To this besieged White House, the Stephanie Clifford (aka Stormy Daniels, aka Peggy Peterson) lawsuit against President Donald Trump might only register as a single locust on the plague scale. Stormy Daniels doesn’t even represent the most interesting sex scandal the White House has to confront this week. Nevertheless, her lawsuit poses a few interesting legal questions that some poor judge in Los Angeles Superior Court will have to very publicly grapple with.
The nature of the dispute is paradoxically convoluted. Clifford’s lawsuit seeks to invalidate a nondisclosure agreement requiring her to keep secret her sexual relationship with Donald Trump, but the lawsuit itself announces the nature of the relationship in the first paragraph of the suit’s factual background:
Ms. Clifford began an intimate relationship with Mr. Trump in the Summer of 2006 in Lake Tahoe and continued her relationship with Mr. Trump well into the year 2007.
Indeed, the opening of the barn doors surely preceded this lawsuit. Countless news outlets have already reported that Clifford had approached Slate’s Jacob Weisberg in late 2016 with details that match the allegations in the lawsuit. The Wall Street Journal has also reported on the details of a $130,000 payment made by Trump’s personal attorney, Michael Cohen, to Clifford at the height of the campaign. This payment may have been a violation of federal election law, but the point is that it speaks to how much the public already knows about this supposedly confidential case.
That arrangement had a nondisclosure agreement with a mandatory arbitration clause, of which Cohen availed himself late last month. Again, it’s all very labyrinthine.
Putting aside for the moment the question of whether Clifford’s lawsuit, by its being filed publicly instead of under seal, represents a breach of the nondisclosure agreement, the next most convoluted question involves Clifford’s attorney Michael Avenatti’s central claim that the agreement is invalid. He argues that there can be no confidential settlement to violate because, as he told NBC’s Today: “Mr. Trump did not sign. We believe that that was so that he could later claim deniability, and therefore, from a legal perspective, we believe she’s free to talk.”
Sure enough, Trump’s seismograph-like signature does not appear on the agreement, either as himself or by his latest alleged nom de plume, “David Dennison.” But if Clifford deposited the check, the court might view that act as a unilateral ratification of her end of the agreement. If a court interprets the parties’ conduct as evincing the existence of a contract, it wouldn’t then matter whether either party signed.
Whether Clifford’s attorney is right involves an area of contract law most lawyers last encountered on their first-year exam, known as the “statute of frauds.” Each state has its own such statute and they’re largely similar, but essentially it requires that certain types of contracts must be signed in writing by both parties. It’s well-established that a court can find a contract valid even where neither party signs simply by the conduct of the parties, though this rule is somewhat constrained in contracts governed by the statue of frauds. If a court deems this agreement as falling outside the statue of frauds, then Trump’s lack of signature might not matter. Generally, the types of contracts that require signatures are weighty and have lasting implications—real estate contracts, mortgages, long-term employment contracts, surety agreements, debts dischargeable in bankruptcy, and so on.
So the question for the court might be whether the Trump–Clifford nondisclosure agreement categorically squares with California’s enumerated statute of frauds. While the aforementioned types don’t quite fit, one interesting candidate is California Civ. Code 1624(a)(1), which requires a signature of the party to be charged or the party’s agent where the agreement, “by its terms is not to be performed within a year from the making” of the agreement. So the question is: What would that mean, with respect to this nondisclosure agreement, where Clifford is obligated to remain silent indefinitely, a period that could easily extend past a year? Despite that argument’s intuitive appeal, courts have mostly viewed indefinite duration contracts as not falling within this one-year provision, sometimes reasoning that the party could die within a year, sometimes finding validation where only one of the parties completes performance. Often, one party’s ratification (e.g., cashing the check) can serve as an exception to the statute of frauds.
Whatever the merits of Clifford’s argument that Trump’s failure to sign the agreement rendered it invalid, it may not ultimately matter because in order for Trump to prevail on the agreement he would have to take Clifford to court and enforce it. For a president of the United States to sue an ex–porn actress for revealing details of their extramarital affair allegedly occurring shortly after the birth of his son Barron would seem to be a politically fraught venture, even for a president as Teflon as Trump has proven to be.
One big caveat to consider here is that Cohen has already filed an arbitration proceeding pursuant to the agreement, with the lawsuit alleging that it was filed “surreptitiously” and without notice to Clifford, and that its purpose was to silence Clifford. The California court could perhaps tell Clifford that she needs to take her case to the same arbitration panel. Clifford’s response to that suggestion is implicit in her lawsuit—arguing that there is no agreement because Trump didn’t sign it. Accordingly, if there’s no agreement, the arbitration clause within can be disregarded.
The stakes are daunting enough for Clifford, at least on paper—the agreement contains a $1 million liquidated damages clause for each individual breach of the agreement, and it’s reasonable to assume that she doesn’t presently have $1 million in the bank. Whether or not filing such a lawsuit publicly might separately constitute such a breach, or multiple such breaches, is a rabbit hole beyond the scope of the rabbit hole we’ve already crawled down. That a lawsuit seeking to undo the terms of an agreement could potentially violate that agreement suggests that we’re inside a farcical adaptation of the film Inception.
At every stage of this story, the White House has simply pretended that Stephanie Clifford doesn’t exist. On Wednesday, White House press secretary Sarah Sanders said that Trump had been unaware of the payment and that he denied the relationship took place, another point of contention of the lawsuit itself—the suit argues that it stretches credulity to argue Trump didn’t know about the payment—and one that would seem potentially to offer another avenue for invalidating it. If Trump was not even aware of the agreement, how could he agree to it and how could Cohen even have acted as an agent on his behalf in signing? Then again, what Trump supposedly paying $130,000 for was the right to pretend none of this ever happened. Harvey Weinstein can probably sympathize.
Ultimately, if Trump chooses to enforce the agreement against Clifford in court it will serve as a tacit admission of Clifford’s underlying story. However, if a court throws out the suit and the enforcement is made in arbitration, then we may never get the full story. Perhaps the lesson here is that nondisclosure agreements over personally embarrassing incidents involving the rich and famous aren’t particularly useful as anything more than a calculated bluff, when the revelations can’t be undone by 1 million uncollectable dollars.
One more thing
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