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A New York state appeals court has vacated a nearly $50,000 award that an arbitrator handed to President Donald Trump's campaign over allegations that a former staffer violated a non-disparagement agreement after she sued the organization for alleged harassment.

A four-judge panel of the Appellate Division, First Department ruled to nullify the arbitration award that ordered former Trump campaign staffer Jessica Denson to pay $49,506 for disparaging remarks she made in state court alleging she endured sex discrimination, retaliation and a hostile work environment during the 2016 election season.

According to the appeals court, the arbitrator's award in part went against public policy, and in other respects exceeded the scope of the defendant's arbitration demand. The appeals court specifically took issue with the fact that many of the statements underlying the campaign's claim that Denson violated her NDA were made as part of her lawsuit raising the harassment issues. According to the court, "there is a deep-rooted, long-standing public policy" that allows people to make statements in the course of court proceedings.

"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," the court said. "Defendant is hard-pressed to explain how plaintiff could have pursued her right without setting forth necessary factual statements for the federal court to consider."

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Denson's attorneys, Maury B. Josephson of Uniondale, New York and David Bowles of Bowles & Johnson, said in a statement, "We are extremely gratified that four judges of the respected First Department Appellate Division unanimously invalidated the arbitration award against Ms. Denson on the grounds that it was overreaching and violated public policy. We can now go forth unhindered to pursue Ms. Denson's rights without fear of financial retaliation for doing so."

Denson, a California resident who worked as the former director of Hispanic engagement for the campaign, initially filed suit in Manhattan Supreme Court in November 2017, alleging a former male superior, Camilo Jaime Sandoval and the campaign itself slandered, harassed and sexually discriminated against her in violation of New York City's human rights laws. The campaign "compounded a slander crusade executed by Sandoval" that included the claim she was responsible for an illegal leak of Trump's taxes, "perpetuating a climate of fear and terror for the extent of her employment and beyond," Denson alleged.

In December 2017, Trump's attorney in the matter, LaRocca Hornik Rosen Greenberg & Blaha name attorney Lawrence Rosen, filed a demand for arbitration in state court. In it, he cited Denson's breach of confidentiality and non-disparagement obligations in the NDA she signed when she began with the Trump campaign. The violation, according to Rosen, was Denson's "publishing certain confidential information and disparaging statements in connection with a lawsuit she filed" in state court.

In March 2018, Denson also filed a declaratory judgment action in the Southern District of New York, arguing that the NDA had should be voided.

Although New York County Supreme Court Justice Arlene Bluth ruled in August 2018 that Denson's state law claims fell outside the scope of the arbitration clause, a few weeks later, U.S. District Judge Jesse Furman of the Southern District of New York determined that the federal case should go to arbitration.

Denson, however, did not fully participate in the arbitration process, citing Bluth's holding, and the arbitrator eventually determined that Denson breached the NDA. According to the First Department panel, the nearly $50,000 award was entirely related to attorney fees stemming from the federal action and arbitration.

On appeal to the First Department, Denson argued that the NDA was so broad and over-inclusive that it barred virtually any negative statement about the campaign, or those connected to Trump, and was therefore void against public policy.

After finding that statements made in court proceedings could not form the basis for an NDA violation, the panel further determined that the other statements Denson made online should likewise not have been considered, since they were made after the arbitration demand was filed.

"Since the award takes into account events occurring after the demand, which could not have been legitimately considered at arbitration, the award was made in excess of the arbitrator's enumerated authority," the panel said.

Patrick McPartland, of counsel to LaRocca Hornik Rosen & Greenberg, did not return a call seeking comment.

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