The Fifth Circuit Court of Appeals held that an Amway arbitration agreement was unenforceable because Amway's unilateral right to modify the agreement rendered Amway's promise to arbitrate illusory.

In Morrison v. Amway Corp., No. 06-20138, 2008 WL 315697 (5th Cir. Feb. 6, 2008), Morrison represented the interests of many Amway distributors (the Distributors) in a decade-long suit against Amway. The claims in dispute arose prior to June 1997. In September of that year, Amway gave notice of the inclusion of an arbitration agreement in its distributorship agreements.

The distributorship agreement allowed Amway the unilateral authority to modify the arbitration agreement as it applied to disputes both before and after September 1997, including disputes which had led to lawsuits of which Amway already had notice.

Despite several protests as to the validity of the arbitration agreement by the Distributors, an arbitration award was entered, largely in favor of Amway, in early 2005. The Distributors moved to vacate the award but their motion was denied by a district court. The Distributors appealed to this Court.

This Court agreed with the Distributors that the provision in the distributorship agreement allowing Amway to modify the arbitration agreement rendered the arbitration agreement illusory and unenforceable.

The Court distinguished the instant case from In re Halliburton, 80 S.W.3d 566 (Tex. 2002). In that case, the arbitration agreement specifically disclaimed coverage of any dispute of which the employer had notice before the arbitration agreement amendment took effect. Here, there was no such express "savings clause" limiting Amway's rights to modify rules in its distributorship agreement. This made the agreement unenforceable.