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Suing a Former Employee Under an NDA has Substantial Risks… Even If You’re Donald Trump

April 26, 2022
NDA

In what appears to be the largest attorney fee award against a political campaign or president, an arbitrator ordered Donald J. Trump for President, Inc. to pay $1.3 million in legal fees and $17,300 in costs to former White House staffer, Omarosa Manigault Newman, as a result of the Trump campaign’s unsuccessful attempt to enforce a nondisclosure agreement (an “NDA”). The award, ordered on April 19, 2022 by Arbitrator T. Andrew Brown of the American Arbitration Association (AAA), signifies the end of a contentious dispute over the content in Omarosa’s tell-all book, “Unhinged: An Insider’s Account of the Trump White House.” The award should serve as a lesson to all companies about the risk of trying to enforce an NDA without an adequate review of the generally applicable law and the specific contractual provisions.

Unhinged

On August 14, 2018, the very same day Unhinged was released, the Trump campaign filed a lawsuit against Omarosa, alleging the release of her book breached the standard NDA that she signed back in 2016. The specific agreement also contained a “Loser Pays” provision, providing that the prevailing party’s reasonable attorneys’ fees and costs incurred in connection with the NDA litigation would be paid by the losing party. Employers commonly add these provisions with the hopes that, among other things, the economic risk will prevent an employee from potentially violating or contesting a signed NDA.

As background, Omarosa’s tell-all book, Unhinged, provided a behind-the-scenes look at her time working in the Trump White House. The book contains stories that the campaign stated were “confidential” and “violative” of the terms specified in her NDA. As further alleged evidence of an NDA breach, the lawsuit cited Omarosa’s released audio recordings of her conversations related to Mr. Trump. The recordings, as asserted by Omarosa, supported claims in her book of racist and misogynistic behavior by the former President. In response, the lawsuit asserted that all of these actions specifically violated the NDA.

Trump Campaign’s NDA thought to be “Highly Problematic”

More than three years after the lawsuit was filed, AAA ruled against the Trump campaign, finding the NDA unenforceable and invalid under the applicable New York contract law. In the September 24, 2021 decision, it was stated that the terms of the NDA were “highly problematic” as the agreement prohibited Omarosa from saying anything even remotely critical of Trump, his family members, or their businesses for the rest of her life. The decision also noted that the NDA was so vague and indefinite that Omarosa would have no way of knowing whether her actions had breached the agreement.

Under the NDA, Omarosa then sought a whopping $3 million in legal fees and $41,400 in costs and received only a portion of the requested amount. Nonetheless, this decision highlights the risks of suing a former employee under an NDA. This result firmly shows that a company should do its due diligence before deciding to bring a claim for a confidentiality provision from an NDA.

Omarosa’s attorney, John Phillips, understood this implication and stated that this award order will send a message that “weaponized litigation” will not be tolerated and that other attorneys will be inspired to “fight for the whistleblower and vocal critic against the oppressive machine.” In light of this noteworthy ruling, it appears that Trump’s repeated efforts to silence his former employees and campaign workers through the use of NDAs may no longer be an effective tactic.

Employers Should Proceed with Caution

This ruling should serve as a lesson for all employers to proceed with caution when contemplating a lawsuit under an NDA involving the disclosure of personal information. Prior to jumping right in, employers should carefully read the agreement, ensure it is legally enforceable, and understand the significant risks associated with moving forward. Apparently accustomed to utilizing NDAs as a way to silence employees, the Trump campaign clearly failed to consider these risks, especially those related to the “Loser Pays” provision, when it hastily filed a lawsuit the very same day Unhinged was released. Learn from Trump’s costly mistake and proceed as you would under other business situations – consider all of the risks prior to initiating a lawsuit under an NDA.

For more information or to discuss further, please contact KJK’s Litigation and Arbitration practice group Chair, Brett Krantz (BK@kjk.com; 216.736.7238).

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