Update, March 30: A grand jury in New York voted to indict Donald Trump over his role in a hush money payment to Stormy Daniels. Is hush money really that unusual? When does it cross the line? Read the original story below.
We still don’t know when or if Donald Trump will be charged in Manhattan over potential financial crimes related to the $130,000 hush money payment he made to adult-film star Stormy Daniels in 2016. But on Tuesday night, Tucker Carlson defended the former president thus: “Paying people not to talk about things—hush money—is ordinary in modern America.” The argument—which is tangential to this case, as what Trump is in trouble for is not the payment itself, but the way it was accounted for—had us wondering. So we called up University of Pennsylvania Carey School of Law professor Tess Wilkinson-Ryan to get at the question: What’s the deal with hush money payments? Why can someone like Donald Trump just pay people off ? When does this practice cross a line?
Wilkinson-Ryan teaches and writes about contracts and researches the moral psychology of legal decision-making. She is also the author of Fool Proof: How Fear of Playing the Sucker Shapes Our Selves and the Social Order—and What We Can Do About It. We chatted about hush money payments, their relationship to nondisclosure agreements, and their limitations and extralegal power. This interview has been condensed and edited for clarity.
Molly Olmstead: So, when is a hush money payment legally OK, and when is it not?
Wilkinson-Ryan: It’s legally OK in a pretty broad swath of situations. It’s legally OK if the information being kept confidential is not about a crime, or if keeping it confidential doesn’t otherwise violate the law. If the payment itself is illegal—imagine bribery or blackmail—that’s a matter of criminal law.
But largely, we’re not talking about that kind of situation. We’re talking about cases in which two parties would have an agreement to keep something confidential. One party pays the other one and says, I’m paying you this money because you promise not to tell anybody about the affair. In those cases, there’s nothing illegal about making that transfer. But there might be times where the contract isn’t enforceable.
When wouldn’t it be enforceable?
If the concern is there’s a real public interest in this fact being disclosed, that’s a reason for a court to say we should not be enforcing this. There are cases where courts take very seriously the idea that enforcing some contracts will create social harm. You can see some of the same kind of rhetoric in cases where courts are grappling with contracts, for example, for group gatherings during a pandemic. One of my colleagues, Dave Hoffman, found this great case [from 1918] called Hanford v. Connecticut Fair Association. It was about a contract to hold a baby fair. Like a fair where you entered your baby into a most-beautiful-baby contest. This was happening right at the outbreak of a polio epidemic, and the court said, We’re not enforcing [the contract]. There’s another public policy that’s more important here.
When it comes to nondisclosure agreements, when might they be “against public policy” in a way that would lead a judge to throw out the agreement?
One of my concerns about NDAs generally is that they can have the potential to over-deter people from speaking, keeping things out of the public conversation. Some of the cases that I find the most troubling—and also probably some of the most troubling cases from a legal perspective—are contracts where a person who has been sexually harassed accepts payments to settle their claim, and as part of their settlement they promise not to disclose the harassment to anybody else. There’s a real argument that that contract might not be enforceable because it’s against public policy. You might imagine the court saying, We’re not going to enforce a contract if a person is unable to disclose this harassment to other people who might themselves be victims of harassment in the future.
Some states have started to regulate these [agreements] more proactively. So California has a law called the “Silenced No More Act” that restricts the use of NDAs and employment contracts [relating to harassment, discrimination, or retaliation]. I think Maine has one. Some states are more proactive about what can and cannot be covered by an NDA, between the employer and the employee.
But these laws are mostly about employment NDAs, not payments between individuals?
That’s right.
In the Trump case, the problem is in accounting shenanigans, not the nature of the encounter that the agreement covered. But when we’re talking in general about politicians and hush money payments, could a judge be open to the argument that if this person is a public figure, it’s in the public interest to know what they did? And that therefore the agreement could be unenforceable?
I think it’s plausible. But frankly, it doesn’t strike me as a winning argument.
So, setting aside the matter of the source of the funds and his missing signature, because this was a consensual sexual encounter, this kind of agreement probably wouldn’t be an issue for this reason you outlined?
Not unless it’s written to be too broad. There are cases in which courts say no, you have to be relatively targeted about what specifically is being kept secret.
In these hush money payments, if someone violates the agreement, and talks, is that person likely to face repercussions? How often do people actually get in trouble for actually speaking up?
You know, I’m not even sure that anyone knows the answer to that. A lot of what’s going on is there are a bunch of dogs that don’t bark, people who just don’t sue. Having anything written in a contract, even if the contract turns out later to be unenforceable, is a really powerful motivator for most people. And so one of the dangers of NDAs is that even when courts would look at an NDA and say, No, this is void, or It’s too broad to be enforced this way or It’s in tension with some state law, the individual might comply on their own. More than they have to.
Does anyone ever get in legal trouble for making someone sign an NDA? Or is it just that it’s found unenforceable?
It’s unenforceable. There are other kinds of unenforceable clauses where sometimes there could be civil penalties—like a fine—but I’ve never heard of this in the NDA context.
This might sound silly from a legal perspective, I suppose, but it seems a little odd to me that this is a thing that you can do—just pay someone for silence.
I know what you mean. I will say, 15 years into being a law professor, I have become a little bit inured to it. It helps if you start with trade secrets: You’re an employer, and you have some secret formula for some awesome product, and it’s only worth it to you to hire an employee if they promise not to tell somebody else your secret recipe for your medication or salad dressing. So that would be the most sympathetic case. And you can look outward from there.
Trade secrets make sense to me, but where it starts to feel a little bit more confusing is when we get into affairs and other sorts of personal things. It seems like these agreements are just creating a society in which wealthy people can do things that non-wealthy people cannot.
I mean, there’s so few protections for women in this situation that there are a lot of plaintiffs’ attorneys representing women in sexual harassment claims who say, Don’t make these contracts unenforceable because this is sometimes the only redress my clients have.
So I think it’s important that we take seriously what victims of harassment sometimes say: The ability to get a private settlement is really important to me, because courts are notoriously hostile to these kinds of [sexual harassment] claims. I want to take that seriously. But I also just want to flag that the agreement itself can be used as a piece of informal power by the person who already had the money and the power.
What do you mean by informal power?
There’s a double whammy in this layer of moral consternation about [the recipients of payments] having participated in the agreement in the first place, and then having broken the agreement. A lot of people are resistant to the idea of trading silence for money; it feels like a taboo trade-off, especially if it involves sexual behavior. But people care about contracts, so if they’re trying to go public, there’s another layer of condemnation: “What kind of a person promises something and then takes it back?” So one of the problems with these agreements is the ways that they can be leveraged to trigger certain kinds of moral intuitions that can really be really harmful for the parties with fewer resources. And it gives the person who already has more power more leverage.
