Michael Avenatti's law firm ordered by judge to pay $10M to ex-colleague

Michael Avenatti represents adult-film star Stormy Daniels. (AP Photo/Seth Wenig, File)

A law firm managed by Michael Avenatti, the attorney representing adult-film star Stormy Daniels in her lawsuit against President Trump and his personal attorney, was ordered to pay $10 million Tuesday to a lawyer who claimed that the firm had misstated its profits and that he was owed millions.

The Los Angeles Times reported the judgment by a U.S. bankruptcy court in southern California against the Eagan Avenatti law firm.

"At this point, that's what's appropriate," Judge Catherine Bauer said of the award, according to the paper.

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Attorney Jason Frank, who worked at Eagan Avenatti under an independent contractor agreement, alleged in court papers that the law firm failed to pay a $4.85 million settlement he had reached in December. He added that Avenatti had personally guaranteed the settlement.

In response to the initial report of the judgement, Avenatti tweeted at Los Angeles Times reporter Michael Finnegan: "Nonsense. Completely different law firm - no ties to Daniels case. Irrelevant. Over blown. Sensational reporting at its finest. Check the facts next time please and report accurately."

Finnegan responded that Avenatti "has not challenged the accuracy of a single fact" in the paper's story.

Under his agreement, Frank was supposed to collect 25 percent of the firm's annual profits, along with 20 percent of fees his clients paid, according to court documents. He resigned in May 2016 after alleging that the firm didn't pay him millions of dollars that he was owed, misstated the firm's profits and wouldn't provide copies of tax returns and other financial documents.

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After he resigned, Frank brought the case to a panel of arbitrators, who found that the firm "acted with malice, fraud, and oppression by hiding its revenue numbers," according to a copy of the arbitration report included in court documents.

The December settlement was supposed to include an initial $2 million payment and then a second payment for $2.85 million. The $2 million payment was supposed to be made by May 14, but Avenatti and his firm never paid, Frank said in court papers.

The settlement agreement included a clause that the firm couldn't oppose a request for a $10 million judgment if the settlement payments weren't made within three days of the due date.

During Tuesday's hearing, an assistant U.S. attorney said Avenatti had not made a payment that was due last week for unpaid taxes as part of an agreement that was reached in January. Court records showed Avenatti personally had agreed to pay about $2.4 million in back taxes and penalties.

Thom Mrozek, a spokesman for the U.S. attorney's office in Los Angeles, told Fox News that Avenatti had paid approximately $1.5 million in March "as called for in the stipulation."

Court documents show Avenatti is the "managing member and majority equity holder" of Eagan Avenatti and "solely owns and controls" another firm, Avenatti & Associates, which represents Daniels.

Daniels, whose real name is Stephanie Clifford, has said she had an affair with Trump in 2006 and has sued to invalidate the confidentiality agreement she signed days before the 2016 presidential election that prevented her from discussing it. She's also suing Trump and his personal attorney, Michael Cohen, alleging defamation.

Fox News' Brooke Singman and The Associated Press contributed to this report.