Legal Lessons from the Stormy Daniels NDA

The saga of the Stormy Daniels nondisclosure agreement (“NDA”) provided a front-row lesson in how not to draft and enforce a confidentiality contract. As a California lawyer who often works with NDAs, I watched this drama unfold with equal parts horror and fascination. To help you avoid these same pitfalls, I’ve developed the Strategic NDA Generator below—an interactive tool that guides you through creating legally sound confidentiality agreements by incorporating the hard lessons from this high-profile case. The generator addresses everything from proper signature requirements and pseudonym handling to reasonable damages provisions and essential legal carveouts.

In this post, I’ll break down what went wrong with the Stormy Daniels NDA – from whether an NDA can bind someone who never signed it, to the perils of pseudonyms, arbitration battles, “hush money” as consideration, and new laws that sprang up in the aftermath. (Spoiler: Even a $130,000 NDA can crumble when it collides with politics, public policy, and poor drafting.) I’ll draw on the Clifford v. Trump case (Stormy’s lawsuit against Donald Trump to void the NDA) and California law to distill key takeaways for anyone drafting or signing NDAs today. We’ll explore:

• Whether an NDA can bind or benefit a non-signatory (looking at Trump’s missing signature)
• The use of pseudonyms and agency principles in contract formation (“David Dennison” and “Peggy Peterson,” anyone?)
• Arbitration vs. litigation in NDAs and how public policy can override private secrecy
• Whether “hush money” payments count as valid legal consideration
• Confidentiality carveouts – when you can legally speak despite an NDA
• Severability clauses and saving a bad NDA from total invalidation
• PR and enforcement risks (a.k.a. the Streisand Effect on steroids, as Michael Cohen learned)
• Post-Stormy legislative responses that impact NDA drafting (especially California’s #MeToo-inspired laws)

I’ll draw on the Clifford v. Trump case (Stormy’s lawsuit against Donald Trump to void the NDA) and California law to distill key takeaways for anyone drafting or signing NDAs today. We’ll explore:

• Whether an NDA can bind or benefit a non-signatory (looking at Trump’s missing signature)
• The use of pseudonyms and agency principles in contract formation (“David Dennison” and “Peggy Peterson,” anyone?)
• Arbitration vs. litigation in NDAs and how public policy can override private secrecy
• Whether “hush money” payments count as valid legal consideration
• Confidentiality carveouts – when you can legally speak despite an NDA
• Severability clauses and saving a bad NDA from total invalidation
• PR and enforcement risks (a.k.a. the Streisand Effect on steroids, as Michael Cohen learned)
• Post-Stormy legislative responses that impact NDA drafting (especially California’s #MeToo-inspired laws)

By the end, you’ll see how a contract intended to quietly resolve a dispute instead became a public spectacle – and how proper drafting and strategy can prevent your NDA from becoming a “dumpster fire.” Let’s dive in.

Can an NDA Bind or Benefit a Non-Signatory?

One of the first oddities in the Stormy Daniels NDA was that Donald Trump never signed it. The agreement was executed by Stormy (under the pseudonym “Peggy Peterson”) and by Michael Cohen on behalf of a company called Essential Consultants, LLC – but Trump (a.k.a. “David Dennison”) left his signature line blank. Stormy’s lawsuit seized on this, arguing that because Trump didn’t sign, he never consented to the NDA and thus couldn’t enforce it. Intuitively, it feels wrong that someone who didn’t sign a contract could benefit from it. But contract law (especially California law) isn’t quite so simple.

Agency and Actual Authority: Trump’s lawyer, Michael Cohen, did sign the NDA (via Essential Consultants, LLC) and negotiated its terms. Under California agency principles, an agent (like an attorney) can bind the principal (the client) if acting with authority. Cohen was ostensibly acting on Trump’s behalf in this deal – he created a whole LLC to pay Stormy and shield Trump. If Cohen had Trump’s authorization (express or implied) to make the deal, Trump could be considered a party even without his literal signature. In fact, California law recognizes that an agent’s knowledge and actions are imputed to the principal. Even if Trump claimed he didn’t know the details (as he later did publicly), Cohen’s knowledge would be treated as Trump’s knowledge in the eyes of the law. And if Trump accepted the benefits (Stormy’s silence and surrender of materials), that could count as ratification of the contract, effectively adopting it as his own after the fact.

Third-Party Beneficiary: Additionally, the NDA was written in a way that strongly indicated it was for Trump’s benefit – it said it was between Essential Consultants, LLC “and/or” David Dennison (DD) on one side, and Stormy (PP) on the other. That “and/or” was confusing drafting (more on that later), but the intent was clearly to include Trump (DD) as a beneficiary. In California, even if someone isn’t a named signatory, they can enforce a contract if they are an intended third-party beneficiary. Here, the whole purpose of the NDA was to protect Trump; Stormy’s own lawsuit acknowledged “DD” was a pseudonym for Trump and that the deal was to benefit him. Courts look at whether the contracting parties intended to benefit the third party – and it was pretty obvious they intended to benefit “David Dennison” (Trump). Thus, Trump would likely have the right to enforce the NDA as a third-party beneficiary even without signing, as long as Cohen/Essential Consultants and Stormy validly formed the contract.

What Went Wrong: From a drafting perspective, leaving Trump’s signature line blank was, in a word, dumb. It gave Stormy an opening to argue no mutual assent by Trump. She alleged Trump purposely didn’t sign so he could later disavow the deal if needed. That may have been true – by not signing, Trump maintained plausible deniability. But legally, if challenged, a court could well find Trump was bound despite the lack of signature, via agency or ratification (especially since Cohen was his attorney and fixer). In fact, when Trump’s lawyers later tried to claim Trump wasn’t a party to the NDA, a California judge flatly noted there was “a large amount of evidence” showing Cohen chose “David Dennison” as a pseudonym for Trump. Trump couldn’t play the “wasn’t me” game for long.

Lesson for Drafters: If you want an NDA to be enforceable by or against someone, get their signature or a clear assent. Don’t rely on “and/or” shenanigans or secret side agreements (here, there was a side letter identifying Trump as DD, but Trump didn’t sign that either, as far as we know). If using an entity or agent to contract on behalf of a principal, it’s wise to document the agency or have the principal sign a short ratification. For example, a simple one-line signature block like “Donald J. Trump, known hereunder as ‘David Dennison’, by Essential Consultants, LLC, his authorized agent” would have made it explicit.

Also, be cautious with non-signatories enforcing NDAs. Generally, only parties (and intended beneficiaries) can enforce a contract. But as seen here, a well-drafted NDA can indeed confer rights on a non-signatory beneficiary. On the flip side, if you’re the one asked to sign an NDA where the real party in interest is hiding, know that they might still enforce it later. The absence of a signature isn’t a foolproof get-out-of-contract-free card, especially if their lawyer or shell company signs and performs the deal.

In summary, yes, an NDA can bind or benefit a non-signatory in many cases – but doing it that way is an invitation for dispute. The Stormy NDA could likely have been enforced by Trump despite his non-signature, but the optics (and ethics) of him trying to avoid signing were terrible, and it ultimately helped Stormy in court of public opinion and gave her legal theories to pursue. A cleanly signed contract by all parties would have avoided a lot of headache (though it wouldn’t have fixed the other problems we’ll discuss).

Pseudonyms and Agency in Contract Formation

“Peggy Peterson” and “David Dennison.” It sounds like a bad soap opera alias plot, yet those were the names used for Stormy Daniels and Donald Trump in the NDA. Why the subterfuge? Privacy and deniability. High-profile individuals sometimes use pseudonyms in contracts to prevent leaks (imagine a celebrity booking a hotel under an alias). Here, Trump (then a presidential candidate) definitely didn’t want “Donald Trump” on a hush agreement that might leak, so they used a code name. Stormy also used a pseudonym, likely for symmetry and privacy.

Are pseudonyms legally valid? Generally, yes – a contract can use pseudonyms as long as it’s clear who those pseudonyms refer to. In this case, the NDA had a Side Letter (Exhibit A) that was supposed to list the true identities of DD and PP. In other words, Stormy would sign the NDA as “PP” and Trump’s side as “DD,” and a separate confidential document would say “DD = Donald Trump, PP = Stephanie Clifford.” This mechanism can work; it’s been used in other secret settlements.

However, a pseudonym doesn’t let you escape legal responsibility. If the contract is validly formed, the pseudonym is just a placeholder. If hauled into court, the pseudonym’s mask comes off. Indeed, when Stormy sued, she attached the NDA itself, and everyone quickly learned who DD and PP were (if it wasn’t obvious already). Judge Broadbelt, in ruling on attorney’s fees later, noted that the evidence showed DD was Trump. No real debate there.

Agency issues: Using an alias doesn’t change the agency analysis from the prior section. Cohen signed on behalf of Essential Consultants, LLC (“EC LLC”). That LLC was essentially a vehicle for Trump/Cohen – it had been formed just weeks prior to facilitate this payment. Under agency law, EC LLC (and Cohen as its rep) acted as agent for Trump (the principal). Stormy’s side argued Trump had no idea, but it stretches credulity that Cohen would shell out $130k without Trump’s knowledge. Even if Trump didn’t sign, Cohen’s actions could bind Trump if within the scope of his authority. And if Trump later accepted benefits – e.g., he certainly benefited from Stormy not talking pre-election – that’s ratification.

California law explicitly provides that a principal can ratify an agent’s deal after the fact, and accepting the benefit (here, the hush) can equal acceptance of the obligations. By early 2018, Trump’s team did seek to enforce the NDA (through arbitration), which pretty much ratified it. So pseudonym or not, Trump was on the hook as far as contract law is concerned.

What went wrong: The pseudonyms by themselves weren’t the fatal flaw – the NDA could have worked with code names if everything else was done right. But there were a couple of issues:

• Incomplete execution of side letter: It’s unclear if the side letter was ever signed by Trump or delivered. If that piece of the puzzle was missing, one could argue there wasn’t a complete meeting of the minds on who “DD” was, though practically everyone knew. One commenter quipped that the NDA’s wording (“and/or David Dennison”) made it “entirely uncertain” who Stormy actually contracted with – “we don’t know who, especially if he didn’t sign his name, er, pseudonym”. Ambiguity like that can undermine enforceability. Courts might throw up their hands at a contract that literally says “Party A and/or [someone else].”
• Pseudonyms used to facilitate deniability: Trump not signing and hiding behind Cohen/EC LLC was a strategic choice, but legally a risky one. If he truly didn’t authorize the deal, then Cohen arguably exceeded his authority. Stormy’s complaint alleged Cohen acted without Trump’s knowledge or consent. If that had been proven, Trump could disavow the contract (you generally aren’t bound if your agent acted without authority and you didn’t ratify). However, proving Trump had zero knowledge would be hard, and Cohen’s own statements later contradicted that. Notably, Cohen testified and evidence showed Trump reimbursed Cohen in 2017 for the payout, implying Trump knew and ratified it after the fact.
• Ethical duty and imputed knowledge: Stormy’s lawyers pointed out that if Cohen really never told Trump, that in itself would mean Cohen breached ethical duties to his client. California (and New York) ethics rules require attorneys to inform clients of significant dealings, especially a settlement that creates obligations for the client. So either Cohen told Trump (meaning Trump knew, undercutting the “I didn’t know” defense) or Cohen violated ethics (not a great look if Trump tried to enforce something he supposedly knew nothing about). Either scenario actually bolstered the idea that Trump was tied in, one way or another.

In sum, pseudonyms require careful handling. Drafters should always include a confidential side agreement that clearly identifies the real parties and is signed by them. Otherwise, you get arguments like “we don’t even know who the contract is with.” In this NDA, the side letter was meant to do that, but since Trump never personally signed anything, it left a shred of doubt.

Lesson for Drafters: If you must use pseudonyms (and there are legit reasons to, for privacy), do it like this:

• Clearly state in the contract something like: “This Agreement is made between XYZ, Inc. (‘Company’) and John Doe (‘Employee’), which names are fictitious. The true identity of ‘John Doe’ is known to the parties and documented in a Side Letter executed concurrently.” This way, even if the side letter is separate, the primary agreement itself acknowledges it and there’s no intent to deceive the other party as to identities.
• Have all parties or their authorized agents sign all relevant documents, including the side letter. In Stormy’s case, the NDA text said Exhibit A (the side letter) was attached and incorporated. If Trump never signed Exhibit A, one could argue he never formally acknowledged his pseudonym. Get that signature!
• Avoid “and/or” in naming parties. That was just bad drafting. “EC, LLC and/or David Dennison” – does that mean the contract is with the LLC, or Trump, or both? One commenter noted this made mutual obligations confusing. Use clear definitions: e.g., “This Agreement is between Essential Consultants, LLC (‘EC’) on behalf of David Dennison, and Peggy Peterson.” Or make both jointly parties. But ambiguity in parties can be lethal – a court might void the contract for uncertainty if it truly can’t tell who the parties are. (Though here a court would likely construe it as including both EC and Trump to give effect to intent.)
• Understand that a pseudonym does not equal anonymity if things blow up. In the Stormy case, the pseudonyms became a late-night punchline. Draft with the assumption that if there’s a dispute, the real names will come out. So focus on solid legal footing more than the camouflage.

From an enforcement standpoint, Trump could enforce the NDA as an intended beneficiary and principal behind EC LLC. But the pseudonym gambit, combined with the lack of signature, provided Stormy a technical and narrative advantage. It let her say “He didn’t even sign, it’s not a real deal!” which, while not an open-and-shut legal defense, certainly framed the NDA as shoddy. A judge never got to formally rule on whether Trump was bound despite not signing – but the consensus among legal experts was that Trump would be treated as a party (and hence bound) under agency/beneficiary theories. Ironically, Trump’s own lawyers later argued he wasn’t a party to avoid paying Stormy’s legal fees – the judge rejected that, because all evidence showed the pseudonym referred to Trump.

Humor/Example: To put it in perspective, imagine I draft an NDA between “Party A” and “Party B” where Party B is “Agent Smith (code name for a certain billionaire client).” If Agent Smith doesn’t sign, and later I try to enforce it, my client might say “Hey, I never signed as myself.” The court will likely say, “Nice try, Agent Smith. Did you benefit from this NDA? Was it intended for you? Yes? Then you’re in it.” It’s like wearing a mask – if you make a deal in a mask and send your sidekick to shake hands, you’re still on the hook if it was done for you.

The Stormy NDA shows that pseudonyms can be a double-edged sword: they provide short-term obscurity, but if a dispute arises, they can make the contract look clandestine (which it was) and potentially undermine its credibility. Use them sparingly and never as a substitute for proper execution and authorization.

Arbitration vs. Litigation: Keeping NDAs Private vs. Public Policy

The Stormy Daniels NDA had a robust arbitration clause – not uncommon in hush agreements. Arbitration means disputes are handled confidentially by a private arbitrator instead of in public court. From Trump’s perspective, this was critical: if Stormy breached, they wanted a quick, quiet way to enforce the NDA without splashing details in the press. The NDA stated that “any and all claims or controversies” between the parties shall be resolved by binding confidential Arbitration with JAMS (a private arbitration service). It even let “DD” (Trump’s side) pick the location of arbitration – a very one-sided touch, giving Trump the home-court advantage.

So what happened? Cohen invoked that arbitration clause in February 2018. In fact, he got an ex parte (one-sided) temporary restraining order from a private arbitrator on Feb 27, 2018 to gag Stormy. This was done without Stormy’s attorney present, which Stormy’s team called “surreptitious” and “bogus”. Essentially, Cohen and his lawyer went to an arbitrator (per the NDA’s terms) and said “we need an immediate order to prevent Ms. Clifford from violating the NDA,” and the arbitrator signed it.

However, Stormy fought back in public court the very next day. On March 6, 2018, she filed her lawsuit in Los Angeles Superior Court asking for a ruling that the NDA was void. By doing so, she put the dispute squarely in the public realm (and attached the NDA and side letter for everyone to read). The existence of the arbitration clause didn’t stop her from suing; instead, it became part of the lawsuit (she argued there “is no agreement to arbitrate” because the contract was never formed or was illegal).

Tug of War – Arbitration vs Court: Trump’s lawyers responded by moving the case to federal court and indicating an intent to push it back into private arbitration. Indeed, they immediately claimed $20 million in damages (for 20 alleged NDA breaches) and said they’d seek to arbitrate those claims. The federal judge (Judge Otero) initially leaned toward enforcing the arbitration clause – he even put the case on hold at one point pending arbitration. Stormy’s team argued the arbitration clause was invalid because the whole contract was invalid. This is a legal concept called a challenge to the validity of the contract as a whole – often, if the contract has an arbitration clause, arbitrability might itself be arbitrated unless the court finds the arbitration clause specifically unenforceable.

Stormy had some interesting public policy arguments: Her complaint suggested the NDA was against public policy because it sought to hush up matters of immense public concern (a potential President’s affair and possible campaign finance violation). There’s a notion that some NDAs might be void if they conceal information the public has a right to know. This is not a slam-dunk argument in most cases (the law generally allows private settlement of even salacious matters), but given Trump was President, there was a strong public interest in the story.

California, in particular, recognizes that contracts contrary to public policy are void. For example, you cannot enforce a contract that prevents someone from cooperating in a legal investigation, or a contract to suppress evidence. Stormy’s lawyer (Michael Avenatti) pitched her speaking out as “about the truth” and potentially about illegal campaign cover-ups, appealing to that public policy angle.

One might analogize it to NDAs in sexual harassment cases – historically they were enforceable, but the #MeToo movement led states to ban them for public policy reasons (more on that later). Here, it wasn’t sexual harassment, but election law. Congress members even cited the Stormy situation when calling for legislation, saying NDAs shouldn’t be used to hide relevant info from voters.

Public Policy Limitations: Generally, arbitration clauses are favored by courts (thanks in part to the Federal Arbitration Act) and will be enforced even in sensitive matters. But there are limits. You cannot arbitrate certain claims (criminal matters, some statutory claims if Congress or state law excludes them). By 2018, there was a movement against forced arbitration in sexual harassment cases, viewing it as a tool to sweep misconduct under the rug. That culminated in the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, which now prohibits employers from forcing arbitration of those claims. Stormy’s case wasn’t employment, so that law wouldn’t directly apply, but it’s part of the trend that not everything can be confidentially arbitrated if public interests are strong.

Also, California law (at that time) had a bit of friction with arbitration in NDAs: California passed a law (since partly blocked in courts) that tried to ban mandatory arbitration in employment contracts (Assembly Bill 51 in 2019). That shows a state public policy preference for allowing people to go to court in certain contexts.

What ultimately happened: The arbitration clause didn’t save the day for Trump. Stormy’s very public lawsuit outmaneuvered the quiet arbitration. Eventually, Trump blinked – in September 2018, he announced he would not enforce the NDA or arbitrate. By March 2019, the court dismissed Stormy’s lawsuit as moot, noting Trump and Cohen agreed not to enforce the NDA. In effect, Stormy got what she wanted – release from the NDA – without a definitive court ruling on the arbitration clause.

However, we can glean that if Trump hadn’t backed down, the fight would have been whether the arbitration clause bound Stormy. Given she signed the NDA, normally yes – she agreed to arbitrate. Her strategy was to argue no valid contract at all (hence no valid arbitration clause). That’s a heavy lift but not impossible if the contract was void for illegality or lack of consent. It’s a bit of a circular argument: “This contract is void, so its arbitration clause is void too – so judge, you get to decide voidness.” Sometimes courts will indeed decide contract validity if the challenge goes to whether the contract was ever formed (e.g., signature missing might be such a formation issue).

Notably, Stormy’s side also pointed out she wasn’t given proper notice of the arbitration Cohen initiated. If Cohen truly went to an arbitrator without notifying Stormy, that could itself violate due process and the terms of the clause (JAMS rules require notice to the other party). So even procedurally, the way arbitration was invoked was questionable.

Arbitration vs. Litigation – Lessons:

• Arbitration clauses in NDAs are powerful tools to keep matters private. If you draft one, make sure it’s clearly written, covers all claims (including requests for declaratory relief), and specifies the rules and forum. The Stormy NDA did include JAMS Rules and even “Interim Measures” (like TROs), which is how Cohen got that TRO. It was actually fairly sophisticated on that point.
• However, consider adding a clause about what happens if someone tries to go to court anyway. Perhaps an express stipulation that any court challenge to the agreement’s validity must be filed under seal or something (though sealing is up to courts and not guaranteed). In high-profile cases, people may ignore the arbitration clause and accept the risk of being slapped for breaching it if it means freeing themselves from it.
• Public policy can trump arbitration. For example, if the NDA were trying to arbitrate something non-arbitrable (like a criminal penalty or waiving statutory rights), a court could refuse arbitration. In Stormy’s case, if she argued the NDA was to cover up a crime (campaign finance violation), a court might void the NDA itself – an arbitrator might not want to touch that either, frankly.
• Secrecy vs. Scrutiny: A theme here is that trying to enforce complete secrecy via arbitration can backfire if the subject matter is explosive. Arbitration gave Cohen a quick win (the TRO), but it was short-lived. Stormy went public, which arguably violated the TRO – but once she did, the arbitrator’s order was a paper tiger unless they rushed to court to enforce it, which would cause more publicity.
• There’s also the matter of unconscionability: Stormy’s complaint argued the arbitration clause (and NDA as a whole) was unconscionable. Courts can refuse to enforce unconscionable arbitration clauses (e.g., if it’s extremely one-sided). The NDA let Trump pick venue, perhaps arbitrator, and perhaps had other terms favoring him – a court might find it procedurally and substantively unconscionable given the power imbalance and oppressive terms, and thus refuse to compel arbitration. That was a viable argument under California law.

In short, arbitration was meant to keep things quiet, but public policy and strategy dragged the dispute into open court anyway. It’s a reminder that an airtight arbitration clause in theory doesn’t guarantee a silent resolution if the other party is willing to make a ruckus to challenge the NDA itself. Stormy’s case became a very public litigation about whether arbitration should happen at all – undermining the very purpose of the clause.

Lesson for Clients: If your goal is secrecy, an NDA with arbitration is a good start, but you must also consider how you’ll practically enforce it. If the person breaches and runs to the media or court, you have to decide whether chasing them through legal channels will just amplify the story (which it did here). Sometimes the better call is to not enforce despite having that arbitration clause, as Trump ultimately decided.

Lesson for Signers: Just because you signed an NDA with an arbitration clause doesn’t mean you’re completely without options. Stormy showed one can go on the offensive. It’s risky (had she lost, she would have been in breach and maybe owing millions), but it’s a path – especially if you have arguments that the NDA is void or voidable. Also, if an arbitration is initiated without your knowledge (as happened to Stormy), get a lawyer to challenge it immediately – you can often get a court to stay or refuse arbitration if proper procedure wasn’t followed.

Public policy note: After Stormy’s case, there’s been even more skepticism of secret arbitration for sexual or misconduct cases. Today, a Stormy-like NDA in a sexual context (if it were sexual harassment, not a consensual affair) would face new laws that void mandatory arbitration and NDAs. So the legal landscape is shifting toward transparency in certain scenarios, meaning arbitration clauses in NDAs won’t always be enforceable.

Is Hush Money Valid Consideration?

The term “hush money” sounds illicit, but at its core it’s just payment in exchange for silence. In contract law, silence (or forbearance from speaking) can be a valid form of consideration, as it is essentially giving up a legal right (the right to speak or publish). In Stormy’s NDA, the deal was very clear: She gets $130,000, and in return she delivers any evidence (the “Property”) and agrees to remain silent and not disparage Trump. Both parties are exchanging something of value: money from Trump’s side, silence (and intangible rights, plus any materials like texts or photos) from Stormy’s side. That’s classic consideration – each side incurs a detriment/obligation and each gets a benefit.

Stormy did receive the $130,000 payment (wired to her attorney’s trust account) on October 27, 2016. So the contract’s consideration was actually fulfilled on Trump’s end (via Cohen/EC LLC).

Yet Stormy’s lawsuit argued that Trump himself “did not provide any consideration” and never truly assented. This was a bit of a legal finesse. The money technically came from Essential Consultants, LLC (Cohen’s shell). Stormy could claim, “Donald Trump didn’t pay me or sign, so as far as a contract with him, there’s no consideration or consent.” However, a court likely would view Cohen/EC’s payment as on behalf of Trump (agency again). The NDA said it was in consideration of the promises and covenants, etc., and acknowledged receipt of $130k (calling it the “Gross Settlement Amount”). So Stormy got paid – she couldn’t say she got nothing.

The fact Trump himself didn’t personally hand over the check doesn’t negate the bargain. If I have my friend pay you $100 as my agent, you still got your money – consideration is satisfied. Stormy’s lawyers knew this, but the angle was to claim Trump was not a party (no signature, no payment directly), thus no obligations from him = no contract with him. It’s a clever attempt to sever Trump while letting her keep the cash. Realistically, if a court found the NDA void, usually both sides return to status quo (which is why she offered to return the money to rescind). So it’s not like she’d void it and necessarily keep the money free and clear (though since Trump mooted it, she ended up keeping it anyway, unless Cohen asked for it back, which he didn’t publicly).

Is hush money illegal or immoral consideration? Generally, paying someone to keep something secret is not illegal, unless what is being bargained for violates the law or public policy. Some examples:

• Covering up a crime: If the “hush” is about not reporting a crime to authorities, that’s problematic. You cannot enforce a contract that essentially amounts to obstructing justice or compounding a crime. For instance, if someone witnessed a felony and the perpetrator pays them to not testify or report, that contract is void and possibly itself a crime. There’s an old concept of “compounding a crime” – accepting value in exchange for not prosecuting – which is unlawful.
• Non-disclosure vs. non-cooperation: Many NDAs explicitly carve out that nothing prohibits one from reporting to law enforcement, precisely to avoid that public policy issue. The Stormy NDA did not have such an explicit carve-out (since the subject matter wasn’t a crime), though it did say if law enforcement inquired, Trump’s side wouldn’t volunteer her name unless necessary (which is kind of the opposite scenario).
• Public duties: If hush money is paid to influence an election (i.e., to keep voters in the dark), one could argue the public policy issues. That is exactly what prosecutors later argued with the Stormy payment – that it was a campaign expenditure intended to affect the election without disclosure. As a contract, the NDA didn’t mention the election. But context matters. A contract in furtherance of an illegal act (here the violation of campaign finance law) could be deemed void. However, courts might separate the two: the NDA is a private contract; the campaign finance violation is a separate illegal act by Cohen/Trump. Indeed, the NDA wasn’t what was prosecuted – the payment was.

On morality, hush money has a bad rap because it implies paying for silence about wrongdoing or at least something unsavory. But legally, courts enforce settlement agreements all the time where money is paid and the other side agrees not to pursue claims or speak about allegations. In fact, that’s extremely common in civil disputes. Stormy’s NDA was essentially framed as a settlement of potential legal claims: it recited that Stormy might have claims against Trump (she alleged some kind of unspecified “tort claims” in the recitals, which he denied), and Trump had claims against her (for intending to disclose private info). Each side released the other from those “claims” in the agreement. This mutual release structure gives a contract a more legitimate basis than pure “here’s money, now shut up.” It’s saying “we’re settling claims.” Settlement of claims is absolutely valid consideration. Stormy gives up her right to sue Trump (for, say, emotional distress or anything from their encounters) and her right to speak about it, and Trump (or EC) gives up his potential claims and pays money.

Hush money vs. extortion: It’s worth noting, paying hush money can sometimes be seen as paying off what amounts to extortion. If Stormy had threatened “Pay me or I go public,” one could argue she’s extorting. Trump’s side never claimed extortion openly; they wanted the NDA, so presumably they saw it as a voluntary deal. But it raises a point: if someone demands money in exchange for silence about a crime, that’s blackmail. Here, it was Cohen approaching Stormy’s lawyer to buy silence. That’s voluntary on her part to accept. Nothing illegal about an offer of money for confidentiality in a personal capacity.

Did the Stormy NDA have valid consideration? Yes, Stormy got $130k (benefit), Trump got silence and property (benefit). Each gave up something: money from one side, First Amendment rights from the other. Courts have long held that waiving one’s right to speak or sue can be valid consideration if done knowingly and not against public policy.

Stormy’s attempt to return the money was to rescind the contract – to undo it, both sides give back what they got. That’s standard if a contract is voided; you don’t get to keep the fruits. She offered the money back publicly (a savvy PR move to show she wasn’t just after money). Cohen/Trump didn’t accept, likely because accepting might moot their ability to claim the NDA was still in force (also, pride). But eventually, they effectively let her keep it anyway when they walked away from enforcement.

Campaign finance aspect: The fact that Cohen’s payment was deemed an unreported campaign contribution doesn’t automatically void the NDA, but it meant the whole arrangement had an illegal aspect. Could Stormy have argued “illegality” as a defense? She did claim the contract was illegal and violated public policy. A judge might have been sympathetic, actually. An illegal contract (one for an illegal purpose) is void ab initio. If Stormy argued the purpose was to illegally influence an election, a court might void it on that ground. That’s a novel argument, as typically NDAs aren’t considered election expenditures, but here prosecutors said it was.

However, a court might also say, “The NDA just says you won’t talk about an affair – nothing illegal on its face. The illegality was in not reporting the payment to the FEC. That doesn’t void the agreement between you two.” It’s a gray area. We don’t have a ruling, but it’s a fair bet the NDA could have been deemed unenforceable due to the shady purpose behind it.

Lesson for Drafters: Ensure that consideration is clearly stated and delivered. The NDA did this – it specified the payment and indeed they paid on time (the day before she signed, interestingly). Always have a recitation of consideration (“for good and valuable consideration, receipt acknowledged…”). In settlement NDAs, mutual releases can serve as consideration too.

Also, consider adding clauses where the person acknowledges the sufficiency of the consideration and waives any argument later that it was inadequate or invalid. Stormy’s NDA, like most, probably had language that $130k is adequate and that she’s not relying on any other promises.

From a deal ethics view: hush money is delicate. If it’s concealing something minor (e.g., a private embarrassing incident), it’s straightforward. If it’s concealing something major (like a public hazard or crime), you’re treading on void/voidable territory. In corporate settings, you cannot pay someone to hide a safety issue from regulators – that NDA won’t hold. In personal settings, paying for silence about consensual affairs, etc., is generally legal.

California angle: California has specific statutes now that say if the underlying claim is something like sexual assault or harassment in the workplace, an NDA (in a settlement) cannot include a confidentiality clause on the facts of that claim. That’s a legislative choice overriding what would otherwise be valid consideration (money for silence). So if Stormy’s case were e.g. a sexual harassment claim, paying hush money to drop the claim and be quiet would be void in CA after 2019 for the factual silence part. But for a private non-work affair, no law prohibits that NDA – except general contract defenses.

Consideration Pitfall: Had Cohen not paid the money on time, Stormy could claim the contract failed for lack of consideration (or material breach). They were smart to pay up front (in fact, they paid before she signed, possibly to entice her – interestingly the timeline suggests she got paid on Oct 27 and signed Oct 28). If money isn’t paid, the NDA is on shaky ground.

One more twist: Stormy’s NDA also transferred any intellectual property rights she had in images or texts to Trump. That is additional consideration from her to him. She assigned copyright of any “Property” to Trump. Copyright assignment is a thing of value. So Trump’s side gained intangible property rights too. They likely did that so they could legally stop her from publishing, since he would own the copyright on any photos or messages and could sue for copyright infringement if she released them. That’s a clever layer; it wasn’t just a promise not to talk, it was actually giving Trump ownership of materials so he had another legal hook to prevent dissemination (if she tried to sell a story with text messages, Trump could say “that text is my copyrighted property now”).

Validity of that consideration: Totally valid – you can assign IP for money. That wasn’t controversial legally.

In conclusion, hush money constitutes valid legal consideration in a contract as long as the content of what’s being silenced isn’t something you’re not allowed to contract over. Stormy’s NDA consideration structure was pretty typical for a settlement: money + peace (no suing, no talking) in exchange for silence + surrender of claims/property.

Ethically it raised eyebrows because it involved a soon-to-be President and covering information from voters. But legally, absent the campaign finance element, it’s enforceable. With the campaign finance element, Stormy had a colorable argument that the NDA should be void as part of an illegal scheme. Since no court ruled directly, we’re left with the insight that if your hush deal brushes up against election laws or other laws, all bets are off.

As a lawyer, I’d advise clients: if you’re paying hush money, you must consider all applicable laws (tax, campaign finance, etc.). For instance, there’s even a tax law now (IRC §162(q)) denying deduction of hush payments related to sexual harassment if subject to an NDA. That doesn’t void the contract, but it hits the wallet. The Stormy case indirectly led to more scrutiny on these fronts.

Confidentiality Carveouts: When NDAs Can’t Keep Secrets

Most NDAs, even very stringent ones, have exceptions – situations where the recipient of the information is allowed to disclose despite the NDA. These are often called confidentiality carveouts. They acknowledge that absolute secrecy has limits set by law or practicality. The Stormy Daniels NDA, being heavily one-sided, had relatively few carveouts for Stormy, but it did have some standard ones (and notably omitted others).

What carveouts did the Stormy NDA include? From the text of the NDA:

• Legal Process: The agreement allowed Stormy (PP) to disclose confidential information “if compelled to do so by valid legal process, including… a subpoena”, provided she gave DD’s side notice 10 days in advance so they could seek to prevent the disclosure. This is a classic carveout: if a court or government body orders you to testify or produce information, you can comply (NDAs can’t force someone to commit contempt of court). However, NDAs often require the bound party to give notice to the other side so they can try to quash the subpoena or get a protective order. Stormy’s NDA had that: she had to not only notify but also “use best efforts” to fight the disclosure if possible. That’s a pretty heavy requirement (basically, she had to help resist the subpoena). Still, bottom line, if a court order came, she could ultimately disclose. (If it were, say, a grand jury subpoena, she’d have to comply; the NDA would just force her to alert Trump’s lawyers.)
• Prior Disclosures: The NDA referenced “PP Disclosed Individuals/Entities” – people Stormy had already told about the affair. It appears the contract listed a few people Stormy might have confided in (perhaps a friend, or her manager, etc.). It said any disclosure beyond those already listed confidants would be a breach. This implies a carveout: Stormy was allowed to have certain previously disclosed individuals know (since that cat was out of the bag), but she wasn’t allowed to proactively tell others or use those folks to leak info. (It even said she must not induce anyone to disclose on her behalf.) So the NDA recognized some people already knew and carved that out, but tightly.
• Law Enforcement Inquiry (for Trump’s side): Interestingly, the NDA had an asymmetric clause that Trump’s side (DD) agreed not to report Stormy to law enforcement unless certain conditions happened. Specifically, Trump (DD) warranted that in regard to any attempts Stormy made to sell the story before the NDA, he and his counsel would refrain from pursuing any civil action or “absent a direct inquiry from law enforcement, from disclosing PP’s name to the authorities.”. In plain English: Trump won’t sue her or go to the cops about her prior actions unless law enforcement directly asks or unless she breaches going forward. If she breached by retaining copies or intending to disclose later, then all bets off – he could go to authorities. This was likely to reassure Stormy that Trump wouldn’t, say, try to accuse her of extortion or something to the police, as long as she abided by the deal. It’s a bit unusual to see the paying party promise not to involve law enforcement, but it makes sense here because Stormy hadn’t committed a crime. It was basically a peace pact.
• Miscellaneous: The NDA presumably allowed disclosures to her attorneys, etc., as necessary. We know she had an attorney negotiate it (Keith Davidson). The text likely considered communications with attorneys as not breaches. (Even if it didn’t explicitly, privilege would cover a lot of that, and it’s implied you can talk to your own lawyers/accountants). Many NDAs have a carveout like “you may disclose confidential info to your legal or financial advisors who are bound to confidentiality.”

What carveouts were missing or problematic?

• No whistleblower/agency carveout: Nowhere did it say “nothing in this agreement prevents PP from reporting possible legal violations to law enforcement or regulatory authorities.” Nowadays, that kind of clause is common and in some contexts legally required. Stormy’s NDA, being drafted in 2016 and not involving a corporation, didn’t have any whistleblower carveout. If, hypothetically, Trump had committed some crime against her or someone, the NDA as written would appear to bar her from talking about it to anyone (but as stated earlier, such a bar wouldn’t hold up in court if it came to it).
• No carveout for her own personal use or therapist, etc.: Some NDAs allow you to talk to your spouse or therapist about it (with expectation they keep confidence). Stormy’s NDA did not explicitly allow that (except if her spouse was listed as one of those previously informed, which we don’t know). It was very restrictive. So, if strictly enforced, she couldn’t vent to a friend or counselor beyond what was pre-approved. That’s burdensome and arguably unconscionable in a personal context.
• Public domain info: Many NDAs carve out information that becomes public through no fault of the bound party. Stormy’s NDA didn’t really anticipate partial leaks, etc. By early 2018, news of the NDA itself surfaced in the Wall Street Journal. At that point, one could argue some info was now public. If an NDA lacks a clear “public domain” exception, technically even if the info is out, the person could still be contractually barred from confirming or discussing it. Courts often won’t enforce confidentiality on stuff that’s already public knowledge, because the cat’s out of the bag (and damages would be hard to prove). In Stormy’s case, once the WSJ and others reported on the deal, the value of the NDA was greatly diminished. Cohen himself talked publicly (saying he paid Stormy but it had nothing to do with the campaign). Stormy’s lawsuit pointed to Cohen’s public disclosure as a breach that “nullified” the NDA. Strictly, the NDA didn’t say “if one side breaches, the whole thing is void” (though rescission could be sought). But she had a point: how can Cohen/Trump enforce her silence when Cohen didn’t stay silent? It’s the pot calling the kettle black.
• Statutory rights: California (and federal) law now mandates certain carveouts. For example, under federal law, an NDA cannot prevent an individual from reporting crimes or sexual harassment (thanks to the Speak Out Act for predispute NDAs, and other statutes). In 2016, those specific laws weren’t in effect. But even then, an NDA cannot bar someone from testifying truthfully under a subpoena (well-established principle) – Stormy’s did allow compliance with subpoena after notice. California also has a civil code (now) voiding any agreement that prevents someone from testifying about criminal conduct or sexual harassment when asked by court/agency. If Stormy’s situation fell under that (not exactly, since it wasn’t her employer or a crime she witnessed), that would override the NDA.

Legally Permitted Disclosures: In broader terms, NDAs cannot override:

• Legal duty to report in certain professions (e.g., an NDA can’t stop a doctor from reporting child abuse if they learn of it, because that’s a mandated reporter duty by law).
• Government investigations: Even without a carveout, courts have held that you can’t penalize someone for cooperating with an official investigation (whistleblower protections, etc.). For instance, the SEC has fined companies for NDAs that appeared to muzzle employees from reporting securities law violations.
• Truth in legal proceedings: If you’re under oath, you tell the truth. The NDA may require you to try to fight the subpoena, but if that fails, you must testify truthfully. Stormy’s NDA recognized this by allowing compliance with a court order after exhausting efforts to fight it.

In Stormy’s case, had she been subpoenaed by, say, Congress or a grand jury about the payment, she could and would have to talk. In fact, she did speak to federal prosecutors later (in the Michael Cohen investigation). The NDA was effectively moot by then, but even if it weren’t, she could not be stopped from testifying under subpoena.

What went wrong with Stormy’s carveouts (or lack thereof): The NDA was extremely broad and didn’t explicitly allow some reasonable disclosures. This contributed to the court (and public) perceiving it as unconscionable or overbroad. Stormy’s complaint called the NDA “unconscionable” and against public policy. Part of that was the $1M penalty, but also the complete muzzle on her. A contract that literally forbids someone from ever talking about an intimate relationship, under any circumstance, forever, can be seen as too much – especially when coupled with a liquidated damages bomb.

From a learning perspective: drafters should include sensible carveouts to make an NDA balanced and legally defensible. Common carveouts include:

• “This NDA does not prohibit either party from making disclosures required by law, regulation, or court order, provided the party gives [prompt/advance] notice to the other (if legally permissible) to allow for intervention or protective order.” – This covers subpoenas, etc. Stormy’s NDA had this, though it put a heavy burden on her to fight the order too.
• “Nothing in this agreement is intended to or shall be interpreted to prevent or restrict either party from reporting possible violations of law to any governmental agency or cooperating with any governmental investigation or proceeding.” – Modern NDAs often have this (to comply with whistleblower laws). Absent it, courts might read in that right anyway.
• “Recipient may disclose Confidential Information to their attorney, tax advisor, or as necessary to enforce their rights under this agreement or in a court of law.” – For instance, if Stormy wanted to talk to a tax preparer about that $130k income, she should be able to; the NDA shouldn’t bar her from saying “I got a settlement for this reason” to an accountant. The Stormy NDA didn’t mention that, but presumably she could since taxes had to be filed (side note: Stormy did pay taxes on the $130k, and ironically Trump’s company improperly booked a reimbursement to Cohen as “legal expenses”).
• “If information covered by this NDA becomes publicly available through no breach by Recipient, Recipient’s obligations under this NDA as to that information shall cease.” – Many NDAs have a clause that if the info is public (say a media outlet breaks the story independently), the party is no longer bound to confidentiality about that specific piece of info. Stormy’s NDA didn’t explicitly have that. So even after the affair was reported in general, Stormy was still gagged from confirming or elaborating. That mismatch often drives people to break NDAs – they feel it’s unfair they can’t speak on something everyone else is talking about. A carveout could avoid that tension.

Because the Stormy NDA lacked a public-domain or responses carveout, once the story broke, she was still technically bound not to comment – which likely made her more eager to get the NDA tossed.

Legally permitted disclosures in Stormy’s context: By March 2018, Stormy was itching to tell her story on 60 Minutes. Under the NDA, she wasn’t permitted. So she took the legal step of suing to be freed from it. Could she have just gone on 60 Minutes without suing? She could have, but then Trump/Cohen would have invoked the $1M per breach clause. She preemptively sued to invalidate the NDA to shield herself. That was wise.

After they declared the NDA would not be enforced, she did the interview. One could argue once Trump’s side said “we won’t enforce,” that itself is a kind of carveout (they basically released her). That’s how it ended – a unilateral carveout by the NDA’s holder saying “fine, you can talk.”

A Note on Mutuality: Stormy’s NDA was mutual in theory (both sides weren’t to disclose) but in practice, Stormy was the one with info to spill. Yet Cohen went and disclosed the existence of the NDA and payment in Feb 2018. Stormy’s team used that to argue the NDA was void or at least they were released. They claimed Cohen’s public statement was a material breach, so she shouldn’t be bound. In some NDAs, there’s a clause that if one party breaches confidentiality, the other party is relieved of their obligations. Stormy’s didn’t explicitly say that, but a judge might agree with that principle under contract law (a material breach by one side can excuse performance by the other). So Cohen possibly shot himself in the foot by talking.

Lesson: If you have an NDA, follow it yourself. If you breach, you undermine your ability to enforce it against the other side. In this case, that’s exactly what happened.

Humor/Analogy: Think of NDA carveouts as the “safety valves.” Even spies have a way out – like “if caught or under oath, this message will self-destruct.” Stormy’s NDA gave her a tiny valve (subpoena compliance) but in the pressure cooker of a national scandal, that wasn’t enough. The pot blew its lid. For NDAs to hold, they need enough reasonable escape hatches so that a court doesn’t view them as trapping someone in an intolerable position or violating public needs.

In California, especially, failing to include required carveouts (like the right to discuss unlawful workplace conduct) will void the NDA by statute. So modern NDAs here often explicitly enumerate those exceptions to ensure enforceability. A tightly-drafted NDA that ignores those will not survive a challenge.

In summary, NDAs can impose silence, but not at the expense of the justice system or overriding public interests. Stormy’s NDA tried to be a total silencer, and it met the reality that some things – like legal proceedings and crime/fraud – aren’t subject to private gag orders. The lessons from it have influenced how NDAs are drafted today: you’ll see more carveouts and acknowledgments of these limits in well-drafted agreements.

Severability and Partial Enforceability of NDAs

Contracts often contain a severability clause, which says if one clause is invalid or unenforceable, the rest of the contract remains effective. The idea is to avoid throwing out the baby with the bathwater. The Stormy Daniels NDA did have a severability provision – it stated that if any provision is found illegal or unenforceable, that doesn’t affect the validity of the rest, and that any overbroad provision should be enforced to the maximum extent allowed by law. They even agreed to “waive any defense” based on illegality of a provision, and that if a provision is invalid due to scope, it should be deemed valid to the extent of scope permitted by law. That’s a pretty strong severability/blue-pencil clause.

Why is this important? Because parts of Stormy’s NDA were arguably problematic: e.g., the $1,000,000 per breach liquidated damages could be seen as an unenforceable penalty under California law. If a court struck that clause, severability would allow the confidentiality and other parts to remain in force, just without the $1M penalty. Likewise, if the “and/or David Dennison” wording was illegal (not illegal per se, just confusing), a court might excise “and/or” and interpret the contract in a way that still holds together (maybe by reading it as including both EC and Trump as parties). The severability clause instructs the court to salvage what it can.

How might a court have applied severability in this case?

• Liquidated damages: California law (Civil Code §1671) generally enforces liquidated damages clauses in non-consumer contracts if they’re reasonable. But $1,000,000 per breach for talking about an affair? That’s arguably excessive. It wasn’t tied to any calculation of harm; it was a round number meant to terrorize Stormy. A California court might call that a punitive damages clause and refuse to enforce it as written. Severability would allow the court to strike or limit the $1M clause but still enforce the NDA’s nondisclosure obligations. Alternatively, the court could reduce the amount to something reasonable (some jurisdictions will “blue pencil” a liquidated damages to a lower figure, others will void just that clause). The NDA’s language – “if invalid due to breadth, deem it valid to extent permitted” – suggests the parties wanted the court to modify rather than toss any overbroad terms.
• Scope of confidentiality: If the court found the NDA’s definition of “Confidential Information” too broad or indefinite, severability might allow trimming it. For example, if the NDA tried to cover “all information concerning DD’s business and personal life ever,” a court could narrow it to just the affair-related info (the obvious intent).
• Mutuality issue: If one part – say the “and/or” pseudonym issue – was problematic, the court might treat “and/or” as “or” and say the contract is between Stormy and EC or Trump, which essentially means at least EC, and Trump as beneficiary. They wouldn’t void it just because of a grammatical absurdity if they could discern the intent.
• Unconscionable terms: Stormy argued the contract was unconscionable – typically a court remedy for unconscionability is either severance of the offending clauses or voiding the whole contract if it’s permeated by unconscionability. California courts have discretion: if a contract is permeated by an unconscionable scheme, they can nullify it entirely; if it’s just one or two clauses, they often sever those and enforce the rest. Here, a court might view the NDA as heavily one-sided (substantive unconscionability) and with some procedural unconscionability (pressure to sign days before election, perhaps no negotiation on $1M term). The $1M clause is the standout for substantive unconscionability. The judge could cut that clause to cure the worst unconscionability and then enforce the nondisclosure (maybe with only actual damages or a lesser liquidated amount like the return of $130k as damages). Severability allows that surgical strike.
• Illegal purpose: This one’s tougher – if the whole contract is for an illegal purpose (e.g., violating campaign finance law or covering up a crime), severability can’t really save it because the entire consideration is tainted. If a court believed the NDA’s fundamental purpose was illegal, they’d void it entirely as against public policy (Civil Code §1667, §1668). Severability clauses usually won’t rescue a contract that is illegal as a whole. They’re more for slicing off an illegal term. For example, if there was a term “PP shall defraud the IRS” (just a hypothetical), the court would cut that and enforce the rest, if the rest stands independently. In Stormy’s NDA, nothing on its face was illegal (paying money for silence isn’t illegal; only the unreported campaign contribution was). So a court could sever the hush money from the illegal context – but that gets philosophical. In any event, the severability clause signaled the parties’ intent to enforce as much of the NDA as possible even if some bits fail.

The court’s inclination: We know Judge Otero (federal court) never ruled on severability because the case ended. Judge Broadbelt (state court) might have considered it in thinking about whether Stormy “prevailed.” In awarding Stormy attorney’s fees, he effectively found the NDA unenforceable (since she was released). But we don’t have text if he thought parts were invalid.

Given how things went, Trump’s side choosing not to enforce might be because they feared parts would be struck down. If a court struck the $1M clause, for instance, Trump loses his big stick. Then enforcing becomes much less attractive (she already spent or allocated the $130k likely, and damages would be hard to quantify beyond that).

Partial enforcement vs. total invalidation: Courts generally prefer partial enforcement if it reflects the core deal and fairness. But sometimes an agreement is so one-sided or tainted that they throw it out entirely. Stormy’s NDA might have been borderline. A court could say: “This NDA was so lopsided (especially given the circumstances of signature) that we refuse to enforce it at all.” Or it could salvage it by just nixing the worst parts.

California courts, in cases of unconscionable terms, often sever if the unconscionability can be removed by deleting a clause, unless the agreement is “permeated” by unconscionability (like if there are multiple or egregious unfair terms indicating a systematic effort to cheat the weaker party). One might argue Stormy’s NDA had multiple suspect elements (huge liquidated damages, unilateral choice-of-forum, pseudonym confusion, etc.). A court might be tempted to void it outright as a matter of public policy/unconscionability and to deter such drafting in the future. That was a risk for Trump.

Lesson for Drafters: Always include a Severability clause (the NDA did). And consider including an explicit “Blue Pencil” or “Reformation” clause – basically authorizing the court to modify overbroad terms. Stormy’s NDA did that by saying a provision invalid due to scope “shall be deemed valid to the extent of the scope or breadth permitted by law”. That’s an invitation for the court to reduce scope rather than strike entirely.

But note: some states will not rewrite a covenant if it’s not written reasonably; they’ll just void the clause. California, for example, doesn’t rewrite non-compete clauses (it voids them). For confidentiality, courts have more leeway.

From the perspective of Stormy’s legal team, they wanted the whole NDA gone (hence they argued no contract formed, or void for illegality, etc.). Severability was their enemy in that sense. If a judge was inclined to enforce something, severability would save Trump’s core interest (her silence) while perhaps just removing an extreme remedy.

One more thing: The NDA’s severability clause also said no party is deemed the drafter (to avoid contra proferentem bias) and that ambiguity won’t be construed for or against either. This is standard to avoid a court interpreting ambiguities against the party who wrote it (which likely was Trump’s side’s lawyer). So they were trying to guard against the court favoring Stormy on any ambiguous points.

Severability in practice: If I were hypothetically the judge: I might strike the $1M per breach as unconscionable, strike the “and/or” and treat Trump as included, enforce the silence obligation but limited in time (the NDA didn’t specify a time limit; arguably it was perpetual. A judge could impose a reasonable duration if they felt perpetual was too much). But given the public interest, I might also refuse an injunction (courts can deny specific performance if a contract is against public interest, even if valid). So I might say: “Mr. Trump, you can seek money damages for breach but we won’t gag Ms. Clifford with an injunction because the public interest in political transparency outweighs enforcement.” That’s speculative, but judges do weigh equitable relief vs. public interest.

The severability clause can’t force a court to give an injunction; it just keeps the contract alive minus void bits. Injunction is discretionary relief. Stormy’s NDA wanted arbitration, which likely would have easily given an injunction (which the arbitrator did). But in open court, injunction is not automatic.

Bigger picture severability lesson: The Stormy NDA was a package deal of several clauses (non-disclosure, non-disparagement, no leaks of materials, etc.). A flaw in one part doesn’t necessarily kill the whole. But sometimes the whole thing just collapses under the weight of context. The severability clause is the lifeboat for the enforceable parts – but if the ship’s hull is breached (e.g. contract is void ab initio for something like illegality or lack of assent), no number of lifeboats (severability clauses) will save it.

So, always draft assuming a court might excise anything too aggressive. Don’t rely on a crazy clause thinking “eh, if it’s too much the court will just knock it out and enforce the rest.” Courts might, but they might also say the inclusion of multiple crazy clauses shows bad faith or overreach, and toss the entire agreement.

In the Stormy NDA, too many aspects were over the top, which risked the whole contract. The severability clause would encourage a court to just trim it, but there’s no guarantee. The NDA drafter sort of hedged by including severability, but ultimately the NDA died a political death rather than a purely legal one.

PR and Enforcement Risks: The Streisand Effect Strikes Back

Perhaps the biggest lesson from the Stormy Daniels NDA debacle is that winning the legal battle can lose you the war in public opinion. The NDA was supposed to protect Donald Trump’s reputation and privacy. Instead, it ended up shining a blazing spotlight on the very thing it was meant to hide, due to how the enforcement was handled. This is a textbook case of the Streisand Effect, where attempting to suppress information only makes it more widely known.

Let’s recap the PR fallout:

• In January 2018, news broke in the Wall Street Journal that Trump’s lawyer paid an adult film actress hush money for an affair. The NDA had successfully kept Stormy quiet through the 2016 election and a year after. One could argue it served its purpose up to that point. But once the story leaked, the existence of an NDA (though not the full content) became public.
• Michael Cohen, in responding to media, confirmed he paid Stormy $130k (while claiming Trump knew nothing). By doing so, he publicly acknowledged the NDA. This made the story even bigger – now it wasn’t rumor, it was confirmed there was a hush deal. Cohen likely thought admitting the payment (but distancing Trump) would quell the campaign finance angle, but it backfired legally and PR-wise. Stormy’s side said Cohen’s admission breached the NDA’s confidentiality, thus freeing her. And in the court of public opinion, it validated Stormy’s claims of a cover-up.
• Cohen’s ex parte arbitration move in Feb 2018 to gag Stormy immediately was a classic attempt at shutting the barn door after the horse has bolted. He got a private gag order, but Stormy was already gearing up with a new lawyer (Avenatti) and the press was reporting on it. That arbitration TRO was filed under seal, but Stormy’s lawsuit the next day made it public that such an order had been obtained. Now headlines blared that Trump’s lawyer was trying to silence Stormy via a secret arbitration. It fed a narrative of bullying and lack of transparency.
• By suing Trump in open court, Stormy turned the tables. The NDA and pseudonyms were published for all to see. Media and analysts ridiculed the contract (the “David Dennison” alias became late-night joke fodder). The very text of the NDA got dissected online (we saw Ken Adams calling it a “dumpster fire” of drafting). So instead of keeping things discreet, the enforcement attempt actually ensured the contract itself went viral.
• Public sentiment and credibility: Stormy, by breaking her silence (via the lawsuit and then the 60 Minutes interview after legal clearance), came off as the one telling the truth. The NDA’s existence implicitly corroborated that an affair happened – why pay someone if nothing happened? So ironically, the NDA’s exposure gave Stormy credibility. Trump’s side, who initially denied any affair, looked evasive. Later, Trump had to admit reimbursing Cohen. The whole saga made Trump look like he was lying (he had said he knew nothing, then evidence showed he did), and made Stormy a household name who largely won public sympathy, even among those who might not normally side with an adult film actress over a President.
• Enforcement misfire: Cohen and Trump’s team at one point threatened Stormy with millions in damages. In their federal court filings, they claimed Stormy had already breached 20 times and owed $20 million. This was technically asserting the liquidated damages clause: $1M × 20 breaches = $20M. While that might be a legal position in arbitration, including that in a public court document was a PR disaster. It made them look draconian – trying to crush a woman financially for talking about an alleged consensual affair. The public largely doesn’t like seeing Goliath sue David for $20 million over free speech. It further villainized Cohen/Trump and martyr-ized Stormy.
• The “Cohen enforcement misfire” indeed: Not only did their enforcement actions galvanize Stormy’s resolve (she said as much – that being threatened pushed her to fight), it also drew legal scrutiny from elsewhere. The arbitration and money trail caught the eye of federal prosecutors. The NDA and payoff became part of Special Counsel Mueller’s probe (tangentially) and then the Southern District of New York’s case against Cohen. In April 2018, the FBI raided Cohen’s home and office, reportedly seeking info on the hush payments. That raid probably would not have happened if the hush payment had stayed truly hush. The high-profile fight basically hung a sign that said “investigate this payoff.” By August 2018, Cohen pleaded guilty to campaign finance violations, admitting the Stormy payment was done “in coordination with and at the direction of” Donald Trump to influence the election. This was devastating politically and legally for Trump (though he wasn’t charged federally, it implicated him as essentially an unindicted co-conspirator).
• NDAs can’t stop prosecutors. Once Cohen was in criminal crosshairs, he spilled the beans under oath. Stormy’s NDA certainly didn’t stop Cohen from talking (by then, Cohen didn’t care – he was facing prison and cooperated). So the information came out anyway – through court filings, etc. Stormy even eventually released a book with full details, and because the NDA was non-enforced, there was nothing stopping her.
• Public relations own-goal: Had Trump’s camp not pursued the NDA in Feb/Mar 2018, perhaps Stormy’s story would have been a one-week wonder. Instead, the legal battle prolonged the news cycle for months and kept the story in headlines through much of 2018. Stormy and Avenatti were on TV constantly. Late 2018 saw Cohen’s guilty plea, keeping it in news. Even in 2019-2020, there were headlines as Trump had to pay Stormy’s legal fees (another PR loss). To cap it off, in 2023, a New York District Attorney actually indicted Donald Trump for state crimes related to falsifying business records about this hush money. It’s poetic: the NDA’s enforcement chain reaction led to what might be a criminal charge against Trump himself years later. All over an encounter that, absent the NDA fuss, might have been a minor footnote.

The Stormy NDA story is a glaring example that legal wins can cause PR catastrophes. Trump technically never paid a dime of damages for NDA breach; Stormy never paid that $1M (or $20M). Legally, one could say Trump “won” by having Stormy stick to the NDA until after the election and eventually dropping it without paying her more. But that “win” came at enormous cost: embarrassment, legal trouble, and ensuring the very subject went mainstream.

Enforcement risk assessment: When deciding whether to enforce an NDA breach, consider:

• Is the breach already public? If yes, suing may amplify it. This is especially true if the subject is interesting to the media. Stormy’s tale had sex, celebrity, and payoffs – catnip for press. Taking it to court guaranteed more coverage.
• What do you stand to gain vs lose? Trump enforcing NDA could at best get money from Stormy (which she likely didn’t have much of, relative to $1M penalties) and maybe silence her after the fact (though once she tells it, you can’t un-ring the bell). Versus the risk of exposure and legal consequences. In hindsight, dropping it early might have been wiser. That’s effectively what they eventually did, but only after maximum exposure.
• Sympathy factor: A powerful figure using an NDA to muzzle someone can look like bullying. This can backfire if the public sides with the weaker party. In corporate contexts, a company trying to enforce an NDA against a whistleblower or victim can suffer reputation damage (and now legal damage, under new laws).
• Criminal or regulatory triggers: As noted, forcing the issue might draw regulators or prosecutors. Another example: if a company aggressively enforces NDAs against former employees who talk about toxic practices, it might prompt regulators or lawmakers to step in (like what happened in Theranos or Weinstein’s cases – NDAs there spurred legislative changes when exposed).
• Ongoing relationships: In business, you might not want to be known as the company that sues employees for NDA breaches over, say, complaining about harassment – you’ll scare off talent and invite scrutiny. Sometimes it’s better to quietly settle things.

Humor/Analogy: I often tell clients, enforcing an NDA is like playing Whac-A-Mole: you might whack one mole (person) legally, but that often causes another mole (public interest, press, authorities) to pop up. And you can’t whack all those moles with an NDA hammer. In Stormy’s case, they whacked at Stormy and got whacked back by basically everyone else.

The Cohen example is particularly rich in irony. He went from the enforcer to a cooperator, from threatening Stormy with millions to paying her $130k to ultimately paying nearly $2 million in fines and restitution and serving prison time for that and other crimes. The NDA enforcement literally blew up his career and life.

Lesson for lawyers and clients: Consider the optics and downstream effects of NDA enforcement. Ask:

• Is this a fight we can win quietly, or will it Streisand-effect us?
• Even if we “win” legally, will the victory be pyrrhic (costly) in terms of reputation or unwanted attention?
• Is there an alternative resolution? (e.g., renegotiating with the party, or letting it go, or addressing the issue another way)
• Has the landscape changed? (In Trump’s case, once he was President, a sex NDA was near-impossible to enforce without intense scrutiny. The calculus should have changed from when he was a private citizen.)
• If you must enforce, can you do it in a way that minimizes exposure? (Maybe arbitration, but that only works if the other side doesn’t run to court like Stormy did. And now with many states limiting confidentiality in certain disputes, arbitration might not stay private either if someone challenges it.)

One strategic point: sometimes companies will enforce NDAs just to signal to others that they mean business, even if it’s messy. It’s a deterrence strategy. But with Stormy, deterrence wasn’t an issue (it was a one-off situation). In workplaces, I’ve seen companies sue a former employee for NDA breach to scare other employees from leaking. It can work internally but can also result in PR disasters externally (like suing a whistleblower can trigger bigger backlash).

In conclusion, the Stormy NDA enforcement ended up being a masterclass in how overplaying your hand can backfire. The lawyers involved (Cohen et al.) were perhaps too focused on “crush the opponent” and not enough on “consider the environment.” Stormy and Avenatti (despite Avenatti’s later downfall for unrelated reasons) outmaneuvered them by leveraging public forums. Once the issue moved from arbitration to the court of public opinion, the NDA was effectively unenforceable – not legally, but practically.

Thus, NDAs, especially high-profile ones, should not be seen as an absolute shield. They are a tool, but if relied upon too aggressively, they can become a spotlight. The Stormy saga likely made a lot of attorneys counsel their clients differently: sometimes letting a story die is better than litigating to the bitter end.

Post-Stormy Legislative Responses and Modern NDA Drafting

The public drama of the Stormy Daniels NDA unfolded in 2018, around the same time the #MeToo movement was exposing how NDAs had been used to silence victims of sexual misconduct (Harvey Weinstein being the prime example). While Stormy’s situation was an alleged consensual affair (albeit with public implications), it got lumped into a broader conversation: Are NDAs being abused to hide information the public should know? The result has been a wave of legislative changes, particularly in California, that restrict certain NDAs and impose new requirements on their drafting.

Here are the key legislative and legal responses since then, especially in California:

1. The STAND Act – California Senate Bill 820 (2018)

California passed SB 820 in 2018, effective January 1, 2019, known as the STAND Act (Stand Together Against Non-Disclosures). This law prohibits confidentiality clauses in settlement agreements in cases involving claims of sexual assault, sexual harassment, or sex discrimination in employment or housing. In plainer terms, if someone files a lawsuit in California alleging sexual harassment or similar, and you settle, you cannot include a clause that prevents them from discussing the underlying facts of the case. Any such clause is void as a matter of law.

• The only exception is that at the request of the claimant, you can keep their identity confidential (to protect victims’ privacy). But the perpetrator’s identity or the facts cannot be made confidential by demand of the paying party.

This was a direct reaction to high-profile cases (like Weinstein) where predators used NDAs to hide their behavior, only for it to continue. Lawmakers decided public policy against secret settlements in those contexts.

How does this relate to Stormy’s case? Indirectly. Stormy’s NDA wasn’t about harassment – it was a private deal about an affair. SB 820 wouldn’t apply to that scenario. However, Stormy’s very public fight further sensitized people to NDAs. It was part of the zeitgeist that NDAs can have far-reaching social consequences (hers possibly influenced an election).

2. The Silenced No More Act – California SB 331 (2021)

Seeing that SB 820 only covered sex-based claims, California passed SB 331 (Silenced No More Act), effective Jan 1, 2022. This law expanded the prohibition of NDAs to any kind of harassment or discrimination, not just sex-based, in workplace settings. So now, if an employee settles a race discrimination or age discrimination case, for example, the employer cannot insist on confidentiality of the facts. SB 331 amended Code of Civil Procedure §1001 (the section SB 820 had created) to cover all forms of prohibited workplace conduct.

SB 331 also addressed non-disparagement clauses in severance and employment contracts. It requires that any such clause include specific language that “nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”. If an agreement doesn’t have that carveout, the non-disparagement or confidentiality provision is invalid. So California essentially mandates a whistleblower carveout in employee NDAs/non-disparagements now.

Again, Stormy’s NDA was not in employment, but these laws reflect a trend: state law stepping in to void NDAs that conceal misconduct. It shows a shift in public policy – less tolerance for secret settlements that keep vital information hidden.

3. Federal Speak Out Act (2022)

At the federal level, the Speak Out Act, passed with bipartisan support and signed in December 2022, prohibits enforcement of predispute NDAs or non-disparagement clauses regarding sexual assault or sexual harassment disputes. In other words, if you, say, signed an NDA as part of getting a job (before any incident occurred) that would prevent you from speaking about any sexual harassment you experience, that NDA is unenforceable for those topics. It doesn’t affect NDAs signed after an incident as part of a settlement (those are still governed by state law like SB 820/331), but it addresses NDAs in employment contracts or other initial contexts.

While not directly triggered by Stormy’s case (it was more #MeToo-driven), it’s part of the larger scrutiny on NDAs.

4. Federal Ending Forced Arbitration of Sexual Assault and Harassment Act (2022)

Though about arbitration, it’s related: this law now allows employees to void any predispute arbitration agreement for sexual harassment/assault claims. That means even if they signed an arbitration clause (like Stormy had arbitration in her NDA), if it were an employment sexual harassment scenario, they could choose court anyway. This again shows the legislative intent to not let powerful parties hide issues through private mechanisms.

5. Campaign Finance Laws & Others

In the political realm, Stormy’s case highlighted that hush payments can be deemed campaign contributions. The Federal Election Commission (FEC) later fined Trump’s campaign and an associated entity for the Stormy payment (in 2021, the FEC fined Trump’s campaign $375,000 and AMI – the tabloid company involved in a separate catch-and-kill story – $187,500 for violating campaign finance law in these hush-money deals). So enforcement came through existing law rather than new legislation, but it sets a precedent: political candidates must be careful; an NDA payment timed with an election can lead to legal penalties or even criminal charges, as we’re seeing with the New York indictment in 2023 for falsifying business records related to the reimbursement.

Some have suggested making it explicitly illegal to use campaign funds for NDAs (it already kind of is, since campaign funds can’t be used for personal use, and hush money might be considered a campaign expense if primarily election-related, which if unreported is illegal). The law here is nuanced but the takeaway is: Stormy’s case alerted political actors that NDAs to silence allegations can cross into crime. That’s not a new law, but a new awareness.

6. California SB 3109 (2018) – Testimony in Court or Agency

California also passed a law (AB 3109, codified at Civil Code §1670.11) effective 2019 that says any contract or NDA that would prevent someone from testifying in court, legislative, or administrative proceedings about criminal conduct or sexual harassment is void and unenforceable. This ensures, for instance, if Stormy had been subpoenaed to testify about Trump in any official proceeding, the NDA couldn’t stop her. This was spurred by situations where companies tried to stop former employees from testifying in #MeToo hearings, etc.

This law basically enforces what was already likely public policy, but it made it explicit: NDAs cannot gag people from participating when justice calls.

7. Other States

California was at the forefront, but other states passed similar laws:

• New York in 2019 banned NDAs in harassment case settlements unless the victim wants it, and mandated that the victim have 21 days to consider and 7 days to revoke – ensuring it’s truly voluntary.
• New Jersey voided NDAs in settlements of discrimination/harassment claims (and interestingly said if an NDA provision is rendered unenforceable, the employer can’t then enforce the rest of the NDA against the employee – basically an anti-severability in favor of employee).
• States like Illinois, Washington, and others have also passed laws limiting NDAs in certain contexts (often employment or sexual misconduct related).

8. #MeToo NDA Backlash in General

The cultural shift is that NDAs are no longer seen as sacrosanct private contracts when they touch on public harm or important societal interests. Legislators carved out these exceptions so that NDAs cannot be used to perpetuate wrongdoing.

For NDA drafters in 2025 and beyond, this means:

• You must tailor NDAs to comply with these laws. For example, if I’m drafting a severance agreement in California with a confidentiality clause, I must include the “does not prohibit discussing unlawful workplace acts” carveout (SB 331 requirement). If I don’t, that clause is void and I risk the whole agreement being challenged.
• Know the state differences: If you operate in multiple states, an NDA that’s enforceable in one might be illegal in another. E.g., a broad non-disparagement might fly in Texas but not in California for an employee.
• Predispute vs postdispute: Many laws distinguish NDAs signed before any claim arises (like as condition of employment) vs those signed to settle a claim. The Speak Out Act voids the former for sexual harassment, but not the latter. So if you’re settling a claim of harassment, you can still include an NDA (though in CA state court that portion is void by SB 820). But if you include an NDA in an onboarding document, be aware it won’t stop an employee from later speaking about harassment.
• Federal Contractors: There are also some laws like the Defend Trade Secrets Act that have whistleblower immunity for trade secret NDAs if reporting to government or in court under seal. If you want to preserve the ability to recover attorneys’ fees under DTSA, you need to notify the signer of that immunity in the NDA. So modern NDAs often contain a notice of immunity for whistleblowing with trade secrets.
• Tax law consideration: As mentioned, the 2017 Tax Cuts and Jobs Act added IRC §162(q), which says if a settlement or payment is related to sexual harassment or abuse and is subject to a nondisclosure agreement, neither the payment nor the legal fees can be deducted as a business expense. This doesn’t void NDAs, but it discourages companies from insisting on NDAs in those cases by penalizing them financially. So many companies now will settle harassment claims without NDAs so they can deduct the payout, or they at least weigh that cost.

9. Modern NDA Clauses Post-Stormy/#MeToo

It’s now common to see language in NDAs such as:

• “Nothing in this agreement prohibits me from reporting possible violations of law to law enforcement or government agencies, or from responding truthfully to a valid subpoena or court order.”
• In employment agreements: “Employee retains the right to discuss or disclose information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct the employee has reason to believe is unlawful.” (This exact wording is often included to comply with CA’s SB 331).
• Time limits: Some NDAs now specify a term (like 2 years, 5 years, etc.) rather than forever, to appear more reasonable and avoid perpetual muzzling.
• No Retaliation: Especially in severance deals, employers might include: “Nothing herein prohibits you from engaging in protected activities or rights,” listing things like NLRA rights, etc., to avoid any claim that the NDA chills lawful activity.
• Mutuality (when appropriate): To appear fair, companies might make NDAs mutual (both sides won’t disparage each other, for example) rather than one-way, unless there’s a reason for one-way.
• Carveout for professional advisors and immediate family: Standard now to let a person tell their spouse or attorney or tax advisor, as long as those people agree to keep it confidential. This prevents the scenario of psychological harm by total silence or inability to seek counsel.

In Stormy’s case, none of those friendlier touches were present. It was brute force. Today’s climate encourages a softer approach, at least on paper, to avoid legal invalidation and to show reasonableness if scrutinized.

10. Impact on Corporate Practices

Many companies audited their use of NDAs after #MeToo. Some announced policies to not use NDAs in sexual harassment cases anymore (e.g., some big tech companies did so voluntarily before laws required it). Law firms also updated their templates to incorporate new laws – for example, every settlement agreement in a sexual harassment case I draft in California now explicitly says: “No confidentiality regarding the underlying facts can be imposed per CCP §1001; the parties acknowledge that nothing prevents the claimant from discussing the facts of the case.”

Also, NDAs with pseudonyms in high-profile matters (like Stormy’s) are now known to be huge liabilities if they become public. It’s such a bad PR look that I suspect many advisers would caution against it unless absolutely necessary. If anonymity is needed, other methods (like filing documents under seal, or confidential arbitration without pseudonyms in the actual contract) might be considered.

11. Post-Stormy: An Example

A noteworthy “son of Stormy” scenario is the Karen McDougal case. She was another woman who alleged an affair with Trump and was silenced via a deal with AMI (National Enquirer). Her NDA was actually a contract with the tabloid to sell her story and not publish it (a catch-and-kill). In 2018, after Stormy’s case gained traction, Karen McDougal sued to get out of her NDA with AMI, claiming she was misled. She reached a settlement that let her speak freely after a little negotiation. This shows that post-Stormy, others found empowerment to challenge NDAs.

12. Are NDAs Dead?

Not at all. NDAs are still extremely common in business (for trade secrets, M&A, partnerships) and generally enforceable. The changes have primarily affected NDAs in settlement of disputes or pre-dispute employment contexts. So:

• Companies can still protect trade secrets with NDAs (just with whistleblower caveats).
• NDAs in personal contexts (like family, private citizen deals, or between friends) are still generally fine, though one should still avoid anything unconscionable or illegal.
• The average celebrity still uses NDAs for staff or paramours (but they might be more limited; e.g., some celebrities reportedly put time limits or not pursue legal action if the info is about illegal acts by the celebrity, because they know it wouldn’t hold up).

However, public skepticism of NDAs means if one comes to light, people often assume the worst (“What are they hiding?”). Some jurisdictions considered outright bans on NDAs for certain things (like New Jersey’s law essentially voids any provision that has the purpose of concealing details of discrimination – arguably voiding even voluntary mutual NDAs). The trend is toward transparency when it comes to misconduct.

So for a California corporate lawyer (like me), drafting NDAs now requires:

• Incorporating required carveouts (so our NDAs explicitly mention the rights protected by law).
• Tailoring confidentiality to protect legitimate interests (trade secrets, customer lists, etc.) and not overreaching into areas that could be seen as restraining someone from reporting wrongdoing or sharing general workplace info.
• Considering choice of law: If I want an NDA governed by a state with less restrictions, will that even hold if the person is in California? Likely not if it contravenes fundamental CA policy. California law has a strong interest in protecting its residents/employees, so often you can’t contract around it by picking another state’s law for things like employment NDAs.
• Being mindful that even if an NDA is legally enforceable, it might be scrutinized, leaked, or legislated against later. So don’t put in “time bombs” like a crazy penalty or oppressive term that won’t pass the smell test.

Conclusion of Lessons: The Stormy Daniels NDA was a perfect storm (pun intended) that highlighted many pitfalls of NDAs. While it primarily embarrassed those involved and didn’t directly change the law, it contributed to a climate where lawmakers and courts are less tolerant of NDAs used to suppress information of public significance.

For modern NDA drafters:

• Do your homework on state laws (like CA, NY, NJ, etc., which have unique NDA laws now).
• Be specific about what’s confidential (broad “everything under the sun” clauses are more likely to be struck or abandoned).
• Include carveouts for legal compliance and protected activities, not just because it’s the law, but it also shows fairness if a judge reviews it.
• Avoid pseudonyms unless absolutely necessary, and if used, handle with extra care (side letters, all parties sign, etc.).
• Use liquidated damages sparingly and reasonably. $1M per breach might fly in a private agreement with equal bargaining (maybe between two companies of equal size) if justified, but with an individual, it looks like a hammer. Many NDAs choose not to have a dollar amount, relying instead on the threat of actual damages and injunctive relief. If you include an LD, make it defensible (e.g., a trade secret NDA might say $50k per breach or something arguably tied to likely costs).
• Severability and Attorney’s Fees: Still include them (Stormy’s had severability; not sure about fees clause, but typically NDAs say “prevailing party gets fees”). In Stormy’s case, because she ultimately was deemed prevailing, Trump had to pay her legal fees by court order. I wonder if the NDA had an arbitration fees clause that never got to play out because they mooted the case. Regardless, assume any fee-shifting might end up benefiting the other side if the NDA fails.
• Consider PR in enforcement: Advise clients on the optics. Sometimes the best legal advice is to not enforce or to find a different way (maybe let the person talk and respond via PR rather than sue, depending on context).

Finally, NDAs remain a useful tool – just not a tool to cover up serious misconduct as easily as before. As a solo lawyer, I still draft NDAs regularly, but I do so with a sharper eye on these lessons: keep it reasonable, keep it lawful, and always imagine how it would look on the front page of The New York Times. If an NDA would make you or your client look terrible if leaked, maybe rethink the underlying issue.

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FAQs

Below I’ll address some frequently asked questions about NDAs (Non-Disclosure Agreements), confidentiality clauses, and what we’ve learned from the Stormy Daniels saga. These address both general NDA concepts and specifics that arise from the Stormy Daniels case and the evolving legal landscape.

Can a non-disclosure agreement be binding if one party never signed it?

Answer: Generally, an NDA (or any contract) isn’t binding on a person who didn’t sign or otherwise agree to it. You need offer, acceptance, and consideration on both sides. However, there are scenarios where a non-signatory might still be held to (or benefit from) an NDA:

• Agency: If someone’s agent (like an attorney or business partner) signed on their behalf with authority, the principal can be bound even if they didn’t personally sign. In the Stormy Daniels case, Trump didn’t sign the NDA, but his lawyer did (via a shell company). Under agency law, if the lawyer had authority, Trump could be considered bound. Likewise, if you authorize someone to execute an NDA for you (e.g., your assistant signs an NDA with a vendor on your behalf), you’re bound.
• Third-Party Beneficiary: If the NDA is clearly intended to benefit a non-signatory, that person might enforce it. For example, say A and B sign a confidentiality agreement that any of A’s trade secrets disclosed by B can’t be shared. If those trade secrets actually belong to A’s parent company C (who didn’t sign), C might be seen as an intended beneficiary who can enforce the NDA. In Stormy’s NDA, Trump was arguably an intended beneficiary even though he didn’t sign, since the NDA was for his benefit.
• Estoppel/Ratification: If a non-signatory behaves as if they are part of the agreement, or accepts benefits from it, a court might estop them from denying the contract. In our context, Trump’s side arguably ratified the NDA by enforcing it (seeking arbitration) and by benefiting from Stormy’s initial silence. So even without signature, his actions signaled approval of the contract.
• But caution: A non-signatory also isn’t bound by obligations unless those doctrines apply. In fact, Trump’s lawyers later argued in court that because he didn’t sign, he wasn’t bound (they were trying to avoid paying Stormy’s legal fees by saying he wasn’t technically a party). The judge rejected that, citing evidence that he was a party through pseudonym/agent.

For everyday purposes: if you haven’t signed an NDA, you generally can’t be sued under it. But if your company signed and you’re an officer, the company could be liable for your disclosures. Or if your agent signed, you might be on the hook.

Key Takeaway: Whenever possible, get all parties who have obligations under the NDA to sign it. If someone important is left out (like the main beneficiary), explicitly include language binding them (or at least giving them rights) to avoid confusion. If you’re asked to adhere to an NDA you didn’t sign, know that enforcement against you would be difficult unless one of these special circumstances applies.

Did Stormy Daniels’s NDA fail because Donald Trump didn’t sign it?

Answer: Not exactly – the lack of Trump’s signature was one factor Stormy’s side used to challenge the NDA, but it wasn’t the sole reason it fell apart. Let’s break it down:

Stormy’s argument was that the contract was never formed because Trump never signed or personally agreed. And indeed, Trump’s missing signature created an appearance problem: on its face, it looked incomplete. However, as discussed, Trump’s lawyer signed on behalf of a company (Essential Consultants, LLC) and named “David Dennison” (Trump’s alias) as a party. Under law, that could be enough to bind Trump via agency or to let him enforce it as a third-party beneficiary.

If the NDA had gone to trial, a court might have found the agreement was binding despite Trump not signing, given Cohen’s role and Trump’s reimbursement of Cohen (implying he knew of the deal). In fact, in a later fee dispute, a judge did find there was plenty of evidence Trump was a party to the NDA (pseudonym or not).

The NDA “failed” ultimately because Trump’s side chose not to enforce it further (likely due to public pressure and legal risks). The lawsuit was dismissed because they agreed not to hold Stormy to it. So you could say it “failed” because Stormy fought back hard and they blinked.

However, had Trump signed it, Stormy’s case would have been weaker on the contract formation point. She still had other arguments (public policy, Cohen’s breach, unconscionability), so it’s not guaranteed it’d be enforceable even with Trump’s signature. But not having the signature gave her an easy argument and a PR talking point (“He didn’t even sign it!”).

In practical terms, a missing signature from a key party can doom an NDA. For instance, if two parties intend to sign an NDA but one never does, generally no contract is formed. In Stormy’s scenario, the intent was for Trump to sign (there was a signature line for him), but he didn’t. Stormy still got paid though, and she signed, so it put her in a bind – she had taken the money, implying acceptance. She tried to return the money later to negate that.

So – the NDA didn’t outright fail solely because of the signature issue, but that issue contributed to it unraveling. It allowed Stormy to get into court and created uncertainty around Trump’s ability to enforce it (which might be part of why he hesitated to sign – plausible deniability).

Lesson: Ensure all parties sign an NDA. If someone expected to sign doesn’t, fix that immediately with a proper signature or addendum. Otherwise, one side may later claim “I never really agreed.” In Stormy’s case, that tactic (Trump distancing himself) undercut the NDA’s strength.

What is a third-party beneficiary in contract law, and how did it relate to the Stormy Daniels NDA?

Answer: A third-party beneficiary is someone who is not an actual signatory to a contract but stands to benefit from its performance and whom the contracting parties intended to benefit. If such intent is clear, that third party can sometimes enforce the contract.

For example, say Alice buys a car from Bob’s dealership, and part of the sale contract says Bob will donate $500 to Charlie’s charity. Charlie is not a signer, but the contract is expressly for his benefit (the donation). Charlie is a third-party beneficiary and if Bob fails to pay, Charlie could potentially sue Bob for the $500 (even though Charlie wasn’t party to the original sale contract).

In the Stormy Daniels NDA:

• The signatories were Stormy (as “PP”) and Essential Consultants, LLC (Cohen’s entity, on behalf of “DD”).
• Donald Trump (“DD”) wasn’t a signatory, but the NDA was clearly designed to benefit him – it shielded his personal secrets and protected him from Stormy’s disclosures.
• The contract even named him via pseudonym and said it’s between EC and/or DD on one side and Stormy on the other.
• That wording signaled that Trump was an intended beneficiary: the parties intended that Trump benefit from Stormy’s silence. Under California law (and most jurisdictions), a contract can be enforced by an intended third-party beneficiary. The key is that the benefit to that third party was a motivating purpose for the contracting parties.

Stormy’s NDA terms (like giving “DD” all the rights to tapes, and penalties to be paid to “DD” for breaches) made it obvious the benefit was for Trump. So even without his signature, Trump could claim third-party beneficiary rights to enforce Stormy’s obligations. Stormy’s side even acknowledged this by suing Trump along with EC LLC – implicitly recognizing that if the NDA was valid, Trump had rights under it (otherwise they’d have just sued EC).

The judge in California, when awarding Stormy legal fees, noted the evidence showed Trump was indeed the intended beneficiary (no surprise).

So, the concept mattered because it countered the lack-of-signature issue. Even if Trump wasn’t formally a party, as a third-party beneficiary he could enforce the NDA’s terms as if he were, since it was clearly made for his benefit.

In contracts you or I deal with: common third-party beneficiaries are:

• Insurance contracts: If a life insurance policy lists a beneficiary, that person can enforce the claim when the insured dies.
• Construction contracts: A property owner might be a third-party beneficiary of a subcontractor’s warranty made in a subcontract.
• Trusts or credit agreements often explicitly name third-party beneficiaries.

One thing: to be a third-party beneficiary with enforcement rights, it usually must be clear that the benefit to that third party was a primary purpose of the contract, not just an incidental side-effect. In the NDA, benefiting Trump was the purpose, not incidental.

Conclusion: In Stormy’s NDA, Donald Trump functioned as a third-party beneficiary. The contract was intended to benefit and protect him, so he would have had standing to enforce it (for example, to sue Stormy for breach or demand arbitration) even though he didn’t sign. This is why Stormy’s lawsuit named him – to bind him in a declaratory judgment and prevent him from later saying “I can enforce it even if Cohen can’t.”

For anyone drafting NDAs: if you intend a non-signatory (like a parent company, or an executive) to have rights, either make them a party or explicitly state third-party beneficiary rights in the contract. Conversely, contracts often include a clause “No third-party beneficiaries” to prevent outsiders from claiming rights unless specifically enumerated. (Stormy’s NDA did not disclaim third-party beneficiaries – it actually implied one).

Are pseudonyms in contracts legally acceptable?

Answer: Yes, pseudonyms or using codenames in contracts can be legally acceptable and binding, but there are important caveats:

• The parties’ actual identities must be ascertainable (even if confidentially) so it’s clear who is bound.
• Both parties should understand who the pseudonyms refer to, and ideally, you document that in a separate writing (often called a “side letter” or “identity of parties” clause).

Use cases: Pseudonyms might be used when a famous party wants to keep their involvement secret. For example, an NDA or settlement might say “Party A (real identity disclosed in separate Confidential Side Letter) agrees with Party B…” This way, if the contract becomes public, the names aren’t obvious. We saw this in Stormy’s NDA: it said DD and PP are pseudonyms whose true identities are acknowledged in a Side Letter (Exhibit A).

Legally, a contract with pseudonyms can still be enforceable so long as:

• There is no confusion between the actual parties about who “DD” and “PP” are. (Stormy knew DD was Trump and Trump/Cohen knew PP was Stormy.)
• The pseudonym isn’t being used to defraud or mislead the other party. (In their case, Stormy was fully aware who DD was supposed to be; the pseudonym was to mislead others, not the contracting parties themselves.)
• If enforcement is needed, a court can receive evidence of the true identities (like the side letter or testimony). Courts care about substance over form – if they see that “David Dennison” is just a code for Trump, they will treat it as Trump.

Issues: While pseudonyms are allowable, they add complexity. For one, if a dispute arises, you have to break the anonymity to enforce (which happened with Stormy). Also, if a pseudonym is ambiguous (“and/or” as they used was problematic), it can cause confusion. Some commentators noted that using “and/or” with pseudonyms made it unclear if the contract was with the LLC, or Trump, or both. Clarity is key.

In some cases, people use pseudonyms plus a statement like “Party X is a fictitious designation used for privacy; the parties have executed a confidential addendum identifying Party X’s legal name.” Then both sign that addendum. That would make it pretty bulletproof that Party X is a specific person.

Stormy’s NDA and pseudonyms: They did have a side letter (Exhibit A) meant to list real names. Stormy’s lawsuit said the draft side letter was actually unsigned by Trump too (not sure if true). If it was unsigned, that’s a snag – ideally Trump would have at least signed the side letter acknowledging he is DD.

The pseudonyms themselves didn’t invalidate the contract. Courts have seen similar things (e.g., some celebrity cases or hush agreements in the past). If the case had gone to court, they’d simply say “we interpret ‘David Dennison’ to mean Donald J. Trump.” And indeed, Judge Broadbelt basically did that when he noted evidence that Cohen chose “David Dennison” as Trump’s pseudonym.

Bottom line: Pseudonyms are a contractual tool that can be used for confidentiality, but:

• They require extra steps (side letters).
• They don’t fool judges/arbitrators if it comes to enforcement – the real identity will be considered.
• You must be careful to ensure the pseudonym is consistently used and both sides agree who it is.
• Ethically, a lawyer should make sure the other party knows who they’re actually contracting with. (In Stormy’s case, her lawyer obviously knew it was Trump and even had his initials “D.D.” in places. If she hadn’t known, that’d be misrepresentation.)

In general, yes – you can have contracts with code names. For example, large M&A deals often use code names for companies in early documents (though by final contract they usually use real names). Those are still binding once the parties sign and know who’s who.

So pseudonyms in the Stormy NDA were legally fine in theory, just part of the attempt to keep it secret. The larger failure was not the use of pseudonyms, but that the pseudonym for Trump wasn’t backed by his signature and the whole situation unraveled publicly.

Can someone be sued for breaking an NDA if they were not paid the money promised?

Answer: If an NDA is part of a contract where one side promises payment (or some benefit) and the other side promises confidentiality, and the payment isn’t made, then we have a breach of contract by the payer and potentially a failure of consideration.

In such cases, the party who was supposed to be paid (the NDA recipient) might argue the NDA is not enforceable against them because the other side didn’t hold up their end of the bargain. Generally, if consideration for a contract fails, the other party is no longer bound to perform.

Applying this: Imagine Stormy signed the NDA but never received the $130,000. Could Trump’s side still enforce her silence? Likely not successfully, because their obligation (payment) wasn’t met. Stormy could sue for breach (to get the money) or rescind the NDA for material breach, and she wouldn’t be obligated to keep the secret if the whole contract falls apart due to non-payment.

In contract law, material breach by one party excuses performance by the other. Not paying the promised money is a material breach. Stormy’s NDA even contemplated rescission: her lawyer offered to give back the money when she wanted out, implying if money is returned, contract can be rescinded. The inverse is also true: if she never got money, she could rescind or claim it’s void.

So typically, if you weren’t paid, you can say “no deal” and you’re not bound (though the safe route is to seek a court declaration to that effect rather than just blabbing, to avoid risk).

However, timing and wording matter:

• Some NDAs are standalone (no payment, just mutual confidentiality from the get-go). In that case, payment isn’t an issue. But many hush agreements are essentially settlement contracts where payment is the consideration for silence.
• If, say, the NDA says “Payment to be made within 5 days” and it isn’t, that breach could allow the recipient to declare the NDA void or sue for payment. If they sue for payment, technically they’re affirming the contract (just enforcing it). If they want out, they’d rescind and give back what they got (or if they got nothing, rescind and owe nothing).

Stormy’s case: she was paid upfront (the money came through before she signed). So that scenario didn’t occur. But consider if Cohen never paid. Stormy would have had a strong argument in March 2018: “I got zero, so there’s no consideration, this NDA fails.” And a court likely would concur that without the payment, the NDA lacks consideration (making it invalid) or at least that Stormy’s duty of silence isn’t enforceable due to the other side’s material breach.

There’s a concept in contract law: condition precedent. The NDA might implicitly (or explicitly) say Stormy’s confidentiality is conditioned on receiving $130k. If that condition (payment) never happens, her duty doesn’t activate. Many settlement agreements say confidentiality obligations only become effective upon receipt of settlement funds.

So in practice:

• If you have an NDA for money and you haven’t been paid, you should consult a lawyer before spilling secrets, but you likely can either demand payment or declare the contract void.
• The other side cannot in good faith both fail to pay and try to enforce the NDA. A court would almost certainly not allow someone to enforce an NDA if they reneged on the promised payment (courts don’t reward breaching parties).

One exception: if the NDA had some weird clause like “even if payment is late or disputed, confidentiality still must be maintained,” possibly the breaching party could try to enforce at least the confidentiality while fixing the payment issue. But most judges would frown on that; equity would say you can’t hold them to it if you haven’t paid what you promised.

For example, if Cohen was a month late paying Stormy, and during that month Stormy spoke out, could they enforce? They’d say she breached, she’d say you breached first by late payment. It’d get messy, but likely Stormy would be on solid ground that a late payment (material delay) excused her, or at least that her speaking would offset damages since they breached too.

Lesson: Always perform your side of the bargain if you want to enforce an NDA. If the other side doesn’t get what was promised, they may be legally freed from their obligations.

And for the person expecting payment: if you’re not paid, you likely can consider the NDA void. But do it properly – perhaps give notice: “you didn’t pay me as agreed, therefore I consider our NDA terminated.” Best to give them a chance or at least document it, in case it goes to court.

Stormy sort of did that in reverse – she offered to give back the money to terminate the NDA. That’s her saying “I’ll undo my side (return money) if you free me.” If they hadn’t paid in first place, she wouldn’t even need to offer that; she’d be free by their failure.

Is $1,000,000 per breach a normal liquidated damages clause in an NDA?

Answer: It’s not “normal” in the sense of common or standard, but it’s not unheard of in certain high-stakes NDAs. That amount is extremely high and, in many contexts, would be seen as a penalty rather than a fair estimation of damages, making it legally vulnerable.

Most NDAs do not include a fixed dollar penalty per breach. They typically just say each party can seek remedies (injunctions, actual damages, etc.) through court or arbitration. When NDAs do have liquidated damages, the amount is usually more modest or formula-based, and it should bear some relationship to expected harm.

Examples:

• An employment NDA might say if an employee leaks trade secrets, they owe $50,000 as liquidated damages (some companies do that to avoid hard-to-prove damages).
• A settlement NDA might say if the plaintiff breaches confidentiality, they have to return the settlement money or pay a specific sum.

But $1,000,000 per occurrence is huge, and in Stormy’s case, seemed plucked from thin air to be terrorizing. Considering she was paid $130k, a million per breach is nearly 8 times that – arguably a punishment, not a reasonable forecast of damage.

Enforceability: Courts typically enforce liquidated damages if:

1. At the time of contracting, actual damages would be difficult to estimate, and
2. The liquidated sum is a reasonable estimate of potential damages (not a punitive number).

For Trump’s reputation, could one claim each breach cost $1M in damage? That’s dubious. It wasn’t tied to any analysis – it’s a round, large number. A California court may well have ruled it an unenforceable penalty (California Civil Code §1671b prohibits penalties and requires reasonableness for liquidated damages).

In fact, one could see that as unconscionable – it’s so high that it might have scared Stormy into not even getting legal advice (though she eventually did). That could be substantive unconscionability in bargaining power terms.

Why include it then? From Trump/Cohen’s perspective, it was to give teeth to the NDA. If Stormy breached and made, say, $500k from telling her story, the clause means she owes double that (or more, if multiple breaches). It’s meant to deter her and to ensure if she violates, they can bankrupt her or at least take all her profits. They even used it to threaten $20 million as breaches accumulated.

However, ironically, it backfired by making them look heavy-handed and by being legally questionable.

Normal practice: Most NDAs don’t use liquidated damages because:

• It’s hard to decide on a number that won’t be seen as a penalty.
• If too low, it might be seen as a license to breach (“I’ll breach and just pay the fee”).
• If too high, court may strike it or the other party might refuse to sign or later fight it.

In very sensitive NDAs (celebrity, trade secrets), I’ve seen clauses like “in the event of breach, the disclosing party shall be liable for $X or all profits gained from the disclosure, whichever is greater, as liquidated damages.” That at least ties it to something tangible.

The Stormy NDA also had a clause to disgorge any money she made from sharing info, separate from the $1M penalty. So they double-dipped: she’d lose any profits and owe a penalty.

So, $1M per breach is not standard. It’s an extreme measure mostly seen in hush agreements for very wealthy or public people (there were reports that Harvey Weinstein’s NDAs had similarly huge penalties, e.g., $250k per breach or something; some of Jeffrey Epstein’s agreements with victims had big penalties). It’s characteristic of a certain era of hush money deals – throw in a giant number to scare compliance.

But post-Stormy/MeToo, more people realize such clauses may not hold. In California, I as a drafter would be very hesitant to use a $1M per breach clause now; I’d warn the client a court might refuse to enforce it. I might instead say “material breach of this NDA will cause irreparable harm entitling the disclosing party to injunctive relief and liquidated damages of $___” with a number I can justify, or maybe just stick to “injunction plus actual damages including disgorgement of any profits from the breach.”

One more angle: If Stormy had breached, Trump’s lawyers likely would’ve sought an injunction first (to stop further breaches) and then monetary damages. The arbitrator’s TRO was the first step. The $1M clause is mainly to set expectation for damages. But since it’s so high, Stormy’s team would’ve fought it, and possibly gotten it voided, leaving Trump to prove actual damages (which could be hard – how do you quantify reputation damage?).

In summary: $1,000,000 per breach is not a typical term in NDAs for most folks; it’s a hallmark of a very aggressive NDA. It stands out, and any NDA with such a clause should be recognized as particularly harsh. If you see that in a contract you’re asked to sign, it’s a red flag that the other side means business (and you might negotiate it down or add a cap on total liability, etc.).

From Stormy’s perspective, that clause certainly put her at huge risk – another reason she went to court to invalidate the NDA rather than just quietly breaching and waiting to be sued.

What happens if you breach an NDA and the other side sues?

Answer: If you breach an NDA (for example, you disclose confidential info you promised not to), several things can happen when the other side takes legal action:

• Injunctive Relief (Gag Order): Typically, the party enforcing the NDA will seek an injunction to stop any further disclosures. This is a court (or arbitrator) order that you cease the breaching behavior. In Stormy’s case, Cohen got a temporary restraining order from an arbitrator to prevent her from speaking. Injunctions are a common remedy because, with NDAs, stopping the leak is often more important than money after the fact.
• Monetary Damages: They can also seek damages for any harm caused by the breach. If there’s a liquidated damages clause, they’ll claim that amount (e.g., $1M per breach in Stormy’s NDA). If not, they’ll claim actual damages – which might be, say, lost profits, harm to reputation, loss of secret advantage, etc., depending on context. Quantifying that can be tricky: e.g., if a trade secret is leaked, damages could be the lost value of that secret or profits the breacher made from it. If a personal secret is leaked, sometimes actual damages are minimal except possibly if it caused business deals to fall through or such.
• Attorneys’ Fees and Costs: Many NDA agreements include a clause that the prevailing party in a dispute gets attorneys’ fees. So if you breach and they sue and win, you might have to pay a hefty legal bill on top of damages. (And vice versa if they lose, sometimes they pay yours.) In Stormy’s saga, in the end, Trump had to pay Stormy’s legal fees for the declaratory judgment case, because she was deemed the prevailing party.
• Return/Destruction of Materials: If the breach involves documents or files, the court may order that you return or destroy any confidential materials. Stormy’s NDA had required her to hand over and delete all materials (like texts, photos) up front. If she hadn’t, they could force that via an injunction.
• Contempt of Court (if you defy orders): If an injunction is issued and you ignore it, you can be held in contempt, which carries fines or even jail in extreme cases. Courts don’t jail people for initial NDA breaches (it’s a civil matter), but if you violate a court order, then you’re in trouble.
• Settlement Pressure: Often, when sued, the breaching party might settle – maybe paying some money or agreeing to some conditions to avoid worse consequences. Or the enforcing party might settle if the cat is out of the bag and they just want to mitigate further damage.

In Stormy’s hypothetical breach scenario (if she had done the 60 Minutes interview without suing first), Trump’s side would have tried to get an emergency arbitrator order (which they actually did preemptively) and possibly slam her with a lawsuit for $1M (or multiple millions if counting each statement as separate breach). Stormy would then argue the NDA is invalid for reasons we’ve discussed. It would be a fierce legal battle.

For an average person breaching an NDA:

• If it’s with your employer and you leak trade secrets, they might sue for damages and an injunction. Possibly also, they’ll track down where the leak went (e.g., if you gave secrets to a competitor, they might sue the competitor too).
• If it’s an ex-employer, they can still sue post-employment if you had a surviving NDA obligation (most NDAs survive termination of relationship).
• If it’s a mutual NDA between businesses and one leaks, the other sues similarly.

Defenses: You could defend by arguing:

• No breach (the info wasn’t actually confidential or you didn’t disclose what they claim).
• The NDA is invalid (e.g., lack of consideration, signed under duress, etc.).
• The info is now public or was obtained independently, so no damages or no injunction needed.
• Fair use or legally protected disclosure (whistleblower protection, etc., as we’ve discussed).
• The scope of NDA is unreasonable (so maybe partial invalidity).

Consequences severity: In worst case, breacher pays big money. Eg: If a court upheld the $1M per breach clause, Stormy could owe, say, $5M for 5 statements – financially ruinous. Or in a trade secret case, you might owe millions if the secret’s value is high. Conversely, sometimes breach of an NDA might result in only nominal damages if the disclosing party can show little to no harm was done (but you’d still have legal expenses and potentially an injunction or settlement costs).

A recent example: a famous case is Omarosa Manigault Newman, a former Trump aide, who wrote a tell-all book. Trump’s campaign filed arbitration claiming she breached an NDA (from the campaign) by disparaging Trump in the book. In 2021, the arbitrator ruled the NDA was too vague and unenforceable, thus Omarosa won, and the Trump campaign had to pay her legal fees (~$1.3 million). That shows an NDA enforcement that backfired, similar to Stormy’s scenario. So if the NDA is overly broad, the breacher might actually end up winning in court, as she did.

Takeaway: If you breach an NDA:

• Be prepared for swift legal action, especially if the info is sensitive.
• It can get expensive fast – both in potential judgment and in needing to hire lawyers.
• The outcome will depend on the NDA’s enforceability and how damaging the breach was.
• It’s often better to seek a legal resolution (like ask a court to void the NDA before breaching, which is what Stormy did) rather than willfully breach and hope for the best.

In general, I advise clients that NDAs are enforceable and not to breach them lightly – you could be tied up in litigation and owe a lot. The Stormy case was unique with its publicity and politics, but most NDA breaches occur in quieter settings (like an ex-employee joining a competitor and sharing client lists – that often results in a cease-and-desist letter and lawsuit).

Can an NDA stop someone from talking to the police or government investigators?

Answer: No, an NDA cannot lawfully prevent someone from reporting possible criminal activity to the police or cooperating with government investigators (such as regulatory agencies or prosecutors). Any clause that tries to do so is unenforceable as against public policy, and in some cases, it could even be considered obstruction of justice if someone attempted to enforce it that way.

Why: The justice system and public safety take priority over private contracts. You can’t contract away the state’s right to obtain evidence of a crime or prevent someone from testifying truthfully under subpoena.

• Many NDAs include explicit carveouts: e.g., “Nothing in this agreement prohibits you from reporting possible violations of law to a government agency or law enforcement.” This is to make clear that the NDA isn’t intended to gag someone from whistleblowing or crime reporting.
• Even if the NDA doesn’t say it, that exception is usually read into it by law. For instance, if an NDA said “You will not disclose any information about X to anyone,” a court would not interpret that to include law enforcement. And now, as mentioned earlier, some laws (like California’s Civil Code §1670.11) expressly void any contract term that would stop someone from testifying about criminal or unlawful conduct when asked by authorities.
• NDAs also typically allow disclosure “if required by law” – cooperating with a police investigation or an agency like the SEC or EEOC often falls under that. If you get a subpoena or court order, the NDA’s legal process carveout kicks in.

In Stormy’s scenario, the NDA didn’t explicitly mention “police” but did say “law enforcement inquiries” – interestingly, it was more about Trump’s side not giving her name to law enforcement unless she breached. If a law enforcement agency subpoenaed Stormy for information on Trump, the NDA wouldn’t stop her from truthfully responding. Trump’s side might have tried to fight a subpoena (e.g., via attorney-client privilege or something if it involved Cohen), but not via the NDA’s terms on her.

Consider an example: Suppose you witnessed your company dumping toxic waste illegally, and you signed an NDA when you left. That NDA cannot stop you from reporting the environmental violations to the EPA or similar. If the company sued you for breaching NDA by whistleblowing, they would almost certainly lose, and the act of suing could itself become evidence of attempting to cover up a crime (which regulators frown upon).

Another angle: Under U.S. law, certain whistleblower communications are protected even if an NDA exists. For example:

• SEC Rule 21F-17 prohibits companies from using NDAs to prevent employees from contacting the SEC about securities law violations. Companies have been fined for having overly restrictive NDAs that might chill whistleblowing.
• The Defend Trade Secrets Act provides immunity if someone discloses trade secrets to government or attorneys solely for reporting or investigating a suspected violation of law.

Law enforcement interviews: If the police come knock and ask questions, you can talk. An NDA is not a legal basis to refuse answering law enforcement. It’s not a privilege like attorney-client or Fifth Amendment. You might inform the other party (if NDA requires) that “hey, cops asked me about X, I told them,” but you shouldn’t and legally can’t obstruct an investigation because of an NDA.

Subpoenas: If you get a grand jury subpoena or a court summons to testify, an NDA doesn’t excuse you from complying. Usually, you could even show the NDA to the court to potentially get a protective order (maybe the testimony can be under seal if it involves trade secrets), but you cannot just say “I refuse to answer because of an NDA.” If you tried, you could be held in contempt.

Stormy specifics: Had Stormy been subpoenaed by, say, Robert Mueller’s team or the New York DA while the NDA was in effect, she could and would have to talk. (In fact, she did meet with federal prosecutors in 2018 regarding Cohen’s campaign finance case, NDA notwithstanding). The NDA had language requiring her to notify Trump if legally compelled, and possibly try to quash it, but ultimately if it’s a valid order she must comply.

So the clear answer: NDA or not, you can talk to the police or government about possible illegal conduct. The NDA can’t punish you for that. At most, if you disclose more than necessary or do so in a way not covered by immunity, there might be a technical breach, but no court would enforce penalties for it.

In many states now (like New York, California), even non-criminal matters like harassment/discrimination are protected for disclosure to authorities or in legal proceedings. So NDAs are drafted to account for that.

Conclusion: If someone ever tries to tell you “you can’t report this crime because you signed an NDA,” know that’s not legally enforceable. Public policy will protect your right to report. Always, life and law > contract. NDAs are meant to cover voluntary disclosures, not mandatory or legally protected ones.

Did Stormy Daniels actually break her NDA?

Answer: Prior to being released from it, Stormy Daniels did not fully break the NDA in the sense of spilling all the explicit details while it was enforceable – she was very close to breaching and certainly prepared to, but she took the legal route instead.

Timeline:

• She signed the NDA on October 28, 2016 and received $130k.
• She remained silent through the 2016 election and for over a year after. In January 2018, Wall Street Journal reported on the hush payment (through other sources). At that time, Stormy (through a statement released by her former lawyer) actually denied the affair happened – ironically under pressure from Cohen, she issued a false public denial to uphold the NDA.
• By early February 2018, with the story gaining traction, Stormy wanted to speak out (she was in talks to do an interview). That’s when Cohen got the arbitrator’s gag order on Feb 27, 2018.
• On March 6, 2018, she filed her lawsuit asking the court to declare the NDA void. By taking that step, she (mostly) refrained from breaching until a court resolved it. However, she did tape a 60 Minutes interview around that time, but CBS held it until the legal situation was clearer.
• Once Trump’s side said they wouldn’t enforce the NDA (September 2018) and the lawsuit was dismissed (March 2019), Stormy was effectively free to talk – and she did, extensively (the 60 Minutes interview aired March 25, 2018, during litigation, presumably because her team felt confident; she also published a memoir Full Disclosure in October 2018, after it was clear they weren’t enforcing).

So, technically:

• She was about to break it in early 2018, but Cohen’s legal moves and her own lawsuit filing held her back until she got a green light.
• She did give the 60 Minutes interview while the suit was pending. That arguably was a breach if the NDA was still considered in force at that moment. Indeed, Trump’s lawyers cited that interview and other statements as breaches (20 breaches claimed). But because she contended the NDA was void, she went ahead. If the court had ruled against her, she could have been liable for those breaches. It was a calculated risk.

After the NDA was declared non-enforceable, anything she said isn’t a “breach” because the contract was deemed void (and Trump agreed not to enforce). A dismissed NDA can’t be breached.

So one could say she “broke” the NDA by speaking on TV while the outcome was uncertain, but in her view she was fighting it and it was invalid. Since ultimately the NDA was not enforced, she didn’t suffer consequences for those disclosures.

An interesting footnote: Because Trump’s side walked away, there was never an official finding “Stormy breached.” In fact, the opposite: the case ended with Stormy as prevailing party (and Trump paying her fees), implying she was justified.

In a practical sense, her actions in early 2018 definitely went against the NDA’s terms (she spoke to media, suedNeed guidance on NDAs? Every situation is unique. As a California attorney experienced in drafting and litigating NDAs, I can help ensure your agreements are effective and legally sound. If you have questions about NDAs or want one customized for your needs, feel free to reach out and schedule a consultation. It’s always better to get it right from the start than to face a dispute later – as the Stormy Daniels case has shown, an ounce of prevention is worth a pound of cure.