When AmeriPlan terminated contracts with numerous “independent business owners” (“IBOs”), four IBOs—who had achieved the rank of Sales Director and earned “lifetime residual income” through commissions from their own recruits—brought suit for breach of contract. AmeriPlan moved to compel arbitration. The agreement with each of the parties spanned three documents—a Broker Application, a Sales Director Agreement (both of which could not be modified without written agreement by all parties), and a Procedures Manual (which could be unilaterally modified by AmeriPlan). AmeriPlan later added a mandatory arbitration provision to the Procedures Manual.

The Fifth Circuit reversed the district court’s order compelling arbitration for 3 of the 4 plaintiffs. The court found that the dispute resolution procedure (“DRP”) in the original Sales Director Agreement—which mandated nonbinding arbitration and thereafter allowed such claims to be brought in court—could not be read harmoniously with the later arbitration provision, and that AmeriPlan had waived any argument that the arbitration provision superseded the original DRP. The remaining plaintiff was required to arbitrate her claims, however, because her older-version Sales Director Agreement contained only a forum selection clause, which the court held could be read harmoniously with the arbitration provision. AmeriPlan could have avoided this poor result by drafting a written agreement—signed by all the parties—modifying and replacing the original DRP language with the arbitration provision. Businesses that adopt arbitration procedures should take time to harmonize those procedures with any pre-existing DRPs. Sharpe v. AmeriPlan Corp., No. 13-10922 (5th Cir. Oct. 16, 2014).