U.S. District Judge Paul Gardephe of the Southern District of New York/courtesy photo

Blaming in part the use of block billing, a federal judge said Monday that Nike Inc. can recover less than a third of its requested restitution in Michael Avenatti's extortion case.

U.S. District Judge Paul Gardephe in the Southern District of New York rejected some of the requested $856,162 attorney fees from Boies Schiller Flexner as unrecoverable under the Mandatory Victims Restitution Act.

But the reductions grew even more because the judge said he couldn't distinguish some unrecoverable expenses from recoverable ones, because Boies Schiller had grouped everything though block billing, and hadn't attributed specific amounts of time to particular tasks.

"This court cannot now attempt to extricate recoverable expenses from non-recoverable expenses in block-billing entries. Nor should it," Gardephe wrote, citing the U.S. Supreme Court's 2018 ruling in Lagos v. United States. "Having carefully reviewed the revised Nike time entries, the court has subtracted from the total requested amount any entry that contains an unrecoverable expense."

Gardephe said Southern District courts have interpreted Lagos as limiting restitution to expenses for investigative activities specifically requested by prosecutors, which in the judge's view does not include activities related to Avenatti's postarrest activities. This was an issue last summer when prosecutors initially submitted a restitution request for $1 million of a claimed $1.7 million recoverable expense.

Avenatti's opposition complained about Boies Schiller's use of block billing, and Gardephe deferred decision because he said Nike's submissions were inadequate and also contained unrecoverable expenses.

That led to Nike's revised request of $856,162, which Avenatti lawyer Scott Srebnick opposed as seeking reimbursement for unnecessary expenses, and again said Nike doesn't qualify as a victim under federal restitution standards so it deserves no restitution. 

Gardephe's ruling on Monday says Nike is indeed a victim deserving of restitution because the attorney fees it incurred were a result of Avenatti's crimes, but it sided with Avenatti regarding the recoverability of some of the expenses.

"For example, Nike requests reimbursement for attorneys' fees generated by several Boies Schiller attorneys who spent hours reviewing, analyzing, researching and corresponding with Nike about Avenatti's motions to dismiss," according to the 21-page ruling. "But there is no evidence that Boies Schiller's assessment of Avenatti's motions was invited, required, requested, or otherwise induced by the government, much less that it was of use to the government."