Trump-Daniels Affair Exposes Inherent Legal Challenges with Hush Agreements

There are plenty of clues that the so-called “hush agreement” between Donald Trump and porn actress Stormy Daniels (née Stephanie Clifford) was hastily crafted and poorly thought out. Executed just days before the 2016, the non-disparagement agreement has a wealth of careless errors (“disparagement” is misspelled in the document’s title and signatures are missing from both Trump and the notary who witnessed Daniels’ signature) and head-scratching legal points.

This is an odd legal document, starting with the use of fake names to represent the three parties in the agreement. I’ve seen a lot of highly sensitive confidential settlement arrangements, but I’ve never seen one using fake names (other than to protect the confidentiality of minors, of course). And that’s the problem here – how can you expect to enforce an agreement between parties using pseudonyms all the way around? The lawyers here got a little too cute for their own good.

Confidentiality and non-disparagement agreements have an important place in business litigation, but parties must enter into them with eyes wide open because at the end of the day there is no absolute guarantee of confidentiality. The best you can do is build an attractive structure of incentives to ensure that sensitive information remains confidential. The most effective way to accomplish that is to schedule payments over time. That way, if confidentiality is breached, payments are stopped. There’s a balancing act at play because for confidentiality to be preserved, the value tied to staying quiet must be greater than any incentive to breaching the agreement. In this case, Ms. Daniels received a single early payment to stay quiet before the election, while the moral and financial incentive to breach the agreement skyrocketed after Trump’s win. I have never had an issue with a confidentiality settlement agreement being broken – on either side – but I have never had one involving party who later was elected president.

The Trump legal team is assuming the role of the gang that can’t shoot straight, resulting in death by a thousand cuts as this story churns through the national media, including a “60 Minutes” interview.

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