It is widely reported that Michael Cohen, who allegedly represents himself in connection with the Non-Disclosure Agreement enter into by Stormy Daniels in exchange for $130,000 paid by Cohen personally (Cohen says), is claiming that he is entitled to damages from Stormy Daniels of $20 million for her multiple violations of the agreement.
Given the “looseness” of the factual setting in this situation, we have to make some assumptions in order to say anything rational about it. So, let’s go along, hypothetically, with Cohen’s claim that he paid the hush money from his own pocket with no knowledge of, or expectation of reimbursement by, Trump. Let’s also go along for now with the assertion that Ms. Daniels violated the agreement by publicly declaring an affair with Trump.
Now, let’s assume that either through arbitration enforceable by a court order, or by a direct lawsuit, Cohen gets a verdict that Ms. Daniels violated the “hush agreement.”
Who was damaged by the violation of the NDA? Cohen? He was not the real party in interest. The NDA was designed to protect Donald Trump, not Michael Cohen. Whatever Ms. Daniels may have said about her claimed affair with Trump is about Trump and, if there is an argument to be made, the argument is that Trump sustained the damages, not Cohen.
But, Cohen may argue, the $1 million was “liquidated damages” under the NDA and thus no proof of damages is required. Maybe so, but the law generally does not permit the use of fixed damage amounts in contracts if the damage amounts are considered a “penalty” rather than a substitute for having to go to the expense of proving actual damages in court. If Cohen is claiming he is the real party in interest in the NDA with Daniels and thus is entitled to damages, Most courts would likely invalidate the liquidated damages clause as a prohibited penalty because its provision has no relation to the actual damages Michael Cohen would have sustained from Daniel’s breach.
If, on the other hand, Trump is the real party in interest, the damages would belong to Trump who is not a party to the litigation claiming the NDA was violated. I cannot imagine, even in the Trumpian Universe, that a court is going to award damages to a non-party based on an agreement the non-party did not sign and about which the non-party claims to have had no knowledge.
In the end, the courts may decide. One interesting potential maneuver in the litigation would be a motion by Daniels to add Trump as a party. If that were successful, Trump would be subject to having his deposition taken under oath about the affair, the entering of the NDA and much else. Wouldn’t that be interesting?