Appeals court orders re-sentencing for suspended attorney Michael Avenatti, Stormy Daniels' former lawyer

A panel off appellate judges on Wednesday overturned the prison sentence for Michael Avenatti, the suspended attorney who recently rose to fame as he represented adult film actress Stormy Daniels in her trial against former president Donald Trump. 

The panel of three judges in the Ninth Circuit Court of Appeals sent the case back to United States District Judge James V. Selna for reconsideration of Avenatti's punishment. It's believed that his 14-year-year sentence could be cut in half. 

"I am thankful that a unanimous three judge panel of the 9th Circuit threw out my draconian prison sentence today," said a statement from Avenatti. "The sentence was always grossly unjust and violative of my most basic constitutional rights, but the government sought it anyway solely because of who I am. We all deserve due process."

In June 2022, Avenatti made an open plea to tax and wire fraud, which means there was no guarantee as to what his sentence would be. Selna's original sentencing was made after Avenatti was given five years in prison in New York for an extortion scheme against Nike and for stealing from Daniels. 

Selna ordered that the punishments would run consecutively. 

On Wednesday, the appellate judges ruled that Selna had erred when he did not account for the value of the legal services that Avenatti provided to his victims, and that he improperly upped the punishment on the grounds of obstruction of justice based on perjury. 

They also sided with Avenatti on Selna's erring in an enhancement of the punishment based on his calculation of the $12.3 million from losses due to the fraud. 

"Avenatti contends that (Selna) should have accounted for the value of his legal services and costs, as well as the value of certain payments he made to victims," the judges ruled. "We agree."

They say that Selna calculated the loss based on the full settlements that Avenatti negotiated for his clients because the attorney "forfeited" his fees because of "fraudulent conduct," the judges wrote.  

"Selna erred. Forfeiture is a sanction that does not approximate the pecuniary harm caused by an attorney's misconduct," they wrote. "It has no place in calculating 'actual loss' for the purposes of enhancing a criminal defendant's sentence. Further, Avenatti's clients were never entitled to receive the full settlement values — they hired Avenatti on a contingency fee basis and agreed, by contract, to pay him a portion of any settlement as his fees and to reimburse him for his costs."

The judges directed Selna to assess what fees and expenses Aveantti should receive credit for, and they also found that he abused his discretion in declining to credit Avenatti for payments that he made to his clients after he misappropriated funds from their settlements. 

Additionally, Selna was directed to determine the value a company he helped a client acquire to be credited to his restitution to that victim. 

Appellate judges also agreed with Avenatti in part on whether his punishment should run consecutively to the term that was imposed in the Nike case. 

They did however side with Selna on his use of discretion in determining that the misconduct in the Nike case was different than what was done in the Southern California case. 

Federal prosecutors in Santa Ana originally sought a 17-and-a-half-year prison sentence for Avenatti, who argued for a six-year sentence to run concurrently with the New York cases.