Is the Stormy Daniels (alleged) hush agreement legally invalid?

I’m not going to teach the Stormy Daniels / “David Dennison” contract in my contracts class. Time is short. But there is some good stuff for law students to ponder—even an integration clause!

In the end, Daniels’ case is pretty weak.* In seeking a declaratory judgment that the “hush agreement” is invalid, she makes three, or possibly four, arguments.

1. No contract was formed because “Mr. Trump [the putative real identity of David Dennison] never signed the agreements. Nor did Mr. Trump provide any valid consideration. He thus never assented to the duties, obligations, and conditions the agreement purportedly imposed upon him” (para. 38).

2. The agreements “are invalid, unenforceable, and/or void under the doctrine of unconscionability” (para. 39).

3. The agreements are invalid because “they are illegal and/or violate public policy” (para. 40).

4. Elsewhere, in the factual recitation, she argues that because Trump (or actually his lawyer Cohen) breached the agreement by disclosing his payment of $130,000 to Daniels, Daniels is no longer obligated to keep her side of the bargain.

On #1, there is no legal requirement that Trump sign the agreement, as far as I know. He can simply consent to it through his lawyer. And even if there were, there’s no reason why the contract wouldn’t be valid as a deal between Daniels and Essential Consultants, the LLC apparently created for this purpose, with Trump as a third-party beneficiary. In other words, Essential Consultants pays Daniels to keep mum, and she agrees to keep mum. The $130,000 payment, whether from Trump himself or Cohen or EC, is valid consideration. Contract? Sure.

On #2, Daniels does not allege facts that make out a claim of unconscionability. She was represented by a lawyer in the negotiations, and she seemed, if anyone, to be in the superior bargaining position. While she vaguely asserts that Trump and Cohen “aggressively sought to silence” her, she does not describe the aggression. If there was something amounting to unconscionability—significant threats, say—she would presumably have mentioned them. Moreover, the $130,000 payment would not likely be regarded by a court as unconscionably low.

On #3, public policy actually favors settlements. There has been some argument lately about whether non-disclosure agreements may violate public policy by hiding bad behavior, but the law, as far as I know, says otherwise.

On #4, Daniels would normally be entitled to damages if Trump/Cohen breached the agreement in this way. But, while I can’t say I’ve read every word of the agreement, virtually all the non-disclosure obligations are (not surprisingly) on Daniels’ part. Moreover, if, as Daniels argues, Cohen violated the non-disclosure provisions, it would seem that Trump (not Daniels) is the injured party, and that Trump would have a remedy against his attorney, rather than Daniels against Trump. Incidentally, Cohen is not listed as a defendant; and it does seem that Daniels alleges that Cohen’s disclosure was at the behest of Trump, suggesting that the breach was Trump’s rather than Cohen’s. Maybe, but the weakness of the contractual language will be a problem for Daniels; she would have difficulty showing that the disclosure was a material breach given that her major aim in the contract was apparently the monetary payment, which apparently took place; and it’s also not clear that she can prove she was injured by the disclosure.

[Additional thought: however, it is my impression that a court might refuse to enforce a non-disclosure agreement if the protected party did not take reasonable efforts to maintain the confidentiality of the information. The question then becomes why Cohen revealed the information he revealed, and whether Trump really ordered him to. If Cohen did so on his own, then that won’t invalidated the agreement though it may diminish the harm from further disclosures, depending on what they are.]

Of further interest, the contract includes a $1 million liquidated damages clause that benefits Trump alone. Law students: is this clause enforceable or illegal as a penalty? I’m inclined to think the latter because the clause stipulates the same penalty for any violation, no matter how trivial. It is also large relative to the payment to Daniels.

*Under common law principles. Maybe there are idiosyncrasies of California law, especially in relation to the public policy claim, that I don’t know about.