Will A Salacious Dispute Be Arbitrated Behind Closed Doors?

By: Rob Harris 

Assume for the sake of our discussion that there is a high powered, well known figure who, among other things owns a number of high end golf courses, and escapes from a grueling day job just about every weekend to spend time at one of his favorite clubs. Assume further that the aforementioned person, let’s call him Mr. X, engaged in certain activity with another individual, let’s call her Ms. Y, that, if disclosed, might cause him difficulty in achieving a professional goal and/or certain challenges on the home front. Finally, assume Mr. X, with the help of a close confidant, sought to ensure the problematic events would not see the light of day by effecting a payment to Ms. Y in exchange for promises of sealed lips.

How might Mr. X best assure himself that, if Ms. Y decided to revisit her promise of confidentiality, he could secure enforcement of the contractual arrangement with minimal public scrutiny?

Tee up an arbitration provision.

This way, when Ms. Y starts making noise about making noise, Mr. X can claim a breach of the agreement. Rather than make a public filing, he can assert the claim in front of an arbitrator.

Such, apparently, is what happened in the case of celebrated golf course owner, Donald Trump, against the ostensible noise maker, Stormy Daniels. With the agreements having been made public, we see that the agreement provides as follows:

5.2 Dispute Resolution. In recognition of the mutual benefits to DD and PP of a
voluntary system of alternative dispute resolution which involves binding confidential arbitration of all disputes which may arise between them, it is their intention and agreement that any and all claims or controversies arising between DD on the one hand, and PP on the other hand, shall be resolved by binding confidential Arbitration to the greatest extent permitted by law. Arbitration shall take place before JAMS ENDISPUTE (“JAMS”) pursuant to JAMS Comprehensive Arbitration Rules and Procedures (including Interim Measures) (“JAMS Rules”) and the law
selected by DD, (such selection shall be limited to either, California, Nevada or Arizona), or before ACTION DISPUTE RESOLUTION SER VICES (“ADRS”) pursuant to the ADRS Rules (including Interim Measures) and the law selected by DD (whichever the claimant elects upon filing an arbitration), in a the location selected by DD, and will be heard and decided by a sole, neutral arbitrator (“Arbitrator”) selected either by agreement of the Parties, or if the Parties are unable to agree, then selected under the Rules of the selected arbitration service…

The Arbitrator shall have the right to impose all legal and equitable remedies that would be available to any Party before any governmental dispute resolution forum or court of competent jurisdiction, including without limitation temporary, preliminary and permanent injunctive relief, compensatory damages, liquidated damages, accounting, disgorgement, specific performance, attorneys fees and costs,and punitive damages.

Since arbitration proceedings are deemed private, we have no knowledge (until someone leaks it), of where the arbitration proceeding occurred, who is / was the arbitrator, who participated, what evidence was introduced.

We have heard that the arbitration likely was a preliminary proceeding that resulted in a temporary restraining order directing Ms. Y not to talk about those matters she agreed would remain confidential.

Against this background, Ms. Y filed suit, seeking a court order that she is not bound by the agreement, or by the arbitration provision. In her court complaint, her lawyer refers to the proceeding as a “bogus arbitration.”

Great fodder for those of us who participate in the arbitration process as arbitrators, counsel and parties.

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