Law firm of Stormy Daniels' attorney ordered to pay $10 million

PHOTO: Stormy Daniels (Stephanie Clifford) and Michael Avenatti, attorney for Stormy Daniels, exit the courthouse, April 16, 2018 in New York City. PlayDrew Angerer/Getty Images
WATCH Stormy Daniels' lawyer reacts to questions raised about the president's legal web

A federal bankruptcy court judge in California has entered a $10 million judgment against a law firm of Michael Avenatti in a dispute with a former employee.

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The decision was first reported by the Los Angeles Times.

The order, from U.S. Bankruptcy Judge Catherine Bauer, requires the law firm of Eagan Avenatti LLP, to pay $10 million to Jason Frank Law PLC.

Jason Frank is an attorney who worked for Eagan Avenatti from 2009 until 2016, according to court filings.

In a brief phone interview with ABC News, Avenatti -– who's representing adult-film star Stormy Daniels, whose legal name is Stephanie Clifford, in her lawsuit against President Donald Trump and Michael Cohen –- described the bankruptcy case as "a sideshow that’s irrelevant."

"My personal business and my personal life is completely irrelevant to [the Daniels] lawsuit. It has no relevance to anything in that case," Avenatti said.

PHOTO: Stormy Daniels, left, and President Donald Trump. Getty Images
Stormy Daniels, left, and President Donald Trump.

Prior to Eagan Avenatti's bankruptcy filing in 2016, Frank alleged in arbitration proceedings that the firm had failed to fully compensate him for bonuses and other compensation in excess of $14 million.

Avenatti had disputed those claims and asserted in a court filing earlier this year that Frank and two other former attorneys at the firm "were terminated after they were discovered to have been forming their own competing law firm for months," allegedly taking "substantial business with them."

Frank and the two attorneys disputed Avenatti's allegations, according to court documents.

Earlier this year, the parties opted to settle their differences.

The bankruptcy court approved a settlement agreement that called for Eagan Avenatti to pay Frank's firm $4.85 million in two installments. According to the terms of the agreement filed with the court, Avenatti agreed "to personally guarantee, in his individual capacity" the $4.85 million in settlement payments.

The first installment of $2 million, due May 14, wasn't paid, according to a court filing from Frank's attorney, Sara Chenetz. That default triggered a final judgment of $10 million that couldn't be appealed, according to a provision of the settlement agreement cited in Bauer's order.

PHOTO: Michael Avenatti appears on Good Morning America, May 9, 2018.ABC News
Michael Avenatti appears on "Good Morning America," May 9, 2018.

Avenatti told ABC News Tuesday that the judgment "is not against me personally at all" and applies only to Eagan Avenatti, which he described as an entity separate and distinct from Avenatti & Associates, the one representing Daniels.

"They are different legal entities, they represent different clients. One doesn't have anything to do with the other," he said. "It's not the law firm that represents Miss Daniels. So this whole thing is just a complete sideshow and completely irrelevant. Who cares?"

In court filings from earlier this year, Avenatti was described as the "managing member and majority equity holder" of Eagan Avenatti.

In a statement to ABC News, Sean Walsh, a spokesman for the lawyers representing Frank's firm, wrote: "Last week, Mr. Avenatti described our client's claims as 'fraudulent and bogus.' Today, a federal judge issued a $10 million judgment in our client's favor. That should tell you all you need to know about who is telling the truth."

According to the L.A. Times, the U.S. Justice Department revealed at the court hearing Tuesday that Avenatti has also missed a deadline this month for a payment of $440,291 on back taxes owed by the firm to the Internal Revenue Service, and that the government soon would be filing a motion with the court demanding the payment.

Efforts to reach the government's attorney who appeared at the hearing were unsuccessful.

In an email to the L.A. Times, Avenatti said of the issues surrounding the bankruptcy case: "Irrelevant. Over blown. Sensational reporting at its finest. No judgment against me was issued nor do I owe any taxes."

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