Michael Avenatti, lawyer to Stormy Daniels, filed 27 pages in U.S. district court on Sunday that may just take the president of the United States down. Or, at least, get him to sit down for a deposition.
Daniels, of course, is the adult film star—legal name Stephanie Clifford—who alleges that she had an affair with President Trump beginning in 2006. She’s been fighting the hush agreement that Trump’s attorney, Michael Cohen, paid her $130,000 to sign just before the election since early this year.
Daniels asks for a jury trial and for expedited discovery in the filing against Trump, Cohen and the “firm” Cohen created to pay Daniels off, Essential Consultants LLC. Specifically, Team Daniels is seeking:
(1) a deposition of Mr. Trump of no greater than two hours, (2) a deposition of Mr. Cohen of no greater than two hours, and (3) no more than ten (10) targeted requests for production of documents directed to Mr. Trump and Mr. Cohen on various topics relating to the Settlement Agreement.
Avenatti’s focused on two particularly strong threshold arguments that would either negate the contract in its entirety or vitiate the arbitration clause.
Argument #1: No signature, no contract.
Trump never agreed to the deal, which would mean the contract was never actually formed. Trump’s lack of signature on the contract and his own statements, as well as those of his representatives in the White House and those of Cohen support that very argument.
In Sunday’s memorandum of points accompanying his motion for a jury trial and limited discovery, Avenatti effectively used Trump’s and his surrogates’ own words against them.
Exhibit C as part of the motion are statements the president issued on Thursday denying that he had any knowledge of the agreement. As I pointed out then, and as Avenatti hammers home in his filing, how could Trump have agreed to the essential terms of the contract foreswearing his right to contact or sue Daniels if he hadn’t been aware of its existence?
You could argue that the contract was nonetheless valid if we understand Michael Cohen’s Essential Consultants LLC to be Trump’s representative. Trump did lay the groundwork for that, after all, suggesting Cohen had the power to take care of things for him without troubling Trump over every little thing for ages.
Problem is, Cohen didn’t make his/Essential Consultants’ role in representing Trump explicit in the contract itself.
Georgetown Law professor David Super told me that only Trump or an explicitly defined representative can sign off on such essential promises. If Trump’s signature is absent, it’s clear he didn’t sign off. And what about a representative? Trump’s attorney, Michael Cohen, set up a company called Essential Consultants LLC to agree to the deal with Clifford. But according to Super, an expert in contract law, there isn’t anything in the agreement to indicate Essential Consultants is authorized to agree to essential promises on Trump’s behalf.
Nonetheless, Trump’s crew will try to make a third-party beneficiary argument.
Cohen’s attorney David Schwartz recently took it a step further, and argued to CNN’s Anderson Cooper that Trump is not a “party” at all, but rather a “third party beneficiary.”
A contract, made expressly for the benefit of a non-party, may be enforced by that non-party, even if he did not sign the agreement. In that case the non-party is a “third-party beneficiary.”
So in this situation, a “donee beneficiary” is a third-party beneficiary (Trump) to whom a party to the original agreement (Cohen) intends to make a gift of the other party’s (Daniels’) performance (not speaking about the alleged tryst) under the original contract.
Third-party beneficiaries are a common feature of contract law. Indeed, most of us are either third-party beneficiaries under some contract, or we have contracted to enrich donee beneficiaries. Indeed, with just a few changes to the original agreement — like deleting the Trump signature line, which suggests he was a party, not a beneficiary — this “beneficiary” argument might have been airtight.
Is the current Daniels/EC/Trump agreement, as worded, crystal clear as to whether Trump is a party or a third-party beneficiary?
In a word: No.
The problem here is that Trump’s declared he had no knowledge of the agreement at all: If he’d managed to suggest Cohen/Essential Consultants had his blessing to represent him and he was aware in some way of the benefit intended, they could have lodged a more credible third-party beneficiary claim.
Argument #2, my personal favorite? The arbitration clause was an end-run around campaign finance laws; it's thus inherently illegal.
If the arbitration clause itself was formed for an illegal purpose, it might be considered invalid.
“Ordinarily, [moving to set aside an arbitration agreement on the ground that it is simply illegal is] a tough hurdle to overcome,” [Loyola Law School professor and arbitration expert Adam] Zimmerman told me. “But here, the parties distinguish [recent] case law by arguing the arbitration agreement itself violates federal law, not just the entire contract.”
As Zimmerman also notes, Avenatti cites “well-established contract law that generally find political contracts to suppress information for money as void against public policy.”
Avenatti has proven an able agitator in both the public and legal arenas. Let’s see what Trump does next.