Stewart v Gooch, Childers et al
Third Amended Complaint
February 3, 2003
In January of last year, companies owned by Ken Stewart, an Amway/Quixtar Crown, sued a number of companies and individuals in upline, downline and crossline positions from Stewart in the Amway/Quixtar organization.
A third amended petition has now been filed in that suit, which is case # 101CC4530 in the Circuit Court of Greene County, MO, Division No. 2.
In addition to all of the allegations of the original complaint, including
- illegal pyramid scheme
- tortious interference
- various contractual and good-faith breaches, and
- misrepresentations
This amended complaint includes accusations of four separate antitrust violations. They are
- Conspiracy to Monopolize
- Group Boycott
- Price Fixing and Allocation of Customers, and
- Illegal Tying Arrangement.
Unfortunately, none of these accusations will sound the least strange to anyone who has spent any time reading Amway/Quixtar distributor complaints in recent years. Of possibly more immediate interest are the assertions regarding the applicability of various arbitration agreements.
In September of 1997, Amway's Intent to Continue/Business Support Materials Arbitration Agreement, which every participant must sign when renewing his/her distributorship*, was introduced. This agreement forces binding arbitration on any distributors who have disputes with their upline or with the corporation, and takes away their legal right to find remedies through litigation. At the time when renewing or new distributors were compelled to sign this "agreement," the terms of the arbitration had not even been promulgated.
Following this, many of the motivational organizations also created their own arbitration agreements to deal with disputes over Business Support Materials (BSMs) within their organizations.
According to Stewart's amended complaint:
"The prospective Pro Net members were also subjected to economic coercion/ duress, negating any voluntary assent to the purported arbitration provision, by being told that their refusal (to agree) would result in the loss of their tool and function business profits. As such, the demand for an arbitration provision and/or Pro Net membership agreement constituted an illegal tying arrangement. As an illegal contract, the Pro Net arbitration provision is void ab initio. . .
"The purported Pro Net arbitration provision applies to disputes between regular members of Pro Net, as well as disputes between Pro Net and any of its regular members. Plaintiffs are/were not 'regular' Pro Net members. 'Founding' members were not subject to the purported arbitration provision."
The petition then goes on to assert that, in fact, none of the parties to this lawsuit -- neither the plaintiffs nor the defendants -- were subject to any arbitration provision, and that therefore they have no legal standing to enforce such an arbitration!
These arguments challenge Amway/Quixtar and the motivational organizations very directly on their ongoing attempts to treat the Quixtar product distribution business and the motivational business as a single entity when it suits them, and as separate and distinct entities when it suits them.
Stewart's complaint also sets forth the virtual impossibility of receiving an impartial arbitration hearing regarding Amway complaints, since:
"The Rules create an arbitrator selection process that ensures that any arbitrator selected will be biased. Only those arbitrators who have been trained by Amway are eligible to serve as arbitrators under the Amway Rules of Conduct. See Amway Rules of Conduct, Rule 11.5.15. Amway and the IBOAI Board also vote on whether or not to retain an arbitrator on the roster of neutrals. See Amway Rules of Conduct, Rule 11.5.14. This vote must be unanimous. Id. Thus, the IBOAI's vote in favor of an arbitrator is nullified by the single negative vote of Amway. Further, Defendants Gooch and Childers, and some of their co-conspirators, serve as members of the IBOAI Board. The 'deck is stacked' against the distributor. This is not bona fide, fair and good-faith arbitration."
It is also one-sided, in that Amway reserves to itself the right to seek relief through the legal process.
If the plaintiffs prevail on this issue, it will open the door for a rash of litigation.
