The WSJ and CNN report today, October 2, 2018, that Pres. Donald J. Trump (aka David Dennison) directed his attorney Michael Cohen to seek a restraining order through an arbitration proceeding to prevent Stormy Daniels (aka Peggy Peterson aka Stephanie Clifford) from airing dirty laundry in a TV interview.
The WSJ reports that the arbitrator issued a restraining order, which, evidently, did not restrain Ms. Daniels.
We have previously posted on March 8, 2018, about the Trump/Daniels arbitration.
Did Owners Collude To Keep Him From Playing Or Did All The Owners Happen To Individually Decide To Keep Him From Playing?
The NYT and other news sources report that arbitrator Stephen B. Burbank denied the NFL's motion for summary judgment in its dispute with Colin Kaepernick. For now, Kaepernick can proceed with his grievance against the NFL. Kaepernick, of course, is now famous as the quarterback who initiated the wave of kneeling during the national anthem to protest police brutality and racial inequality. He became a free agent in March 2017, after which he has faced protracted unemployment. He is represented by famed litigator Mark Geragos.
I have received a confidential television script from a disloyal former staff member of the White House. In episode 571 of the long-running reality show, “Raging Dumpster Fires At 1600 Pennsylvania Avenue,” the courtly, urbane and impeccably mannered DJT and the villainous Omarosa Manigault Newman (OMN) grease up for a wrestling match in the ring. But this soon turns into a cat fight, with DJT and OMN trying to scratch out each other’s eyes. DJT calls OMN “a dog” and “crazed low-life” and OMN calls DJT “unhinged” and a “racist”. OMN smacks DJT with a rolled-up copy of Forbes. And as everyone by now knows, DJT, who is a germaphobe, and has a long history of using canine insults, has an intense dislike of dogs, being the first president in a long time, perhaps the first president ever, not to have a White House First Dog. The match seems remarkably even, given DJT’s little paws, and OMN’s sharp nails. Is this truly a made-for TV reality show, or is this a telenovela, complete with betrayal, infidelity, and violent emotion? Alas, those attributes do not help at all to distinguish between the TV reality show and the telenovela. Is this rotten script believable enough to be accepted even by a tasteless TV show with tabloid standards? To ask the question is to answer it: of course.
Where in the world is this post going? Oh yes, Team DJT has filed with the AAA to enforce a non-disclosure agreement (NDA) in arbitration in New York. And if, as Politico reports, the enforcement proceeding has been launched by the Trump for President Campaign, based on OMN's release of her book Unhinged, what impact, if any, will this have on confidentiality during the time in the White House?
We previously had some fun posting about Team DJT’s efforts to enforce an NDA with Stephanie Gregory Clifford (Stormy Daniels) in the privacy of arbitration, where dirty linen is not to be aired in public. I will not begin to opine where the latest fight between DJT and OMN is destined to end. Badly, is my best guess. What does the NDA say? Which one will apply, an NDA for the Apprentice? For the campaign? For the White House? What remedies does the NDA provide, and will they be found to be enforceable? Did OMN have a security clearance requiring pre-publication review of any writing that might contain classified information? Will OMN be able to obtain the legal firepower necessary to carry on a legal battle? Will the anti-matter DJT, Michael Avenatti, now step forward and represent her? Will she be able to successfully stake out a position as a whistleblower? Is there a written rule or statute that prohibits taping a conversation in the Situation Room? Were OMN’s tapes recorded in Florida (where both parties must consent to taping) or in Washington D.C. (where taping can be done unilaterally)? Does one have a reasonable expectation of privacy if taping can be done unilaterally? Are there considerations of public policy and freedom of speech that militate against using a private NDA to ensure confidentiality in the White House? Have other White Houses routinely required staff members to sign NDAs? Will parallel court proceedings be filed, resulting in a public airing of grievances and naked transparency? And even if the matter can be forced into arbitration, will the cat be out of the bag, so to speak, with so-called confidential information no longer confidential?
I plan to consume many bags of popcorn while I sit back and watch the hideous show.
BONUS: For a serious discussion of OMN's free speech rights in this kerfuffle, see Bradley P. Moss's article published August 14, 2018 in Lawfare, entitled "Why the White House Can't Stop Omarosa Manigault-Newman From Talking."
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.
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.
CNN Legal Analyst Danny Cevallos reported on July 18, 2016 about the strategic maneuvers of Mr. Ailes’ attorneys to move Gretchen Carlson’s sexual harassment suit from the the court to arbitration – and presumably to enforce confidentiality, so that dirty linen need not be washed in public.
Ms. Carlson’s lawsuit was filed in New Jersey State Court on July 6, 2016. Under diversity jurisdiction, the case was removed by Mr. Ailes to federal court in New Jersey. Mr. Ailes’ attorneys are seeking to change venue to New York federal court, and to compel arbitration.
“Overall, the defendants have a good chance of sending this back to arbitration,” concludes Mr. Cevallos.
HAT TIP: Hat tip to my wife, Catherine Campbell, who brought the Ailes/Carlson arbitration story to my attention, and who also suggested the “Roger Dodger” title.
Opinion Addresses Substantive Versus Procedural Arbitrability – And Who Gets To Decide
Kurt Knutsson, aka Kurt the CyberGuy, and his company, Woojivas, Incorporated, filed claims against KTLA, LLC, a television broadcaster, for breach of contract, misappropriating CyberGuy’s name and likeness, unfair business practices, and age discrimination. The company brought a motion to compel arbitration that the trial court denied, leading to an appeal. Knutsson v. KTLA, LLC, B251567 (2/5 Aug. 12, 2014) (Turner, Mosk, Kriegler).
Defendant argued that plaintiffs were bound by a personal services agreement to an arbitration clause in a collective bargaining agreement that contained a tiered grievance procedure. That procedure included three steps: (1) the union or employee were allowed to resolve a grievance by discussion with a supervisor; (2) if the union was dissatisfied with the supervisor’s resolution of the matter, it could formally present a grievance to a manger; (3) the union could (a) file an appeal followed by a discussion process; (b) if that did not resolve the dispute, arbitration could result.
The defendant’s problems were several: first, “defendant has forfeited the right to compel compliance with the collective bargaining agreement’s non-arbitration provisions” in the grievance process by moving to compel arbitration without mentioning steps one and two; second, the arbitration provisions simply did not say that the defendant could compel arbitration – only the union could compel arbitration; and third, the trial court, not the arbitrator, was entitled to resolve the substantive arbitrability issue – a so-called “gateway issue.”
The last issue – whether the court or the arbitrator gets to decide arbitrability – is the most interesting. By labeling the issue as a substantive arbitrability issue, the Court of Appeal telegraphed that this was a gateway issue for the trial judge to decide.
When the issue of “arbitrability” is whether procedural prerequisites to arbitration have been complied with, the issue may be decided by the arbitrator. See, e.g., our March 6, 2014 post on BG PLC v. Republic of Argentina, 573 U.S. __, 134 S. Ct. 1198 (2014).
At first blush, John Wiley v. & Sons, Inc. v. Livingston, 376 U.S. 543, 556-558 (1986) should have supported defendant’s argument that an arbitrator should have decided the arbitrability issue, because “John Wiley held an arbitrator should decide whether the first two steps of a grievance procedure, which were prerequisites to arbitration, had been completed.” However, John Wiley also “held the issue of whether the dispute must be arbitrated is decided by the court.” And here in Knutsson, “as we have explained, defendant cannot compel plaintiffs to arbitrate anything – there is no agreement between them.”
One curious point about the opinion is that the issue of “substantive arbitrability” decided by the Court of Appeal – the “gateway issue” – is seemingly resolved on the ground that there is no arbitration agreement between plaintiff and defendant, and therefore no duty to arbitrate. The trial court’s reasoning, at least as described by the Court of Appeal, is different: “Concluding the grievance procedure was a condition precedent for arbitration and it had not occurred, the trial court denied the motion.”
In Which An In Pro Per Defendant/Appellant Takes On Adam Sandler’s Corporation . . .
HP, a company owned by Adam Sandler, employed McDonald as a nanny for his children. When her employment ended, she entered into a confidential settlement agreement, and as a result, $48K was paid to her, and $32K was paid to her attorneys. After McDonald “purported to terminate the settlement agreement and threatened to sue,” HP invoked an arbitration provision. Things did not go so well for McDonald in arbitration, because she was ordered to cough up the $48K, was permanently enjoined from filing suit against HP and from disclosing confidential information, and was directed to pay $33K in attorneys fees and costs. The award was confirmed, and McDonald appealed in pro per. HP Production, Inc. v. McDonald, B252175 (2/4 Aug. 5, 2014) (Epstein, Willhite, Edmon) (unpublished).
The grounds for vacating a judgment under CCP 1286.2 are narrow. And McDonald’s arguments that the fee award was “exorbitant,” and “obscene”; that HP breached the settlement agreement; that it was unconscionable for her to have to pay more than she could afford; that the disparity in net worth of the parties made consideration for settlement unfair; and that she signed the settlement agreement under economic duress, just didn’t cut it. Nor did her argument that the trial court had no authority to issue an injunction, because the arbitration clause gave broad authority to the arbitrator to issue an injunction, and the trial court could confirm the award.
Sometimes it’s better not to stir the pot.
Stirring the pot. Thomas Fogarty. Sometime between 1890 and 1938. Library of Congress.
Actor Nicolas Cage Ordered to Pay Attorney’s Fees in Real Estate Lawsuit After Losing Attempt to CompelArbitration
On March 20, 2012, we posted about Lindemann v. Hume, et al.,Case Nos. Nos. B226106, B233273 (2nd Dist. Div. 7 filed February 21, 2012) (Perluss, P.J.), a case in which the Court of Appeal affirmed the trial court’s order denying a motion to compel arbitration. This was a real estate sale/water intrusion/nondisclosure case. A motion to compel the Buyer to arbitrate raised “a possibility of conflicting rulings on common issues of law and fact if the nondisclosure causes of action against [the Seller] were ordered to arbitration and the litigation against [the Developer] proceeded in superior court” – the basis for denying the motion to compel arbitration. Actor Nicolas Cage is the beneficiary of the trust acting for the Seller, so we placed the case in our ‘celebrities” sidebar category.
The City News Service reported on August 17, 2012, that Superior Court Judge Rolf M. Treu found in favor of the trust set up for the Buyer, and awarded $165,510 in attorney’s fees – a loss for the Oscar winner.
Rep. Dennis Kucinich Writes of His Accomplishment in Getting Banks to Abandon Mandatory Arbitration of Credit Card Disputes
On August 17, 2012, Rep. Dennis Kucinich authored a short article in the Huffington Post, entitled “Consumers fight Big Banks for a Day in Court.” He objects to banks’ imposition of mandatory arbitration upon consumers. Rep. Kucinich bemoans that banks “erect massive structures of red tape that most American families don’t have the timore or money to fight.”
“My staff followed up with all the major banks,” writes Kucinich, “and, over the course of several months, nine of those banks abandoned the practice of using arbitration to collect their credit card debts.”
Rep. Kucinich’s comments do not mention CompuCredit Corp. v. Greenwood (2011), the recent U.S. Supreme Court case holding consumers who sign credit card agreements with arbitration clauses are bound to arbitrate. Consumer advocates have criticized the case.
How to Reconcile the Federal Arbitration Act With the Bankruptcy Code?
The threshold issue that the Ninth Circuit had to resolve In the Matter of: Jose Eber, Case Nos. 10-56772 and 11-55341 (9th Cir. July 9, 2012) (for publication) was “how to reconcile the FAA with the Bankruptcy Code, and, more specifically, a bankruptcy court’s jurisdiction to determine dischargeability pursuant to sections 523(a)(2), (4) and (6).” Those subsections are the bases for nondischargeability of a debt in bankruptcy: fraud or deception ((a)(2)), fiduciary fraud, embezzlement, or larceny ((a)(4)); and willful and malicious injury to person or property ((a)(6)). The debtor in the bankruptcy, Jose Eber, is the well-known celebrity hairstylist (i.e., a celebrity himself, as well as a stylist for celebrities), and author of the books “Shake Your Head, Darling,” and “Beyond Hair: The Ultimate Makeover Book.” Mr. Eber earns a Wikipedia entry.
The appellants, Ackerman and Kuriloff, had sought to compel arbitration with with Jose Eber, based on an arbitration agreement. The problem, according to the Bankruptcy Court, was that the arbitration, which had not yet commenced, could result in findings to which collateral estoppel applied -- “for all practical purposes” the arbitrator would end up determining the issue of nondischargeability. The district court agreed, and the appeal followed.
The Ninth Circuit noted that disputes involving the Bankruptcy Code and the FAA often “present a conflict of near polar extremes: bankruptcy policy exerts an inexorable pull towards centralization while arbitration policy advocates a decentralized approach towards dispute resolution.” (quoting In re United States Lines, 197 F.3d 631, 640 (2d Cir. 1999).
Polar extremes. 1924. Library of Congress.
Here, there is “no evidence in the text of the Bankruptcy Code or in the legislative history suggesting that Congress intended to create an exception to the FAA in the Bankruptcy Code.” But that is not the sole test of preemption here. “The relevant inquiry then becomes ‘whether there is an inherent conflict between arbitration and the underlying purposes of the Bankruptcy Code.’” Ins. Co. v. Thorpe Insulation Co., 671 F.3d 1011, 1020 (9th cir. 2012). And because dischargeability is especially within the purview of the Bankruptcy Court, here, the Ninth Circuit found that there was no abuse in denying the motion to compel arbitration because it would have conflicted with the underlying purpose of the Bankruptcy Code.
The opinion, authored by District Judge Marbley, invites future examination. Why? Because: “Our holding in no way extends beyond the particular facts of this case or to all cases in which a bankruptcy judge makes this determination prior to the commencement of an arbitration.”
In One Case, Arbitration Presented Possibility Of Inconsistent Rulings, And In The Other Case, Arbitration Of Indemnification Claim Was Beyond The Scope Of The Agreement To Arbitrate
The following scenario reminds me of cases I have litigated – and arbitrated. Buyer discovers water intrusion in home she buys, and sues Developer and later Seller for allegedly concealing the facts. Seller and Developer cross-complain against one another for indemnity. After trial court denies Seller’s motion to compel arbitration against Buyer, Buyer adds business manager associated with Seller, general contractor, and real estate agent as targets. Seller now moves to compel arbitration of its indemnification claims against business manager and general contractor. Trial court denies that motion to compel too. The orders denying the two motions to compel are both appealed. Lindemann v. Hume, et al., B22616 & B233273 (2nd Dist. Div. 7 filed 2/21/12;pub. order 3/20/12) (Perluss, P.J.).
