Arbitration Archive
December 3, 2006
Don't Sign BSMAA
Posted by QBlog
The Myth Perpetuated
When my wife joined Quixtar a few years ago she was told by her sponsor that she must sign the BSMAA in order to become an IBO. She trusted her sponsor so she signed the Arbitration Agreement.
Likewise, while my wife was an IBO she told those she sponsored that they too must sign the BSMAA. Her understanding was that without signing the document, one could not become an IBO.
And as I've studied Quixtar over the years and met numerous active and inactive IBOs, virtually all of them believed that Quixtar required IBOs to sign the BSMAA.
And if you read the BSMAA (pdf) from Quixtar's website it seems to indicate that IBOs need to sign the agreement if they want to buy support materials.
THIS AGREEMENT SHOULD BE SIGNED BY EACH IBO WHO CHOOSES TO PURCHASE INDEPENDENTLY PRODUCED BUSINESS SUPPORT MATERIALS FROM, OR SELL SUCH MATERIALS TO, ANOTHER IBO.
And to further perpetuate the understanding among IBOs of all types (current, former and future) that the BSMAA is required, Quixtar is telling callers to its customer support that it's "part of the plan."
Myth Busters
However, thanks to an Amway Distributor living in Europe I now have the proof that unequivocally dispels the myth that has perpetuated for so long among so many IBOs — signing the BSMAA is NOT required.
That's right. Quixtar does not require anyone to sign the BSMAA for any reason. I know this because I have a copy of the letter Quixtar faxed to the European Amway Distributor. The letter is from Quixtar's Rules Administration department and clearly states that signing the BSMAA "is optional."
This letter is in response to yours dated August 23, 2006 regarding the Business Support Materials Arbitration Agreement (BSMAA).
Since the purchase of business support materials (BSM) is optional, signing the BSMAA is also optional. A Quixtar Independent Business Owner is not required to sign this form. However, should they choose to purchase or sell BSM, Quixtar, as well as the Independent Business Owners Association International (IBOAI) encourages them to complete the Business Support Materials Arbitration Agreement. In fact, some IBO organizations may require the BSMAA be signed before the sale of a BSM occurs.
You indicated in your letter, "If one wishes to register online, the box agree to the BSMAA must be ticked before registration can proceed." This statement is incorrect. The option to agree to the BSMAA is available, but the registration process can continue without ticking the box. Furthermore, you mention in your letter an entry on a website www.webraw.corn/quixtar about a call to Quixtar's Customer Support department regarding the BSMAA. The information provided by the operator in that phone call was inaccurate and is being corrected.
I hope I have answered your questions, and made it clear that while signing the BSMAA is strongly encouraged, it is not required. If you have any further questions, please don't hesitate to contact us.
Sincerely,
Karen O'Neill, Supervisor
Rules Administration
Business Conduct & Rules
Questions
So, we've cleared up the confusion about the BSMAA right? Good. You do not have to sign the BSMAA. Got it.
But why did my wife's sponsor tell her that she must sign it? Why did her upline repeat that myth? Why do so many IBOs I meet believe that it's required? Why did Quixtar customer service tell me it's part of the plan? If I called up today, would I get the same answer? Why are people so willing to sign something without clearly understanding its legal implications or how it's connected (or not connected) to the business?
I don't know. I do know that I've never signed it and I believe that you shouldn't either.
September 8, 2006
Quixtar Rule Change: Vendor Arbitration
Posted by David Robison
UPDATE - The following entry appeared briefly at Quixtar Blog shortly after 6:00 PM CDT, but due to an editing change, it was accidently deleted. The entry needed editing, but in the interest of the integrity of Quixtar Blog, the entry appears unedited as originally posted.
My apologies to the readers.
- Dave
There was a recent announcement that Quixtar and a Quixtar IBO leader were going back to court to settle a dispute that arose out of the sale of motivational materials. The original case was first heard during a legal arbitration. This arbitration was held on the belief that Quixtar could bind the IBO leader to arbitration based on the BSMAA (Business Support Materials Arbitration Agreement).
The IBO leader was also the owner of a company producing the business support materials. During the case, his BSM company was found to be separate from his Quixtar Independent Business and not subject to the arbitration.
I hate to say it, but once again Alticor is playing "catch up." Or as my Momma used to say, "Closing the gate, after the cows done got out."
It would seem that Alticor and Quixtar expected this case to move forward and have revised the Quixtar Rules of Conduct. Quixtar made the Rules Change announcement on August 29, 2006.
"At its June 2006 meeting, the Independent Business Owners Association International Board recommended the adoption of Rule 7.3 and the Vender Arbitration Agreement (VAA), and a clarification to Rule 4.14.1 of the Rules of Conduct.
Rule 7.3, the VAA, and the clarification of Rule 4.14.1 were adopted by the Corporation and will take effect immediately."
The addition of the new Rule and Rule clarification will also be included in the next revision of the Business Reference Guide." (A PDF version of the guide can be read at this link.)
7.3.5- Every BSM Company must agree in writing to submit to confidential binding arbitration any dispute arising from or relating to the Quixtar business or to BSM:
between the BSM Company and any IBO;
between the BSM Company and any other BSM Company or any of its predecessors, successors, affiliates, parents, officers, directors or employees; or
between the BSM Company and Quixtar Inc. or any of its predecessors, successors, affiliates, parents, officers, directors or employees.
BSM Companies will comply with this requirement by either (a) executing the Vendor Arbitration Agreement ("VAA") or (b) by executing an agreement of substantially similar scope.
Language in the Vendor Arbitration Agreement begins with a legal recital:
Quixtar provides a multilevel business opportunity to independent business owners ("IBOs') throughout North America.
BSM Company is not an IBO. BSM Company produces for and/or sells to certain IBOs and their affiliated organizations ("LOAs") motivational and training materials such as tapes, books, audio-visual materials and meeting and seminar programs(hereinafter"BSMs") that are designed to aid and support the LOAs and individual IBOs in the development of their Quixtar-related businesses; BSM Company and Quixtar desire to minimize the time and expense that might be involved in resolving any disputes between BSM Company and Quixtar, or disputes between BSM Company and any Quixtar IBO, or disputes between BSM Company and any other company involved in the publication, production, distribution or sale of BSMs intended for use by IBOs, which may arise out of or relate in any way to BSM Company’s sales of BSMs to the LOAs and individual IBOs that purchase same.
The current legal case will move forward, I'm sure; but this new rule seems to be an additional hoop for the current IBO leaders to jump through in the new "campaign" to reign in the "motivational organizations."
Whether it is too little, too late, remains to be seen.
August 19, 2006
IBOs Must Sign BSMAA
Posted by QBlog
What is the Quixtar BSMAA? Well, it's an arbitration agreement (pdf) that all IBOs must sign before buying (or selling) any motivational or training materials. That means an IBO who decides to purchase tools from a Quixtar Line of Affiliation must first sign an arbitration agreement that has been described as "fundamentally unfair."
But if that same IBO wanted to buy a Zig Ziglar training pack or attend a Tony Robbins seminar, guess what he is required to sign. Absolutely nothing.
So What?
Why should IBOs be worry about signing the BSMAA? Well, a better question to ask is why an IBO is required to sign anything just to listen to some CDs or attend a motivational rally? Doesn't that seem like a bit of overkill, especially considering some of the concerns expressed about the agreement?
At least one anonymous IBO has an answer to that question — "There is no requirement by Quixtar to sign the BSMAA to buy tools. If someone wants you to sign it before they'll sell you stuff, that's up to them."
However, if I call up Quixtar and ask if I need to sign the BSMAA I'm told that yes, I need to sign it even if I just want to purchase products.
The Conversation
I recently called Quixtar Customer Support to inquire about the BSMAA. What follows is the audio of that phone call which was slightly modified to boost the Support woman's voice and to remove her name. The audio is less than three minutes long and I've transcribed it for those who'd rather read than listen.
» Conversation with Quixtar about the BSMAA (1.4 MB mp3 file)
Conversation Transcript
Customer Support: Quixtar customer support, (name withheld) speaking, how may I help you?
Me: Hi, yes I had a question about signing up for Quixtar.
Customer Support: Ok, I'll try to answer that for you.
Me: Ok. Do I need to sign a uh... it's called a business support materials agreement?
Customer Support: Yes.
Me: I do?
Customer Support: Yes.
Me: Ok. Where can I get one of those?
Customer Support: Should have been in the kit. Let's see if that's even available online. Business materials. Did you already receive the packet? The information packet? Some literature?
Me: Yes, I've received that. I don't have it with me.
Customer Support: Ok. Yeah, it should have been in there. Let me see if that's available online.
Me: I just want to buy products. I didn't really need to sign... I mean do I have to sign it to just buy stuff?
Customer Support: Yeah, it's part of the... part of the plan.
Me: Oh.
Customer Support: But yeah, you can download that from the Quixtar site.
Me: Can I do that from work?
Customer Support: Uh huh. You go to the Quixtar site you go to the build and manage my business and then under resources which is going to be on the right hand side it will have business support materials. And once you click that on in the middle of the page will be business forms. And when you click that on it will say the Business Support Arbitration Agreement. It's an SA-2033.
Me: What is that number?
Customer Support: SA-2033.
Me: SA-2033.
Customer Support: Uh huh.
Me: Ok. Thank you.
Customer Support: Thanks for calling.
Me: Bye-bye.
Customer Support: Bye-bye.
So, if you read the BSMAA or call Quixtar it's pretty clear that IBOs must sign the BSMAA. It's not optional. But why? Is it to give the Quixtar leaders the legal latitude to do what was done to Bruce Anderson or Eric Scheibeler? Or is there some other reason that I'm unable to comprehend? Because I'll be honest, I see no reason to sign an arbitration agreement if I want to be trained or motivated. I never have and never will. Why would you?
May 24, 2006
Nitro Distributing v. Alticor Oral Arguments
Posted by QBlog
The MLM Blog recently reported the release of oral arguments from the Nitro Distributing v. Alticor case in the Missouri Courts. I downloaded the audio which is available on the U.S. Court of Appeals for the Eighth Circuit website (click Oral Arguments, Court Session, 2006 May and Case Number 05-3686) and have made it available in a compressed (smaller file size) format for your listening pleasure.
» Nitro Distributing v. Alticor Oral Arguments (41:14 min. mp3 file approximately 9.53 MB)
» Nitro Distributing v. Alticor Oral Arguments (directly from court website, 41:14 min. mp3 file approximately 19.3 MB)
There are a lot of great quotes in the arguments and here are a couple of my favorites though I'm not sure who to attribute them to.
"Nobody can get a fair shake in this system"
"Amway is not required to Arbitrate. They take away the rights to these unknowing distributors. They take it away. Their precious Constitutional right to access to the courts and to the jury. They don't do the same for themselves."
"There's gold in those tapes."
Take the time and listen to the audio and then leave your favorite quotes in the comments.
May 14, 2006
Bruce Anderson Returns
Posted by QBlog
Scott Larsen reports that former Quixtar Diamond Bruce Anderson has brought his site back online after taking it down for a while. If you're not sure who Bruce Anderson is you can read my comments from April, 2005, or follow Larsen's detailed report.
May 12, 2006
Supreme Court Ruling Explained
Posted by QBlog
The Missouri Supreme Court issued its opinion and ruling in Nitro Distributing, Inc., et. al. v. Jimmy Dunn et. al. on May 2, 2006. The case is about whether two motivational businesses owned by Amway distributor Ken Stewart - "Nitro Distributing" and "West Palm Convention Services" - have to arbitrate their lawsuit against several other Amway distributors and their respective "tools" businesses - primarily those involved in an Amway "Line of Affiliation" or "system" called Pro-net.
The defendants are: Jimmy Dunn; Jimmy V. Dunn & Associates, Inc.; Hal Gooch; Gooch Support Systems, Inc.; Gooch Enterprises, Inc.; Bill Childers; TNT, Inc.; Tim Foley; T&C Foley, Inc. ; Steven Woods; G.F.I. International, Inc.; Parker Grabill; Grabill Enterprises, Inc.; Pro Net; Don Brindley; Global Support Services, Inc.; Pro Net Global I, Inc.; and Robert A. Blanchard.
Nitro was Stewart's tape, video and book company. West Palm was the business through which he provided speaking services at conventions.
No Confusion
This case should not be confused with Stewart's individual case in the Missouri federal court against Amway and Quixtar, in which United States District Court Judge Richard Dorr ruled that Amway's arbitration agreement was legally unenforceable because it was procedurally and substantively unconscionable. Judge Dorr's order is still on appeal in the federal Eighth Circuit Court of Appeals.
This case involves Stewart's tools businesses as the plaintiff instead of Stewart himself, and it's against other tools kingpins and their tools businesses from the system of which Stewart's tools businesses were once a part - ProNet.
Importantly, unlike the case in Judge Dorr's court, this opinion does not deal with whether the Amway/Quixtar arbitration agreement is legally valid. It mainly concerns whether the different parties can sue to enforce the Amway arbitration agreement as third parties (they can't, said the Missouri Supreme Court) and whether some of the defendants could enforce a different arbitration agreement that was part of the ProNet contracts (they could, held the court).
No Legal Basis
The Missouri Supreme Court concluded that there was no legal basis for any of the parties to enforce the Amway/Quixtar arbitration agreements against Stewart's tools businesses because the tools businesses did not sign the agreements with Amway and, therefore, they weren't legally bound to arbitrate under that agreement. The court also decided that since the suit wasn't against Amway and wasn't brought by an Amway distributor, the Amway arbitration clause wouldn't apply to the lawsuit anyway.
However, the court found that there was another arbitration agreement that came about as part of the formation of ProNet. With regard to the ProNet arbitration agreement, the court held that West Palm never signed it and could not be bound by if for the same reasons West Palm was not bound by the Amway arbitration agreement. On the other hand, Stewart did sign the ProNet arbitration agreement in the name of Nitro. Thus, the court concluded that Nitro was bound by the ProNet arbitration agreement. Not all of the defendants had signed the ProNet agreement though - only Gooch, Childers, Foley, Woods, Grabill, Dunn, Pro Net, and Blanchard.
The court concluded that Nitro's lawsuit against Gooch, Childers, Foley, Woods, Grabill, Dunn, Pro Net, and Blanchard had to be dismissed because of the ProNet arbitration agreement, but that West Palm's claims against all of the defendants could go forward in the trial court, as could Nitro's claims against the non-signatories to the ProNet agreement, Gooch Systems, Gooch Enterprises, TNT, Pro Net I, Global and Brindley.
End Result
The end result: the majority of the case will go back to the trial court as a regular lawsuit, while a small part will be resolved in arbitration. Obviously, this opinion does not have as wide an impact on the arbitration agreements as the federal case involving Amway/Quixtar itself. However, it could be very important, particularly if discovery reveals information about how these tools systems operate.
September 20, 2005
Judge Halts Quixtar Arbitration
Posted by QBlog
Last Friday (Sept. 16) a Missouri Federal Judge denied Quixtar's motion to compel the infamous "Nitro Lawsuit" to arbitration. The ruling by District Court Judge Richard E. Dorr could have long-term repercussions for Quixtar by jeopardizing its ironclad Arbitration Process.
Judge Dorr's 26-page decision (pdf) is a lot to digest but it's well worth the effort and doesn't disappoint. For those with shorter attention spans, the lawBlawg provides a few highlights from the order. What I found most interesting begins on page 23 (pdf):
It is this Court's opinion that the procedure utilized by Defendants to screen, train and ultimately hand-pick their panel of arbitrators does not come close to passing any reasonable test of fairness and neutrality required for a legitimate arbitration proceeding.
Ouch! I bet Jody Victor wishes he'd been told that tape was running.
UPDATE: The Kansas City Star reports »
The ruling permits the case, which charges that Amway conspired to freeze out lower-level distributors in its motivational business, to go forward in federal court.
"Obviously it's a huge ruling," said one of the plaintiffs' attorneys, Dan Boulware of Shughart Thomson & Kilroy. "It has significance nationwide and huge consequences."
Boulware said that keeping the case out of arbitration was important because "no one wins in that forum with Amway and we certainly weren't going to."
UPDATE 2: The Grand Rapids Press reports »
The lawsuit alleges Quixtar helped these distributors monopolize the BSM business, cutting others out of potential profits. It also said Amway and its distributors misrepresent the true earnings potential of being an IBO because top earners are reliant on BSM income, which most IBOs are not eligible to collect.
The "kingpins," with Quixtar's help, also required their "downline" network to buy their materials and attend their functions or risk being blackballed from the "pyramid," the lawsuit alleges.
July 15, 2005
Jody Victor And Missouri
Posted by QBlog
Last November I posted about a videotape that surfaced as evidence in the now infamous "Hart Lawsuit" from Missouri. A description of that videotape made its way onto PACER (a public court records database) and explained that, among other things, Quixtar Diamond Jody Victor could be seen "woodshedding a JAMS facilitator" about a Plaintiff in a Florida arbitration case.
Of course the videotape was entered as evidence by the Plaintiffs (former tool distributors suing Quixtar et al.) to demonstrate that the Quixtar arbitration process is rigged. Watching Jody Victor "woodshed" a supposedly neutral arbitrator couldn't have helped the Defense.
And obviously Quixtar was upset that a description of the videotape was released to PACER and that websites like this one picked it up and published it for the rest of the world to read. So Quixtar filed a Motion to sanction the Plaintiffs and claimed that they were "harmed" by the publication of the videotape description.
The Order from Judge Richard Dorr (pdf), United States District Court, concedes that the Plaintiffs erred by not placing the videotape description under a Protective Order but says that the Defendants did not show how the publication was damaging to them.
The Court finds that Defendants Motion is due to be denied. While it may have been improper for the Plaintiffs to file these materials without the proper protection to Defendants of placing them "under seal," Plaintiffs corrected the mistake as soon as it was apparent to them. Additionally, Defendants have not demonstrated how they were harmed by the availability of the information for such a limited time. Defendants mention the publication on a few internet sites, however they have not shown how this publication was damaging to them.
This particular case is important to Quixtar because it may very well decide the fate of its Business Support Materials Arbitration Agreement. Scott Larsen has done an excellent job of detailing the important events in this case.
- Mandatory Arbitration Question goes to Missouri Supreme Court
- Alticor upset about "Quixtar-hating Internet zealots" and "Internet rumormongers"
April 7, 2005
Diamond Bruce Anderson Debacle
Posted by QBlog
There's an interesting and very complex story that recently surfaced about an Amway/Quixtar Diamond named Bruce Anderson. Scott Larsen does a pretty good job of making this tale understandable but it's still pretty confusing. I've read most of Larsen's summary as well as Bruce Anderson's own accounting of events and I'll do my best to explain what happened.
- Bruce Anderson was an Amway/Quixtar Diamond
- While still a Diamond, Bruce Anderson won a lawsuit against an Amway videographer named Lee Luster and is awarded over $250,000
- Coincidentally, around the time Bruce Anderson won the $250,000 judgment against Luster, another Amway/Quixtar Diamond named Hal Gooch was sued by none other than videographer Lee Luster
- Luster won his suit against Gooch and was awarded a $250,000 judgment
- Luster owes Anderson $250,000 — Gooch owes Luster $250,000
- Using a legal maneuver called a "Chose in Action," Anderson takes control of Luster's judgment which means that Gooch will just give the $250,000 to Anderson instead of handing it to Luster
- Gooch defaults and doesn't give Anderson the $250,000
- After defaulting, Gooch then tries to send the case to Arbitration since both he and Anderson are IBOs but the Arbitrators reject it saying it has nothing to do with Quixtar
- The Florida courts don't appreciate Gooch defaulting on his ordered payment and they rule in favor of Anderson, demanding that Gooch pay Anderson the $250,000 and then some
- Gooch's Insurance Company finally pays Anderson the money
- Somehow, the Quixtar Arbitrators change their minds afterwards and decide that they should arbitrate the case — after Gooch already lost in open court
- The Arbitrators, who are selected, trained, advised and controlled by Quixtar, rule against Anderson in favor of Hal Gooch
- Unlike the Florida court ruling, all proceedings in the Arbitration are secret and not subject to public scrutiny
- Anderson believes he's been shafted by Quixtar, his lawyer and the Arbitrators and decides to take his case to the court of public opinion
- Unfortunately for Anderson, he is not a "great communicator" and fails to present his case in a way that anyone (except for the hyper-intelligent and lawyers) can easily understand
That's my understanding. There's much, much more to this story and I've probably done a poor job of even giving you the highlights. Anderson's site, and the message he presents, is a complete mess. I spent a couple of hours listening to his video segments and still don't really understand his story. And while Larsen's summary is great, there is still a lot of confusing details that just frustrate people like me.
If you understand this Anderson case, and can boil it down to bullet points, then send me your summary and I'll add it here. The main thing I get from all this is that Quixtar used its BSMAA to royally screw a Diamond. What did you get from this story?
UPDATE - Anderson has launched his own online forum titled The Baboon Brief. If you have questions for him, I suggest you go there and ask him.
Also, thanks for the revision suggestions. However, so far none of them make the case easier to understand. I realize that my bullet points have left out a lot of detail but I feel that they cover the most important points and frame this debacle in the context that makes it easiest for the masses to understand. There's also a Forum topic providing more discussion on the matter.
UPDATE II - I've completely revised the summary as my understanding of this miserably confusing case has grown. I still have a hard time following all this but I hope I've made some sense of it.
November 13, 2004
Jody Victor Caught On Tape
Posted by QBlog
You remember the Quixtar BSMAA don't you? Sure you do. It's that document new recruits are encouraged to sign when they register as IBOs. My wife signed it when she became an IBO and I bet you signed it too (if you're an IBO).
It's really a nifty little agreement and the more I learn about it the more I agree with Missouri Judge J. Miles Sweeney who said that the BSMAA system is "fundamentally unfair."
Why is the BSMAA "fundamentally unfair?"
Well, the short answer is that if you ever have a problem with your upline (or Line of Affiliation) that can't be resolved amicably then you're basically bound to enter an arbitration process. That process is secret and you MUST abide by the ruling of the "neutral" arbitrators. What Judge Sweeney objected to (in part) is that the arbitrators are trained and essentially selected by the IBOAI. That seems a little unfair in my book. (The lawBlawg has more information about the BSMAA)
Jody Victor And The BSMAA
So what does Jody Victor have to do with the BSMAA? I'm getting to that. Last year some former tool distributors (Brig Hart, Ken Stewart and Charlie Schmitz) sued Alticor, Amway and Quixtar in Missouri. Judge Sweeney's sharp criticisms of the BSMAA resulted from that complaint. And because the BSMAA and it's confidentiality requirements are still being debated, most of the suit's details aren't available to the public.
However, one interesting document (pdf) is available to the public. A summary description of a "newly surfaced" videotape was recently obtained from PACER (a public records database). The document describes the videotape as showing an arbitrator training session and reveals some startling details.
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?
Sex, Lies and Videotape
Frankly, I must agree with Judge Sweeney when he says that the Quixtar arbitration process is "fundamentally unfair." The big question on my mind is how much similarly alarming information is still under a protective order? What would we think about the arbitration process if we knew ALL the facts. I shudder to think.