News/Celebrities: ADR, Donald J. Trump aka David Dennison, and Stephanie Clifford aka Stormy Daniels
Stormy Weather . . .
Above: Video/recording: Comedian Harmonists Sing Quand Il Pleut (Stormy Weather/Ohne Dich). 1933.
News about our latest reality show, Stephanie Clifford a.k.a. Stormy Daniels a.k.a. Peggy Peterson v. Donald J. Trump a.k.a. David Dennison, and Essential Consultants, LLC, LASC Case No. BC696568 (filed March 6, 2018) is now splattered across the information superhighway. The lawsuit seeks declaratory relief that a non-disclosure agreement or "hush agreement" created to prevent adult film actress Stormy Daniels from communicating about her relationship with Donald J. Trump a.k.a. David Dennison, is unenforceable. A copy of the secret non-disclosure agreement is attached as Exhibit 1 to the very public complaint.
Meanwhile — and this is where alternative dispute resolution enters into the picture — President Trump's press secretary Sarah Huckabee Sanders, has announced that President Trump has already won in arbitration, thereby perhaps inadvertently admitting that President Trump, who did not sign the non-disclosure agreement, is the real party in interest seeking to shut up Ms. Daniels.
Seth Abramson, in a series of Twitter tweets, has analyzed the enforceability of the arbitration agreement. The enforceability of the agreement is also discussed by Emily Bazelon, David Plotz, and John Dickerson, in their March 8, 2018 Political Gabfest podcast.
Here is my own somewhat random collection of issues relating to the enforceability of the arbitration agreement:
1. Is the agreement too ambiguous to be enforceable, because the parties are a shell corporation and/or Donald J. Trump (who is identified in a side agreement).
2. Does it matter that DJT did not sign the agreement, though there is a signature line for him?
3. Is the agreement enforceable, because there is an offer, an acceptance, consideration ($130,000), and a meeting of the minds?
4. Was there a meeting of the minds if the agreement, as DJT's press secretary apparently admitted, is for the benefit of DJT, yet he did not sign it?
5. Can DJT enforce the agreement as a third-party beneficiary?
6. Does DJT need to sue in his name to enforce the agreement on his behalf?
7. Did Ms. Daniels violate the non-disclosure agreement when she filed a public document attaching the NDA as Exhibit 1, rather than filing under seal?
8. How can a shell corporation make representations in the NDA on behalf of DJT, if the shell corporation is not his agent or attorney?
9. Did attorney Michael Cohen violate campaign election law by funneling a $130,000 payment to Ms. Daniels to help DJT win the presidential election, without declaring an in-kind campaign contribution?
10. Did attorney Michael Cohen violate rules of professional ethics by settling a legal dispute without a real client, or without the knowledge of the client, whose fingerprints are not on the agreement?
11. Has the NDA been compromised by public statements of the President's attorney and the President's press secretary, such that it cannot be enforced?
12. How do you feel about the use of NDAs to prevent someone from speaking about the sexual conduct of an important public figure? Is it important that the NDA was entered into just before the election, when DJT was not yet a public official, rather than after the election? Does it matter to you whether the person seeking to speak was a victim, or whether the conduct was consensual?
13. Is enforceability of this NDA, concerning the President, against public interest?
14. Is the million dollar liquidated damages provision in the NDA unenforceable as a forfeiture having no reasonable relationship to the actual injury? Has DJT ever been monetarily damaged by publicity?
15. If an award has been issued against Ms. Daniels in arbitration, how will it now be enforced? Does a petition to confirm the award in court lead to a public circus that will vitiate the benefit of such an award?
16. Are the private lives of important public officials fair game?
17. Was the original sin an effort to blackmail, making enforcement of the arbitration remedies with the help of a private arbitration process more acceptable?
Dear readers, please let us know if you spot additional issues worthy of consideration.
BONUS: The original Comedian Harmonists, who sing Stormy Weather in its French version in the recording above, were a German harmony ensemble active between 1928 and 1934. They are the subject of an entertaining 1997 German movie entitled The Harmonists, directed by Joseph Vilsmaier. Our blogger's grandfather, Eric Collin, was the second tenor in the group.
Arbitration/Delegation: SCOTUS To Consider Who Decides Arbitrability Of Federal Arbitration Act Section 1 Exemption
Arbitrator Or Judge?
SCOTUSBlog reports today that the Supreme Court has added an arbitration case to its next term:
"New Prime Inc. v. Oliveira
| Docket No. | Op. Below | Argument | Opinion | Vote | Author | Term |
|---|---|---|---|---|---|---|
| 17-340 | 1st Cir. | TBD | TBD | TBD | TBD | OT 2018 |
Issues: (1) Whether a dispute over applicability of the Federal Arbitration Act's Section 1 exemption is an arbitrability issue that must be resolved in arbitration pursuant to a valid delegation clause; and (2) whether the FAA's Section 1 exemption, which applies on its face only to “contracts of employment,” is inapplicable to independent contractor agreements."
Mediation Confidentiality: An Update On The Work Of The California Law Review Commission
Arbitration/FAA/Class Action/Standard Of Review: Court Of Appeal Rejects Enforcing Class Action Waiver Under Federal Arbitration Act, Because FAA Does Not Apply To Workers Engaged In Transporting Goods
Gentry v. Superior Court: It's Alive, It's Alive!
Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry) held that class action waiver provisions in a contract are unenforceable, and a motion to compel arbitration may be denied, where the so-called "Gentry factors" are satisfied, and it is determined that a class action is a more effective practical means of vindicating rights of affected employees than individual litigation or arbitration. In AT&T Mobility v. Concepcion, 563 U.S. 333 (2011), SCOTUS effectively invalidated Gentry in circumstances where the Federal Arbitration Act preempts state law — typically, circumstances where interstate commerce is involved.
In Muro v. Cornerstone Staffing Solution, Inc., D070206 (4/1 2/23/18) (Dato, Benke, Aaron) (published), interstate commerce was clearly involved. The plaintiff, a trucker, sued his employer Cornerstone, a "full service employee staffing firm providing assistance to a variety of employers" in California and other states, for employment-related violations. Furthermore, the plaintiff had routes in California and across state lines. The trial court, however, determined that the FAA did not apply, that Gentry did apply, and that the class action waiver was unenforceable.
Why? Section 1 of the FAA expressly exempts from its coverage all "'contracts of employment . . . of workers engaged in foreign or interstate commerce.'" Rejecting the employer's argument that the employers' business must be devoted to the transportation industry, the Court of Appeal held that the plaintiff was a worker was engaged in interstate commerce. Because the FAA did not apply, the Court applied state law, i.e., Gentry, to affirm the trial court's order denying a motion to compel arbitration.
COMMENT: Regarding the application of the Gentry factors, an abuse of discretion standard of review applies. As a refresher, the four Gentry factors are: (1) the modest size of potential individual recovery; (2) potential for retaliation against members of the class; (3) the fact absent members of the class may be ill informed of their rights; and (4) other real world obstacles to the vindication of class members' rights through individual arbitration.
While the result in this particular case may seem dramatic, the circumstances are a bit unusual, because it will not be the usual case that, when interstate commerce is involved, the FAA does not apply.
Arbitration/Unconscionability/Severability/Choice Of Law: CCA 1/1 Holds That Arbitration Provision Is Not Unconscionable Under Washington State Law
Washington And California State Law Unconscionability Analysis Are Different.
DeGraff v. Perkins Coie California P.C. et al., A148405 (1/1 2/21/18) (Dondero, Humes, Banke ) (unpublished) applies Washington state law to analyze the enforceability of an arbitration provision in a dispute between an attorney and his former law firm. Reversing the order denying the defendants' motion to compel arbitration, the Court holds that, except for two provisions, the arbitration provision is not unconscionable, and the two unconscionable provisions can be severed.
An interesting aspect of the opinion is that it underscores how unconscionability analysis can differ from state to state. California requires procedural and substantive unconscionability to overturn an arbitration agreement, and those two factors may be considered on a sliding scale. "Under Washington law, an agreement may be invalidated if it is either substantively or procedurally unconscionable."
The Court of Appeal agreed with the trial court that the confidentiality provision providing that the arbitration "shall be strictly confidential" was substantively unconscionable under Washington state law, but also held that it could be severed. Relying on a Washington case, Zuver v. Airtouch Communications, Inc., 153 Wn.2d 293 (2004), the Court of Appeal agreed that under Washington state law, the confidentiality provision only benefited the employer, hampered an employee's ability to prove a pattern of discrimination or take advantage of past arbitrations, and undermined an employee's confidence in the fairness and honesty of the arbitration process. That's Washington state law, and the reasoning is worthy of consideration. However, I could also see a California state court brushing such considerations aside, and instead saying that the provision applied to both parties, that the contract had been signed by a seasoned attorney, that confidentiality could benefit either side (or maybe that compelling business reasons allow for confidentiality) and holding that the confidentiality provision is not unconscionable.
Arbitration: Existence Of Agreement/1281.2/Stay: Incorporation By Reference Works This Time, But It’s Not The End Of The Story
Settlement Agreement Incorporated Arbitration Clause In Licensing Agreement — But Only Claims Arising Out Of Or In Connection With Any Provision In The Licensing Agreement Could Be Arbitrated.
On February 9, 2018, we posted about Cirile v. Petersen-Dean, an unpublished case, in which incorporation by reference was too amorphous and vague to incorporate an arbitration provision in a separate agreement. In Advanced Charging Technologies, Inc. v. Flexible Manufacturing, LLC, G054671 (4/3 2/21/18) (Thompson, O'Leary, Ikola) (unpublished), incorporation by reference did work — sort of.
In Advanced Charging Technologies, a Settlement Agreement entered into one day after a Licensing Agreement, and including an integration clause, incorporated the terms and conditions of the Licensing Agreement. And the Licensing Agreement included an arbitration provision applying to a dispute or claim arising out of or in connection with any provision of the Licensing Agreement. The trial court denied a motion to compel arbitration, believing that the integration clause wiped out the Licensing Agreement, an argument rejected by the Court of Appeal, because the successful incorporation by reference preserved the terms of the Licensing Agreement. The trial court also believed that the arbitration clause, which only applied to the disputes arising out of the Licensing Agreement, was too narrow to cover disputes arising out of the Settlement Agreement, a position that did have some traction in the Court of Appeal.
The upshot is that Court of Appeal reversed and remanded, with directions to grant the motion to compel arbitration, and set up a three-step process. First, the trial court had to decide whether the claims arose out of or in connection with the License Agreement that was incorporated by reference. Second, the trial court had to determine whether the resolution of "any nonarbitrable issues may make the arbitration unnecessary, as set forth in Code of Civil Procedure section 1281.2." And finally, the trial court was directed to order any appropriate stay order.