TEAM: More on the Amway Arbitration case

Original Source

More on the Amway Arbitration case
February 11, 2008

As expected the reversal of the arbitration ruling in the Morrison case has made it's rounds and now the IBOAI, Alticor, and even others are putting their two cents in. Of course most of what is being said I don't think is even addressing the issues. To me it looks like more damage control then anything. At any rate there are apparently some things that the IBOAI want you to know.

1. The decision in this case could be changed in future court proceedings. (Much like how the earlier decision in favor of Amway was later changed in future court proceedings).

2. The Morrison decision was based upon arbitration agreement rules that were in effect in 1998 and have since changed. For instance Amway can no longer make changes to the agreement without the consent of the IBOAI.

3. The dispute arose before January 1, 1998 when the arbitration agreement went into effect and therefore that does not apply to anyone who had a dispute after 1998.

As far as Alticor goes they are trying to say that all Morrison gets is a redo of his arbitration, and that the decision was based off of the fact that the dispute arose prior to 1998. But from the way I read it the court is saying there was no enforceable arbitration agreement because of Amway's unilateral authority to amend.

Other certain Amway supporters have also written on their site that after having time to read the decision "properly" they also see the decision being based off of the fact that there was no arbitration in effect at the time of the dispute. Well apparently time was of no help to read the decision properly.

The way I read it however the final wording in the decision clearly is referring to Amway's unilateral right to amend the agreement. Here is what the final wording is in the decision:

There is nothing in any of the relevant documents which precludes amendment to the arbitration program – made under Amway’s unilateral authority to amend its Rules of Conduct – from eliminating the entire arbitration program or its applicability to certain claims or disputes so that once notice of such an amendment was published mandatory arbitration would no longer be available even as to disputes which had arisen and of which Amway had notice prior to the publication. There are no Halliburton type savings clauses which preclude application of such amendments to disputes which arose (or of which Amway had notice) before the amendment. We accordingly hold that the arbitration agreement was illusory and unenforceable under Davidson as applied to the claims asserted in the instant suit.12 We thus reverse the district court’s October 15, 1998 order staying the case pending arbitration and its September 15, 2005 final judgment denying the Distributors’ motion to vacate the award, granting Amway’s motion to confirm the award, and entering judgment based upon the award; and we remand the case for further proceedings not inconsistent herewith. (emphasis mine)
The reference to Halliburton is addressed earlier in the document where Halliburton's arbitration was ruled not illusory since they could not avoid arbitration by amending or terminating the arbitration provision due to the way it was written. Amway had no such "saving clause".

But as with anything I encourage you to go and read the decision yourself and come to your own conclusion. This case is quite old and many of the rules considering arbitration have changed. But for anyone considering this business I would recommend that you get a good understanding of such processes.