"The central doctrine of Christianity, then, is not that God is a bastard. It is, in the words of the late Dominican theologian Herbert McCabe, that if you don’t love you’re dead, and if you do, they’ll kill you."--Terry Eagleton

"It is impossible for me to say in my book one word about all that music has meant in my life. How then can I hope to be understood?--Ludwig Wittgenstein

“The opposite of poverty is not wealth; the opposite of poverty is justice."--Bryan Stevenson

Thursday, March 08, 2018

The More We Practice to Deceive....

I worked on a lawsuit once where we ran the plaintiff through a series of procedural hoops trying to ferret out who was really suing our client.  It was a contract dispute, and part of the problem was the plaintiff had sued individually, but the evidence in discovery made clear he was representing a large number of people, family investors in the business meant to be created by the contract.

We had to find out who was really suing our client, which is to say, who was actually a party to this contract.  Non-parties to a contract have no standing to enforce it, usually.  Which brings us to this fascinating Slate article, which examines the legal issues at play in the law suit against the confidentiality agreement entered into by Stormy Daniels and...well, who?

The buzz right now is that, if Trump's signature is not on the agreement, there is no contract.  As the Slate analysis points out, it's not that simple.*  To put it almost too simply, if Ms. Daniels cashed the check pursuant to the written agreement, that pretty much creates a contract that the other party can enforce.  But the interesting question is:  who is the other party?

Sure enough, Trump’s seismograph-like signature does not appear on the agreement, either as himself or by his latest alleged nom de plume, “David Dennison.” But if Clifford deposited the check, the court might view that act as a unilateral ratification of her end of the agreement. If a court interprets the parties’ conduct as evincing the existence of a contract, it wouldn’t then matter whether either party signed.

That's the fact Daniels' lawsuit rests on, that Trump didn't sign this agreement, period.  If he didn't, who is the party to this agreement?  The argument may be one of agency, that Cohen signed as agent for Trump or "David Dennison."  According to the Complaint, Cohen did sign, but on behalf of an entity known as "EC," an entity allegedly created for the purpose of laundering the money paid by Trump to Daniels.  Despite Trump not signing the agreement, Cohen wired the money to Daniels, per Daniels' lawsuit.  But still, to my mind, there's a question:  if Cohen wired the money, and if Cohen can't show the money came from Trump (news reports are that Cohen was never reimbursed by Trump), then the parties to the contract are Daniels and Michael Cohen as the agent for EC (the Daniels complaint makes essentially this argument, declaring that Trump didn't pay the money (and he didn't) and so received no consideration.  Without consideration, there is no contract.  This may, indeed, be where the contract dissolves.**).  And, in fact, EC is the entity seeking arbitration pursuant to the terms of the agreement.  But Cohen has a problem, which is pointed out in the Daniels' Complaint:  on February 13 of this year, Cohen issued a public statement affirming the existence of the agreement, pointing out (correctly) that Trump wasn't a party to the agreement, and that the money didn't come from Trump.  If Trump is not a signatory to the agreement, and is not made a party by payment to Daniels under the terms of the agreement, then the payment can't be used to enforce the agreement on Trump's behalf.

Except (and here's where we go deeper into the hall of mirrors), if Trump wasn't a party to the agreement, to whom did "PP" deliver the "property" identified in the agreement that "DD" was effectively buying in order to cover up any evidence of the relationship?  The agreement said "PP" (Daniels) would deliver the "property" (a defined term in the agreement, hence the quotation marks) to "DD" (Trump) as part of the agreement and grounds for receiving the money.  If she delivered but Trump didn't receive, did the "property" go where socks go in the dryer?

Inquiring minds want to know.

To make it even messier: the remedies allowed in the agreement in case of breach "shall render PP liable to DD for any and all damages incurred as a result thereof."  Further, if an arbitrator determines there has been a breach of the agreement by PP, payment under the terms of the agreement is to be made to DD, and further to pay to DD the amount of $1 million in "liquidated damages."  But the only entity seeking arbitration of this agreement is EC, which, by the terms of the agreement, is not entitled to any damages at all.  The arbitration TRO (the "secret injunction," actually just an ex parte action allowed by the courts because it requires both parties come to court within a short time, or the restraining order expires on its own terms) is really basically toothless, since the court is not going to enjoin "PP" from seeking a declaratory judgment on the validity of the agreement.

There are grounds to indicate there was a contract, but that the contract was between "PP" and "EC."  At most, EC could demand the $130, 000.00 on a breach of contract action (the arbitration it is pursuing could recover that).   Unless Trump becomes a party to that arbitration action (he isn't, so far), the $1 million in damages clause doesn't come into play because EC is neither referenced in that clause, nor in any way damaged by PP beyond the reach of the payment made by EC under the contract.  The agreement, after all, is meant to protect the reputation of "DD" from allegations made by "PP."  Which puts Trump in a very particular pickle:

Trump wants this to go away.  There's a reason he didn't sign it, and a reason only EC is seeking arbitration of the agreement now.  Trump could seek to enforce the agreement on the grounds there was consideration and acceptance by Daniels, especially if she turned over the "property" to him, even if it went through Cohen as Trump's agent.  However, the consideration came from EC, not Trump, so enforcing the agreement on that ground is tenuous at best. (I should explain that consideration is usually held against the person receiving it, not the person giving it, when the question is:  was a contract created?)  Besides, Daniels gave Trump consideration (the "property"), which would make the agreement binding as to Trump, but Daniels wants out of the agreement, so that would not be binding against her.  And if he wants to enforce the agreement Trump has to admit he had an affair with Daniels, or at least face questions about why he entered into this agreement, and he doesn't want to do that.  And to do that, he has to admit the money from EC came from him, which he also doesn't want to do, else why go through the ruse of setting up a third party merely for payment?  Trump went to a lot of trouble not to be a party to this contract, but unless he is, the contract is essentially unenforceable, since EC's reputation was not threatened by what PP has to say, and recovering the money from Daniels might well lead to a suit to recover the "property" (photos, text messages, maybe even videos?) from Trump.  The clear intent of the agreement is that Trump will suffer damages if Daniels doesn't hold up her end and keep quiet, and Trump secures her silence with the damage clauses of the agreement.  But those damages are recoverable by Trump and not any other party to the Agreement.   If Trump doesn't enforce the agreement, Daniels would be free to distribute whatever copies of the photos, text messages, etc., she may have, because there would be no agreement blocking her from doing so, it having been dissolved in arbitration because EC got its money back.   If EC gets its money back in arbitration, Daniels can credibly argue she is entitled to control, if not possession, of the "property" transferred to Trump, and if she has her own copies, Trump can't stop her from releasing them.

And wouldn't that get messy?

*My analysis intentionally skips over the Statute of Frauds issues, which the Slate article mentions.  I think that analysis valid on its face, and generally assume the validity of the contract anyway, contrary to the arguments for the declaratory judgment action filed by Ms. Daniels.

**At least with regards to Trump.  EC can credibly argue it is a party to the agreement, and it paid money (i.e., "consideration") to Daniels, which she accepted, creating a contract that can be enforced in arbitration.  But, as I argue, EC's damages are limited to only what it paid under the contract.  I don't think EC is entitled to any other remedy specified in the contract, as those remedies are specific to Trump, and if he's not a party because he gave no consideration, he can't enforce those terms in his favor.


Blogger The Thought Criminal said...

Is there any way that Cohen could end up disbarred for this? I know it's NY and the level of corruption there is legendary but you'd think they'd be able to disbar him for his conduct in something.

I'm going to change my suggestion for replacing Hail to the Chief, Dance of the Cuckoos is more appropriate now.

2:59 PM  
Blogger Rmj said...

I know there's some allegation he's in violation of NY Rules in his conduct here, but I'm not sure how well it sticks. The point of the claim is to tie Trump to this agreement, and I think Trump's problem is he's not tied to this agreement at all, quite intentionally. But the agreement is drawn so that only Trump can enforce it's most punitive provisions. It's actually better he not be tied to it, than to argue Cohen violated professional ethics rules if he didn't tell Trump what was going on.

4:09 PM  

Post a Comment

Subscribe to Post Comments [Atom]

<< Home