Adult film star Stormy Daniels filed a civil action against Donald Trump last week. She wants a California court to declare that the nondisclosure agreement between them is not valid because Trump never actually signed it. The action comes in response to a restraining order, sought and obtained in late February, that precludes Daniels from violating the terms of the original agreement.
Stormy Daniels alleges that she had an intimate relationship with Trump between 2006 and 2007, and that years later, during Trump's presidential campaign, Trump and his lawyer Michael Cohen sought to aggressively silence Daniels. Daniels says that she was pressured into signing a nondisclosure agreement and that she was paid $130,000 for her silence.
The litigation between Daniels and Trump has a number of procedural hurdles. What is next for this case, which has caught the public’s attention?
First, the company (“EC”) and attorney Cohen will likely file a request in the California Court to get Daniels’ case out of court and to compel private arbitration. California has a strong public policy in favor of arbitration, so any doubts about whether a dispute can go to arbitration or not will be resolved in favor of pushing it to arbitration.
The company and Cohen only need to prove the existence of the arbitration agreement; Daniels, on the other hand, has the burden of establishing a defense to enforcement of the arbitration agreement. One of Daniels’ defenses to the nondisclosure agreement, which contains the arbitration provisions, is that it wasn’t signed. The company and Cohen may also argue that the key issue is whether Daniels agreed to arbitrate, not whether the entire agreement is enforceable.
Arbitration clauses are generally independent of the larger contract in which they are contained. Frequently, the arbitration clause will be enforced even if one party argues that the overall agreement in unenforceable or invalid. In other words, the issue of its enforceability will be heard by an arbitrator, not in a court of law.
Keeping the case out of court and in arbitration would be a big victory for the company, Cohen and Trump. Arbitration is private, and the arbitration rules in the contract are slanted in favor of the company and Trump. For example, the restraining order was obtained from an arbitrator ex parte, with no notice to Daniels and depriving her even of an opportunity to make arguments concerning her rights or the contract. It sounds unfair, but it’s the very procedure Daniels ostensibly agreed to when she signed the contract.
The company and attorney Cohen may try to argue that Trump did not need to sign the agreement, as his interests and the interests of the company are the same, and the company “signed” the agreement through the signature of attorney Cohen. They may argue that Trump knew nothing of the agreement, but it’s still enforceable because the company signed it.
Finally, even if the contract was never valid, Trump and his team might argue that once Daniels accepted payment with knowledge of the contract, she ratified the contract, and thus she is prevented from denying its validity.
Daniels can argue that the absence of Trump’s signature (under his fake name in the agreement, “David Dennison”) means the original agreement was never really created, or it is unenforceable. She could also argue that the arbitration provision is unfair and unenforceable because it only gives the individual party DD the right to compel arbitration. It does not reference the company. Here, it’s the company and attorney Cohen seeking to compel arbitration, not the individual DD. The restraining order issued by the arbitrator does not say who is seeking the restraining order, and oddity which will have to be cleared up.
The trap for Trump is that Daniels could argue that Trump/DD and the company can’t have it both ways: they are either the same party, and Trump is tied to this agreement and must acknowledge it, or they are different, and only Trump can make the arbitration claim.
Finally, Daniels can argue that the terms of the arbitration provision are too onerous and one-sided to be enforceable. This is an argument that the arbitration clause is unconscionable. It is procedurally unconscionable if the parties had unequal bargaining power; it is substantively unconscionable if the provision yields one-sided results. The terms of this agreement certainly lend themselves to this argument, even if it is typically a difficult argument to make.
Regardless of the outcome, Stormy Daniels and her counsel have employed a clever strategy to get her story into the public eye, even with a nondisclosure agreement hanging over her head: they have told her story through detailed allegations in the complaint, including that Daniels has photos and text messages with (or from) Donald Trump evidencing their relationship. These statements do not expressly violate the nondisclosure agreement, because they are allegations in a complaint. Other plaintiffs in similar situations (think employment law and harassment matters or libel cases) can use this tactic to their great advantage.