Quixtar's Mandatory Arbitration
Is it rigged in Quixtar's favor?

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In this post, I explained the basic workings of the Quixtar/Amway arbitration process, including rules that allowed the IBOAI members to retain the arbitrators on the so-called "roster of neutrals", and "train" the "arbitrators" outside your presence. I also wrote about how a Missouri judge found this arrangement "unconscionable" and "offensive." Well, now there's an interesting new development. Apparently, a videotape has surfaced depicting former chairman of the IBOAI Jody Victor trampling all over any remaining idea that these arbitrators are "neutral."

Currently pending before the United States District Court for the Western District of Missouri there is a lawsuit brought by former high-ranking Quixtar/Amway distributors (Crown Kenny Stewart, Double Diamonds Brig Hart and Diamond Charlie Schmitz) and their BSM businesses ("Nitro", "U-Can II", "Scmitz & Assoc.") against Alticor/Quixtar/Amway. As it always does, Amway/Quixtar tried to convince the judge to force the parties into to secret arbitration before one of the famous "neutral" arbitrators. In a lawsuit, the parties get to ask questions of one another and look through each others documents and records (to an extent) as they head toward trial. This process is called "discovery."

The plaintiffs in the Nitro v. Alticor lawsuit have been fighting it out with Alticor/Quixtar/Amway for months over whether the case must go to the company's secret arbitration process instead of proceeding in court. According to an unsealed document on PACER (an electronic records system for federal court filings), the plaintiffs' (Stewart, Hart, Schmitz, etc.) recently got their hands on a videotape of meetings between Jody Victor, Quixtar executive Gary VanDerven and the arbitrtators the company uses from an organization called "JAMS" ("Judicial Arbitration and Mediation Services").

According to the plaintiffs' filing, the video depicts VanDerven explaining that the BSM arbitration is not subject to the arbitration rules in Quixtar's "Rules of Conduct" in direct contradiction, apparently, to what he said under oath during his deposition in the lawsuit. The plaintiffs also claim that the video depicts Jody Victor, apparently not aware the video was running during a break, talking to the "facilitator" on a "confidential" arbitration, and remarking that the distributors in that arbitration "knew that what they were doing was wrong." There are also apparently repeated references during the meeting to Quixtar's "integrity" and "character" and how it's "not a pyramid."

This doesn't seem like that big a deal unless you stop to think about how the arbitration process works. An arbitrator is like a private judge. His or her decision about your case is pretty much as legally binding as the judgment of an official court of law. Would you be bothered if you found out that your opponent in a lawsuit made the decision to hire the judge, retain him, and was allowed to "train" the judge about the general issues in the case - all outside of your presence? I know I would. Would you be bothered even more if you found out that part of that training consisted of your opponent explaining how right and honest he was and how wrong you are? I know I would. Would you be horrified to watch your opponent as he corrupts your judge on a videotape?

Here are the "ethics" guidelines from JAMS (the company that supplies Quixtar's "neutrals"). JAMS anticipates that arbitrations will occur using their people where one party chooses and pays for the arbitrator. JAMS calls these "non-neutral" arbitrators. I kid you not. And JAMS so-called "ethics" guidelines go on to state that these "non-neutral" arbitrators do not even have to disclose to you "the compensation arrangements" with the party that appoints them.

Yep. You read that right. If someone were to give your JAMS arbitrator $100,000 cash to decide the case in a big arbitration, the arbitrator is allowed to treat that "compensation arrangement" as confidential and not tell you about it!

I'm too angry to write any more right now.


 This from Quixtar Blog on the subject.

Here are some highlights from the document:

  • The Plaintiffs received belated discovery from Defendants in the form of a partial videotape from the May 2, 2003 Quixtar/JAMS session. (JAMS is the Arbitration service)
  • The partial videotape contains a number of key admissions against Defendants (Quixtar, et al.) respecting the issues of arbitration and unconscionability.
  • On the tape, a Quixtar executive can be heard telling the JAMS arbitrators that "the disputes that arise from there (BSMs) are not specifically covered by the (Quixtar) Rules." The executive continued saying that "the big difference is it doesn't come back to the company for us to make a decision, because it's not covered by our Rules." His statements contradicted his earlier deposition testimony where he said that "disputes relating to the sale of independently-produced BSMs are covered by Rule 11 in the Rules of Conduct." Oopsie.
  • There's a moment when a Quixtar representative is telling some JAMS arbitrators that "some of the disputes may even question the arbitration process." That comment is followed by laughter from the entire room.
  • The JAMS arbitrators are repeatedly told that Quixtar is "fair and equitable," has "integrity" and "character" and that it's "not a pyramid." That may not seem like such a big deal unless you understand that nobody is providing similarly positive comments about you. So much for neutrality.
  • Jody Victor, not realizing the camera was on, is seen "woodshedding a JAMS facilitator" about a Plaintiff in a Florida arbitration case. Jody Victor then discusses another confidential arbitration case with the JAMS facilitator explaining that the Plaintiff "knew what they were doing was wrong." Gee, that's fair.
  • Jody Victor then compares training JAMS arbitrators to "training cats, dogs, seals (and) elephants." Why did he omit monkeys from his list?

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