The Dallas Court of Appeals Refuses to Expand the Scope of an Arbitration Clause Under Non-Disclosure Agreements.

The Dallas Court of Appeals affirmed the trial court’s ruling denying a motion to compel arbitration because the arbitration clause in two non-disclosure agreements (“NDAs”) did not apply to tort claims for assault and battery in Alliance Family of Companies v. Nevarez, No. 05-18-00622-CV (April 4, 2019).

In January 2018, Plaintiff Jamisha Nevarez sued Defendants Alliance Family of Companies (“AFC”) and its chief executive officer, Justin Magnusson, for assault, sexual assault, and battery based on alleged actions by Magnusson. AFC hired Plaintiff in 2016 as Magnusson’s personal assistant, requiring her to sign NDAs with both AFC and Magnusson. The trial court conducted a hearing and denied Defendants’ motion to compel arbitration because Plaintiff’s claims did not fall within the narrow scope of the arbitration clauses’ language.

In affirming the trial court, the Court of Appeals  noted the absence of language such as “arising out of” or “relating to;” rather, the NDAs arbitration language only applied to “[a]ny dispute under this Agreement.”Because  Plaintiff’s claims for assault, sexual assault, and battery did not fall within the scope of the NDAs, the Court of Appeals refused to overturn the trial court. 

The Court of Appeals further rejected any suggestion that recitals, or “whereas clauses,” in the agreements transformed them from NDAs into full employment contracts requiring arbitration of any disputes arising out of that employment relationship. The “whereas” clauses referenced “all work done” by Nevarez.  However, those recitals “do not transform the agreement into an employment contract or otherwise expand the terms of the agreement.”  Thus, even though the NDAs contemplated a broader relationship the protections covered by the NDAs, and thus the arbitration clause, were limited.  Because a recital is a preliminary statement explaining the background of the transaction or the reason for entering the contract, they are not strictly part of a contract and will not control a contract’s operative clauses unless those clauses are ambiguous. Where the recitals are broader than the contract stipulations, the former will not extend the latter.

By: Allison Raley

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