Arguments continue in Quixtar suit

The Grand Rapids Press
August 22, 2007

GRAND RAPIDS -- Arguments were to continue Thursday in lawsuits filed in an effort to keep Quixtar distributors from disclosing confidential information in what Quixtar and a distributors' association say is a smear campaign.

Kent County Circuit Judge Paul Sullivan heard arguments for more than three hours today in cases Alticor, Quixtar's parent, and the Independent Business Owners International Association filed.

They are seeking to prevent former high-profile distributors Orrin Woodward and Chris Brady, among others, from releasing information they say could cause irreparable harm to Quixtar and other distributors, known as IBOs.

The cases spawned from Quixtar's dismissal of at least 15 IBOs after the company said they refused to agree to the company's demands they fall in line with its business rules.

The IBOs then filed suit, alleging Quixtar the non-compete clauses that were part of those rules were invalid because is an illegal pyramid scheme.
The suit said the company, the online variation of Alticor's Amway home products sales unit in the United States, relies almost solely on internal consumption of products by its IBOs.

It becomes a pyramid because, in order to make money, IBOs must continually recruit people for their "downline," the suit said. Higher-level IBOs receive commission-like payments from them.

The crux of Quixtar's arguments against Woodward and Brady's TEAM organization of IBOs focused on non-compete agreements. The company said they prevent them from tapping their networks of IBOs for other ventures or to sell motivational products and events.

Stephen Turner, the IBOIA's attorney, argued Woodward, Brady and four other high-level IBOs had breached pledges and contracts in which they swore not to divulge what happens at IBOIA board meetings.

He is asking for an injunction to prevent further dissemination of confidential information.

The defense attorneys argued the California case would decide whether Quixtar's confidentiality agreements are valid and there wasn't enough evidence to show the company would be irreparably harmed without the temporary injunctions they are requesting from Sullivan.

In the IBOIA case, defense attorney John Anding argued the IBOIA was trying to squelch free speech and the information the IBOIA called confidential was already in the public domain.

Arguments are slated to restart at 8:30 a.m. Thursday.

Both sides declined to comment pending the outcome of the hearing.

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