Amway world headquarters (file photo)
Updated: Monday, 26 Oct 2009, 8:31 PM EDT
Published : Monday, 26 Oct 2009, 8:28 PM EDT
GRAND RAPIDS, Mich. (WOOD) - A federal judge has ruled against Amway Corp. in a class-action complaint filed by 27 former salespeople, or independent business owners.
The ruling says Amway must stop forcing its one-time
distributors into arbitration over disputes between the two
The independent distributors had filed a complaint against Amway asking the court to stop Quixtar, Amway's e-commerce business, from "harassing and intimidating plaintiffs ... with repetitive arbitrations asserting trumped up violations of Quixtar's unilaterally-enacted ... trade secret rules."
According to the complaint, when potential independent business owners, or IBOs, start up with Quixtar, they sign a registration form that lists the company's rules for engaging in "arbitration" as a means of resolving disputes.
But the court ruled the agreement to arbitrate did not extend to "post-termination disputes involving former IBOs who are no longer operating an Amway 'Independent Business.' "
United States District Court Judge Bruce Jenkins further decided "the public interest is also advanced by preventing parties from wielding their arbitration processes as a weapon to harass ... and ultimately bankrupt their opponents."
The former IBOs had argued "Quixtar had undertaken this abusive litigation strategy to bankrupt former Quixtar distributors and to coerce them into abandoning the lawful pursuit of independent businesses as distributors of MonaVie, LLC."
The lead plaintiffs, George and Jill Guzzardo of Ironwood, are former Quixtar IBOs now affiliated with TEAM, a motivational tools and training organization founded by former Quixtar IBOs Orrin Woodward and Chris Brady. The Guzzardos now are distributors for MonaVie, a Salt Lake City-based "multilevel marketing company."
The federal court ruling is the latest development in a long string of legal fights between Amway and a group of breakaway distributors. The Ada-based director sales giant has fought to keep the former IBOs from using Quixtar sales and training material in their own businesses.
24 Hour News 8 reached Amway spokeswoman Kate Makled early Monday evening. After a conversation with company lawyers, Makled could say only that the "company did receive notice of the ruling and is looking at its options."