Nitro, Netco, West Palm amended complaint hammers JAMS

The amended complaint  has this new section with allegation about the JAMS/Amway relationship.  JAMS Endispute is the for-profit arbitration company to provide private judges for Amway/Quixtar disputes.

The Role of JAMS/Endispute in the Conspiracy.

166. In furtherance of its conspiracy to control the tool business, Amway unilaterally adopted – and implemented without the express agreement of a vast majority of Amway/Quixtar distributors – a mandatory arbitration procedure in its dispute resolution process. The Amway Arbitration Provision requires arbitration of all disputes that are not resolved through its conciliation and mediation process (the "Amway Arbitration Provision"). These mandatory arbitration rules were specifically designed to afford Amway and its co-conspirators a means to exercise influence and control over the process. Through its one-sided rules, Amway is able to influence the outcome of conciliations and arbitrations to reach its desired result. At the same time, by requiring confidentiality of disputes, and the results of arbitrations, Amway can conceal evidence unfavorable to it and its favored kingpins.

167. JAMS/Endispute, Inc. ("JAMS"), is a private, for-profit Delaware corporation, and national dispute resolution company. At least until approximately September 2005, JAMS was the sole entity authorized to be the administrator of all arbitrations under the Amway Arbitration Provision. In or about September 2005, Amway purportedly amended the Amway Arbitration Provision to permit arbitration before other dispute resolution companies, but only in the event JAMS is "unable or unwilling" to serve as the administrator. For all practical purposes, JAMS remains the sole administrator of all Amway-related arbitrations.

168. JAMS is anything but a neutral third party. It is under Amway’s thumb and is a participant, be it wittingly or unwittingly, in the conspiracy. The JAMS arbitrators, as found by this Court, were "screened" first and then subjected to at least "manipulation" by the kingpins and Amway, who "trained" them.

169. Under the Amway Arbitration Provision, the only persons eligible to serve as a decisionmaker are those JAMS arbitrators who have been trained by Amway and the IBOAI Board. Prior to the training, the arbitrator candidates were screened by Amway and the kingpins. JAMS was selected by Amway because it would allow Amway to screen and "train" its arbitrators. This process enabled the shocking situation where an IBOAI Board member and kingpin participated in training and selecting the JAMS arbitrator in the very action in Texas where he and his business were named defendants. This was the arbitrator who ultimately decided the merits of that case and found against the complaining distributors, awarding $6 million in attorneys’ fees to Amway and other defendants, forcing some, if not all, of the distributors into bankruptcy.

170. As this Court stated in denying Amway’s motion to compel arbitration, those training sessions passed beyond merely "basic education" on the Amway business, and extended into "subtle manipulation" on substantive legal issues. Those substantive legal issues included Amway’s purported compliance with applicable antitrust and pyramid laws. Incredibly, Amway represented that it was in compliance with these laws despite the fact that it was, at that time, facing antitrust claims in litigation.

171. Amway and the IBOAI also manipulated the candidates to, in the words of this Court, "produce a very favorable view of Defendants," such as Amway’s supposedly "benevolent" culture.

172. Amway’s confidentiality provision in the process plays a key role in its conspiracy. The confidentiality provision both facilitates the conspiracy and evidences Amway’s influence over JAMS. Parties involved in Amway arbitration are prohibited from disclosing the substance and basis of their claim, the evidence presented, and the terms and amounts of any arbitration award. As a result of this provision, parties are prevented from discovering facts that would demonstrate biased decision making under the Amway Arbitration Provision. And, despite the existence of this confidentiality provision, JAMS discloses to Amway information about arbitrations between IBOs, even when Amway is not a party to the arbitration proceedings, thus showing that Amway has JAMS under its thumb.

173. Amway’s rule giving it the right to intervene in any arbitration further allows Amway to exert its influence over the arbitration process.

174. JAMS has a financial incentive to favor Amway. Unlike the American Arbitration Association ("AAA"), and its clientele, JAMS has a contractual relationship with Amway to administer the Amway arbitration program. Also unlike the AAA, which is a not-forprofit organization, JAMS is a for-profit corporation in which the neutrals’ livelihood is dependent exclusively on JAMS and, by extension, Amway. Thus, they have a financial stake in pleasing its "national program" customer.

175. As further evidence of Amway’s ability to unduly influence JAMS arbitrations, until late 2003, Amway and the IBOAI Board voted on whether to retain an arbitrator on its "roster of neutrals." This vote was required to be unanimous. This rule, in effect, gave Amway veto power over any arbitrator who does not decide a dispute in the company’s favor – even if the IBOAI Board wishes to retain the arbitrator. Of course, it gave the kingpins the same opportunity through the IBOAI. As a result, the arbitrators, knowing that they can be stricken from Amway’s "roster of neutrals" if they fail to toe the company line, necessarily have a financial incentive to rule in Amway’s favor.

176. After the Honorable J. Miles Sweeney, Circuit Court of Greene County, Missouri, declared the "retention vote" to be unconscionable, Amway eliminated this rule. However, even under the current rule, the hand-selected arbitrators serve a five-year term. There is little doubt that an arbitrator who does not rule in Amway’s favor would not be appointed for a successive term. Thus, both JAMS and its arbitrators have a financial incentive not to "bite the hand that feeds" them. As Judge Sweeney adeptly pointed out, Amway claims the "right" in its rules to change the rules at any time. Amway could easily reinstate the previous rules. As such, the Amway rules are illusory.

177. JAMS’ lack of neutrality is also apparent from the fact that it assisted Amway in drafting or suggesting substantive terms of the Amway arbitration rules, notwithstanding the fact that JAMS is the very entity that is responsible for administering those rules, and its neutrals will be called upon to construe those rules. This fact ensures that rules will be construed favorably to Amway.

178. JAMS also aided Amway and its co-conspirators in their efforts to compel these Plaintiffs to arbitrate. Contrary to JAMS’ own ethical rules which prohibit it from being a witness in litigation, JAMS provided – at Amway’s request – affidavits for use in the three state court actions brought by these Plaintiffs against Amway’s co-conspirators, wherein JAMS attempted to persuade the courts that its arbitration program was fair and impartial. These affidavits were used to compel arbitration. It is difficult to imagine the AAA ever siding with one party over another in a court action to determine whether arbitration is appropriate. JAMS’ conduct is evidence of its bias in favor of Amway.

179. Still further, JAMS has turned a blind eye to evidence that the Amway arbitration program is a sham. The incestuous relationship between Amway and the IBOAI Board was a topic of discussion at a July 2002 meeting between Amway and JAMS (the same currently being subject to a confidentiality designation by Defendants). Despite these serious doubts about the fairness of the Amway program, JAMS took no action.

180. Amway’s influence over the JAMS arbitration process also extends to the actual arbitration proceedings themselves. Specifically, Amway and its outside litigation counsel routinely communicate with JAMS, ex parte, respecting pending arbitrations, including cases in which it is not even a party, violating Amway’s own confidentiality provisions. Indeed, Amway and/or its attorneys engaged in over 45 telephone calls with JAMS respecting this lawsuit in late 2003 alone. Amway’s ex parte communications included pressuring JAMS to change adverse decisions in pending arbitrations.

181. Perhaps the most telling admission that Amway has the power to control JAMS arbitration is a statement made by IBOAI Board President Bob Zeander at the March 1998 training session. Amway has heretofore designated the DVD containing the statement as "confidential," and such remains under seal at this time.

182. As designed and implemented, the Amway/Quixtar arbitration process does not and has not afforded any semblance of due process. Missouri courts – state and federal – have now conclusively determined that the Amway arbitration process is/was "unconscionable."

183. As implemented, JAMS’ involvement in these disputes has well-served the unlawful purposes and agendas of Amway and the kingpins. JAMS has been used as an active instrumentality of this unlawful conspiracy. Hence, JAMS’ role, and that of Defendants in interacting with JAMS, heretofore remains relevant and material to Plaintiffs' claims in this action.