Court Vacates Arbitration Award Against Former Trump Campaign Employee for Alleged NDA Violation

In Denson v. Donald J. Trump For President, No. 101616/17, 10334, 10334A, 2020 N.Y. Slip Op. 00923, 2020 WL 573113 (N.Y.A.D. 1 Dept., Feb. 06, 2020), the court, inter alia, struck down arbitration awards – predicated on claimed violations of a non-disclosure, non-disparagement agreement (NDA) – against an ex-employee of Donald J. Trump’s presidential campaign.

Plaintiff, the former Director of Hispanic Engagement for defendant (the company that ran Donald J. Trump’s 2016 presidential campaign), alleged that during her employment, she was subject to a hostile work environment and experienced sex discrimination, and that after she complained, high ranking persons in the campaign retaliated against her. She pursued an action in state court, and subsequently filed a lawsuit in federal court, seeking a declaration that the NDA was void and unenforceable as against public policy.

The First Department held that the portion of the arbitration award for disclosure of confidences in filing an action in federal court (in which plaintiff attacked the validity of the NDA) violated public policy. In reaching this conclusion, the court noted the arbitrator’s statement that plaintiff breached the NDA “by making disparaging statements about [defendant in the Federal action]”.

The court continued:

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. [S]tatements uttered in the course of a judicial … proceeding are absolutely privileged. This is true so long as the statements are material and pertinent to the issues involved and regardless of the motive with which they are made. This legal principle is also found in cases where a party claims it was defamed in court or court documents. Disparagement, although not exactly the same as defamation, is analogous because both torts concern communications of a negative and unflattering nature. In defamation actions, [p]ublic policy mandates that certain communications, although defamatory, cannot serve as the basis for the imposition of liability. To hold otherwise would impede justice by hamper[ing] the search for truth and prevent [the] making [of] inquiries with that freedom and boldness which the welfare of society requires. [Citations and internal quotation marks omitted.]

Applying the law, the court concluded:

Plaintiff’s negative statements about defendant, for which the arbitrator made an award, were made in the context of the federal action in which she sought a declaration that the NDA was unenforceable (Rosenberg v. MetLife, Inc., 8 N.Y.3d at 365–366, 834 N.Y.S.2d 494, 866 N.E.2d 439). 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. Defendant is hard-pressed to explain how plaintiff could have pursued her rights without setting forth necessary factual statements for the federal court to consider.