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Lawsplainer: Michael Cohen's Attempt To Delay The Stormy Daniels Litigation

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Oh my God. Oh my God. Ohmigod ohmigod OMG.

Now what?

This Michael Cohen thing.

You're going to have to be way more specific.

He's trying to take the Fifth! He wants the Stormy Daniels lawsuit stopped so he can take the Fifth!

Well. Sort of.

Isn't that huge?

Yes and no.

That's not helpful. You're not being helpful.

Imagine my guilt. What is it that you want to know about? What part of the Stormy Daniels lawsuit don't you understand?

Just a tiny bit of it. Just a bit. Some. Part of it. Just part . . . all of it. I don't understand any of it. I don't know what's going on, I just nod when people talk about it.

Okay. Let's start from the beginning.

So. Stormy Daniels, whose real name is Stephanie Clifford, claims she had a relationship with Donald Trump in 2006 and 2007. She claims that when the infamous "grab them by the pussy" Access Hollywood tape became public, she wanted to tell her story to the media. Once she started shopping her story, she says that Trump — through Michael Cohen — approached her and negotiated a non-disclosure agreement — $130,000 for her silence. The parties to the agreement were "Essential Consultants LLC", a company formed just before the 2016 election, Mr. Trump (referred to as "David Dennison,") and Ms. Clifford (referred to as "Peggy Peterson."

Is . . . is it normal to have a nondisclosure agreement with aliases and a party that's a new company that you just started?

No. No it is not.

Anyway, Ms. Clifford got a $130,000 payment under the agreement. When the existence of the agreement became public in February 2018, Mr. Cohen began making statements about it and about Ms. Clifford, and sought to enforce the provisions of the agreement (including the gag order on Ms. Clifford and the penalty provision) in a secret arbitration proceeding.

Ms. Clifford, through her current attorney Michael Avenatti, filed a lawsuit in Los Angeles County Superior Court asking the court to hold that the agreement is not enforceable, so that (1) she can talk freely and (2) she won't be penalized for talking. You can read that here. Clifford sued Donald Trump "aka David Dennison" and Essential Consultants, the company Mr. Cohen created.

Then, in what they thought was a shrewd move but was not, Essential Consultants removed the case to federal court.

Removed it! Wow. Removal, with the removing and stuff. Exciting. I understand.

. . .

I don't know what that means.

OK. Federal courts, broadly speaking, can hear two types of cases. One type is a case that alleges a violation of a federal statute. The other is a case under what's called "diversity jurisdiction." The idea, historically, is that state courts might not treat someone from another state fairly, so if a case involves disputes from people from different states, you can "remove" it to federal court, and litigate it there. Put simply, if someone sues you in state court, you can remove it — that is, transfer it — to federal court if there is "complete diversity" — if no plaintiff is from the same state as any defendant. Also, the amount at issue has to be high enough.

So here, Essential Consultants (supported by Trump) moved the case from California state court to United States District Court for the Central District of California, because Clifford is from Texas, Trump lives in DC, and Essential Consultants is a Delaware company. The notice of removal is here.

Was that a good idea?

No it was not. Conventional wisdom is that federal courts are better for the defense and more likely to enforce arbitration agreements. However, federal judges move faster and abide by deadlines and rules more closely, and are substantially less tolerant of bullshit than state judges. If substantial portions of your defense are premised on bullshit and delay, don't remove to federal court.

So. What's the issue in federal court?

Well, the main issue is whether the nondisclosure agreement — and especially the part that requires disputes to be arbitrated in private — are enforceable. If they are enforceable, then Trump (and, I suppose, "Essential Consultants") could conceivably get a gag order against Clifford and get massive damages against her for breaching the confidentiality agreement, and could do so through a private arbitration proceeding instead of in public.

But wait a minute. Stormy Daniels already told her story in public. It's been all over the media. All this litigation does is draw more attention to it and, potentially, make Trump or Cohen answer questions about the hush money. How does it make sense for Trump and Cohen to try to enforce the nondisclosure now that the cat's out of the bag?

It's a very foolish move.

Unless, of course, Trump and Cohen are worried that failing to pursue Clifford will signal to others than other nondisclosure agreements will not be enforced.

But really, even then.

Okay. So even Ms. Clifford says that she signed this agreement and got the $130,000, right? So how can she say that she's not bound by the nondisclosure agreement and the arbitration clause?

You can read her arguments in her amended complaint in federal court.

She has three main arguments. First, she says that there was never an enforceable contract. Her argument is this: Trump never signed the contract. Now, normally, that wouldn't be a good argument — Clifford signed it, and she accepted the money, which is enough to enforce it against her. But here the contract has some ill-considered boilerplate language that it's only effective once everyone signs it. Don't put that in your contracts if you're not going to get everyone to sign them.

Second, she says that the contract is unconscionable. Very rarely, a court will refuse to enforce a contract if its terms are too shocking and one-sided. Clifford claims that the million-dollar penalty and other terms, all one-sided, and that there's no penalty if Trump or Cohen breach (by, for instance, Cohen's rant to the media).

Third, she argues that the contract is void because it's against public policy. Courts refuse to enforce certain contracts that contradict strong public policy — as one example, you can't contract to conceal a crime from the police, and can't contract to kill someone. Here, Clifford argues that the contract is against public policy because it's meant to evade federal campaign contribution limits (in the sense that the $130,000 to silence Clifford represents an undisclosed and excessive contribution to Trump's campaign) and because it suppresses speech about a candidate for President.

Clifford argues that because the whole contract is void, the arbitration clause is void.

These are, at least, plausible arguments.

Is that all?

No, in her amended complaint, Clifford threw in a defamation claim against Cohen, on the theory that he justified paying her hush money by saying "Just because something isn't true doesn't mean it can't cause you harm or damage." Clifford claims that's defamatory because it states that she's lying.

I think that's an unusually weak defamation claim — the statement is hyperbole in the context of trash-talking about litigation, and isn't even definite, and therefore isn't a provable statement of fact. Cohen has filed an anti-SLAPP motion against that claim, which I think he might win if the case ever moves forward.

Wait a minute. If there's an agreement saying all disputes are arbitrated, who decides the dispute over whether the agreement is valid?

You spotted the loophole! People trying to enforce arbitration agreements always argue that the arbitrator should decide whether they are enforceable. People trying to break them always argue that a judge should decide first. The law in the area is something of a mess, but it's often the case that the arbitrator decides.

There's a significant exception, and Clifford is trying to take advantage of it. The Federal Arbitration Act generally controls arbitration agreements in federal court. Under that Act, if a party disputes that the arbitration agreement was formed at all (as Clifford does here), the federal court can hold a mini-trial on that issue alone. Essential Consultants has asked the federal court to send the whole thing — including the attacks on the validity of the agreement — to arbitration. But Clifford has asked the Court first to hold a mini-trial on whether the contract was ever formed at all, and — crucially — to allow limited discovery into that point through depositions of Cohen and President Trump.

That's where it was when the shit hit the fan.

The search of Michael Cohen's office?

The search of Michael Cohen's office, which was huge.

This immediately created grave dilemma for Michael Cohen. On the one hand, the litigation in California would require him to testify — in arbitration if not in the deposition Clifford requested — and would require him to otherwise commit himself to facts. But based on that search, the FBI is clearly investigating him based on the hush-money agreement with Clifford. It's likely that the government's theory is that Cohen engaged in transactions that broke campaign finance laws by paying the $130,000 to protect Trump's campaign, and perhaps committed other violations arising from that core violation. It would be absolutely reckless for him to start talking about the circumstances; the only good advice is to lawyer up and shut up.

Incredibly — and uniquely, in the course of the Trump people's behavior in the last year — Cohen has done something smart. Well, sort of. He's decided to preserve his option to shut up. He's asked the federal court to stay the case — freeze it without activity — because it implicates his Fifth Amendment rights in the criminal investigation.

He can take the Fifth in a civil case? I thought that was for criminal cases.

You can take the Fifth anywhere. The difference is the consequence. If you take the Fifth in a criminal proceeding in which you are the defendant, it can't be held against you. The prosecutor can't even mention it to the jury. But in a civil case, taking the Fifth — that is, asserting your Fifth Amendment right to remain silent — can have serious negative consequences. If you're the plaintiff in a civil case and take the Fifth, the case can be dismissed. If you're a defendant, there can be all sorts of other bad consequences. The jury can be told to consider that you took the Fifth. The Court can prohibit you from introducing any evidence on the issues on which you took the Fifth, so that you can't effectively contradict the Plaintiff's evidence. You can be left unable to prove essential parts of your defense. It's pretty disastrous and it's very hard to defend a civil case while taking the Fifth.

So, when faced with a criminal investigation, both plaintiffs and defendants often ask the civil court to stay — freeze — the civil case while the criminal investigation or prosecution is going on.

And do courts to that?

Sometimes they do, sometimes they don't. The Court is supposed to use a five-part test to decide whether to stay the case. The factors are (1) the plaintiff's interest in moving forward and the harm to plaintiff if there is a delay, (2) the burden on the defendant if the case moves forward, (3) the convenience of the court, (4) the interests of third parties, and (5) the interests of the public.

How do you think it will go?

I think Clifford has the better argument by far.

Her opposition brief is very strong. She points out that Cohen has already run his mouth extensively about the hush money transaction in the media, so his interest in shutting up can't be that strong. She points out that Cohen himself initiated an arbitration proceeding to try to shut Clifford up. She points out that Cohen filed a declaration in this civil case about the formation of the contract even after the FBI's search warrant, and gave a statement about the matter the day after the search.

Moreover, Clifford points out that Cohen's motion is extremely vague — it amounts to saying "look, the FBI is investigating the same general subject." He doesn't explain what specific subjects of testimony (including, for instance, the source of funds or his communications with Trump) that could incriminate him. Finally, she points out that the case is of national interest and has attracted huge public attention, weighing against a stay.

Cohen's failure to commit that he will take the Fifth doesn't help either. Perhaps because taking the Fifth is so widely perceived as a sign of guilt (which, of course, it is not), Cohen's not ready to say definitely that he will take the Fifth to any questions about the transaction — he's sticking with the wishy-washy argument that his rights are "implicated." That's compounded by the fact that his lawyers, asked about him taking the Fifth, publicly denied that he had decided to do so, and suggested that doing so was premature. In other words, they undercut their own stay request.

Wow. That's . . . wow.

I KNOW, RIGHT? I think you only get one smart move per quarter out of Cohen. Contemplating taking the Fifth was his. Now it's all downhill until July or so.

So where does this leave us?

Judge Otero, who is hearing this, is a very no-nonsense judge who likes things to be orderly. I expect a thorough written opinion from him on the stay promptly — within days, I suspect. The best thing Cohen has going for him is that he's only asking for a 90-day stay. Judge Otero may look at this daily-escalating national legal catastrophe and decide that shutting down the civil case for a few months to see how things work out is not a bad idea. Or he may just say Cohen hasn't carried his burden of showing he need a stay.

What happens then?

It depends on the ruling. If Judge Otero grants the stay, then Cohen will have mitigated the harm from this very foolish litigation for the time being, allowing him to focus on his troubles in New York. If Judge Otero denies the stay, next he'll have to rule on whether Clifford gets to take limited discovery and get a mini-trial to determine whether the contract was ever formed and therefore whether the case should go to arbitration. If Judge Otero allows that, then Cohen will have to decide whether actually to take the Fifth when confronted with questions. Buckle up.

Will you update this post when Judge Otero decides?

If I feel like it.

Copyright 2017 by the named Popehat author.
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jimwise
6 days ago
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Nice write-up...
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April 15, 2018: Mayfair Games

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Mayfair For those who missed it, Mayfair Games, as of early February, has essentially been sold to Asmodee. One good discussion is on Boardgamegeek.

The mayfairgames.com website has now been replaced by a single page that states:

Mayfair Games Site [sic] is now being managed by Asmodee, North America.
Any inqueries [sic] can be made through the contact form on their site.
There [sic] website is https://www.asmodee.us/en/support/


A disrespectfully brief and illiterate epitaph for a company that helped shape our hobby. Goodbye, Mayfair.

Steve Jackson

Warehouse 23 News: Make Your Home Down Below!

Hang your heroic hat in an exciting home, courtesy of GURPS Dungeon Fantasy Setting: Caverntown. This urban environment is the perfect landing spot to pass through, have a few adventures, or make your permanent residence. And it's both underground and the center of a dungeon complex! Your trip of a lifetime begins with a download from Warehouse 23!
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jimwise
7 days ago
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:-(
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The Search of Trump Lawyer Michael Cohen's Office: What We Can Infer Immediately

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The Very Big News of the day: FBI Agents raided the law office of Michael Cohen, President Trump's lawyer who was involved in payment of $130,000 to adult performer "Stormy Daniels" for a nondisclosure agreement.

Recently I've been listening to the Podcast "Slow Burn," about Watergate. There's a fascinating theme throughout it: when you're living a historical event, how do you know? How can you tell when a development is a Big Deal?

This is a big deal. It's very early on, but here's some things we can already tell.

1. According to Cohen's own lawyer, the U.S. Attorney's Office for the Southern District of New York (widely regarded within itself as being the most important and prestigious U.S. Attorney's Office in the country) secured the search warrants for the FBI. Assuming this report is correct, that means that a very mainstream U.S. Attorney's Office — not just Special Counsel Robert Mueller's office — thought that there was enough for a search warrant here.

2. Moreover, it's not just that the office thought that there was enough for a search warrant. They thought there was enough for a search warrant of an attorney's office for that attorney's client communications. That's a very fraught and extraordinary move that requires multiple levels of authorization within the Department of Justice. The U.S. Attorney's Manual — at Section 9-13.320 — contains the relevant guidelines and regulations. The highlights:

The feds are only supposed to raid a law firm if less intrusive measures won't work. As the USAM puts it:

In order to avoid impinging on valid attorney-client relationships, prosecutors are expected to take the least intrusive approach consistent with vigorous and effective law enforcement when evidence is sought from an attorney actively engaged in the practice of law. Consideration should be given to obtaining information from other sources or through the use of a subpoena, unless such efforts could compromise the criminal investigation or prosecution, or could result in the obstruction or destruction of evidence, or would otherwise be ineffective.

Such a search requires high-level approval. The USAM requires such a search warrant to be approved by the U.S. Attorney — the head of the office, a Presidential appointee — and requires "consultation" with the Criminal Division of the U.S. Department of Justice. This is not a couple of rogue AUSAs sneaking in a warrant.

Such a search requires an elaborate review process. The basic rule is that the government may not deliberately seize, or review, attorney-client communications. The USAM — and relevant caselaw — therefore require the feds to set up a review process. That process might involve a judge reviewing the materials to separate out what is privileged (or what might fall within an exception to the privilege), or else set up a "dirty team" that does the review but is insulated from the "clean team" running the investigation. Another option is a "special master," an experienced and qualified third-party attorney to do the review. Sometimes the reviewing team will only be identifying and protecting privileged material. Sometimes the reviewing team will be preparing to seek, or to implement, a court ruling that the documents are not privileged. (Robert Mueller is aggressive on this sort of thing; he already sought and obtained a court ruling that some of Paul Manafort's communications with his lawyers were not privileged because they were undertaken for the purpose of fraud — the so-called "crime-fraud exception" to the attorney-client privilege.

3. A Magistrate Judge signed off on this. Federal magistrate judges (appointed by local district judges, not by the President) review search warrant applications. A Magistrate Judge therefore reviewed this application and found probable cause — that is, probable cause to believe that the subject premises (Cohen's office) contains specified evidence of a specified federal crime. Now, Magistrate Judges sometimes are a little too rubber-stampy for my taste. But here, where the Magistrate Judge knew that this would become one of the most scrutinized search warrant applications ever, and because the nature of the warrant of an attorney's office is unusual, you can expect that the Magistrate Judge felt pretty confident that there was enough there.

4. The search warrant application (the lengthy narrative from the FBI agent setting for the evidence) is almost certainly still under seal, and even Michael Cohen doesn't get to see it [yet]. But the FBI would have left the warrant itself — and that shows (1) the federal criminal statutes they were investigating, and (2) the list of items they wanted to seize. Much can be learned for those. Assuming Michael Cohen doesn't release it, watch for it to be leaked.

Again: this is a Big Deal.

I'll follow up with more as it becomes available.

Copyright 2017 by the named Popehat author.
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jimwise
13 days ago
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Welcome SSL/TLS and Good-Bye Facebook

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We know that you like to keep your private data private. And our software and processes are designed to keep it that way. Here’s what we’ve done recently to protect your privacy and security as well as our own integrity in these matters:

  • Data protection iconOur website and all of its subdomains use SSL/TLS encryption now. You’ll notice that they use https: instead of http: and all common browsers show a padlock icon or similar in the address bar when you visit them. If they don’t please let us know.
  • We have unpublished our Facebook page. While sharing personal data with other companies is well covered by their terms of service we don’t like the idea. We believe that the service should be the product, not the user. So we’ve followed Elon Musk’s lead.
  • We’ve updated our Privacy page with information about the EU General Data Protection Regulation. We’ll continue to amend this page and notify you here via our blog should there be any changes from our side in the future.

We only store personal information related to purchases in our online shop so that we can, e.g., resend you your license code if needed. Our software never shares any data with us except for anonymized usage statistics and crash logs. And this only if you purchased them in the App Store and agreed to sharing this information with developers.

If you have any questions on what data we store and why, or why not, please feel free to contact us.

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jimwise
16 days ago
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Facebook Info Loss Now Up to 2 Billion

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How many people have had their personal information compromised by Facebook? Here’s how the estimates have changed over time starting from early March:

  • 270 thousand
  • 50 million
  • 87 million
  • 2 billion

Meh. What’s a factor of 10,000 between friends? And make no mistake: we are all friends now, whether we want to be or not.

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17 days ago
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Cutting “Old Heads” at IBM

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Peter Gosselin and Ariana Tobin (Hacker News):

The company reacted with a strategy that, in the words of one confidential planning document, would “correct seniority mix.” It slashed IBM’s U.S. workforce by as much as three-quarters from its 1980s peak, replacing a substantial share with younger, less-experienced and lower-paid workers and sending many positions overseas. ProPublica estimates that in the past five years alone, IBM has eliminated more than 20,000 American employees ages 40 and over, about 60 percent of its estimated total U.S. job cuts during those years.

[…]

The company’s pre-2014 layoff documents required employees receiving severance to waive all bias claims based on “race, national origin, ancestry, color, creed, religion, sex, sexual orientation, pregnancy, marital status, age … disability, medical condition, or veteran status.” The new documents deleted “age” from the waiver list. In fact, they specifically said employees were not waiving their right when it came to age and could pursue age discrimination cases against the company.

But, the new documents added, employees had to waive the right to take their age cases to court. Instead, they had to pursue them through private arbitration. What’s more, they had to keep them confidential and pursue them alone. They couldn’t join with other workers to make a case.

With the new documents in place, IBM was no longer asking laid-off workers to sign away their right to complain about age bias so, the company’s lawyers told the EEOC, the disclosure requirement in the 1990 amendments to the age act no longer applied.

[…]

IBM has also embraced another practice that leads workers, especially older ones, to quit on what appears to be a voluntary basis. It substantially reversed its pioneering support for telecommuting, telling people who’ve been working from home for years to begin reporting to certain, often distant, offices.

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jimwise
20 days ago
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1 public comment
peelman
20 days ago
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i am torn on this. i dislike IBM, and i hate this practice. but i also don’t have a good take on WHY i hate it. I can’t take the stance that Coal miners need to move on as we shift from fossil fuels, but then say IBM should pay these guys out through retirement if they aren’t the most effective (whether from a technical or cost perspective) employees.

i do think it’s shady as hell to fuck with their ability to seek discrimination suits; but from a company perspective, if you just need an army of drones who can follow directions, do you really need to pay an army of senior engineers six figures or could you get the same result from a junior making $60-70k right out of school?

courts probably aren’t going to be kind to a company saying that its not about their age, it’s about fairness and their experience demands salaries that the work doesn’t justify, so i can see IBM wanting a litigation shield. but the shades of gray in there make it hard to see where the line is.
Seymour, Indiana
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