Nondisclosure Agreements and the Executive Branch

Written by Edward Day

Image by Lori Shaull, CC-BY 2.0 License.

Under normal circumstances, “Porn Star Sues Wealthy Billionaire” seems like a headline made for the tabloids, if worthy of being a headline at all. But as many Americans now know, the legal battle between Stephanie Clifford (aka “Stormy Daniels”) and President Donald Trump has become one of national importance. The allegations are scandalous, and likely to receive press out of public fascination more than its probative value. But for the study of law, the case recently filed in the California Superior Court is a rare opportunity to discuss nondisclosure agreements and the scope of privacy entitled to the President of the United States.

A nondisclosure agreement (NDA) is a contract between private parties to keep specified information confidential. NDAs are commonly used in the business setting to protect trade secrets or other proprietary information. They can also be used in conjunction with a settlement to “hush” one party from disseminating potentially embarrassing or damaging information. The NDA that Ms. Clifford signed falls into this second category.

Ms. Clifford argues that the NDA is invalid because the other party, listed only as “DD,” did not sign the agreement. DD is widely understood to be President Trump. The NDA states in part that “any unauthorized use, dissemination or disclosure of Confidential Information” would cause various injuries, both personally and professionally, to President Trump. Ms. Clifford claims that this confidential information includes an alleged affair she had with President Trump. Key to any NDA are the remedies provisions. If Ms. Clifford violates the NDA, she is liable for $1,000,000 in liquidated damages for each instance. This liability is a driving force behind her legal challenge to invalidate the entire agreement, as President Trump and his attorney claim Clifford is liable for $20,000,000.

To understand why the NDA is so important to President Trump, it is worth considering what his legal recourse would be if a court invalidated the agreement. Without an NDA allowing parties to sue under contract law, President Trump would have to sue in tort. President Trump might try to claim that some information was a “public disclosure of private fact,” and seek damages from Ms. Clifford, or the first publisher to break the story. A public disclosure of private fact is an offensive intrusion into one’s privacy by revealing to the public truthful information that a reasonable person would want to keep secret, and is not a matter of legitimate public concern. While Ms. Clifford has the right to tell the world about her own experience of having an affair, there are presumably other intimate aspects of President Trump she would have learned. Many secrets can be revealed in a private setting, and the public by and large would get along just fine without knowing them.

Unfortunately for President Trump, the California Supreme Court held in the 1998 case Shulman v. Group W Productions, Incthat information’s “newsworthiness” can sometimes justify an otherwise discouraged or unlawful disclosure. As long as there is a logical “nexus” between the disclosed information and a larger matter of public interest, the disclosure is okay. President Trump was already an international television personality by the time of the alleged affair in 2006. A court in 2006 could have easily found a logical nexus between his behavior during the affair and his public persona. Now, as President of the United States, nearly all of his current and past actions can be logically tied to his ability to perform his duties, a matter of utmost public concern. If this tort were litigated in the same California court as the NDA is today, President Trump would likely lose. But with the NDA, he could walk away with $1,000,000 per breach. This stiff financial penalty does much more to silence Ms. Clifford than the threat of a tort suit she would likely win.

While an NDA might be good for President Trump in this circumstance, it enables him to contract around the newsworthiness interests that the Shulman court sought to protect. There are general benefits to the wide dissemination of information regarding matters of public concern. Access to more information allows the public to better understand issues of importance. It remains to be seen whether the “Stormy Daniels Scandal” will be a defining moment of the Trump presidency, and it is not immediately clear if it even relates to President Trump’s ability to fulfill the duties of his office. But if Ms. Clifford had chosen to honor the NDA, the public would have never had the opportunity to evaluate her story and determine its significance.

President Trump requires that White House staff sign NDAs as a condition of their employment, a practice he chose to continue from his time running the Trump Organization. The NDAs are largely symbolic because there are no monetary damages provisions. Even though there are no contractual penalties if a staffer chooses to speak, the message is clear. President Trump expects an extra level of privacy beyond what has been seen with past administrations. With the President contracting for privacy with so many of his associates, one is left to wonder what else the public does not know about.