Labor & Employment Law Daily Arbitration award against former Trump campaign director accused of breaching NDA vacated
News
Wednesday, February 12, 2020

Arbitration award against former Trump campaign director accused of breaching NDA vacated

By Kathleen Kapusta, J.D.

“There is a deep-rooted, long-standing public policy in favor of a person’s right to make statements during the course of court proceedings without penalty,” the court wrote.

Although an arbitrator found a non-disparagement agreement (NDA) signed by Donald J. Trump for President, Inc.’s, former Director of Hispanic Engagement was neither void nor unenforceable, a New York state appeals court vacated the award in its entirety. The employee’s negative statements about the Trump defendants were made in the context of a federal court lawsuit in which she sought a declaration that the NDA was unenforceable. “By concluding that the allegations in the federal action are tantamount to disclosure of confidential information violative of the NDA, the arbitrator improperly punished plaintiff for availing herself of a judicial forum,” the court wrote. Further, the remainder of the award, which was based on statements she made in tweets and on a GoFundMe page, was in excess of the arbitrator’s authority as limited by the company’s demand for arbitration (Denson v. Donald J. Trump For President, Inc., February 6, 2020, per curiam).

Non-disparagement agreement. As a condition of employment with the company that ran Donald Trump’s 2016 presidential campaign, the employee signed an NDA containing broad prohibitions against disclosing, disseminating, or publishing any confidential information detrimental to then candidate Donald J. Trump, or any “Trump Person,” which was defined to include various Trump family members and Trump entities (collectively, Trump). She was also prohibited from demeaning or disparaging Trump publicly. The NDA provisions had no temporal duration or geographic restriction, and applied to all manner of expression in all and any contexts. Confidential information included all information “that Mr. Trump insists remain private or confidential. . . .”

Lawsuit. She alleged that during her tenure with the company, she was subjected to a hostile work environment and sex discrimination, and when she complained, high-ranking campaign officials retaliated against her. She sued in state court in November 2017, asserting claims under the NYCHRL for sex discrimination, retaliation, and a hostile work environment, as well as claims for defamation and intentional and negligent infliction of emotional distress.

Arbitration demand. The following month, Trump filed a demand to arbitrate pursuant to an arbitration provision in the NDA. The arbitration demand stated that she “breached confidentiality and non-disparagement obligations contained in a written agreement she executed during her employment with claimant Donald J. Trump for President, Inc. She breached her obligations by publishing certain confidential information and disparaging statements in connection with a lawsuit she filed against claimant in New York Supreme Court. Claimant is seeking compensatory damages, punitive damages, and all legal fees and costs incurred.”

Federal lawsuit arose out of agreement. In March 2018, Trump moved to compel arbitration. Denying the motion, the lower court held on August 9, 2018, that her claims arose out of her employment and were not covered by the NDA. In the meantime, the employee filed a federal lawsuit against Trump, seeking a declaration that the NDA was void and unenforceable as against public policy. Trump then filed another motion to compel, which the federal court granted on August 30. Explaining that its decision was not inconsistent with the state court’s decision, the court observed that in her federal lawsuit, the employee did not bring “affirmative claims arising out of her employment” but rather she raised “a dispute that arises out of the agreement,” namely whether it was enforceable.

Arbitration award. When Trump proceeded with the arbitration process, the employee sent a letter to the arbitrator arguing that pursuant to the August 2018 state court decision, her NYCHRL claims were not part of the arbitration, and she was appealing the federal court’s finding that the validity of the NDA as a whole should be decided at arbitration. The arbitrator subsequently issued an award finding that the NDA was neither void nor unenforceable and that the employee had breached it by “disclosing, disseminating, and publishing confidential matter in the Federal Action, and by making disparaging comments about [c]laimant and the [a]greement on the Internet on her GoFundMe page and on her Twitter account.”

The employee then moved in state court to vacate the award, and in July 2019, the lower court denied the motion (In a July 2019 order, the federal court, denying cross-petitions to vacate and confirm the arbitration award, found that the state court judgment had preclusive effect in that litigation.) Appealing, she argued that the award violated public policy and the arbitrator exceeded his authority as limited by the arbitration demand.

Too broad. The employee first argued that by prohibiting virtually any negative statement about the campaign and Trump Persons, the NDA was so broad and over-inclusive that it violated public policy. But not only was there no legal basis for it to conclude that non-disparagement agreements per se violate public policy, there was no legal basis, said the court, to find that an arbitrator can’t decide issues regarding NDAs and their permissible scope.

Litigation tactic. And while she also argued that the NDA was “weaponized” by Trump to “suppress and defeat her human rights violation claims,” her public policy argument, observed the court, was really that Trump initiated the arbitration action as a litigation tactic. And such an inquiry, said the court, “is contrary to established law that a strong public policy justifying the vacatur of an arbitration award must be apparent from the face of the award, without extended factual inquiry.”

Public policy violation. Turning to the employee’s assertion that the award itself violated public policy or exceeded the arbitrator’s authority, the court noted that the award could be broken into two parts, the first being an award for the disclosure of confidences in filing the federal action, in which the employee attacked the validity of the NDA. And that portion of the award, said the court, in which the arbitrator found the employee breached the NDA “by making disparaging statements about [defendant in the Federal action],” violated public policy.

Statements in judicial proceedings. “There is a deep-rooted, long-standing public policy in favor of a person’s right to make statements during the course of court proceedings without penalty,” the court explained. “By concluding that the allegations in the federal action are tantamount to disclosure of confidential information violative of the NDA, the arbitrator improperly punished plaintiff for availing herself of a judicial forum.”

Scope of arbitration demand. As to the remainder of the award, which was based on tweets and statements on the employee’s GoFundMe page, the arbitration demand was limited to statements made “in connection” with the state court action and the award on its face “did not allow for a conclusion that the offending conduct was made within the scope of the Demand to Arbitrate.” Thus, the court vacated the award in its entirety.

Interested in submitting an article?

Submit your information to us today!

Learn More
Employment Law Daily

Labor & Employment Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on labor and employment legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More