ARBITRATION AGREEMENT IN NDA DID NOT EXTEND TO SEXUAL ASSAULT CLAIM

Alliance Family of Companies v. Nevarez
Dallas Court of Appeals, No. 05-18-00622-CV (April 4, 2019)
Justices Whitehill, Molberg, and Reichek (opinion linked here)

Kelli Hinson

The Alliance Family of Companies and its CEO moved to compel arbitration of an employee’s claims that the CEO sexually assaulted her. In connection with her employment, the employee had signed two non-disclosure agreements, agreeing to keep confidential the information she learned about the company and the CEO. Each NDA included an agreement to arbitrate “[a]ny dispute under this Agreement.” The defendants argued that, because the alleged assault occurred in the course and scope of both the employee’s and the CEO’s employment, the claims were covered under the “broad language” of the arbitration agreements. The trial court denied the defendants’ motion to compel arbitration, and the defendants appealed.

The Dallas Court of Appeals sided with the employee, holding that her claims for sexual assault did not arise “under the [NDA] Agreement,” and so were outside the scope of the agreement to arbitrate. It concluded that “under the Agreement” requires a direct relationship between the agreement and the dispute and limits application to actions that arise as a result of the agreement. The Court distinguished other cases involving “broad provisions,” including an agreement to arbitrate “all disputes related to the employment relationship.” Here, there was no such broad language. And because the NDAs address the non-disclosure of confidential information, and not the type of intentional tort alleged by the employee, the dispute did not arise under the NDAs.

The Court also refused to consider arguably broader language contained in the recitals or “whereas clauses” of the NDAs, noting that contract recitals “are not strictly part of a contract and will not control a contract’s operative clauses unless those clauses are ambiguous.”