Love him or loathe him – there seems to be no in between – the current President of the United States, Donald J. Trump, dominates the news in a way that we have never seen before. In fact, so ubiquitous are items of news of investigations, staff shake-ups, outrage at the President and counter-outrage at those outraged at the President, that one news story that would have absolutely torpedoed any other President – indeed, any other American politician – stayed well under the radar for weeks. I’m speaking, of course, of the alleged extra-marital affair that occurred roughly a decade ago between then private-citizen Trump and porn actress, Stormy Daniels, and the effort to buy her silence in the waning days of the 2016 presidential campaign.
Why am I blogging about this? Well, apart from all of the obvious reasons why this is such a sensational case, there is actually a curious fact pattern here giving rise to some of the same kinds of issues found in commercial and business litigation all the time. The notoriety of this case creates an opportunity to examine and explain these issues in a context that people will actually be interested in. For those of us who litigate contract disputes, this is a moment when the sun is shining on our world.
One of the first questions I thought I would address is precisely what is Ms. Daniels’ claim? At its heart she claims that Donald Trump did not sign the nondisclosure agreement, and the legal consequence of that is that the agreement cannot be enforced against her. Those are points “A” and “B” but what is the path between the two? Right out of the gate, I saw all kinds of explanations of the legal significance of Mr. Trump’s failure to sign the agreement. Among other things, some have asserted that Ms. Daniels was relying on the statute of frauds. Other hot takes claim that Ms. Daniels was fraudulently induced to sign on the belief that Donald Trump was a party to the contract.
We can tackle the question of what Ms. Daniels is claiming in the same way one would prepare to defend a lawsuit: look at the complaint. A complaint is a document that sets forth allegations and claims to be litigated. Such a pleading need not be incredibly detailed, nor does it necessarily need to set forth evidence. Most states adhere to what is generally regarded as a “notice” pleading system, meaning that the complaint merely need to give notice of the nature of the claim being asserted. In federal courts, the decisions of Bell Atlantic v. Twombly and Ashcroft v. Iqbal (handed down by the United States Supreme Court in 2007 and 2009, respectively) have introduced the concept of a “plausibility” standard, which may or may not have transformed the federal pleading standard, depending (according to some studies) on the federal circuit in which you find yourself litigating. Nonetheless, the point here is that all of the speculation on the nature of Ms. Daniels’ claim is strange because there is a document that tells us all exactly what she contends and the legal theories she is advancing.
Ms. Daniels’ Complaint, which was made publicly available and readily accessible by her attorney here argues that the parties never formed an agreement in the first place. (See Complaint, ¶ 38). Specifically, she points to the fact that Donald Trump did not sign the agreements, nor did he provide any “valid consideration,” and never assented to the duties, obligations, and conditions purportedly imposed upon him by the agreements. And, she contends, if Mr. Trump is not bound by the agreement, neither is she. This is frequently referred to as “mutuality of obligation,” ordinarily a fairly straightforward concept that is complicated here by the fact that there are more than two parties to this agreement, and Ms. Daniels was paid $130,000 by one of them.
She also argues that the terms of the agreement are unconscionable (¶ 39) and void as against public policy (¶ 40). Usually you can take these two arguments and place them in to the “throwaway” category, but given the unique circumstances here, I’m not so quick to dismiss them, particularly the "public policy" argument.
As Ferris Bueller famously said, “life moves pretty fast.” In between the time I conceived of the idea of blogging about this and finished this post (admittedly, not exactly a bang-bang play – I do have a practice to tend to), Ms. Daniels has amended her complaint. And, even before that, Donald Trump – of all parties (yes, he who did not sign the agreement and per his lawyer’s lawyer, didn’t even know about it) – removed the case to federal court. Possibly due to the Twombly/Iqbal pleading standards, but possibly for other reasons, Ms. Daniels’ first amended complaint (available here) is substantially more detailed regarding the claimed unconscionability and illegality / public policy arguments (separate and apart from the fact that it adds a defamation claim against Mr. Trump’s lawyer, Michael Cohen.
The Amended Complaint adds little additional verbiage to the central claim (which I will call the “mutuality of obligation” claim). Paragraph 41 of the Amended Complaint is very similar to Paragraph 38 of the original complaint. It adds, however, that Mr. Trump’s signature on the agreement was an express condition to creating a valid and binding agreement. It also fleshes out some of the duties and obligations Mr. Trump was to personally assume under the agreement such as providing releases from liability to Ms. Daniels, a covenant not to sue, and representations and warranties, all of which was separate and apart from the monetary consideration of $130,000 paid to her.
Turning to Ms. Daniels’ claim that the agreement is unconscionable, I will note that in her original complaint, she hardly explains her theory of unconscionability at all. Incidentally, unconscionability is a fairly nebulous concept that is usually defined as shocking the conscience of an ordinary person. Normally, courts respect the freedom of the parties to contract and form their own bargains. Consequently, they will give significant latitude to the parties in fashioning what may turn out to be fairly bad or one-sided deals. At the outer border of this freedom to contract is the unconscionability doctrine – it is where the parties have made a deal that just goes too far. As such, claims of unconscionability are not successful very often. Here, Ms. Daniels claims that the penalty provision of the contract - $1 million in liquidated damages per violation of the agreement – is, standing alone, unconscionable, as is the fact that both the restrictions on Ms. Daniels and the penalties for a violation by Ms. Daniels are far more severe than are the restrictions or penalties for any other party to the contract.
The biggest build-out of Ms. Daniels’ original claims is on the subjects of the illegality and public policy reasons for the unenforceability of the contract. These defenses are rarely asserted, but at a minimum, everyone can readily recognize when the object of the contract is illegal, you cannot enforce the contract (nor should you be able to). In Ms. Daniels’ Amended Complaint, she dedicates several paragraphs to outlining how the contract circumvents federal campaign finance laws – essentially amounting to a payment to silence Ms. Daniels in order to, in turn, influence the outcome of the 2016 election. This notion has been bantered about in the media, and I may come back to this in a later blog post. Suffice it to say, Ms .Daniels contends that because the contract would violate these laws, it is unenforceable.
Far more fascinating is Ms. Daniels’ expanded public policy defense. She contends that the agreement with Mr. Trump violates public policy “by suppressing speech on a matter of public concern about a candidate for President of the United States mere weeks before the election.” (Amended Complaint, ¶ 52). That assertion is not nearly as remarkable as the fact that an illustration to Section 557 of the Restatement (First) of Contracts (1932) contemplates a very similar situation. It considers whether a candidate for office can lawfully contract with another who has letters from the candidate advocating a position contrary to a position that the candidate is running on for the suppression of those letters. The Restatement says such a deal is illegal as against public policy (and hence, unenforceable)
For those not familiar, a “Restatement” of the law is a treatise published that attempts to codify certain broad legal principles in an area of law and will typically flesh these principles out with both commentary and illustrations. Courts – state courts in particular – frequently cite to them. Speaking from experience, I can report that the Supreme Courts of both Ohio and Kentucky have, at various times and on various topics, cited to and relied upon Restatements. The Restatements are not controlling (state courts will, on occasion – usually rarely – disagree with a Restatement), but they are generally viewed as persuasive authority.
These are the highlights, and I am leaving out several additional arguments (in particular, arguments concerning whether the nondisclosure agreement’s arbitration clause is enforceable). The point I wanted to make is that discerning the nature of Ms. Daniels’ legal arguments (and, when the time comes for them to be presented, the legal arguments of Mr. Trump and other parties) should not be difficult to identify. This is a lesson for journalists, but it is also a lesson for how to defend any kind of claim. The Poet, Maya Angelou, has been quoted as saying, “when someone shows you who they are, believe them the first time.” Likewise, when a plaintiff tells you what his or her claims are, believe them the first time. Read the complaint, triage the claims, and formulate your defense based on what is being alleged and claimed, not what legal theory you could imagine a particular factual allegations may support.
I hope to write additional installments about this case over time. I want to examine these arguments in more depth, and I also want to debunk some of the characterizations of Ms. Daniels’ legal theories, specifically that she is relying on the statute of frauds or claiming fraud in the inducement. In addition to such characterizations of her theories being demonstrably incorrect, there are good legal reasons why not only is she not relying on such theories, she couldn’t be relying on them. So, please check back periodically.