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and issued an arbitration award with a net gain to Amway of $6 million ($7 million in
attorney fees and costs to Amway, and $1 million in fees and costs to the distributors).
Amway moved to confirm the award; the distributors moved to vacate it. The district
court confirmed the award and entered judgment. The distributors appealed. (Morrison,
supra, 517 F.3d at pp. 252–253 & fn. 6.)
In the Fifth Circuit, the distributors argued that an enforceable arbitration
agreement had never existed because Amway retained the right to amend the Rules of
Conduct — which included the arbitration program — as published from time to time in
company literature. More specifically, they asserted that Amway could not apply its
1998 arbitration program to claims that arose no later than 1997. (See Morrison, supra,
517 F.3d at pp. 253–254.) The circuit court discussed Halliburton, Davidson, C & H
News, and AdvancePCS in ascertaining Texas law on illusory contracts. (See Morrison,
at pp. 254–256.) It acknowledged the distinction made in AdvancePCS, supra,
172 S.W.3d at page 607, between stand-alone arbitration agreements and arbitration
provisions that are part of an underlying contract, but declined to apply it, explaining:
―[I]n AdvancePCS the court relied on the fact that the Provider Agreement not only stated
that any amendments thereto made by [the management company] would not be effective
prior to thirty days after notice thereof but also that with respect to termination ‘any
obligations that arise prior to the termination of the Agreement shall survive such
termination.‘ . . . No such provision is present here. Moreover, nothing in AdvancePCS
suggests any intention to repudiate or narrow the then so recent Davidson opinion.‖
(Morrison, at p. 256, italics added.)
The Fifth Circuit ultimately held that the arbitration program was illusory and
reversed the order confirming the award. The court reasoned: ―There is no express
exemption of the arbitration provisions from Amway‘s ability to unilaterally modify all
rules, and the only express limitation on that unilateral right is published notice. While it
is inferable that an amendment . . . unilaterally made by Amway to the arbitration
provision would not become effective until published, there is nothing to suggest that
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