What Businesses Can Learn From Trump’s Failed Nondisclosure Agreement

Jessica Denson, a former campaign worker for the Trump organization, filed a harassment and sexual discrimination claim against the Trump campaign.  She filed her lawsuit in New York court, but Trump’s lawyers argued that it must be resolved in private arbitration pursuant to the agreement Denson signed.

Arbitration provisions are often included in contracts because people think (often incorrectly, in my opinion) that it is cheaper and faster to resolve disputes in arbitration than in court.  In this case though, Trump’s team included this provision likely because he wanted all disputes to be kept in a private and confidential arbitration hearing.  If the lawsuit was in court, there would be no secrets about the case and there would be continuous coverage by the press.

The disputed arbitration clause stated:

“any dispute arising under or relating to this agreement may . . .  be submitted to binding arbitration in the State of New York pursuant to the rules of commercial arbitration of the American Arbitration Association”

Judge Bluth made two major rulings.

  • First, she said “[this clause] does not require arbitration for any dispute between the parties,” The language only stated that it “may  . . . . be submitted”  If Trump required arbitration, he should have stated “must. . .   be submitted.”
  • Second, the judge said the clause did not even require arbitration of “any dispute arising out of plaintiff’s employment.”  The Nondisclosure Agreement only covered five prohibited acts, rather than all aspects of Denson’s employment.  Because the sexual harassment claim was not one of the five acts listed, the arbitration clause is not applicable.  So, if Trump really meant to cover everything that could arise out of their relationship, he should have said so.

Judge Bluth’s ruling is important because this language is presumably in all the other Nondisclosure Agreements signed by employees and White House staff members.  Including, ironically and humorously, Omarosa’s.

So, what does this really all mean?

It means that if you really want to have your disputes arbitrated (and I’m not always a fan of this), you better make sure that your language is precise and that it covers the contemplated scenarios for arbitration.

Let’s discuss when to use an arbitration clause in your contracts.  Call me at 248-455-6500 or email me at [email protected]