President Donald Trump has been hounded by reporters about the Stormy Daniels affair ever since it came to light. Despite being a prolific force on Twitter, Mr. Trump has largely remained silent about the matter. His personal attorney, Michael Cohen, has taken responsibility for the matter and has claimed to have paid the “hush money” fee out of his own accounts, without repayment from Mr. Trump or his campaign. To date, this has served to keep the President from being deposed or otherwise questioned on the matter.
One of the legal issues concerning the contract with Stormy Daniels concerns the enforceability of the arbitration provision contained within it. Ms. Daniels has sued for declaratory relief, claiming that the agreement is not enforceable because Mr. Trump never signed it; it was only signed by Michael Cohen for the company he established to make the payment, Essential Consultants. The agreement appears to state that only Mr. Trump can invoke the arbitration provision.
In response to a reporter’s question recently, Mr. Trump stated that he was unaware of the payment to Ms. Daniels, and the reporters would have to ask his lawyer (Mr. Cohen) about it. That raises a fact issue as to whether he knew of the hush money agreement, and if so, whether he knowingly refused to sign it to keep his name from being attached to it.
This off the cuff response may in fact open up the President to being deposed in the civil matter. Mr. Trump’s knowledge of the agreement and the payments called for by it are highly germane to its enforceability. In addition, it opens up Mr. Cohen to potential liability for bank fraud and for campaign law violations, if the money is considered an illegal donation to the campaign to help Mr. Trump avoid negative press in the week before the 2016 election.
Clients often don’t appreciate how their statements can impact the legal liability of themselves, their businesses, or others affiliated with them. It is imperative that lawyers counsel their clients on how to best avoid statements creating either legal liability for themselves or their affiliates, or how to avoid statements that can make the client material to what is otherwise seen as a collateral matter. It has been widely reported in the press that Mr. Trump is a difficult client, and that he has a penchant for not following legal advice. If that was the case in this instance, Mr. Trump has certainly not done himself any favors concerning the Stormy Daniels lawsuit.