A Manhattan federal judge on Monday refused to dismiss two counts of an indictment accusing Michael Avenatti of trying to extort Nike Inc. by threatening to go public with allegations that the company made illicit payments to the families of college basketball recruits.

U.S. District Judge Paul G. Gardephe of the Southern District of New York said in an 18-page opinion that the embattled attorney would have to face charges of extortion and transmitting interstate communications with intent to extort in an alleged plot to damage Nike's bottom line and reputation, unless the athletic apparel giant agree to pay him millions of dollars.

Avenatti, known for his representation of adult film star Stormy Daniels, is also charged with honest-services wire fraud stemming from his representation of Gary Franklin, a California-based youth coach who had hired Avenatti to reinstate its sponsorship of his basketball program.

According to a prosecutors, Avenatti told Nike that he would keep the misconduct allegations quiet, so long as the company agreed to pay him between $15 million and $25 million to head an internal investigation. Nike had denied any wrongdoing.

Avenatti's lawyers, Scott Srebnick and Jose Quinon, moved to dismiss the extortion counts on the basis that a revised indictment failed to allege that his conduct was "wrongful" under federal law. Avenatti, the attorneys said, had a right to publicly expose misconduct, demand a settlement to resolve his client's claims and seek fees for himself in the process.

The Manhattan U.S. Attorney's Office, however, alleges that Avenatti never told Franklin about Nike's offers to resolve the dispute without paying Avenatti or retaining him for an internal probe.

He was arrested March 25 on his way to a meeting with Nike officials and has pleaded not guilty to the charges. Trial in the case is scheduled to begin Jan. 21.

In Monday's ruling, Gardephe cited the 1997 conviction of Autumn Jackson for attempting to extort $40 million from comedian Bill Cosby in exchange for not publicly revealing that she was his illegitimate daughter. Cosby denied fathering a child out of wedlock, but did admit to an affair with Jackson's mother and helping her pay her way through college.

Jackson was sentenced to 26 months in prison. Cosby is currently serving a three- to 10-year sentence in Pennsylvania following a sexual assault conviction in 2018.

In the Jackson case, the U.S. Court of Appeals for the Second Circuit clarified that a threat of economic or reputational harm becomes "wrongful" once it is used to "obtain property to which the threatener is not entitled."

Gardephe said in his ruling that the Avenatti's indictment met the standard laid out in Jackson.

"The indictment adequately alleges that Avenatti engaged in "wrongful" conduct, because it pleads facts demonstrating that Avenatti used threats of economic and reputational harm to demand millions of dollars from Nike, for himself, to which he had no plausible claim of right," the judge wrote.

He continued: "While Avenatti's client may have been in a position to make demands on Nike, Avenatti had no right—independent of his client—to demand millions of dollars from Nike (1) based on confidential information supplied by his client; (2) without his client's knowledge; and (3) to his client's detriment."

A spokesman for the U.S. Attorney's Office did not immediately respond to an email, and Avenatti's lawyers could not be reached immediately for comment.

Avenatti is facing separate indictments in California and New York for allegedly stealing settlements and other funds from former clients, including Daniels, who claimed to have had an affair with President Donald Trump.

Trump has repeatedly denied having sex with Daniels, whose real name is Stephanie Clifford. Avenatti, however, remains a fierce critic of the president, and has vowed to fight the federal indictments on both coasts.

Gardephe is expected to rule in the coming days on a number of pretrial motions, including whether prosecutors will be able to present evidence of Avenatti's distressed financial state to a jury in order to establish his motive.

The case is captioned United States v. Avenatti.

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