Michael Avenatti, left, and Brian Panish, right. Photos: ALM/Courtesy photo

Ten years before he became a cable news regular, Michael Avenatti joined forces with a rainmaking Los Angeles trial lawyer who had two new clients with a promising prospective lawsuit.

Brian Panish had worked with Avenatti before, and he knew him as a tough fighter capable of helping secure the millions of dollars William Parrish and Timothy Fitzgibbons felt they were due from a former employer who'd wrongfully sued them and lost.

Now, long after Panish and Avenatti took decisively different paths—one is suing Alec Baldwin over the "Rust" shooting and one is in prison—the men's business dealings are taking center stage in an Orange County Superior Court branch courthouse, where a jury is to decide whether their former clients owe their former co-counsel Robert Stoll for a $5.4 million attorney fee he never received.

The underlying case was a malicious prosecution lawsuit that settled in 2011 for $39 million—reported on Panish's website as the largest such settlement in California history.

Panish touts the settlement on his website, and Avenatti's New York public defenders mentioned it in their sentencing memorandum last week when describing Avenatti's accomplishments as a lawyer.

Larry Conlan, a partner with Capello & Noel in Santa Barbara. (Photo: Meghann M. Cuniff/ALM)

Neither mentions the ensuing lawsuit, but jurors were introduced to both Panish and Avenatti last week by way of photos displayed during defense lawyer Larry Conlan's opening statement in a trial nearly 11 years in the making.

Avenatti won't be testifying after invoking his Fifth Amendment right against self-incrimination. And Judge Walter Schwarm determined Avenatti's no longer a party to the case after failing to respond to pleadings. But Panish will be a key witness, with Conlan describing how he asked Avenatti to help with the case because "he thought, as he should at the time, that Mr. Avenatti would be honest with his clients."

"He's the kind of attorney who, if he's on the case, defendants start to get really worried, and they often settle cases before the case goes to trial," Conlan said, calling Panish "one of the most renowned lawyers in the country."

"And he knows what the lawyers did in the case and what the lawyers did not do in the case," continued Conlan, a partner at Cappello & Noël in Santa Barbara. "His testimony is going to help tie the whole story together."

Stoll's lawyer, H. James Keathley of Keathley & Keathley in Irvine, will begin calling witnesses June 1 at the West Justice Center branch courthouse in Westminister, nearly two months after the judge officially declared the trial underway.

Appointed to the bench in 2009, Schwarm then spent weeks navigating pretrial issues that included an unusual debate over the admissibility of a video deposition Avenatti sat for in 2015.

(l-r) Robert Stoll with his attorney H. James Keathley outside the West Justice Center in Westminster, California, on May 18, 2022. (Photo: Meghann M. Cuniff/ALM)

For Keathley, whose claims include aiding and abetting and breach of contract, the depo is key evidence because Avenatti implicated Parrish and Fitzgibbons in it as having directed him not to pay Stoll's Los Angeles-based firm Stoll, Nussbaum & Polakov.

Conlan and his co-counsel Chris Wesierski of Wesierski & Zurek in Lake Forest argued the deposition shouldn't be used in trial because Avenatti wouldn't attest to its accuracy when questioned about it via video from prison. They also argued Parrish and Fitzgibbons never had a fair opportunity to cross-examine Avenatti because he was acting as their lawyer at the time, while being represented by his own lawyer, so it's illogical to think he'd cross-examine himself.

But Schwarm determined the deposition is admissible because Avenatti's conflict of interest with his clients when giving the depo was apparent at the time, siding with Keathley's argument that Parrish and Fitzgibbons' complaints about the testimony were best made in a malpractice lawsuit or bar complaint.

'Out for Himself'

Keathley told jurors in his opening that Stoll at all times had a valid fee-sharing agreement that Parrish and Fitzgibbons breached after Avenatti told them Stoll would sue them but if he did, "I will indemnify you." So instead of giving Stoll his share of the money, they sent everything to Avenatti, who paid Panish but refused to pay Stoll, which no one in the case disputes.

"The conduct of Parrish and Fitzgibbons created Mr. Avenatti's ability to keep the Stoll firm's money," Keathley said.

Keathley told the jury Avenatti has since been convicted of felonies, but said the convictions "were 10 years to 11 years after this matter started."

"Mr. Avenatti was not a convicted felon from 2011 to 2020, and certainly not in 2015 when his deposition was taken," Keathley said. "The evidence will likewise show Mr. Avenatti was not convicted of any felonies with respect to the case."

Conlan named each of Avenatti's five felonies in his opening, and said they involved clients, telling jurors that when Stoll "asks you to believe Mr. Avenatti, he's also going to ask you to disregard the fact that Michael Avenatti is a convicted felon."

"Mr. Stoll and his firm are going to want you to believe that the guy who both sides agree took all the money and spent it for his own purposes, can be believed when he said he didn't pay Mr. Stoll because the clients told him not to," Conlan said. "The evidence is going to show, and this is going to be undisputed, that Michael Avenatti is a thief and he's dishonest, and he was out for himself no matter who he hurt."

15 Years of Litigation

Parrish and Fitzgibbons are friends and business partners who both hold doctorates in electrical engineering. Parrish has worked for and served on the boards of companies such as Amber Electronics, Hughes Aircraft and Indigo Systems, where Fitzgibbons was an executive.

William Parrish. (Photo: Meghann M. Cuniff/ALM)

Both worked in the area of infrared military technology, and they set out to open their own company after FLIR Systems acquired Indigo from them in 2003.

FLIR sued them for misappropriating trade secrets, but a judge rejected the claims as being brought in bad faith, and ordered FLIR to pay Parrish and Fitzgibbons $1.6 million to cover their attorney fees.

After their wives met Stoll at a party, Stoll arranged a meeting with Panish that resulted in Parrish and Fitzgibbons enlisting him to sue FLIR. That was 2008, after Panish and Avenatti had worked together at what was then Greene Broillet Panish & Wheeler, and Panish recommended as co-counsel Avenatti and his new firm, "who he had worked with in the past and at the time trusted," Conlan told jurors.

"He thought, as he should at the time, that Mr. Avenatti would be honest with his clients," Conlan said. Parrish and Fitzgerald also agreed to hire Stoll's firm on the expectation that "all three law firms will pull their weight."

According to Conlan, Stoll didn't do so, but Keathley described in his opening how Stoll did important work, including pushing for a higher settlement when Avenatti wanted to settle for $35 million, so "Mr. Stoll's efforts gave Mr. Parrish and Mr. Fitzgibbons an additional $4 million." They were "very good friends" with Avenatti, Keathley said, socializing with him and accepting a $450,000 donation from Avenatti in company they owned, Seek Thermal, while Parrish purchased a jet with him.

But Conlan said Stoll did little work on the case, and Avenatti hated him so passionately that he vowed to never pay him his 35% of the attorney fee and would litigate "if he had to, forever."

After settling with FLIR, Parrish and Fitzgibbons had Avenatti and Panish sue Latham & Watkins for the law firm's representation of FLIR in the original malicious prosecution action. Allegedly upset that he wasn't on the legal team, Stoll then sued over the attorney fee "out of spite," Conlan said.

The lawsuit against Latham was eventually dismissed, and Parrish and Fitzgibbons were ordered to pay the firm's $1.8 million in attorney fees.

But the lawsuit with Stoll persisted, and Avenatti reassured his clients the $5.4 million Stoll was after was secured in a client trust fund, when in fact he'd spent all of it on himself, Conlan said. Parrish and Fitzgibbons grew suspicious in 2018 as Avenatti "was starting to show up in the news, looking like he was busy with clients and other matters."

Timothy Fitzgibbons. (Photo: Meghann M. Cuniff/ALM)

As TV pundits pitched Avenatti as a possible Democratic presidential contender in 2018, Fitzgibbons asked for a litigation update and about the existence of the trust account, writing, "Sorry to be a pest, but as President Reagan taught, trust but verify."

Conlan displayed the email during his opening, as well as one Fitzgibbons sent weeks later after Avenatti didn't answer that reminded him to have his paralegal email the account statements as promised.

Avenatti replied, "Of course," but Conlan said he never sent anything. Parrish and Fitzgibbons then fired Avenatti and discovered the transcript from his 2015 deposition with Keathley in which he said they'd directed him not to pay Stoll.

"He didn't even tell them about it, but it's the main evidence that Mr. Stoll's firm wants you to rely on," Conlan told jurors.

Panish is included in the 2018 emails between Fitzgibbons and Avenatti, and his testimony "will corroborate … what Michael Avenatti told his clients," Conlan said, emphasizing lawyers' duties to their clients. "They're supposed to be able to trust him. That's what the law requires."

Keathley's case is expected to take several weeks once trial resumes June 1. It'll run three days a week, with Panish probably not taking the stand until late June or early July.