Pokorny v. Quixtar
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Pokorny v. Quixtar
Case: Pokorny v. Quixtar (2010)
Subject Category: Arbitration Clause Enforceability.
Agency Involved: Private Civil Suit
Court: Ninth Circuit Court of Appeals, N.D. California
Case Synopsis: Quixtar appealed the District Court decision finding the company's mandatory arbitration
program unenforceable as unconscionable and against public policy.
Legal Issue: Is Quixtar's mandatory arbitration program unconscionable?
Court Ruling: The Court of Appeals upheld the District Court's finding that Quixtar's mandatory
arbitration program was unconscionable and against public policy. The program was procedurally
unconscionable because it was thrust upon Quixtar distributors without a meaningful opportunity to
negotiate the contents of the program. The distributors were not given the opportunity to review the
rules of the program before agreeing to them. The rules of the program also allowed for unilateral
amendment by Quixtar at any time. The court also found the program to be substantially
unconscionable. Only the distributor was required to go through the arbitration program to resolve
disputes; Quixtar was free to resolve their disputes with other means if they so choose. Also, by
requiring a non-binding informal conciliation process before resorting to mandatory arbitration, Quixtar
would get a preview of the distributors claims before the binding part of the arbitration program, giving
it a possible advantage. The court concluded that these factors made the arbitration program so one
sided in Quixtar's favor to render the whole program unconscionable.
Practical Importance to Business of MLM/Direct Sales/Direct Selling/Network Marketing/Party
Plan/Multilevel Marketing: A mandatory arbitration program must be fair to both parties to be
enforceable. Factors that are considered are the amount of negotiation and bargaining power over
acceptance of the program, the permanence of the rules, and the amount of mutuality of treatment
under those rules.
Pokorny v. Quixtar, No. 08-15880 (2010): The Court of Appeals upheld the district court's finding
that Quixtar's mandatory arbitration program was unconscionable and against public policy. The
program was procedurally unconscionable because it was thrust upon Quixtar distributors without a
meaningful opportunity to negotiate the contents of the program. The distributors were not given the
opportunity to review the rules of the program before agreeing to them. The rules of the program also
allowed for unilateral amendment by Quixtar at any time. The court also found the program to be
substantially unconscionable. Only the distributor was required to go through the arbitration program to
resolve disputes; Quixtar was free to resolve their disputes with other means if they so choose. Also, by
requiring a non-binding informal conciliation process before resorting to mandatory arbitration, Quixtar
would get a preview of the distributors claims before the binding part of the arbitration program, giving
it a possible advantage. The court concluded that these factors made the arbitration program so one
sided in Quixtar's favor to render the whole program unconscionable.
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FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JEFF POKORNY; LARRY BLENN;
KENNETH BUSIERE, on behalf of
themselves and those similarly
situated,
Plaintiffs-Appellees,
v.
