MLM: Major Victory for Distributor Rights – substantive unconscionability terms


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Mark this day in History when the granddaddy (Quixtar Inc., the successor-in-interest to Amway Corporation), of the MLM Industry gets smacked down on appeal for unconscionable contract terms.

Kudo’s go out to JEFF POKORNY; LARRY BLENN; and KENNETH BUSIERE, Quixstar IBO’s who had the fortitude to hang on to their belief’s and claim since 2007 and through appeal which finally ocurred on April 20, 2010

It’s a Great Day for all MLM Distributors who have been burned by the unconscionable contracts that permeate their careers in MLM/Network Marketing and the unfair requirement to arbitrate vs. litigate when complaints come up.  Some of the substantial decisions of this case follow:

Page 13:  “the more substantively oppressive the contract term, the less evidence of procedural unconscionabilityis required to come to the conclusion that the term is unenforceable, and vice versa.”

AND

An agreement or any portion thereof is procedurally unconscionable if “the weaker party is presented the clause and told to ‘take it or leave it’ without the opportunity for meaningful negotiation.”

Page 14: This oppressive behavior is the quintessential characteristic of a procedurally unconscionable agreement. See Szetela, 118 Cal. Rptr. 2d at 867.

In addition, those rules were subject to unilateral amendment by Quixtar at any time. Thus, Plaintiffs were not even given a fair opportunity to review the full nature and extent of the non-binding conciliation and binding arbitration processes to which they would be bound before they signed the registration agreements or the BSMAA. These problems multiply the degree of procedural unconscionability of the ADR agreements. See Harper, 7 Cal. Rptr. 3d at 422-23

Page 15:  The fact that Plaintiffs signed or renewed registration forms containing the Agreement to Arbitrate does not assist Defendants.  The forms incorporated by reference the Rules of Conduct over which Plaintiffs had no say. Plaintiffs signatures thus served to make each a party to a contract they now challenge as unconscionable.

Page 17: The court identified three aspects of this ADR agreement that it concluded rendered it substantively unconscionable.  Id. at 307-08. First, the agreement lacked mutuality because only the plaintiff was required to resolve his claims through the ADR process, and no similar requirement bound the defendant. Id. at 307. Second, by “requiring [the] plaintiff to submit to an employer-controlled dispute resolution mechanism
(i.e., one without a neutral mediator),” the defendant “would receive a ‘free peek’ at [the] plaintiff’s case, thereby obtaining an advantage if and when [the] plaintiff were to later demand arbitration.” Id. And third, the ADR agreement placed stringent time limitations on the plaintiff’s assertion of any claims against the defendant without placing any similar limitations on the defendant’s right to bring claims against the plaintiff. Id. at 307-08.

All of the obligations and procedures relating to the non-binding conciliation process refer directly to IBOs, not Quixtar.  Conspicuously absent from this purpose is the creation of any duties or responsibilities for Quixtar.

Page 18:  Quixtar reserved to itself “the sole right to adopt, amend, modify, supplement, or rescind any or all of these Rules, as necessary with respect to cases of Rules enforcement.”

It was for this very reason that the Fifth Circuit held that a similar ADR scheme in a prior version of the Rules of Conduct promulgated by Quixtar’s predecessor Amway was illusory and unenforceable under Texas law. See Morrison v. Amway Corp., 517 F.3d 248, 254-57 (5th Cir. 2008).

Page 19:  As the district court concluded, the Rules of Conduct are “self-perpetuating”and therefore “inherently biased” against an IBO that seeks to challenge them.

Page 20:  This lopsided advantage enjoyed by Quixtar is precisely the type of one-sidedness that the doctrine of substantive unconscionability is designed to protect against. See Harper, 7 Cal. Rptr. 3d at 423.

Page 21:  Thus, as the district court pointed out, although Quixtar may be forced into binding arbitration when an IBO initiates the dispute, Quixtar is free to initiate and litigate any claim it has against an IBO in court without ever submitting the claim to binding arbitration.

Page 22: Soltani recognized that lack of mutuality is relevant to assessing substantive unconscionability, 258 F.3d at 1043, and relied on West v. Henderson, 278 Cal. Rptr. 570, 575-76 (Ct. App. 1991), which held that lack of mutuality makes contractual provisions “suspect” and upheld a nonmutual provision only after finding that it was supported by a specific justification. Particularly in situations like this one, where no special circumstance necessitates a non-mutual provision, a unilateral reduction in the statute of limitations is an indicator of substantive unconscionability. See Nyulassy, 16 Cal. Rptr. 3d at 307-08.

Another indicator of substantive unconscionability is the confidentiality requirement in the Rules of Conduct. This prohibits IBOs engaged in the arbitration process from disclosing “to any other person not directly involved in the conciliation or arbitration process (a) the substance of, or basis for, the claim; (b) the content of any testimony or other evidence presented at an arbitration hearing or obtained through discovery; or (c) the terms [or] amount of any arbitration award.”  Because the confidentiality clause swept so broadly, we concluded that it was substantively unconscionable. Id. at 1078, 1084.

Page 24: Thus, while handicapping the Plaintiffs’ ability to investigate their claims and engage in meaningful discovery, the confidentiality provision does nothing to prevent Quixtar from using its continuous involvement in the Quixtar ADR process to accumulate “a wealth of knowledge” on how to arbitrate future claims brought by IBOs.

Also contributing to the total substantive unconscionability of the binding arbitration provisions is the arbitration selection procedure mandated by the Rules of Conduct.

Page 26:  The use of Quixtar-trained arbitrators is to Quixtar’s advantage, and the IBOs who receive the letters are not informed of that pertinent fact.

Page 27:  As the district court succinctly stated, an IBO “should not have to pay extra” to avoid the unfairness created by Quixtar’s orientation program. The district court therefore properly determined that the arbitration selection process is substantively unconscionable.

Finally, the Rules of Conduct include a fee-shifting clause that unfairly exposes IBOs to a greater financial risk in arbitrating claims than they would face if they were to litigate those same claims in federal court.

Page 28:  Here we have an arbitration agreement that actually includes a fee-shifting provision and that places those costs on the IBO if it loses in a process already stacked against it.

Thank you, Judge Schroeder for your CONCLUSION:   For the foregoing reasons, we hold the district court properly determined that the Quixtar ADR agreements are unconscionable and therefore unenforceable under California law.  We deny Plaintiffs’ request for judicial notice as moot. We affirm the order of the district court denying Defendants’ motion to dismiss or to compel arbitration.  AFFIRMED.

Now there is precendence for ALL MLM/Network Marketers to hold out for their Companies and stop the substantively oppressive, lacking mutuality, inherently biased, one-sidedness type Contracts that usually force GOOD people to leave our opportunities or never consider it at all.

Let me know What you Think about this occurring, post your comments, I’d love to hear from you.

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The Joys of Repeated Failure, especially in Network Marketing


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For most of us, “failure” has a tragic and undeserved reputation as something bad and painful. It’s very unfair, and it holds us back and limits our success. If “failure” had an attorney, it would have an excellent chance of winning a lawsuit for defamation and slander.  :-)

Too often, we view failure as reflecting on the person who “failed”. We view them (or ourselves) as having poor judgment, poor skills, or lack of character! How absurd!

There are only a handful of ways to “fail”, and I don’t view any of them as bad.

First, you can “fail” by losing a competition. I remember talking to a high school athlete who defined himself as “slow” because he lost a race to the state’s fastest sprinter. I also remember a beautiful and talented woman who defined herself as “ugly” because in college she finished fourth in a beauty pageant.  How, exactly, are those examples of “failure”?

Are you beating yourself up when you don’t win your MLM Companies product retailing contest?  Or when there are bonuses for new sponsoring activities?  Why? Read the rest of this entry »

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Are you Familiar with S.I.N.A.L.O.A


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The reason why some people don’t do well in an MLM  business is because they don’t understand what they get paid for.  As an MLM Distributor, you do not get paid for making sales or sponsoring others, you get paid for talking to people!  If you talk to enough people on a consistent, daily basis, results (i.e., making sales and enrolling others) are automatic!

One of the most important concepts for every new distributor to understand is S.I.N.A.L.O.A. (Safety In Numbers And Law Of Averages).  S.I.N.A.L.O.A. means that if you do something consistently, over a prolonged period of time, the numbers will always produce a Law of Averages for you.  This is a great MLM Accountability technique for you to easily grasp.

For example, suppose you were to pass out 250 business cards this week, and that as a result of passing out those cards you made 5 sales for a total profit of $50.  Your law of averages would be that, for every 250 business cards you pass out, you get paid .20 per card – regardless of how people respond!  Whether someone calls or doesn’t call, whether someone says yes or no, you get paid .20 for every card you pass out and for every person you talk to!

And that’s where the Safety in Numbers part of the equation comes in.  If you pass out another 250 business cards, chances are excellent that you will make another $50, profit or .20 per card.

Once you have established your Law of Averages, by talking to enough new people every day, achieving your goals becomes automatic!

You see when you keep records of what activities you are doing it enables you to clearly SEE your Law of Averages.  Once you have established your Law of Averages, you will then know exactly what to do every day to achieve your Business Plan.

So the key here is to keep good records of what you’re doing and follow your DMO consistently! 

Contrary to what the old adage suggests, practice doesn’t make perfect, Practice makes Permanent!  Whatever we do on a daily basis becomes part of our permanent habit patterns.  By consistently applying what you learn, you will develop the right habits – Permanently!  Discipline habits.  Commitment habits.  Attitude habits.  Consistency habits – all of the habits you need not only to build a thriving business, but to enjoy a lifetime of wealth and happiness.

What you do with what you learn is going to determine what lies ahead for you.  If you practice this new concept consistently, then what lies ahead for you is a future filled with exciting personal challenges and phenomenal personal growth.  How high you climb toward the summit of achievement, however, is entirely in your hands.  You are the variable that is going to determine where these new concepts take you in the months ahead. 

You could be discussing the activities you are engaging in and trying to determine your S.I.N.A.L.O.A., with your upline.  It shows them you want to be accountable for your MLM success.

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Network Marketing: Got a Busy Life?


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Question:   What do you and every one of the greatest Networkers in our MLM industry have in common?

Answer.   A 24-hour day!

Yes, the 24-hour day is a great common denominator. All of us who desire success in Network Marketing are using 24 hours of our day already. We may say to ourselves, “As soon as things slow down a bit, I’ll be able to work my Networking business.” The problem is things never slow down!

Many of us act as if our activities will somehow make room for us to work our business. Unfortunately, it doesn’t happen like that.  You have to make it happen. To get something different, you need to do something different. Read the rest of this entry »

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