these were related.

[00:08:21] Speaker 05:
I want to direct your honors, so I'm sorry, it was a tautological mistake by the district court to say, because M Cosmetics was not a part of these services that was fraudulent, I'm not going to consider it.

[00:08:33] Speaker 05:
That's legal error.

[00:08:36] Speaker 05:
In cases that have talked about government contracts where a person, let's say, is not qualified to get a government contract but they

[00:08:43] Speaker 05:
and they get the contract to do a number of different kinds of work, such as the sublet case.

[00:08:48] Speaker 05:
Somebody was not a qualified therapist, but got a contract to provide counseling services for IRS employees.

[00:08:55] Speaker 05:
He provided lots of services to lots of people.

[00:08:58] Speaker 05:
That was the scope of the contractual work that was involved in the fraudulent scheme, and it was all of those services that were

[00:09:08] Speaker 05:
rendered because he did hire some licensed therapist to provide some of those services, they had to be offset.

[00:09:13] Speaker 05:
Same thing here with M. I'm not going to tell your honors what the value of M is because we don't know.

[00:09:18] Speaker 03:
So how could the court then factor that in and determine the amount of attorney's fees?

[00:09:23] Speaker 03:
It's not the amount of attorney's fees, your honor, it's the fair market value.

[00:09:27] Speaker 03:
So I think M could be- What I'm saying is if there isn't any evidence of

[00:09:33] Speaker 03:
provide us with, how could that amount be determined for the court to figure out the amount of the loss?

[00:09:41] Speaker 03:
Through an evidentiary hearing, Your Honor, which Michael Avenatti requested, the court said that the burden was on him.

[00:09:46] Speaker 05:
The court said, no, I won't let you present evidence on this value of M, because we already had a trial on wire fraud.

[00:09:56] Speaker 05:
There are two problems.

[00:09:57] Speaker 01:
May I ask you whether you're conceding that the

[00:10:05] Speaker 01:
grafting this sort of forfeiture analysis for the other cases that are not the M cosmetics case?

[00:10:12] Speaker 01:
Are you conceding that grafting this sort of forfeiture analysis makes sense for the fair market value determination?

[00:10:20] Speaker 05:
No.

[00:10:21] Speaker 05:
I don't think that the forfeiture analysis is valid to calculate fair market value at all.

[00:10:32] Speaker 05:
So you're sort of focusing on mCosmetics?

[00:10:34] Speaker 05:
I'm focusing on mCosmetics, but as to all of them, I don't think it was valid for the court, it wouldn't have been valid for the court to use these factors like the willfulness, threatened or actual harm, adequacy of other remedies, these are not valuation factors.

[00:10:49] Speaker 05:
And so that wouldn't be proper.

[00:10:59] Speaker 01:
So can you address that?

[00:11:01] Speaker 01:
Certainly are.

[00:11:02] Speaker 05:
So I think there's sort of a threshold issue here, is that the government is saying that Castro-Ponce doesn't plainly apply here.

[00:11:11] Speaker 05:
They're going under the Plain Era standard.

[00:11:12] Speaker 05:
So I think question one is, are we under Plain Era or are we not?

[00:11:15] Speaker 05:
Because if we're not under Plain Era and if Mr. Abinati's objection was adequate, they're not, to my reading, contesting that Castro-Ponce's standard applies.

[00:11:24] Speaker 05:
For the reasons in the briefs, his objection was more than adequate.

[00:11:27] Speaker 05:
He objected at ER 61.

[00:11:31] Speaker 05:
also objected to the adequacy of the findings later on in the hearing.

[00:11:37] Speaker 05:
And it was pro se, so to the extent your honors have any doubt about the adequacy, it should resolve it in his favor.

[00:11:42] Speaker 05:
But I also want to address Rojas-Milan, which is the case that the government cites for this idea that you have to object separately to each.

[00:11:50] Speaker 05:
Okay, Rojas-Milan is, well first of all, Rojas-Milan itself we do with the fact that

[00:12:09] Speaker 05:
said, when the defendant objects to the enhancement, these independent findings must be made.

[00:12:14] Speaker 05:
And I will just say that right after Dunion, even before Castro-Ponce and Luka, this court began applying that outside the context of defendant testimony at their own criminal trial, from the beginning, from Luka

[00:12:24] Speaker 05:
Rojas-Milan itself, that was a co-defendants trial.

[00:12:27] Speaker 05:
Taylor, that was a bond hearing.

[00:12:29] Speaker 05:
It's always applied the independent finding standard and required that outside the context.

[00:12:34] Speaker 05:
So I think the court is trying to impose a limitation that this court has never imposed.

[00:12:38] Speaker 05:
But going back to Rojas-Milan, what Dunning and said was, if the person objects to the enhancement itself, the court must make independent findings.

[00:12:46] Speaker 05:
In Rojas-Milan, the person did not object at all.

[00:12:49] Speaker 05:
The defendant didn't object to that enhancement until after the court had already ruled on it.

[00:12:53] Speaker 05:
The court already ruled on the obstruction of justice enhancement, and it was only then, during a colloquy that the government initiated, that the prison said, and I'll just also say that this isn't material.

[00:13:02] Speaker 05:
Okay, so obviously that's not an adequate objection under Donegan because it wasn't even made until obstruction was ruled on.

[00:13:08] Speaker 05:
So the court simply can't take that as

[00:13:13] Speaker 05:
what objection is required.

[00:13:14] Speaker 05:
And the other thing about that is, I think the government also says to Rojas-Milan for the idea that it's okay to adopt findings in a pre-sentence report.

[00:13:22] Speaker 05:
That's not an accurate characterization.

[00:13:25] Speaker 05:
In Rojas-Milan, the court did do that.

[00:13:28] Speaker 05:
It said, I adopt the findings in the PSR.

[00:13:30] Speaker 04:
Can I just ask, because you're running out of time, sorry, I know that you want more findings on all the elements

[00:13:37] Speaker 04:
But if you win on any one of the elements, like say we agree with you that there needed to be a finding on willfully obstructing justice with respect to this offense, is that essentially enough?

[00:13:47] Speaker 04:
Because you'll get a remand to have this, or is it going to make a big difference whether it's a remand on all of the elements or just one of the elements?

[00:13:53] Speaker 05:
I think any one of them is sufficient to get a remand.

[00:13:56] Speaker 01:
There needed to be findings on all of them.

[00:13:58] Speaker 01:
And quite honestly, do we need an instruction that says that specifically?

[00:14:01] Speaker 01:
I think we're judge-free.

[00:14:03] Speaker 01:
if it doesn't matter how we articulate a ruling on remand with respect to whether findings need to be made for all elements or just the willfulness one.

[00:14:14] Speaker 05:
I think Your Honor should say that there needs to be a finding made on all of them because that's what Castro-Ponce requires and that's what Dunigan requires.

[00:14:20] Speaker 05:
This Court was so far away from making any kind of finding that it wouldn't even comply with Dunigan, frankly.

[00:14:26] Speaker 05:
I mean, there's nothing that resembles any kind of a finding.

[00:14:29] Speaker ?:
We don't even know which of the various

[00:14:34] Speaker ?:
by the government, the court considered, if any.

[00:14:37] Speaker 05:
We don't know that there was any consideration given to that.

[00:14:40] Speaker 05:
So I think any one of them is enough for a remand, but I think the court should instruct the court on remand to make the findings required by Dunnigan and Castro-Ponce.

[00:14:51] Speaker 03:
So if you were not successful on your net loss argument, but you were successful on the obstruction of justice argument, the two-level reduction for obstruction of justice

[00:15:04] Speaker 03:
still be within the area that the court sentenced your client at?

[00:15:09] Speaker 03:
No, Your Honor.

[00:15:10] Speaker 05:
The district court applied the obstruction of justice enhancement, and so therefore if that enhancement were vacated, the offense level would go down by two levels.

[00:15:19] Speaker 03:
But your client was sentenced below the advisory guideline range.

[00:15:23] Speaker 03:
In that sentence, even if there was a two-level reduction, isn't it within the new advisory guideline range?

[00:15:30] Speaker 05:
I think under Rosales-Moreles, Your Honor, we have to have an adequate and correct guideline calculation to start with.

[00:15:36] Speaker 05:
Even if the ultimate sentence that was imposed was within the guideline range that we're seeking, there needs to be a correctly calculated starting point under the guidelines.

[00:15:46] Speaker 05:
I don't think it would be harmless error.

[00:15:48] Speaker 05:
No, Your Honor, I don't.

[00:15:49] Speaker 05:
And honestly, I really don't think it would be harmless error, especially when the district

[00:16:01] Speaker 05:
end of the guidelines range that it applied.

[00:16:03] Speaker 05:
I'm sorry, I'm blanking on the exact range, but 234 to 268, I think, was the guideline range it applied.

[00:16:12] Speaker 05:
But in any event, it said, I am varying downward four levels.

[00:16:16] Speaker 05:
And it was clear about that.

[00:16:17] Speaker 05:
So if the guideline range were lower, it would presumably, there's reason to think, at least, that it would do the same.

[00:16:23] Speaker 05:
And his ultimate sentence would be lower by some amount.

[00:16:27] Speaker 04:
Thank you.

[00:16:27] Speaker 04:
We've taken you over your time.

[00:16:29] Speaker 04:
Thank you.

[00:16:31] Speaker 04:
minutes for rebuttal, so.

[00:16:32] Speaker 02:
Thank you, Your Honor.

[00:16:39] Speaker 02:
Good morning, and may it please the Court, Ronnie Katzenstein for the United States.

[00:16:44] Speaker 02:
I'll start right away with the obstruction issue.

[00:17:00] Speaker 02:
about any impending or actual investigation therefore I could not have obstructed anything there was no willfulness here and we know that that's the only thing he was objecting to because he cited the de george case which this court has been overruled by the guidelines and he did

[00:17:35] Speaker 02:
in plain error.

[00:17:37] Speaker 02:
As to willfulness, the court made a distinct and explicit finding that his objection was overruled, and that's at 1 ER 1516, adopting the government's showing at 1 PSR 8992 with the specific

[00:18:06] Speaker 02:
overruling DeGeorge and said, your basis for saying you can't have been willful does not apply.

[00:18:14] Speaker 02:
It doesn't matter.

[00:18:16] Speaker 02:
You have to have known that there is the potential for an investigation.

[00:18:22] Speaker 02:
And he certainly did know that.

[00:18:24] Speaker 02:
He was aware that both Barella and Garten

[00:18:43] Speaker 01:
more broadly objected, then would you agree that our court's cases in Donegan would have required express findings with respect to both the elements of the enhancement as well as the perjury?

[00:18:57] Speaker 02:
Well, first I would say that under Grissom, we do require defendants to present the grounds for their objection.

[00:19:04] Speaker 01:
Why is it not enough for him to object the fact that he provided a more specific objection?

[00:19:10] Speaker 01:
Why wouldn't that require

[00:19:50] Speaker 02:
It allowed the defendant to

[00:20:24] Speaker 01:
But on the other hand, you're saying it would not be OK to make a broad objection either.

[00:20:29] Speaker 01:
So what you're arguing is that he needed to object to every single element of the enhancement.

[00:20:43] Speaker 02:
or Ponce, the court would have made those specific findings.

[00:20:48] Speaker 02:
He didn't do that.

[00:20:49] Speaker 02:
He simply said there isn't willfulness, and that is all he presented to the court.

[00:20:55] Speaker 02:
And I would also say, because I believe we are in the plain error realm, he can't make out plain error for a variety of reasons.

[00:21:05] Speaker 02:
First of all, he

[00:21:15] Speaker 02:
his own trial.

[00:21:17] Speaker 02:
Therefore, it did not raise the very issues that underlie the rationale of requiring specific findings.

[00:21:25] Speaker 02:
There was no possibility of chilling his right to testify in his own trial.

[00:21:31] Speaker 02:
And whether we agree

[00:21:45] Speaker 01:
This is a theory that you're urging to try to reconcile where Rojas Milan departs from our other president.

[00:21:54] Speaker 01:
But, I mean, there is a different way of looking at this, which is that Rojas Milan is just an outlier, and really the standard is set by Donegan.

[00:22:13] Speaker 02:
because a defendant may testify truthfully and may testify untruthfully, the enhancement only applies for perjurious testimony at his trial.

[00:22:24] Speaker 02:
And therefore, that is why they asked for specific findings.

[00:22:29] Speaker 02:
But no case in this case

[00:22:43] Speaker 02:
in Castro Ponce, that's when the perjury enhancement is based on the defendant's own testimony in his own trial.

[00:23:18] Speaker 02:
context.

[00:23:19] Speaker 02:
We know in Herrera Rivera this court's

[00:23:48] Speaker 02:
even if it was error, it can't be plain error under Aparicio, Gonzalez Aparicio, because there was no law specifically on that point.

[00:24:01] Speaker 02:
There was no dispute here about falsity.

[00:24:03] Speaker 02:
There was no dispute about materiality.

[00:24:06] Speaker 02:
Sending it back, and this would be Judge Shrier's question, I'm not sure that we would, the court could go through the evidence

[00:24:19] Speaker 02:
those would have been the findings.

[00:24:22] Speaker 02:
The court wasn't given that opportunity because the defendant didn't make this objection below.

[00:24:28] Speaker 02:
I would suggest to you that on plain error review, it's not appropriate to send this back.

[00:24:34] Speaker 03:
So if we find that express findings were necessary, do you agree that there were not express findings made by the district court?

[00:24:43] Speaker 02:
I believe there were express

[00:24:49] Speaker 02:
defendant challenged, and I believe that that was sufficient.

[00:24:53] Speaker 02:
It is correct that he did not specifically address falsity, although he did say, the district court did say, the showing of the government is sufficient.

[00:25:03] Speaker 02:
And the government's showing, which he cited specifically, did establish the falsity and the materiality.

[00:25:09] Speaker 02:
And I believe, given that we're in the context not of his

[00:25:25] Speaker 04:
pointed to ER 15 to 16, and I'm looking at it, and I think there's a legal analysis there, but can you point me to what, Simon, do you think is the express fact-finding about willfulness?

[00:25:34] Speaker 02:
Well, I think when he says I'm going to apply the enhancement, and he has rejected the sole objection that has been made, he is clearly rejecting their enhancement.

[00:25:45] Speaker 02:
That may be implicit, but that's not very express.

[00:25:49] Speaker 02:
And again, I'm not

[00:25:56] Speaker 02:
that there's any case law that says in this context, they need to be explicit or in magic words.

[00:26:01] Speaker 02:
We have some case law where the findings have been upheld, but not even though there aren't the magic words of going through each of the specific factual components of perjury.

[00:26:28] Speaker 02:
find that the full amount of the settlements was the amount of loss.

[00:26:33] Speaker 02:
And Judge Friedland, I was interested in your question regarding does it matter which way we get there, because during that came up during the sentencing hearing, the defendant did acknowledge that the ultimate issue was the amount of loss he was being held responsible for, however you got there.

[00:26:52] Speaker 02:
And at 1 ER 63 during the sentencing, the court said, well, the question is whether

[00:27:02] Speaker 02:
not who produced it, in other words, who produced the evidence, which way you came at it.

[00:27:06] Speaker 02:
And the defendant said, I don't necessarily disagree with that.

[00:27:09] Speaker 02:
And throughout the discussion, the whole discussion by the defendant with respect to loss was put in the context of offsets.

[00:27:19] Speaker 02:
He wasn't saying it isn't appropriate up front.

[00:27:22] Speaker 02:
And I will say, if you look, for example,

[00:27:37] Speaker 02:
in order to arrive at an accurate loss

[00:27:54] Speaker 02:
included in the loss analysis and deducted.

[00:27:57] Speaker 02:
And the court itself understood that all of defendants' arguments were being made in the context of credits or offsets.

[00:28:06] Speaker 02:
And that's what the court said at 1ER-12.

[00:28:09] Speaker 04:
The court- So my understanding, just so I'm following, because this is kind of complicated, that's step one and step two.

[00:28:14] Speaker 04:
So it sounds like you're agreeing it actually does matter if it's in step one or

[00:28:23] Speaker 02:
that it was, I mean, all of his arguments were about offsets and credits.

[00:28:28] Speaker 02:
That's, that's correct.

[00:28:29] Speaker 02:
And that is how the court understood his arguments and how the court responded to those arguments.

[00:28:35] Speaker 03:
And I think that also how the guidelines are set up because there's a whole section under 2B1.1E about credits against loss.

[00:28:46] Speaker 03:
Yes.

[00:28:56] Speaker 02:
And I would also say that even if we're just in step one, the analysis isn't what harm, what position the defendants, the victims were in, but for the crime.

[00:29:10] Speaker 02:
The analysis is what is the reasonably foreseeable harm to defendants that he is inflicting on the victims.

[00:29:18] Speaker 02:
And he is stealing their proceeds.

[00:29:21] Speaker 02:
He is lying to them continuously.

[00:29:42] Speaker 02:
We're in the same place.

[00:29:44] Speaker 04:
The opposite.

[00:29:44] Speaker 04:
I see.

[00:29:44] Speaker 04:
So you aren't agreeing that it matters.

[00:29:46] Speaker 04:
You're saying it would get to the same result either way, not just a forfeiture argument.

[00:29:50] Speaker 04:
Because now it sounds like you are saying maybe this should be a step one inquiry.

[00:29:54] Speaker 02:
I think the reasonably foreseeable, I think we get there either way.

[00:29:58] Speaker 02:
Yes, Your Honor.

[00:29:59] Speaker 02:
With the reasonably foreseeable harm that he is inflicting on his clients, which is what we look at to determine the original loss figure.

[00:30:08] Speaker 02:
And Judge Shrier points out that that is how the guidelines are set up.

[00:30:16] Speaker 02:
to him, not to the victims, but to him, is the total amount he's stealing from them.

[00:30:22] Speaker 02:
That's correct, Your Honor.

[00:30:25] Speaker 02:
And again, I just want to address for a moment defense counsel's argument that the court erred by applying California law.

[00:30:35] Speaker 02:
That's not what happened here.

[00:30:36] Speaker 02:
The court

[00:30:47] Speaker 02:
law or the restatement.

[00:30:49] Speaker 02:
The factors were good factors for a person making a factual argument, a factual analysis, which is what Judge Selna was doing here.

[00:31:01] Speaker 02:
Those factors, the gravity and timing of the violation, the willfulness of the violation, the effect that the lawyer's conduct had on the client, and any actual harm, all cut in favor of the judge's

[00:31:16] Speaker 02:
The fair market value of these so-called services was absolutely zero.

[00:31:21] Speaker 02:
No one would pay to have their money stolen from them, to be deprived of the opportunity to buy a... The other way of looking at that, but for his services, they wouldn't have been entitled to the settlement amounts.

[00:31:38] Speaker 02:
I would suggest, Your Honor, that what he was doing

[00:31:54] Speaker 02:
But what Your Honor, I think, is asking, and I do believe it is distinct restitution versus sentencing loss.

[00:32:02] Speaker 02:
And that is why we did respect the fact that from the point of view of the victims, when you look at it from the point of view of the victims, which is not what you look at it for sentencing loss.

[00:32:13] Speaker 02:
From their point of view, yes, they were going to get the settlement minus the fees, which is why, for restitution, we said, you're not entitled to more.

[00:32:26] Speaker 04:
I'm having trouble understanding why he shouldn't get the fees for the M cosmetics value so

[00:32:44] Speaker 02:
his work for Fan.

[00:32:46] Speaker 02:
That is what Fan testified to.

[00:32:48] Speaker 02:
That is what Tran testified to.

[00:32:50] Speaker 02:
Her testimony, unrebutted, was take the full amount of your fee out of the first chunk of the payment.

[00:32:58] Speaker 04:
But does the math work out?

[00:32:59] Speaker 04:
I guess I don't understand that, because I thought that the 7.5 percent, the amount he got at first came from the monetary amount, and the value of the company isn't accounted for.

[00:33:10] Speaker 04:
Is that not right?

[00:33:11] Speaker 02:
That is not correct, Your Honor.

[00:33:23] Speaker 02:
getting his 7.5% of that.

[00:33:26] Speaker 02:
It had nothing to do with the fee price.

[00:33:28] Speaker 02:
He never said to Tran or Phan, I'm entitled to more.

[00:33:34] Speaker 02:
There was no testimony of that.

[00:33:36] Speaker 02:
He never asked for that.

[00:33:38] Speaker 02:
It was separate.

[00:33:39] Speaker 04:
But are you saying that when you do the math of how you get to the amount, you need to take into account the value of the company to get to that calculation?

[00:33:49] Speaker 02:
to the calculation of the amount he took as his fees.

[00:33:53] Speaker 02:
It is the amount of the buyback of two checks.

[00:33:56] Speaker 02:
It has nothing to do with the value of M cosmetics.

[00:34:00] Speaker 02:
That was completely separate.

[00:34:02] Speaker 04:
And so why doesn't he get 7.5% of the value of M cosmetics as part of the restitution calculation?

[00:34:08] Speaker 02:
Because that was not part of the fee that he was entitled to.

[00:34:13] Speaker 02:
It was separate work.

[00:34:15] Speaker 02:
It wasn't the value of the fees that he was receiving

[00:34:22] Speaker 02:
that came, the M cosmetics had nothing to do, it was a completely separate thing.

[00:34:27] Speaker 02:
The court certainly did not clearly err in finding that it was separate work, given the testimony that was there, and there was no evidence of the actual value of the M cosmetics.

[00:34:40] Speaker 02:
He suggests that it was based on, you know, he had two newspaper articles and his training and his experience.

[00:34:47] Speaker 02:
That's utterly speculative.

[00:34:50] Speaker 02:
Essentially,

[00:34:55] Speaker 02:
that he owed to FAN.

[00:35:15] Speaker 02:
to cross-examine the witnesses at trial, to present evidence at trial.

[00:35:22] Speaker 02:
He had many, many rounds of briefing.

[00:35:38] Speaker 02:
hearing, he also presented a lot of evidence.

[00:35:41] Speaker 02:
The court merely has to give him an opportunity to be heard and to make his arguments, which it did.

[00:35:47] Speaker 02:
He identified nothing that he would have put on at an evidentiary trial to establish the value of M. Cosmetics.

[00:35:57] Speaker 02:
We have you over your time.

[00:35:58] Speaker 02:
It's all over.

[00:35:59] Speaker 02:
Thank you.

[00:36:00] Speaker 02:
I would respectfully request that the court affirm the sentence.

[00:36:03] Speaker 02:
Thank you.

[00:36:08] Speaker 05:
First, this idea that Michael Abinadi didn't object as a pro se defendant.

[00:36:14] Speaker 05:
He objected generally at ER 60 and ER 61 to each and every enhancement generally.

[00:36:20] Speaker 05:
He then objected specifically to the lack of findings.

[00:36:24] Speaker 05:
The government has conceded that if he pointed out the inadequacy of the findings, that would be sufficient to preserve the error.

[00:36:36] Speaker 05:
purgatory was designed to obstruct justice.

[00:36:39] Speaker 05:
As a pro se defendant specifically objecting to the inadequacy of findings, to me it's unbelievable that anyone could ever conclude that that was inadequate.

[00:36:48] Speaker 05:
What neither Donegan nor Castro-Ponce requires objection to the findings as opposed to simply the enhancement.

[00:36:55] Speaker 05:
He objected every way he could.

[00:36:56] Speaker 05:
There was nothing else that anyone, let alone a pro se defendant, could have done to preserve this era and Michael Avenatti repeatedly preserved it.

[00:37:03] Speaker 05:
The idea that no case

[00:37:07] Speaker 05:
specific independent findings outside the context of one's own criminal trial is just simply false.

[00:37:13] Speaker 05:
In Luka, which is right after Dunning it, it was a false prospectus submitted to a state administrative agency and this court adopted the ruling of the Second Circuit in Sagari about an

[00:37:26] Speaker 05:
an environmental prosecution.

[00:37:28] Speaker 05:
Quite honestly, Your Honor, the idea that the rationale for Castro-Ponce and Donegan is simply limited to testimony at one's own trial is not true either.

[00:37:36] Speaker 05:
In many of these cases, it's part and parcel

[00:37:43] Speaker 05:
We want people to provide information in these proceedings.

[00:37:46] Speaker 05:
We want people to provide prospectuses to state administrative bodies and to say that there's no need to even find that it was willful or material would show that testimony just as surely as in one's own trial.

[00:37:59] Speaker 05:
And that's why this court has repeatedly applied it in bail hearings in the government's own case

[00:38:06] Speaker 05:
And then in SEC proceedings, depositions, this idea that there's some limitation to the criminal trial itself is simply not accurate.

[00:38:13] Speaker ?:
I would like to go on to the idea that the court made a finding on willfulness.

[00:38:17] Speaker ?:
That is also simply not true, Your Honors.

[00:38:20] Speaker 05:
If you look at the ER page that the government cites, ER 15, the only mention of willfulness is in connection with the Alexis Gardner tweet.

[00:38:31] Speaker 05:
and is not on the basis for obstruction.

[00:38:34] Speaker 05:
It says, the court is unable to conclude by a preponderance of the evidence that Avenatti willfully obstructed or impeded or attempted to obstruct your view.

[00:38:39] Speaker 05:
That's only for Gardner.

[00:38:41] Speaker 05:
And that is not at issue here.

[00:38:43] Speaker 05:
Once it goes down to the only basis for the obstruction enhancement that was actually considered by the court, the judgment debtor exams and all of this, there are no findings at all on wilfulness or anything else, Your Honors.

[00:38:55] Speaker 05:
And all of that would be required.

[00:38:58] Speaker 05:
The idea also that I'm just moving on to the last issue,

[00:39:01] Speaker 05:
that, um, the court did not apply a forfeiture or apply state law, that also is untrue, Your Honors.

[00:39:08] Speaker 05:
The court said very clearly what it was doing here.

[00:39:10] Speaker 04:
It said, a lawyer by his name... I'm sorry.

[00:39:15] Speaker 05:
If you look at ER 12, it says, uh, the Ninth Circuit has recognized the propriety of forfeitures such as the one ordered here.

[00:39:24] Speaker 05:
It said it was ordering a forfeiture.

[00:39:25] Speaker 05:
It said it did so under recievement section 37, which is state law, which includes things unrelated to loss or quantity.

[00:39:31] Speaker 05:
Rodriguez v. Cisner says you don't need any loss at all or any hormonal.

[00:39:35] Speaker 05:
That is pure legal error.

[00:39:36] Speaker 05:
And if Your Honors even think that step one and step two

[00:39:41] Speaker 05:
doesn't matter, because the court's analysis is so flawed, Your Honors, just simply send it back so the court can make that determination in the first instance on step one and step two, because its state law analysis was legally wrong, Your Honors.

[00:39:52] Speaker 05:
And I ask you to vacate Mr. Avenatti's sentence and remand for re-sentencing.

[00:39:55] Speaker 05:
Thank you.