Anyone who missed the Anderson Cooper–Michael Avenatti–David Schwartz showdown on CNN tonight really needs to catch up immediately. Watching these guys go at it on live TV was nothing short of spectacular entertainment. Michael Avenatti – chief counsel to Stormy Daniels — did his best impression of a slick TV-lawyer, and while he wasn’t getting bogged down with ridiculous analogies, he desperately tried to play the sound bite game. David Schwartz, longtime friend and attorney for Trump-lawyer Michael Cohen, showed off some powerhouse bravado and great courtroom skills (except for the part where he was sometimes wrong on the law). Either way, it made for great TV. Law & Crime did our own analysis of the law and thought you might like to know how it actually works.
Was there a valid and enforceable contract between Donald Trump (or Michael Cohen, or David Dennison, or their company) and Stormy Daniels?
Schwartz says: “Yes, absolutely, and it’s ‘air tight.’”
Avenatti says: “No. An agreement has to be signed by all parties to be enforceable.”
Ruled: High marks for appearing confident, gentlemen, but you’re both wrong. Avenatti is more wrong, though, so we’re calling this round for Schwartz.
What the actual law says: when a party substantially performs as if there had been a signed contract in place, courts tend to find that the performance is enough evidence that a contract existed. People generally don’t pay $130,000 to porn stars out of sheer generosity, so the payment is excellent evidence that a contractual relationship existed. Signatures are nice, but money talks.
We’re pretty far from “air tight,” though. There are plenty of things that could prevent a contract from forming, even if the contract had been signed by all parties. Moreover, the fact that a contract exists doesn’t mean that everyone agrees on what the terms of that contract are.
Extra points to Schwartz on the issue of contract formation, though, for this gem: “if you think this is an invalid contract, why did you file a lawsuit? “
Ouch. Good point. Usually, when people are sure that no valid contract exists, they just go about their business. They don’t spend thousands filing lawsuits to get a court to officially declare the non-existence of a contract. It’s one of those, “better to ask forgiveness than permission,” situations.
Is there valid consideration for the contract?
Avenatti says: “There is no consideration. How could Cohen provide that consideration?”
Schwartz says: “The consideration is the nondisclosure in exchange for money.”
Ruled: Solidly for Schwartz.
How the law actually works: “consideration” refers to the requirement that a valid contract be predicated on the exchange of something legally valuable between the parties. As long as there’s an exchange, we’re good on consideration.
Did Michael Cohen violate the NDA agreement by speaking publicly about the $130,000 payment to Stormy Daniels?
Schwartz says: “Absolutely not, because [Stormy] had already violated it.”
Ruled: 30-day sentence for Schwartz to brush up on 1L Contracts.
How the law actually works: promises in contracts are usually considered “independent covenants.” That means that when someone breaches a contract, the other person gets to sue for damages. It does not mean that the aggrieved party simply gets to ignore his or her own obligations under the agreement. Sure, there are times when a breach would entitle a party to nullify a contract, but not every breach works that way; simply assuming that this contract would work that way is quite a stretch. We appreciate Schwarz’s certainty here, but he could use a little work on his issue-spotting.
Would Stormy Daniels really be liable for $20 million in damages if she breached the NDA?
Schwartz says: “She’s going to be liable for 20 mil and Cohen is going to collect every penny of that money.”
Ruled: David, don’t be buying a new summer house just yet.
How the law actually works: the liquidated damages clause in the contract is highly suspect. The contract may have obligated Daniels to pay $1,000,000 for each breach, but it’s pretty unlikely that such a clause would be enforceable, even if she were found to have breached 20 times. At almost eight times the price of the contract, $1 million per incident sounds a lot like a penalty. In California, like most states, liquidated damages clauses only work if they constitute a reasonable forecast of what actual damages might be. Penalties don’t work, and even if they did, Daniels probably doesn’t have $20 mil just lying around. So let’s all get control of ourselves.
Does a lawyer commit malpractice if he advises a client to violate a contract ?
Schwartz says: “You’re advising your client to break a contract. You’re the one that’s committing malpractice. When she owes $20,000,000, she should go after you.”
Ruled: Tread lightly, David. Malpractice is serious business.
How the law actually works: lawyers commit malpractice when they are unreasonably careless, when they take advantage of their own clients, or when they engage in conflicts of interest. Advising a client of the repercussions of breach of contract doesn’t come close to constituting malpractice, unless the advice was factually incorrect. As long as Michael Avenatti gave Stormy Daniels a sound assessment of the contract in question, as well as the potential financial harm she could suffer for violating that agreement, he has done nothing wrong, and the choice to breach the agreement would be hers alone. In fact, proceeding by filing a lawsuit for declaratory judgment on the issue of contract formation is perhaps the most cautious course of action in this scenario. Even if Avenatti had committed malpractice during his representation of Stormy Daniels, it would be pretty unlikely for a court to assess damages of $20 million.
Is David Schwartz violating the law because he’s on CNN talking about this case, even though he’s not admitted to practice in California?
Avenatti says, feigning shock: “You’re not even licensed in California?”
Schwartz says, unconcerned: “Nope.”
Ruled: Avenatti, WTF are you talking about? Stop talking before you embarrass yourself.
How the law actually works:
You’re both in a TV studio in New York, giving your opinions about a lawsuit. That’s not “practicing law,” even if you sent Stormy a bill for your time on set.
This is an opinion piece. The views expressed in this article are those of just the author.