Will Nondisclosure Agreement Keep Stormy Daniels Quiet? How They Work

images-1After having an affair with President Trump, then accepting $130,000 and signing a silencing agreement just before the election, the lawsuit the porn star filed last week went viral.

But since she chose to sign the agreement, how can she talk about the affair now? And what does this scandal have to do with my field of personal injury?

You know by now that the case involves a shadowy nondisclosure agreement between the comically named David Dennison and Peggy Peterson.

A clause in the agreement required the parties to resolve disputes through confidential arbitration, a provision common in whistle-blower contracts, and provides for enormous damages of $1 million if “Peggy” speaks out.

But Trump never signed the contract, so there is a legal question whether it is valid. And there is the moral issue of whether the most powerful man in the world can stifle anyone, especially a woman in this era of “me-too.”

The administration just indicated that it has already won a temporary restraining order and may try to to exercise prior restraint on the freedom of the press and prevent her interview with 60 Minutes from being broadcast.

Her lawsuit has lavished attention on this once obscure legal detail.

Corporations use nondisclosure provisions to silence plaintiffs 

These agreements have been used for many years in personal injury settlements. Corporations and high-profile defendants often dangle a substantial recovery in front of injured victims, then try to prohibit them from saying anything about the case.

It is only natural that defendants do not want their images tarnished or others alerted. As a result, terms can be draconian and even require the plaintiff to repay the entire amount of the agreement, attorney’s fees and costs if the agreement is breached.

Companies often try to use the nondisclosure clause to silence whistleblowers from publicizing damaging claims. The agreement also hides crucial information from other prospective victims. This can have a chilling effect on notifying victims about the problem and, ultimately, on making needed changes to corporate conduct to prevent future injuries.

For example, that’s what happened when General Motors failed to recall its defective ignition switch. Only once information about the problem hit the news did people start making the connection to their own crashes. The public disclosure prompted the opening of investigations about previously unexplained accidents.

And all too often plaintiffs have no idea what they’ve signed until they attempt to go public and realize they made a bad deal. Nonetheless nondisclosure agreements are enforceable unless voidable by a legal issue, as potentially here.

Further, attorneys need to have access to all relevant settlements so they can properly appraise case values and should not be prevented from this information. Courts are supposed to be open to the public and this secrecy intentionally covers up good settlements.

So what should an injured person do if he or she is required to sign a nondisclosure agreement?

  1. Carefully review the agreement with your attorney.
  2. Decide how important speaking out is to you. You must make the choice between dragging out litigation and waiting for payment or going before a jury and testifying about corporate negligence.
  3. Make sure the terms are as narrow as possible. Some attempt to forbid any mention whatsoever about the case. Others restrict disclosure of the settlement amount, names of the parties, places, dates, and other details that would alert the public, investors, or lawyers that the lawsuit was ever filed. These terms can be negotiated.
  4. Specify how much money is being paid as consideration for the nondisclosure to avoid taxation problems.

You can be sure corporate executives are emailing memos to their legal teams right now to review these agreements and make sure that they properly drafted and signed.

This sensational story is just the beginning. With so much at stake, I anticipate a long fought battle through the appellate courts. Some in the media are predicting this could topple the president.

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