Morrison v. Amway Corp.
| Citation | 49 F.Supp.2d 529 |
| Decision Date | 15 October 1998 |
| Docket Number | No. H-98-3291.,No. CIV.A. H-98-0352.,No. CIV.A. H-98-1695.,CIV.A. H-98-0352.,CIV.A. H-98-1695.,H-98-3291. |
| Parties | Dr. Joe and Dawn MORRISON, Kelly Robbins, Randy and Janet Councill, Dan and Helen Higgins, Ron and Karen Green, Victor and Cathy Brook, Dr. Marion and Jean McMurtrey, Dan and Helen Higgins, Dr. T.M. and Cynthia Hughes, Richmond Eagle Corp., Dave and Rose Roberts, Dr. Richard and Linda Werner, Tony and Mary Ann Cutaia, Warren and Donna Bird, Tom and Kye Yeaman, and Wade and Debbie McKay Plaintiffs, v. AMWAY CORPORATION, Rich Devos, Jay Vanandel, Dick Devos, Steve Van Andel, Doug Devos, Bob Kerkstra, JARI Corporation, Dexter Yager, Individually and D/B/A Yager Enterprises and Internet Services Corporation, Jeff Yager, Donald R. Wilson, Individually and D/B/A Wow International and Wilson Enterprises, Inc., Randy and Valorie Haugen, Individually and D/B/A Freedom Associates, Inc., Freedom Tools, Inc. and All Star Production Company, John Sims, Individually and D/B/A Sims Enterprises, Randy and Susan Walker, Individually and D/B/A Walker, International, Mark and Martha Hughes, Bill and Alyssa Bergfeld, Individually and D/BA as Bergfeld International, Inc., Jody Victor, Individually and D/BA Jevi Corporation, Mark Cordner, Billy Zeoli, Individually and D/B/A Gospel Films, and Dennis James Defendants. Amway Corporation, Ja-Ri Corporation, Bob Kerkstra, Amway Distributors Association, Dexter Yager, Sr., D & B Yager Enterprises, Inc., Jeffrey S. Yager, Internet Services Corporation, Inc., Donald R. Wilson, Wilson Enterprises, Inc., Wow International, Inc., Randy Haugen, Valorie Haugen, Freedom Tools, Inc., Freedom Associates, Inc., John W. Sims, Sims Enterprises, Inc., Sims Inc., Plaintiffs, v. Cecelia Musgrove, Jeffrey G. Musgrove, Defendants. Ja-Ri Corporation, Bob Kerkstra, Amway Distributors Association, Dexter Yager, Sr., D & B Yager Enterprises, Inc., Jeffrey S. Yager, Internet Services Corporation, Inc., Donald R. Wilson, Wilson Enterprises, Wow International, Inc., Randy Haugen, Valorie Haugen, Freedom Tools, Inc., Freedom Associates, Inc., John W. Sims, Sims Enterprises, Inc., Sims Inc., Amway Corporation, Plaintiffs, v. Mark D. Pruitt and Deanna F. Pruitt Defendants |
| Court | U.S. District Court — Southern District of Texas |
Marion McMurtrey, Jean McMurtrey, Dr T M Hughes, Cynthia Hughes, Richmond Eagle Corp, Dave Roberts, Rose Roberts, Dr Richard Werner, Linda Werner, Tony Cutata, Mary Cutata, Warren Bird, Donna Bird, Tom Yeaman, Kye Yeaman, Wade McKay, Debbie McKay, plaintiffs.
Edward B. McDonough, Jr., Mark S Dube, McDonough & Assoc., Houston, TX, William J Abraham, Rick J Abraham, Abraham Law Offices, Columbus, OH, for D&B Yager Enterprises, Inc., Wilson Enterprises, Inc., Freedom Assoc., Inc., Sims Enterprises, Inc., Sims, Inc., consolidated plaintiff.
Edward B. McDonough, Jr., Mark S Dube, McDonough & Assoc., Houston, TX, William J Abraham, Rick J Abraham, Abraham Law Offices, Columbus, OH, William R Culp, Jr., Culp Elliott & Carpenter, Charlotte, NC, for Wow Intern. and Wilson Enterprises, Inc., consolidated plaintiff.
Thomas W Taylor, Andrews and Kurth, Houston, TX, Sharon D Grider, Amway Corporation, Legal Counsel, Ada, MI, John C Peirce, P Todd Mullins, Howrey & Simon, Washington, DC, for Amway Corp., Bob Kerkstra.
Thomas W Taylor, Andrews and Kurth, Houston, TX, for Rich Devos, Jay Vanandel, Dick Devos, Steve Van Andel, Doug Devos, Dexter Yager, Jeff Yager, Donald R Wilson, Randy Haugen, Valorie Haugen, Freedom Tools Inc, All Star Production Company, John Sims, Randy Walker, Susan Walker, Mark Hughes, Martha Hughes, Alyssa Bergfeld, Jody Victor, Mark Coroner, Billy Zeoli, Dennis James, defendants.
Robert L DeJong, Miller Canfield Paddock & Stone, Grand Rapids, MI, Thomas W Taylor, Andrews and Kurth, Houston, TX, for JA-RI Corporation, defendant.
James L Gascoyne, Collins & Gascoyne, Houston, TX, Thomas W Taylor, Andrews and Kurth, Houston, TX, for Bill Bergfeld.
Edward B McDonough, Jr, McDonough & Associates, Houston, TX, Rick J Abraham, Abraham Law Offices, Columbus, OH, for Internet Services Corp., defendant.
Frank W Mitchell, Maloney Martin & Mitchell, Houston, TX, for Mark Pruitt, Deanna F Pruitt, Jeffrey NMI Musgrove, Cecelia Musgrove, defendants.
Pending before the Court is Defendants' Motion to Stay Pending Arbitration. (Instrument # 51.) Upon reviewing the record, the memorandum in support, (Instrument # 52), the responses (Instruments #57-59), and the applicable law, the Court concludes that the motion to stay should be GRANTED.
The Plaintiffs1 are distributors of Amway Corporation ("Amway"). Amway is a multinational company with sales in excess of $5 billion that sells household products. Amway distributes these products a "network marketing" method by which hundreds of thousands of independent distributors constantly recruit new distributors, or "down-liners." The down-liners are encouraged to purchase and use Amway products and motivational materials themselves and to recruit their own new distributors. A distributor's success is thus dependent upon building a large base of down-liners. See, e.g., Amway Distributors Benefits Ass'n v. Federal Ins. Co., 990 F.Supp. 936, 939 (W.D.Mich.1997); Hanrahan v. Britt, 174 F.R.D. 356, 359 (E.D.Pa. 1997).
In this case, the Plaintiffs, inter alia, have a disagreement with how profits are determined with regard to the motivational and other business support materials. The Plaintiffs have sued Amway as well as other distributors in their respective "upline" for a myriad of claims ranging from defamation to RICO. Three suits filed in this District have been consolidated.
The Defendants have moved to stay this litigation based upon an arbitration clause they contend is in force between the parties. In response, the Plaintiffs concede that the clause was entered into by roughly one-third of the Plaintiffs, but that it is not in effect as to all the Defendants. The Defendants also contend that even if it was entered into, it does not apply, and in any event, it is unconscionable.
The Federal Arbitration Act ("FAA") "create[s] a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act," which requires that "questions of arbitrability ... be addressed with a healthy regard for the federal policy favoring arbitration," and that "any doubts concerning the scope of arbitrable issues ... be resolved in favor of arbitration." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941-942, 74 L.Ed.2d 765 (1983); Mouton v. Metropolitan Life Ins. Co., 147 F.3d 453, 456 (5th Cir.1998). "The preeminent concern of Congress in passing the Act was to enforce private agreements into which parties had entered," a concern that "requires that we rigorously enforce agreements to arbitrate." Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221, 105 S.Ct. 1238, 1242, 84 L.Ed.2d 158 (1985).
Pursuant to § 3 of the FAA, 9 U.S.C. § 3,2 a court must generally stay proceedings pending arbitration. Air Line Pilots Ass'n v. Miller, 523 U.S. 866, 118 S.Ct. 1761, 1769 n. 6, 140 L.Ed.2d 1070 (1998) (quoting Landis v. North American Co., 299 U.S. 248, 254-255, 57 S.Ct. 163, 166, 81 L.Ed. 153 (1936)). A district court's decision whether to grant a stay is ordinarily reviewed for abuse of discretion. Save Power Limited v. Syntek Finance Corp., 121 F.3d 947, 948 (5th Cir. 1997). The FAA, however, does not require arbitration unless the parties to a dispute have agreed to refer it to arbitration. Zimmerman v. International Companies & Consulting, Inc., 107 F.3d 344, 346 (5th Cir.1997). Likewise, the mandatory stay provision of the FAA does not apply to those who are not contractually bound by the arbitration agreement. Id.
Thus, the Court must "first determine whether there is a written agreement to arbitrate"; then, "whether any of the issues raised are within the reach of that agreement." Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752, 754 (5th Cir.1993); see also Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625, 105 S.Ct. 3346, 3353, 87 L.Ed.2d 444 (1985) ().
In this case, the Plaintiffs concede that about one-third of them signed the arbitration agreement. There is no dispute that a written agreement to arbitrate exists as to these Plaintiffs. The rest of the Plaintiffs contend that they did not enter into a written agreement to arbitrate. There is no dispute, however, that each entered into a written distributorship agreement.
An Amway distributorship agreement distributor must be renewed annually and comes in three forms: (1) an original distributorship agreement for new distributors; (2) an automatic renewal form executed only once, but renewed pursuant to an agreement that Amway will thereafter bill the distributor's credit card the appropriate annual fees; and (3) a written continuation form that is executed annually.
In all three instances, the Plaintiffs agreed "to comply with the Amway Sales and Marketing Plan and to observe and abide by the Code of Ethics and Rules of Conduct of Amway Distributors, and all other rules, requirements and...
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Quinn v. Emc Corp.
...not under a delusion would enter into and ... no honest and fair person would accept a contract on such terms.'" Morrison v. Amway Corp., 49 F.Supp.2d 529, 534 (S.D.Tex.1998) (quoting Lindemann v. Eli Lilly and Co., 816 F.2d 199, 204 (5th Cir.1987)). As the Court has detailed above, under t......
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In re Morrison, Case No. 05-45926 (Bankr. S.D. Tex. 6/26/2009)
...rejected Plaintiffs' arguments and issued a memorandum opinion and order staying the lawsuit pending arbitration. Morrison v. Amway Corp., 49 F. Supp. 2d 529 (S.D. Tex. 1998). The District Court found that Plaintiffs had agreed to the arbitration provision through execution of the Distribut......
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In re Morrison
...rejected Plaintiffs' arguments and issued a memorandum opinion and order staying the lawsuit pending arbitration. Morrison v. Amway Corp., 49 F.Supp.2d 529 (S.D.Tex.1998). The District Court found that Plaintiffs had agreed to the arbitration provision through execution of the Distributorsh......
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Lawson v. Archer
...least one federal case indicates Texas law requires a party prove both in relation to a arbitration clause. See Morrison v. Amway Corp., 49 F.Supp.2d 529, 534 (S.D.Tex. 1998). Because we conclude the Archers have failed to prove substantive unconscionability, we need not reach the question ......