On March 6, 2018, the adult performer Stormy Daniels (birth name Stephanie Clifford) filed a lawsuit against President Donald Trump.
The lawsuit, which you can read below, came after a month-plus of reports from various press outlets alleging that Daniels and Trump had an affair beginning in July 2006 at a celebrity golf tournament at Lake Tahoe. The reports also alleged that Trump Organization attorney Michael Cohen had, in October 2016, paid Daniels $130,000 in hush money for her to keep quiet.
While Daniels initially denied the affair, her decision to file a lawsuit served as confirmation on her part of the affair. She and her lawyer, Michael Avenatti, even included the text of the “hush agreement” as an exhibit attached to her complaint:
The lawsuit is notable in that Daniels does not request monetary damages. Rather, she requests relief from the confines of the “hush agreement,” and the permission to tell her story publicly.
Since the lawsuit was announced, there has been a rapid-fire slate of media appearances from Daniels and her attorney Avenatti, as well as legal countermeasures by Trump’s representatives (principally Cohen) meant to silence them.
The developments have been a bit much to follow, so here’s a simple breakdown.
What the “hush agreement” actually says
The lawsuit is notable first and foremost because it contains a mostly unredacted nondisclosure agreement, signed by Daniels and by Trump’s representatives (but, importantly, not Trump himself) on October 28, 2016.
The agreement confirms the amount paid to Daniels: $130,000, routed through Michael Cohen’s company Essential Consultants LLC (referred to as “EC LLC” in the lawsuit), which was also named in the January 18 Wall Street Journal article breaking the story of the affair and payoff.
Throughout the document, Daniels is referred to by the pseudonym “Peggy Peterson” (or “PP”) and Trump is referred to as “David Dennison” (or “DD”), to minimize the odds that their true identities could be made public.
A separate side letter agreement, also attached in the lawsuit, specifies that PP is a pseudonym for Daniels. The original side letter also lists the true names of “David Dennison” and “EC, LLC,” but they are redacted in the version included in the lawsuit. That said, it’s obvious those pseudonyms refer to Donald Trump and Essential Consultants.
The 15-page hush agreement requires that Daniels hand over any still images, text messages, “Instagram message, facebook posting [sic],” or “any other type of creation” by Trump, and bars her from releasing those documents or any private information about Trump (included “alleged sexual partners, alleged sexual actions or alleged sexual conduct”).
The remedies listed in the agreement include the payment of $1 million per breach of the agreement (Daniels is also required to hand over money she earns through disclosing confidential information about Trump). Depending on how a “breach” is defined — $1 million per interview she gives to the press? $1 million per fact about Trump stated in each interview? — that could in theory amount to tens of millions of dollars if Daniels talks extensively to the press.
The agreement is also very clear that Trump and Daniels gave up the right to resolve disputes outside of private arbitration. “Any and all claims or controversies … shall be resolved by binding confidential Arbitration to the greatest extent permitted by law,” the agreement reads.
“Each of the Parties understands, acknowledges and agrees that by agreeing to arbitration as provided herein, each of the Parties is giving up any right that he/she/it may have to a trial by judge or jury with regard to the matters which are required to be submitted to mandatory and binding Arbitration pursuant to the terms hereof.”
The agreement is explicit that Trump is entitled to “immediately obtain, either from the Arbitrator and/or from any other court of competent jurisdiction, an ex parte issuance of a restraining order … without advance notice to [Daniels].” Ex parte is a Latin term referring to a legal proceeding where only one party is present.
The big question: does Trump’s failure to sign void the deal?
From Trump and his team’s perspective, this case is very simple: Daniels agreed to handle all matters relating to the case through private arbitration. She has now instead filed a public lawsuit. She’s clearly in the wrong.
That’s the argument Essential Consultants (read: Cohen and Trump’s team) used to get an arbitrator, retired Judge Jacqueline Connor, to issue a temporary restraining order in late February prohibiting Daniels from “disclosing or inducing, promoting, or actively inspiring anyone to disclose Confidential information.” Connor issued this ruling ex parte, and Daniels and her legal team were not present or able to contest it.
They got this ruling in late February, as press leaks made it clear Daniels wanted to get out of the agreement and to tell her side of the story. So the restraining order came before the lawsuit that Daniels and Avenatti filed. In the lawsuit, Avenatti describes the arbitration ruling as “improper and procedurally defective,” and “bogus.”
His argument is, fundamentally, about signatures. While the hush agreement purports to bind both Daniels and Trump, Trump did not sign it, either as himself or as David Dennison. Instead, the agreement was initialed and signed by Essential Consulting. Indeed, portions of the contract that are labeled to be initialed by “DD” are instead initialed by Essential Consulting:
“Mr. Trump … did not sign the agreement, thus rendering it legally null and void and of no consequence,” Avenatti writes in the complaint. He alleges that Trump “purposely did not sign the agreement so he could later, if need be, publicly disavow any knowledge of the Hush Agreement and Ms. Clifford.”
Avenatti’s contention is that Cohen wired Daniels $130,000 (money Cohen claims came not from Trump but from a line of credit on his own house) even though the agreement was null.
“Because there was never a valid agreement and thus, no agreement to arbitrate,” the lawsuit concludes, “any subsequent order obtained by Mr. Cohen and/or Mr. Trump in arbitration is of no consequence or effect.”
The lawsuit further alleges that Cohen’s public statements on the case have also served to void the agreement, or at least suggested that Cohen himself is treating it as void by talking about matters that Essential Consulting agreed to keep confidential. Finally, the suit claims that Daniels’s initial denial of the affair was the result of “intimidation and coercive tactics” by Cohen.
After the suit went public, Avenatti unearthed and released an email proving that Cohen used his Trump Organization email account to arrange the wire transfer to Daniels, which could serve as additional evidence that Cohen is lying when he says Trump had no knowledge of the deal. If Trump did have knowledge of the deal, then presumably he purposely chose not to sign, which would give weight to the signature argument.
Two takes on whether the suit can succeed
Legal commentators have expressed a variety of views as to whether the signatures argument is valid. MSNBC legal analyst Danny Cevallos argues that the weight of the evidence favors arbitration, and thus a Trump victory.
“Arbitration clauses are generally independent of the larger contract in which they are embedded,” Cevallos writes, citing both US Supreme Court and California Supreme Court cases. “Unless there is a specific attack on the arbitration agreement itself, that part must be enforced, even if Daniels, for instance, asserts the invalidity of the overall ‘Hush Agreement’ that contains it.”
And if Trump prevails and keeps the case in arbitration, he’s basically guaranteed to win arbitration rulings stopping Daniels from speaking out.
Daniels could argue that the arbitration clause was mis-invoked because it appears that Essential Consultants and Cohen, but not Trump, got the arbitrator to issue a restraining order. The hush agreement only gives Trump the power to go to arbitration. And Daniels could also argue that the arbitration clause is so biased against her as to be “unconscionable” and thus invalid because of how much power it gives Trump relative to her, but Cevallos notes that is a hard contention to prove in court.
George Washington University professor Jonathan Turley is more optimistic about Daniels’s chances — and warns that the case could have major repercussions for Cohen personally. Turley writes that Daniels “may have the stronger legal argument” because Cohen filed the restraining order for Essential Consultants, not Trump.
Michael Cohen could be screwed
What’s more, Cohen’s story about the case implicates him in legal misconduct. He told the New York Times in February, “Neither the Trump Organization nor the Trump campaign was a party to the transaction with Ms. Clifford, and neither reimbursed me for the payment, either directly or indirectly,” which suggests that he conducted substantial business on Trump’s behalf without Trump’s knowledge.
“If he is speaking truthfully that Trump had no knowledge of the payment, he signed a document on behalf of a client (and ostensibly binding the client) without either consulting with his client or securing his consent. That would be a clear ethical breach,” Turley writes. “If he did not have Trump’s consent, his representations to Daniels would appear false and potentially fraudulent.”
The ethical baggage for Cohen doesn’t end there. He could also face censure or even disbarment for making Daniels sign a false statement denying the affair under the New York Lawyer’s Code of Professional Responsibility, which states, “In the representation of a client, a lawyer shall not … Knowingly make a false statement of law or fact.” If Daniels’s allegation says that Cohen coerced her to release the false statement, that could bring even worse consequences for him.
Cohen also appears to have, by getting this restraining order, engaged in legal practice in California without being a member of the California Bar. That is a misdemeanor punishable by up to a year in jail.
The broader fallout
Cohen has warned that the case could turn out very badly for Daniels. He told the Washington Post that Avenatti’s conduct, in filing the case and discussing it with media, has been “both reckless and imprudent as it opens Ms. Clifford to substantial monetary liability, which I intend to pursue.” If the $1 million per breach figure holds up, that could add up to an incredible amount.
It would total an even greater amount if the segment of CBS’s 60 Minutes that Daniels and Avenatti filmed with Anderson Cooper last week ever airs. In that segment, she reportedly makes new claims about their affair. BuzzFeed’s Chris Geidner reported that Trump’s legal team is considering legal action to block the 60 Minutes segment, but CBS sources have told reporters that they’ve received no threats of legal action yet.
Daniels has formally offered Cohen a deal in which she would return the $130,000 in exchange for the right to speak out and the formal voiding of their hush agreement. It would require Trump’s signature, which was conspicuously lacking on their previous deal.
But even if their legal dispute is ended, further ones could ensue. The campaign finance watchdog group Common Cause has argued that the hush money payment was made in service of Trump’s presidential campaign because it bought silence on a controversy that could have hurt his prospects. If that’s so, then the payment could be an illegal undisclosed campaign contribution. If the money really is Cohen’s, that would also be an illegally large gift, in addition to the illegality of it being kept secret.
Of course, no one really believes the money is Cohen’s. The more interesting question is whether it came from Trump’s existing campaign money. Hiding a major campaign expense could also get the 2016 Trump campaign and its officials in legal trouble.
And any lawsuit, particularly Daniels’s, carries another danger for Trump: the discovery process. As part of preparing his case, Avenatti and the legal team representing Daniels will have the right to depose Trump and demand documents pertinent to the case. Famously, President Bill Clinton’s deposition in the Paula Jones lawsuit led to the perjury and obstruction of justice charges under which the House of Representatives impeached him.
“A lawsuit opens the door, and judges almost always allow for a plaintiff to have a fishing expedition,” Robert Bennett, who represented Clinton in that case, told the New York Times. He added that “Have you paid other people money?” is one such question they could ask and pursue answers to through document dives and testimony by Trump.
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