306 F. Supp. 3d 601
S.D. Ill.2018Background
- Long registered as an Amway Independent Business Owner (IBO) in 2011 and renewed in 2015; the Registration Agreement incorporated Amway's Rules of Conduct and Compensation Plan, including Rule 11 (an ADR procedure).
- The Registration Agreement contained an "Agreement to Mediate and Arbitrate Disputes," described a three-tiered process (conciliation → nonbinding hearing panel → binding arbitration), and included a delegation clause giving the arbitrator exclusive authority to decide arbitrability.
- Long alleges Amway withheld an annual sales bonus for 2016 (≈ $170,000) from her and 75–100 other distributors of Chinese extraction, and asserts breach/unjust enrichment and a § 1981 racial-discrimination claim.
- Long sought conciliation in November 2016 but withdrew the request in March 2017 and filed this suit in April 2017 seeking a declaratory judgment that the arbitration procedures are unconscionable and therefore unenforceable.
- Amway moved to dismiss or compel arbitration under the Federal Arbitration Act; the court reviewed whether a valid arbitration agreement existed and whether the claims fall within its scope.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Whether a valid arbitration agreement exists | Long says the Arbitration Agreement is unconscionable and she lacked actual/constructive notice (language barrier, clicked "Accept" online) | Amway says the signed Registration (and Rules incorporated) plainly notified IBOs of ADR procedures; Chinese-language version exists | Valid arbitration agreement; delegation clause enforceable; Long’s unconscionability challenge to the agreement as a whole does not avoid delegation |
| 2) Effect of delegation clause (arbitrability question) | Long contends court should decide whether she assented despite delegation | Amway points to clear delegation clause assigning arbitrability to arbitrator; Long did not specifically challenge the delegation clause | Delegation clause enforced; arbitrability (including unconscionability) for arbitrator absent a specific challenge to delegation |
| 3) Whether alleged language/notice defects (English vs. Chinese) void agreement | Long claims she was presented only English and Spanish online and did not understand; lacked meaningful notice | Amway produced a Chinese Registration Agreement with Long's signature and a translator confirming the arbitration term; party who signs is expected to take reasonable steps to understand | Language/notice argument rejected as immaterial; illiteracy in English does not automatically excuse assent; court finds reasonable inquiry notice and that Registration supplied sufficient information |
| 4) Whether Long's claims (contract, unjust enrichment, § 1981) are within arbitration scope | Long seeks declaratory relief permitting litigation in court and argues process unconscionable | Amway argues claims arise from IBO Compensation Plan and are covered by broad arbitration clause | Claims (and antecedent arbitrability) fall within the broad arbitration clause and must be sent to arbitration; court ordered stay pending arbitration |
Key Cases Cited
- Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir. 2017) (web-based contract notice and clarity/conspicuousness analysis)
- Monarch Consulting, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 26 N.Y.3d 659 (N.Y. 2016) (delegation clauses enforceable when parties clearly and unmistakably assign arbitrability)
- Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63 (2010) (party challenging arbitration as a whole must specifically challenge delegation clause to avoid sending arbitrability to arbitrator)
- Mehler v. Terminix Int'l Co. L.P., 205 F.3d 44 (2d Cir. 2000) (broad arbitration clauses compel arbitration of disputes "arising out of or relating to" the contract)