Trump Campaign Non-Disclosure and Non-Disparagement Provisions Deemed Unenforceable

On Tuesday, SDNY  Judge Paul Gardephe issued this opinion in Denson v. Donald J. Trump for President, Inc. (the Campaign) which challenged the enforceability of the non-disclosure agreements (NDAs) that campaign workers were required to enter into.  Judge Gardephe granted plaintiff's motion for summary judgment and declared the NDA non-enforceable as to her.  She brought her claim as a class action, so it remains to be seen whether this opinion will affect all others similarly situated.

People who work for the Trump Campaign were required to promise not to disclose any "confidential information," broadly defined to include anything Mr. Trump wanted to be remain private or confidential, relating to "Mr. Trump, any Family Member, any Trump Company or any Family Member Company."  All these terms were defined to be as inclusive as possible.  The NDA provides for a range of remedies for violations and, of course, includes a provision mandating arbitration in the state of New York.

Why would a loyal Trumpist violate the NDA?  In Denson's case, it was because she wanted to sue the Campaign, alleging sex discrimination, harassment, and slander.  The Campaign responded, filing an arbitration alleging that Denson had breached the NDA through disclosures made in connection with the lawsuit.  Denson did not participate in the arbitration, and the outcome was a $25,000 judgment against Denson.  From there, things got complicated, with motions in multiple venues, state and federal and aggressive actions by the Campaign, including restraining notices filed against Denson's attorney's escrow accounts.  The Campaign had a series of wins, but ultimately New York's Appellate Division vacated the arbitral award on the ground that the Denson's allegedly defamatory comments were made in the context of a federal action and that punishing her for availing herself of her legal rights violated public policy.

In the current round of litigation, the Campaign alleged that Denson lacked standing on the ground that the Campaign had "no present intention to enforce the Employment Agreement’s non-disclosure and non-disparagement provisions against Denson."  The court rejected this claim as inadequate to deprive Denson of standing.  The Campaign's claim that Denson was collaterally estopped from challenging the NDA seems like a closer call.  The arbitration had upheld the NDA's enforceability, and that finding was not reversed in the litigation over enforcement of the award.  However, that failure to reverse had no collateral effects, Judge Gardephe held, as the courts reviewing the decision had no jurisdiction to review mistakes of law made in the arbitration.

On the merits, Judge Gardephe applied the Ashland standard and inquired into whether the NDA's non-disclosure provisions were “reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee."  He concluded that it failed each prong of the Ashland test.  The scope of the NDA was, as a practical matter, unlimited.  While the Campaign has legitimate interests in protecting itself against certain disclosures, the NDA effectively prohibits campaign workers from discussing anything relating to the campaign and leaves them no way of knowing what actions would count as a violation.

Even if the court were to set aside the Ashland standard, Judge Gardephe noted, the NDA is unenforceable under basic principles of contracts law.  Denson could not consent to an agreement under which it was impossible for her "to know what speech she has agreed to forego."  The analysis as to the NDA's non-disparagement provisions was similar, and the court could find no "blue-pencil" approach that would enable it to excise offensive provisions.  As a result, the court granted Denson's motion for summary judgment to the extent that it invalidated the Campaign's non-disclosure and non-disparagement provisions.