Michael Avenatti, lawyer for Stormy Daniels, hit with massive judgment in US bankruptcy court

Michael Avenatti, lawyer for Stormy Daniels, hit with massive judgment in US bankruptcy court
Michael Avenatti, lawyer for Stormy Daniels, was hit with a $10 million judgment in a U.S. bankruptcy court on Tuesday for failing to make a payment on a settlement with a former law partner. (Drew Angerer/Getty Images)

Michael Avenatti, the lawyer for Stormy Daniels who has been a mainstay on mainstream media cable TV stations, was hit with a $10 million judgment in a U.S. bankruptcy court on Tuesday.

Judge Catherine Bauer made the judgment after Avenatti’s law firm, Eagan Avenatti LLP, failed to pay former partner Jason Frank $4.85 million.

What are the details?

According to the Los Angeles Times, Avenatti agreed to pay Frank a $4.85 million settlement in December, but when the first $2 million installment was due last week, Avenatti failed to pay. Under the settlement, Avenatti would be liable to pay Frank $10 million if he failed to pay.

“Michael Avenatti’s law firm entered into a crystal clear written settlement agreement to resolve a prior lawsuit brought by Jason Frank, his former law partner,” an attorney for Frank told CNN. “The settlement agreement was approved by a federal court and was a condition of his law firm exiting bankruptcy.”

Frank initially tried to collect the money through arbitration last year before reaching an agreement with Avenatti. Frank alleges Avenatti cheated him out of millions owed to him for being a non-equity partner at Avenatti’s firm.

Frank accused Avenatti of failing to uphold the terms of their partnership, which required Avenatti share copies of the law firm’s financial documents because Frank would be paid one-quarter of the firm’s annual profits and a percentage of fees paid by clients. Frank sued after he was not paid what he was owed under his partnership deal.

In arbitration last year, a three-panel judge ruled against Avenatti, saying he owed Frank “for nonpayment of fees related to the arbitration and for not providing copies of tax returns and other documents,” according to CNN.

How did Avenatti respond?

In a tweet responding to the LA Times story, Avenatti — who has now made his Twitter account private, alleged the facts in the story were incorrect, but did not actually dispute a single fact stated in the story.

“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,” he said.

Anything else?

Avenatti’s legal woes do not end with Frank. His legal firm is also delinquent on $440,291 in back taxes, interest and IRS penalties. He was required to make the payment last week.

The LA Times has more:

Avenatti and his firm had accepted the deadline under an agreement reached with the Internal Revenue Service in January. It requires [Avenatti] to pay the IRS a total of $2.4 million.

More than half of that was for payroll taxes that the law firm withheld from employees but did not turn over to the government. Avenatti, who has blamed the lapse on an unnamed payroll company, was personally responsible for holding the money in trust for the IRS, according to the U.S. attorney’s office in Los Angeles.

A spokesperson for the the U.S. attorney’s office, Thom Mrozek, told CNN Avenatti still owes the government $880,000 after he made an initial installment payment of $1.5 million.