Avenatti's Old Law Firm Hit With $10 Million Court Judgment

(Bloomberg) -- The law firm founded over a decade ago by the attorney taking on Donald Trump and his longtime fixer Michael Cohen on behalf of an adult film star got socked with a $10 million judgment in an unrelated dispute with a former law colleague.

A federal bankruptcy judge in Santa Ana, California, granted a motion for judgment Tuesday against Michael Avenatti’s former law firm, Eagan Avenatti LLP. The California lawyer has been making headlines for the past two months representing Stephanie Clifford, better known as Stormy Daniels, in a bid to void a $130,000 hush agreement with Trump.

The claim against Avenatti’s old firm, which is winding down, was brought by Jason Frank, who argues he’s owed millions of dollars in profits and fees for his work. His claim ended up in bankruptcy court because a purported creditor filed an involuntary petition against the Avenatti firm in Florida and, according to Frank, Avenatti used the bankruptcy protection to prevent an arbitration trial on his claim.

Avenatti and Frank settled the claim in December for $4.9 million, according to court documents. Avenatti personally guaranteed the money would be paid, but the first settlement payment of $2 million wasn’t made by the May 14 due date, according to Frank. The alleged default allowed Frank to seek a $10 million judgment against the firm, according to court filings. Tuesday’s ruling can’t be appealed.

Avenatti, who says he’s secured more than $1 billion in recoveries for clients, founded Eagen Avenatti LLP in 2007 with three offices in California, according to his website. The firm’s victories include a $454 million verdict last year against Kimberly-Clark Corp. and its spinoff Halyard Health Inc. over the safety of some of their surgical gowns. A judge subsequently cut the verdict to about $25 million.

These days Avenatti is fighting to participate in a New York federal case over evidence seized from the office of Trump’s longtime personal attorney, Cohen, who arranged the hush payment to Clifford just before the 2016 election. His new firm in Newport Beach, California, is called Avenatti & Associates APC, although he still uses his Eagen Avenatti email.

The bankruptcy judgment is "completely irrelevant" to Clifford’s lawsuit, Avenatti said. It "has nothing to with the case. Who cares?"

(An earlier version of this story corrected the identity of the debtor to Avenatti’s firm.)

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