Ronald Reagan had a great statement, "The facts are pesky things." No matter how Amway/Quixtar tries to spin it - federal judges look at facts. The facts are on the side of the distributors in their numerous disputes with Amway and Quixtar. How many secret arbitrations are currently ongoing where Quixtar is attempting to prohibit people from competing against them? How can Quixtar attempt to uphold a contract that has been ruled uneforceable 5 times in 4 separate states. The following article is from Mike McCormick. Mike has been friends with Randy Haugen for years and is one of the top notch lawyers helping out former Quixtar IBO's in their attempt to be free of Quixtar harassment. Mike is an excellent resource as he has worked extensively with Amway/Quixtar and the IBOAI board in the past. Mike was also present on August 9th and saw the behavior of the Amway/Quixtar managers upfront and personally. Here is his analysis of the recent Texas decision on the Amway/Quixtar contract. It is time that Amway/Quixtar admits that it made some mistakes and settle this for the good of their business, the good of former IBO's and the good of current IBO's. Perhaps some Christian men like Dexter Yager, Bill Britt, or Jim Dornan, all on Amway's Founders Council will step in and talk some sense into Amway management. God Bless, Orrin Woodward
Quixtar’s Rules of Conduct Held Unenforceable
On Friday, May 23, 2008, the Federal Court for the Eastern District of Texas ruled that the Quixtar Rules of Conduct are unenforceable because they are on their face illusory. Simmons et. al. v. Quixtar. Citing the fact that Rule 1 of the Rules of Conduct reserve in the Corporation the right to change or amend the rules at any time, the court held that on their face the Rules are but an illusion that cannot be enforced.
The court relied heavily on the Fifth Circuit Court of Appeals decision issued in February, 2008 in the case of Morrison et. al. v Quixtar, et. al., wherein the court, reviewing facts related to the arbitration clause of the Rules of Conduct as the clause existed in 1997, similarly concluded that because the Rules of Conduct permitted Amway to alter or amend the contract at any time for any reason, the contract was unenforceable. Both the Fifth Circuit and the Eastern District of Texas rejected Quixtar’s argument that Quixtar must run all changes by its trade association, the IBOAI (formerly the ADA), and concluded that the Rules are clear on their face and on their face reserve the right of amendment, alteration and change to the Corporation itself, rendering the Rules of Conduct unenforceable.
During the hearing, Judge Bush alerted the parties that he would be deciding which issues remained and would actually be tried. He announced that there would be no breach of contract issues tried because the contract was illusory and unenforceable. Only non contract claims (currently damage claims grounded in tort) would be tried. Therefore, the non competition clause, the data management rule, the non solicitation rule and any other rules set forth in the unenforceable Rules of Conduct are outside the scope of claims for which Quixtar could recover. To quote the court,
The Court’s reasoning applies to the Rules of Conduct and Amway’s (Quixtar’s) ability to unilaterally change the rules of the game. The 1998 contract before the Court in Morrison provided that “Amway reserves to itself the sole right to adopt, amend, modify, supplement or rescind any or all of these Rules, as necessary with respect to Rules enforcement.
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Amway acknowledges that from time to time the contents of its various documents may be changed. Although it represents it will present such changes to the distributor board, final decision making authority rests with Amway (Quixtar). Quixtar admits that the preface to its Rules of Conduct has not materially changed since 1998.
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A promise is illusory if it does not commit the promisor to perform. Alex Sheshunoff Mgm’t Servs., L.P. v. Johnson, 206 S.W. 3d 644 (
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Quixtar has left itself ample “wiggle” room by providing that it may modify the Rules of Conduct as it sees fit. The same provision appears to have been before the Circuit in Morrison.
Because the language in the contract in Morrison was identical to the language at issue before the
As did the district court, 49 F. Supp. 2d at 533-34, we make that determination based on Texas law, which is the law of the forum, there having been no showing that the law of any other arguably more appropriate state materially differs in respect to the present issue.
The Simmons decision comes on the heels of two other decisions striking down all or some of the Rules of Conduct. On March 3, 2008, in Campbell, et. al. v. Quixtar, the
As a result of all of these decisions, any IBO fearing repercussions from Quixtar by virtue of engaging in an MLM concurrently with their Quixtar business or within the six month non competition period or the two year non solicitation period can take comfort that at least three district courts and one Federal Court of Appeals has concluded that the Rules of Conduct are unenforceable.
All of these developments are consistent with the public policy against the restraint of trade that accompanies over-broad contractual provisions like those contained in the Quixtar Rules of Conduct, especially when applied to independent contractors, as opposed to employees. Perhaps Quixtar will consider changing its operation in such a way that attracts its distributors to stay through the merits of its compensation plan rather than the fear of suit if the IBO chooses to leave.
