Denson v. Donald J. Trump for President, Inc.: When non-disclosure and non-disparagement provisions are too vague to understand.

| Mar 31, 2021 | Firm News |

Denson v. Donald J. Trump for President, Inc.: When non-disclosure and non-disparagement provisions are too vague to understand.

Many clients have contacted our office with questions regarding the scope of their restrictive covenant agreements (RCAs). Sometimes these agreements preclude disclosing “confidential information and trade secrets,” which are defined by an endless array of items that leave you wondering whether anything you know about your former employer is not confidential. Sometimes these agreements prohibit you from publicizing anything negative about your old boss or company. These particular types of RCAs (i.e., non-disclosure and non-disparagement agreements) can leave you wondering if you are capable of even having an opinion of your former employer, let alone if you can file a lawsuit to seek a declaration of your rights.

Before examining a recent high-profile RCA that failed at the trial court level, a couple basic tenets of RCA law should be discussed. The first regards the certainty of any material terms. Sufficient definiteness of material terms is important if the parties can be expected to know how to fulfill their obligations under the contract. Ambiguous terms tend to be construed against the drafting party since that party had the power to clarify those term(s) and failed to do so. Second, an RCA must be reasonable to be enforceable.[1] This generally means each restraint must not (1) be greater than is required for the protection of the employer, (2) impose an undue hardship on the employee, or (3) injure the public.[2]

With these tenets in mind, let’s examine the recent order that voided an RCA in Denson v. Donald J. Trump for President, Inc., Case No. 1:20-cv-04737 (S.D.N.Y. March 30, 2021). Back in August 2016, Jessica Denson was a national phone bank administrator for President Trump’s campaign (the “Campaign”). The Campaign offered Denson the position on condition that she and other Campaign employees sign an Employment Agreement, which consisted of a form contract with non-disclosure and non-disparagement clauses.

The Employment Agreement provided as follows:

During the term of your service and at all times thereafter you hereby promise and agree:

  1. Not to disclose, disseminate or publish, or cause to be disclosed, disseminated or published, and Confidential Information;
  2. Not to assist others in obtaining, disclosing, disseminating, or publishing Confidential Information; [and]
  3. Not to use any Confidential Information in any way detrimental to the Company, Mr. Trump, any Family Member, any Trump Company or any Family Member Company[.]

The Employment Agreement further defined ‘Confidential Information’ as:

All information (whether or not embodied in any media) of a private, proprietary or confidential nature or that Mr. Trump insists remain private or confidential, including, but not limited to, any information with respect to the personal life, political affairs, and/or business affairs of Mr. Trump or of any Family Member, including but not limited to, the assets, investments, revenue, expenses, taxes, financial statements, actual or prospective business ventures, contracts, alliances, affiliations, relationships, affiliated entities, bids, letters of intent, term sheets, decisions, strategies, techniques, methods, projections, forecasts, customers, clients, contacts, customer lists, contact lists, schedules, appointments, meetings, conversations, notes, and other communications of Mr. Trump, any Family Member, any Trump Company or any Family Member Company.

As to non-disparagement, the Employment Agreement states:

During the term of your service and at all times thereafter you hereby promise and agree not to demean or disparage publicly the Company, Mr. Trump, any Trump Company, any Family Member, or any Family Member Company or any asset of any of the foregoing own, or product or service any of the foregoing offer, in each case by any of the Restricted Means and Contexts and to prevent your employees from doing so.

Denson worked as an employee of the Campaign for about three months. A year later, she raised claims of sex discrimination, harassment, and slander against the Campaign. These allegations were publicized through her Twitter and GoFundMe accounts. When the Campaign attempted to compel arbitration based on Denison’s breach of her confidentiality and non-disparagement obligations, Denison filed suit in the Southern District of New York seeking (1) a declaration that the Employment Agreement is void and unenforceable and (2) to enjoin the Campaign from enforcing its Agreement.

On March 30, 2021, Judge Paul G. Gardephe found the Campaign’s non-disclosure agreement to be unreasonably vague and thus unenforceable. He criticized the lack of any time limitation, finding the NDA’s application to “the term of your service and at all times thereafter” to be – as a practical matter – unlimited. This effectively means the Agreement could be read to bar Denson from breaching the Agreement for the rest of her life. As for the “confidential information” Denson was precluded from disclosing, the Court found the 35 categories of information to be likewise – as a practical matter – unlimited. Many of the categories – including “personal life,” “relationships,” and “political and business affairs” – were deemed to be undefined and vague, and the agreement gave President Trump carte blanche authority to decide at any time what information is private or confidential. The entities entitled to protection as third-party intended beneficiaries to the RCA were likewise vague, as President Trump alone is affiliated with more than 500 companies, let alone those affiliated with his family members. In sum, the terms of the RCA were not sufficiently definite to be enforceable.

One might reasonably argue whether such RCA language is important given the varied legitimate interests political campaigns – particularly presidential ones – have in protecting. Legitimate interests could include information about private decisions and strategies about targeting voter populations, allocating financial and personnel resources, fundraising and marketing strategies, and analyzing campaign strengths and weaknesses. But even so, Judge Gardephe found the RCA as drafted was so broad that no campaign employee could reasonably know what they could disclose about the campaign – or when. Denson thus stands for the proposition that if a former employee cannot possibly know what speech she has agreed to forego, there can be no mutual assent between the parties to make the RCA enforceable.

An important caveat here is that Denson (which may well ultimately be appealed to the Second Circuit Court of Appeals) presents a case where a federal judge applied New York contract law to the agreement at issue. A judge viewing these same facts under Ohio contract law may reach a different conclusion. For example, certain Ohio courts may have been more inclined to rewrite provisions found to be unreasonable as Ohio is a “blue pencil” state. But multiple Ohio courts have found fault in failing to include a temporal limit and may not be inclined to write in reasonable duration and geographical scope terms where none exist. As Denson illustrates, vague and indefinite terms can be problematic when it comes to understanding the legitimate business interests that a company seeks to protect in enforcing its RCAs.

Most restrictive covenant agreements are not drafted as broadly as the Campaign’s Agreement. They usually include time and geographic limitations, albeit onerous ones that most former employees struggle to comply with. If you find yourself at a loss trying to understand the complexities and implications of your RCA, we are here to help. Consult one of our trusted attorneys to learn of your options in how best to deal with these restrictions.

[1] See Raimonde v. Van Vlerah, 42 Ohio St.2d 21, 71 (1975).

[2] Id.