Contract Law Blog Essay

Revealing Secrecy Tools

Warning my students to put their politics aside, I circulated the “Stormy Daniels” non-disclosure agreement (NDA) for the first day of my 1L Contracts course. It served well as an introduction to many of the course’s topics. Like a child’s drawing of a misshapen, non-functional house, the NDA gave the appearance of a contract while revealing a deep misunderstanding of its proper architecture. We had before us such an obviously miserable version of a contract that we could begin to identify what an actual one might say.

My students could identify the NDA’s component parts and how they were constructed, as well as the drafter’s intent and how it could be (and ultimately was) frustrated. They wondered at the drafter’s various bad word choices, repetitions, and formatting decisions. Each provision held an Easter egg for the discerning student to discover or a laugh line seemingly borrowed from SNL. Most strikingly, the contract begins on Page 0 and includes, in its all-cap title, the typo “NON-DISPARAGMENT [sic] AGREEMENT.” One student sheepishly remarked to me after class that she worried about joining a profession that could have produced such an abomination of composition.

The Stormy Daniels NDA also inspired discussion of the NDA as a species of contract. Is it per se immoral, and should it be illegal, to buy someone’s silence with an enforceable agreement? Here, the students’ neophyte status, and perhaps their lack of confidence, required me to push them. “Shouldn’t a company be able to keep its trade secrets confidential and require its employees to maintain that confidence,” I asked. “And of course,” I continued, “an intelligence agency could, and indeed should, require its employees to sign away their First Amendment right to speak of their classified work after they leave the agency.” So why couldn’t anyone, with sufficient knowledge and a reasonable amount of bargaining power, bargain away their right to future speech, as well as their right to litigate in court about their right to speak?

The issues surrounding NDAs aren’t merely theoretical for academics and counsel. NDAs are now intimately related to our politics, as well as to larger questions of human relations and rights. By hiding public harms and widespread private ones, NDAs create public costs notwithstanding their seemingly private nature. The sexual abuse and harassment which the #MeToo movement had disclosed, for example, had been protected in many instances by NDAs.

The Stormy Daniels NDA, along with the many other Trump NDAs that have been revealed, thus represent merely the large, intensely radioactive tip of a proverbial iceberg. Hillary Clinton’s 2016 presidential reportedly used them (though required them of fewer staffers); earlier in the decade, NDAs that silenced victims of the Catholic Church’s sexual abuse scandal and presidential hopeful Herman Cain became public. But Trump’s NDAs appear to be unprecedented for a public figure and elected official. The President and his various legal entities, partners, and supporters (including Fox News), have required employees and others to sign NDAs in order to protect President Trump from exposure, expanding the universe of promises well beyond those with whom the President has allegedly had an isolated or occasional dalliance. The contracts impose silence on those who have held a range of professional and personal relationships with the President, and cover a wide range of issues of a political as well as of a personal and prurient nature. Trump has sought to use NDAs signed with the private presidential campaign against former campaign employees about work performed while they were employed by the federal government.

Such NDA abuses are multifaceted as well as widespread. Agreements can require silence or they can permit comment so long as it is not disparaging; they can limit the scope of silence to certain subjects or can enumerate a broad, seemingly endless set of subjects; they can remain silent about litigation or force any challenge to the contract to binding arbitration. The most extreme versions, to which Trump agreements like the Stormy Daniels NDA aspire, attempt to impose complete silence not only about the information that the promisee could disclose but about the agreement itself.

Much of the public, academic, and activist response to NDAs has focused especially on those keeping sexual harassment secret and proposed means to curb an abusive practice. Some call for courts to employ contract law tools to curb abuses—assuming, of course, that courts rather than arbitrators can review them. Courts could find certain NDAs unconscionable. Or they could refuse to enforce them as a matter of public policy. State legislatures have enacted or are considering bills that would make such NDAs more difficult or impossible to impose. Maryland’s “Disclosing Sexual Harassment in the Workplace Act of 2018,” for example, prohibits corporations with more than fifty employees from using an NDA as part of sexual harassment settlements; New Jersey’s similar bill has passed both of the state’s legislative houses. Pending before the U.S. Congress is the ME TOO Congress Act, which would prohibit the use of NDAs to settle sexual harassment claims within the Legislative Branch.

For several reasons, however, such fixes will not perfectly solve the problems of abusive NDAs. First, the solutions won’t be perfect. Some academics worry about legislative and judicial overreach, arguing that intervention into these agreements should be limited and targeted in order to avoid excessively inhibiting individual autonomy, impinging on personal privacy, and creating reputational harms disproportionate to an individual’s acts. If they prove excessive, the fixes will themselves face reform. But if the fixes try to distinguish among different kinds of NDAs or among different kinds of behaviors about which promisors agree to remain silent, they will create legal uncertainties for courts, litigants, and contracting parties.

Second, such fixes will not stop efforts to impose and agree to NDAs that create public harms. The will to purchase silence and the willingness to sell it are likely to survive efforts to prohibit such transactions. The Stormy Daniels NDA is the perfect example of this. Wholly inexpert and abusive (its liquidated damages provision, for example, required the promisor to pay $1,000,000 per breach), it demonstrates how easily someone can be bought off and then cowed into silence with the threat of colossal penalties and legal bills. In similar instances, contracting parties may not know that the agreement could ultimately prove unenforceable, and the person whose silence is being promised may not have the money or wherewithal to afford to challenge the contract later.

But there is a non-legal consolation, one consistent with my larger observation that information proves very difficult to control. These agreements can—and do, on many occasions—become public. And when NDAs are exposed, their power to menace and threaten turns on their users, exacerbating the impact of the information they were intended to conceal.

This phenomenon was observable in my Contracts classroom, and has been on full display throughout the country via #MeToo. The Stormy Daniels NDA turned a dalliance into a subject of ridicule, revealing its maker and the principal he represented to be unprincipled bullies. Sometimes, as with Harvey Weinstein and Roger Ailes, powerful figures are brought down not only by revelations of their awful behavior but also by the additional shock of the NDAs (whose existence no doubt encouraged further awful behavior and enabled further victimization).

The NDAs’ exposure can also devastate those individuals and institutions who knew of and helped cover up the initial behavior. Reputations preserved by weaponized silence rest on increasingly shaky foundations; revealed NDAs not only increase the extent of the reputational damage but widen its scope to others within the abuser’s orbit. While not a solution to bad behavior, our understanding of NDAs’ existence and use weakens their efficacy as secrecy weapons. And now that we know more about how they are abused, we can be more aggressive in shaming those who abuse them.

President Trump proves that exposure does not constitute a universal corrective. He appears to have suffered minimal cost (at least as of this writing) from the Stormy Daniels NDAs, for example. No doubt his organization will continue to deploy them, and his agents will continue to use them to threaten current and former employees. As in seemingly all things Trump—think of the leaked Access Hollywood tape and all of the norms of presidential behavior he seems to have violated—the president’s NDAs represent an exception from the norm.