Judge Rules Alticor/Quixtar/Amway's Arbitration "Unconscionable"
October, 2003
In a case brought by Nitro Distributing et al v Alticor, a judge has ruled strongly in favor of the plaintiffs on the issue of compulsory arbitration. Describing JAMS/Endispute, Inc., Alticor/Quixtar/Amway's chosen arbitration company, as "a little-known, for profit corporation," the judge ruled that "Defendants' arbitration program under JAMS is unconscionable."
This supports a previous ruling in the case, where Judge J. Miles Sweeney had determined that the plaintiffs were not subject to any arbitration agreement. Sweeney had also stated that:
"What is absolutely offensive is the fact that [Amway] board members, some of whom are actual parties to this litigation, have veto power over these arbitrators in their jobs. That, coupled with the fact that Amway is not bound by its own arbitration requirements and the fact that all proceedings are held in secret leads me to believe that the Amway arbitration provisions are, both substantively and procedurally, unconscionable. . . I simply could not require anyone to arbitrate any of these issues under a system that is so fundamentally unfair."
The decision raises serious questions about the relationship between JAMS and Amway, pointing out that
- most arbitration companies are not-for profits;
- that Amway demands any arbitrator assigned to one of its cases to undergo "Amway Cultural Training;"
- that JAMS has violated its own ethical policies by acting as a witness for Amway in litigation;
- that JAMS helped Amway set up its entire arbitration program, such that any dispute would be arbitrated rather than tried in court;
- that JAMS arbitrators are also shareholders in the for-profit company, so they have a financial interest in the company; and
- that JAMS "assisted" Amway in drafting its arbitration agreement, a clear conflict of interest.
This ruling, which is a strong victory for the plaintiffs, should help put an end to the "yellow dog" BSMAA which Amway implemented September, 1997.