Stormy Daniels' Lawyer Michael Avenatti's Law Firm Slammed with $10 mil Judgment

Michael Avenatti is now on the receiving end of the legal system, because his law firm was just hit hard in bankruptcy court to the tune of $10 million.

TMZ broke the story, Avenatti's former law partner, Jason Frank, sued Stormy Daniels' lawyer last week for $2 million. Frank claimed when he left Avenatti's firm, Eagan Avenatti, the firm agreed to pay him a settlement of $4.85 million, due in installments. The first installment was due May 14 and, according to the lawsuit, Avenatti's firm missed it ... thus the lawsuit.

Avenatti's firm was in bankruptcy at the time and, even though the case was dismissed, the judge held open the settlement between Avenatti's firm and Frank. According to that settlement, if Avenatti's firm missed any of the installments, the amount due would be $10 million. The bankruptcy judge just entered the $10 million judgment against the firm.

What's more, according to the L.A. Times, one of the creditors in the bankruptcy case was the IRS, which claimed Avenatti personally owed $2.4 mil in back taxes. He agreed to pay in installments and paid $1.5 million but missed last week's deadline to pay the next $440,291.

Avenatti scoffed at the L.A. Times in a Trump style, saying the story was "overblown. Sensational reporting at its finest. No judgment against me was issued nor do I owe any taxes."

Avenatti tells TMZ, the Times was wrong to say he owes the IRS personally. He also says Eagan Avenatti is not the firm that reps Stormy Daniels ... that firm is Avenatti & Associates. The L.A. Times claims it got emails back from Avenatti from an Eagan Avenatti e-mail address.