Quixtar Arbitration Agreement
"Fundamentally Unfair and Unconscionable"

The Honorable J. Miles Sweeney, Circuit Court of Greene County, Missouri

"What is absolutely offensive is the fact that [Amway] board members, some of whom are actual parties to this litigation, have veto power over the retention of 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 provision are, both substantively and procedurally unconscionable. Irrespective of the arguments about who signed which agreements and when they came into effect, I simply could not require anyone to arbitrate any of these issues under a system that is so fundamentally unfair."

The above quote came from a ruling by a Missouri Circuit Court Judge on September 17, 2003 denying forced arbitration in the Stewart/Schmitz vs. Dunn et al. (ProNet) suits.  There are simultaneous state and Federal court actions with the former ProNet distributors.   The the actions in State court being suits against the upline and the Federal court action is a suit against Quixtar/Alticor.

The court documents from, PACER the Federal Courts online service, shows a heated battle between the plaintiffs in the Hart/Stewart/Schmitz suit and the Atlticor/Amway/Quixtar corporation over the issue of arbitration.

Since the "tools companies" of Brig Hart, Kenny Stewart, and Charlie Schmitz are suing the Corporation, they contend they do not fall under mandatory arbitration as called for in the BSMAA. IBOs were required to set their tools businesses up separate from their Amway/Quixtar business. Thus the "tools businesses" never signed the BSMAA arbitration agreement, only the individuals did.

The Alticor's sole arbitration company, JAMS/Endispute, is a for profit corporation where the arbitrators are also shareholders in the corporation. The arbitrators must also attend an "Amway Cultural Training". As well as claiming they are not bound to arbitration, the plaintiffs note several conflicts of interest between Alticor/Amway/
Quixtar and the Alticor chosen arbitration company JAMS/Endispute.

From the Court Document:
SUGGESTIONS IN SUPPORT OF PLAINTIFFS' MOTION TO STAY ARBITRATION PENDING DETERMINATION OF ARBITRABILITY  Document

Following this initial investigation, Plaintiffs' counsel requested that JAMS produce information disclosing the relationship between JAMS and Defendants. Exhibit 5, attached hereto. Specifically, on September 30, 2003, Plaintiffs requested the following from JAMS:

4. Please confirm for us that, unlike other alternative dispute resolution forums, you/J.A.M.S. is in fact a commercial for-profit corporation, in which your arbitrators are also shareholders.

5. The current Alticor/Amway/Quixtar rules purport to use you/J.A.M.S. as the sole arbitration forum. Please advise us of the number of past and pending disputes involving Alticor/Amway/Quixtar rules for which you/J.A.M.S. serve(d) as arbitrator. Please advise us of the total fees or other compensation which you/J.A.M.S. have derived for past and pending disputes involving Alticor/Amway/Quixtar rules. Additionally, please advise us of the amount of any other fees or compensation received from Alticor/Amway/Quixtar unrelated to particular disputes, including but not limited to, any administrative, startup or similar fees.

6. The Alticor/Amway/Quixtar rules mandate "Amway Cultural Training" for your arbitrators presiding over disputes arbitrated under Alticor/Amway/Quixtar rules. Please provide us with a list of all shareholders who have attended such training.

7. Please provide us with any and all documents relating to the "Amway Cultural Training," including but not limited to, any and all manuals, agendas, outlines, slides, presentations and handouts, related to this training.

8. Please provide us with copies of any and all contracts and correspondence between you/J.A.M.S. and Alticor/Amway/Quixtar, including but not limited to, that related to the creation or existence of your Alticor/Amway/Quixtar approved panel of arbitrators and Amway Cultural Training for your arbitrators.

9. We understand that you/J.A.M.S. has its own "Quixtar Arbitration Specialist." In fact, your/J.A.M.S. preprinted Demand for Arbitration form refers to this specialist. Are you the "Quixtar Arbitration Specialist"?

Please identify any and all Quixtar Arbitration Specialists employed by you/J.A.M.S. and detail for us how one becomes a Quixtar Arbitration Specialist.

JAMS has refused to provide the requested information

Plaintiffs have requested JAMS to provide Plaintiffs with information relating its contractual and/or financial relationship with Amway. Despite the fact that the existence of such a relationship is required to be disclosed under JAMS' "Ethics Guidelines for Arbitrators," V (attached hereto as Exhibit 9), JAMS has refused to provide the requested information. The existence of such a relationship has caused other courts to question JAMS' neutrality:

It merits mention that J*A*M*S/Endispute, Inc., is an entity owned by the very arbitrators who adjudicate disputes between the borrower and the very lender who assigns the disputes to J*A*M*S. Thus the arbitrators, in their role as owners, must seek to promote the goodwill of the lenders so as to develop and maintain a volume of business, namely, cases for adjudication. CitiFinancial is a supplier of cases, even perhaps, a major source of business for J*A*M*S. It matters little whether it was Aesop or Confucius who counseled that one should not bite the hand that feeds since the message is an apt reminder of the quite valid perception of a conflict of interest in the arbitration process.

Lytle v. CitiFinancial Services, Inc., 810 A.2d 643, 651 n.5 (Penn. Super. 2002); see Exhibit 1.

The plaintiffs are however not out of the woods yet, as the Federal Court has not ruled on the issue. In a Stipulated Order, Federal Court judge, Richard E. Door has given parties until April, 2004 to make their case on dismissing or compelling arbitration. Document

Flagrant manipulation of JAMS and the arbitration process can be seen in the Anderson case.

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