Amway is trying to create the impression that a prior suit by Procter and Gamble filed
in Ohio has been dismissed. This is not the case. A judge disallowed Procter and Gamble's
contention that Amway spread rumors about the head of P and G being a satanist and
donor of P and G revenues to a satanic church. All other allegations against Amway
still stand in this suit. This newer suit, filed in Texas, again makes the satanist rumor
allegation PLUS contends that Amway is operating as an illegal pyramid because
the sale of Amway products is mainly to its own distributors through "personal use".
Amway is in potentially very hot water on this one since the various AMO's that bring in the
majority of Amway's revenue emphasize recruiting (and not sales) and distributors "buying
from their own stores" for their personal use. Watch this litigation closely.
I. JURISDICTION AND VENUE
1. The matter in controversy exceeds, exclusive of interest and costs, the
sum of Seventy-Five Thousand ($75,000.00) Dollars.
2. The jurisdiction of this Court is based upon a federal question, 18
U.S.C. § 1962(c), Racketeer Influenced and Corrupt Organizations Act, and
diversity of citizenship pursuant to 28 U.S.C. §§ 1331 and 1332. In
addition, this Court has general and specific jurisdiction over each and
every defendant in this action.
3. Venue is proper in the United States District Court for the Southern
District of Texas, Houston Division under 18 U.S.C. § 1965(a), Racketeer
Influenced and Corrupt Organizations Act and under 28 U.S.C. § 1391 because
the Defendants reside in or conduct business within the State of Texas
and/or committed some or all of the acts giving rise to the claims in this
action within this judicial district.
II. INTRODUCTION
4. The Amway Corporation distributes household products for which its
principal competitor is Procter & Gamble. The basic product lines of Amway
and Procter & Gamble coincide in a host of key areas. For instance, Procter
& Gamble's Tide and Cheer laundry detergents are in direct competition with
Amway's SA-8 laundry products; Procter & Gamble's Crest and Gleem
toothpastes compete with Amway's Glister; and Procter & Gamble's Spic n Span
and Top Job compete with Amway's L.O.C. Multipurpose Cleaner.
5. Unlike Procter & Gamble, which sells its products through traditional
retail networks, Amway sells its products through a network of distributors
in what it refers to as a multi-level marketing plan. At first blush, the
plan would appear to focus upon the recruitment of a large sales force to
move Amway products to market through door to-door sales. In reality, the
plan primarily rewards distributors for recruiting new distributors, who
will in turn be rewarded for recruiting new distributors, in a seemingly
endless proliferation of "downlines." Whereas the normal retail distribution
model relies upon a minimal number of middlemen to move products to market,
the Amway system depends upon a multiplicity of layers.
6. Amway's distributors are, in effect, its employees. Amway exerts
substantial control over how and where the plan and product information must
be presented, over the way distributors must manage their "downline," and
over almost every aspect of a distributor's conduct. Amway even describes
how a distributor should deal with a spouse in a divorce.
7. Amway can, and does, exert such tight control because all aspects of the
Amway Corporation and its distribution network are effectively controlled by
the same small group of people. The same families that own Amway also own
the highest level active distributor, Ja-Ri, to which all other distributors
ultimately report. (The name Ja-Ri is a conjunction of the first names of
the two founders of Amway.) Furthermore, Amway and Ja-Ri control the Amway
Distributor's Advisory Council (the ADAC), which is supposedly the forum for
distributors to have a voice in the business.
8. Amway has engaged in a widespread pattern of unfair competition against
Procter & Gamble in an effort to lure consumers into becoming Amway
distributors. Amway has published false claims to the effect that Tide
laundry detergent will form "sludge" that will clog the user's drainpipes.
Distributors are also covertly encouraged to spread a variety of disparaging
remarks about other Procter & Gamble products, such as the false claim that
Crest toothpaste contains abrasives which damage teeth. Most disturbing,
however, are the persistent false rumors circulated by Amway distributors
implying that Procter & Gamble is affiliated with satanism.
9. Amway engages in disparagement and other unfair competition as a part of
its overall effort to lure customers away from Procter & Gamble products,
enticing them to become a part of the Amway distribution scheme.
10. The Amway enterprise is in reality an elaborate, illegal pyramid scheme.
Amway's objective is to entice consumers out of the retail marketplace by
convincing them that purchasing Amway products will make them rich. Of those
who invest the time, money, and personal sacrifice to become Amway
Distributors, only a select few ever break even. Even fewer realize the
profits touted by Amway in its sales pitch--and they do so by siphoning
money from the victims at the bottom.
11. This action seeks to recover the losses Procter & Gamble suffers because
Amway's unlawful pyramid scheme has diverted consumers from the legitimate
marketplace and because the defendants have promoted lies about Procter &
Gamble and its products. A measurable percentage of Amway distributors
previously purchased Procter & Gamble products and would still be purchasing
Procter & Gamble products had they not been misled by the Defendants.
12. All pyramid schemes take from those at the bottom to benefit those at
the top. A simple pyramid is an unadorned payment of money, coupled with the
promise that by recruiting a new crop of victims the payor will become the
payee many times over. To profit requires one to enter the game early,
recruit others, and advance quickly to the top of the pyramid. The promise
is basic: If you allow yourself to be victimized today, you will
profit by victimizing those below you tomorrow. The scheme requires
potentially infinite growth to support the promises made to new recruits.
13. The Amway Pyramid is elaborately disguised as a marketing network in
which "products" flow down in return for money flowing up. The existence of
the "products" creates the illusion of legitimacy and masks the purpose of
the payments. No legitimate distribution network contains so many layers of
middlemen, selling and reselling the same goods a dozen or more times,
encouraging those below to keep the base of the pyramid expanding with new
victims. And, the pressure to keep Amway's pyramid going with new recruits
is enormous, because the Amway Pyramid is in a constant state of collapse
and renewal. In 1996, the average Amway distributor earns just $36.08 per
month before expenses. Every year 50% of Amway's distributors realize
the futility of the venture and withdraw.
14. But Amway's own numbers demonstrate that it is not really in the
business of marketing goods to the public. According to the most recent
statistics available, 82% of all final sales of Amway products are made to
Amway distributors. Hence, like every pyramid scheme, the Amway Pyramid is a
closed system--the profits come not from the distribution of a good or
service to those outside the pyramid, but from a redistribution of
wealth among the layers within the pyramid.
15. The Amway Pyramid has proven so successful at redistributing wealth that
it has spawned a second line of business--the sale of "tools" to lower
level distributors. "Tools" are primarily motivational tapes of dubious
value produced by the highest level Amway distributors. They are sold only
to those within the Amway Pyramid. Buying tapes is characterized as an
essential ingredient to success as an Amway distributor; distributors
are pressured to buy at least one per week. The tape business is immensely
profitable for those at the top, providing additional incentive for them to
replenish the continually collapsing pyramid with new victims.
16. In the early 1980's, Amway acknowledged that the motivational tape
business rendered the entire Amway organization an illegal pyramid scheme.
Amway co-founder, Richard M. DeVos, Sr. told Distributors: "Now, the tape
business, if it is not used as a support for the Amway business, will
oftentimes be an illegal business--in fact, it could be called a pyramid--
because [product] does not get sold to the consumer..." DeVos
continued:
"Let me talk to you about the legal side...that deals with pyramids,
that deals with the illegal operation of a business that does not have
an end consumer, where product is not retailed. That would include all
books and tapes. The sad news, folks, is that when those things go out
that way and become excessive...then it becomes an out and out illegal
pyramid...
17. The motivational tool business has since expanded. More importantly,
DeVos' remarks amount to an admission that Amway is "an out and out illegal
pyramid" by virtue of its being "a business that does not have an end
consumer, where product is not retailed."
18. So long as consumers are misled by inflated promises and lies into
joining the Amway Pyramid, Procter & Gamble will continue to be damaged--
foreclosed from a significant segment of the consumer market and vilified by
false rumors. Amway and the Defendants who help it have engaged in a
persistent pattern of corrupt activity.
Accordingly, Procter & Gamble is entitled to relief.
III. THE PARTIES
19. The Procter & Gamble Company is an Ohio corporation with its principal
place of business in Cincinnati, Ohio. It is therefore a citizen of Ohio.
The Procter & Gamble Company and its subsidiary and affiliated companies
manufacture and distribute consumer products and sell them in Texas and
throughout the United States. These products include Tide, Era, Cheer and
Bold laundry detergents, Crest and Gleem toothpastes, Biz laundry bleach,
Ivory, Zest, Camay and Safeguard bar soaps. Cascade dishwashing soap, Folger
coffee, Mr. Clean, Comet and Spic & Span household cleaning products, Crisco
cooking products, Bounty paper towels, Charmin bathroom tissue, Pert
and Prell shampoos, Scope mouthwash, Pampers and Luvs diapers, Bounce fabric
softener, Duncan Hines baking mixes, CoverGirl cosmetics. Secret and Sure
deodorants, Dawn dishwashing liquid and many other food, laundry, cleaning,
and personal care products. A more complete list of these products is
attached as Exhibit 1.
20. The Procter & Gamble Distributing Company ("Procter & Gamble
Distributing") is an Ohio corporation with its principal place of business
in Cincinnati, Ohio. Procter & Gamble Distributing is therefore a citizen of
Ohio. Procter & Gamble Distributing sells and distributes Procter & Gamble
products, including those identified in the preceding paragraph, to its
customers which include retailers and wholesale distributors throughout
the United States, including within the State of Texas. Procter & Gamble
Distributing is a subsidiary of The Procter & Gamble Company.
21. Defendant Amway Corporation ("Amway") is a Michigan corporation with its
principal place of business in Ada, Michigan. Amway is a privately-held
company owned and controlled by the DeVos and Van Andel families. (See
Exhibit 2.) Amway, through its employees and its chain of distributor-
agents, including the Defendants herein, engages in the business of
recruiting consumers to become "distributors" of Amway products. Amway
products are sold and distributed nationwide and include: Glister anti-
plaque fluoride toothpaste, SA8 Plus Premium laundry detergent, Crystal
Bright dishwashing soap, Far Corners and Nine to Five coffee products,
Durishine household cleaning product, Modern Magic Meals vegetable oil pan
coating spray, Meadowbrook paper towels and bathroom tissue, Satinique sport
shampoo, Amway Zoom Spray Cleaner, Artistry cosmetics, Deter deodorant,
Amway Dish Drops dishwashing liquid, L.O.C multipurpose cleaner, Amway
Fabric Softener and Brightener and many other food, laundry, cleaning and
personal care products. Amway also sells and distributes, through a
catalog,products made by other manufacturers. Amway does not offer for sale
any product made by Procter & Gamble. Defendant Amway Corporation may be
served with process through its registered agent for service, CT
Corporation, at 350 N. St. Paul Street, Dallas, Texas 75201.
22. Many Amway products distributed by Defendants compete with Procter &
Gamble's products in the consumer market nationwide. A list of many of the
Amway products which compete with Procter & Gamble products is attached
hereto as Exhibit 1. Amway specifically advertises against Procter &
Gamble's products in its publications such as its monthly AMAGRAM magazine
and its Amway Product Demonstrations Guide, both of which are sent through
the U.S. Mails. Copies of examples of such advertisements are attached as
Exhibit 3. Information in such advertisements concerning Procter & Gamble
products is often inaccurate, false and/or misleading.
23. Defendant The Amway distributors Association Council ("ADAC") is
comprised of high-level Amway distributors such as members of the DeVos and
Van Andel families, Ja-Ri and Defendants Haugen, Wilson and Rummel. The ADAC
is a Michigan corporation whose business address has been the same as Amway
in Ada, Michigan. (See Exhibit 4.) The ADAC has 30 board members. Fifteen
are elected by less than 1% of Amway distributors. The other 15 are
nominated by Amway and elected by other board members. The ADAC, in
conjunction with Amway and Ja-Ri, controls and supervises Amway
distributors. The ADAC consults and advises Amway on all aspects of the
Amway business. The ADAC further consults, advises, enacts and implements
Amway disciplinary rules on behalf of Amway. The ADAC was directly involved
in the wrongful conduct alleged herein. Defendant The Amway Distributors
Association Council may be served with process through its registered agent
for service, Kim S. Mitchell, at 7575 East Fulton Street, Ada, Michigan
49355.
24. Defendant Ja-Ri is a Michigan Corporation whose business address is the
same as Amway in Ada, Michigan. Ja-Ri was incorporated by Richard M. DeVos,
Sr. and Jay Van Andel in 1963. (See Exhibit 5.) Ja-Ri is a privately-held
company owned and controlled by the DeVos and Van Andel families. Amway and
Ja-Ri are operated as a single entity, using a common place of business,
having common employees, and having common owners. Amway and Ja-Ri
intermingle their assets and fail to adequately observe corporate
formalities. Ja-Ri holds title to real estate used by the DeVos and Van
Andel families for residential purposes. Ja-Ri, in conjunction with Amway
and the ADAC, controls and supervises Amway Distributors. Ja-Ri was directly
involved in the wrongful conduct alleged herein. Defendant Ja-Ri Corporation
may be served with process through its registered agent for service, Kim S.
Mitchell, at 7575 East Fulton Street, Ada, Michigan
49355.
25. Defendant Donald R. Wilson is a citizen of the State of Utah, residing
in Ogden, Utah. At all relevant times, Wilson was a top-level Executive
Diamond Amway distributor. Wilson was directly involved in the wrongful
conduct alleged herein. Wilson engaged in the wrongful conduct in his
individual capacity and in his capacity as a representative and agent of
Amway and as a representative of defendant, WOW International Inc. ("WOW"),
aka Wilson International Network, and Wilson Enterprises, Inc., entities
through which Wilson conducts his Amway business activities. WOW is a Utah
corporation with its principal place of business at 1190 E. 5425 South,
Ogden, Utah. WOW is privately owned and controlled by Don and Nancy Wilson.
WOW is one of the corporate entities through which Defendant Don Wilson
conducts his business, including his Texas business activities, as an Amway
distributor. (Wilson, WOW, Wilson International Network and Wilson
Enterprises are hereinafter referred to collectively as "Wilson." ) Wilson
conducts business extensively in Texas, conducting seminars for Amway
distributors, renting meeting halls and auditoriums in Texas for Amway
seminars, arranging speaking engagements by Texas citizens and supervising,
training, controlling and benefiting from the efforts of numerous Texas
Amway distributors. Wilson's network of Amway distributors is primarily
centered in Utah, Texas, Arizona, and Nevada. At all relevant times, Wilson
was an agent of Amway. Defendant Donald R. Wilson may be served with process
at 1190 E. 5425S, Ogden, Utah 84403. Defendant WOW International, Inc. may
be served with process through its registered agent for service, Donald R.
Wilson, at 1190 E. 5425S, Ogden. Utah 84403. Defendant Wilson Enterprises,
Inc. may be served with process through Donald R. Wilson, one of its
principals, officers, agents or directors, at 1190 E. 5425S, Ogden, Utah
84403.
26. Defendant Ronald Rummel is a citizen of the State of Texas, residing in
Dallas, Texas. At all relevant times, Rummel was an agent of Amway, a
Diamond-level Amway distributor and a member of the ADAC. Rummel's business
is located in Texas. Rummel transacts business in this District of Texas.
Rummel was directly involved in the wrongful conduct alleged herein. Rummel
engaged in the wrongful conduct in his individual capacity and in his
capacity as a representative and agent of Amway and Rummel Enterprises.
Rummel and Rummel Enterprises are hereinafter collectively referred to as
"Rummel." Defendant Ronald A. Rummel may be served with process at
11875 Forestgate Drive, Dallas, Texas 75243. Defendant Rummel Enterprises
may be served with process through its principal, agent or partner, Ronald
A. Rummel, at 11875 Forestgate Drive, Dallas, Texas 75243.
27. Defendant Roger D. Patton is a citizen of the State of Texas, residing
in Magnolia, Texas. At all relevant times, Patton was an agent of Amway and
an Amway distributor. Patton's business is headquartered in Texas. Patton
transacts substantial business in Texas. Patton was directly involved in the
wrongful conduct alleged herein. Patton engaged in the wrongful conduct in
his individual capacity and in his capacity as a representative and agent of
Amway. Defendant Roger D. Patton may be served with process at 40818
Pipestone Road, Magnolia, Texas 77355.
28. Defendant Jeffery G. Musgrove is a citizen of the State of Texas,
residing in Katy, Texas. At all relevant times, Musgrove was an agent of
Amway and an Amway distributor. Musgrove was directly involved in the
wrongful conduct alleged herein. Musgrove engaged in the wrongful conduct in
his individual capacity and in his capacity as a representative and agent of
Amway and Defendant Musgrove Enterprises, a Texas partnership entity through
which Musgrove conducts his Amway business activities. Musgrove and Musgrove
Enterprises are hereinafter referred to collectively as "Musgrove."
Defendant Jeffrey G. Musgrove may be served with process at 6110 Plantation
Bay Drive, Houston, Texas 77084. Defendant Musgrove Enterprises may be
served with process through its principal, agent or partner, Jeffrey G.
Musgrove, at 6110 Plantation Bay Drive, Houston, Texas 77084.
29. Defendant Kevin Shinn is a citizen of the State of Texas, residing in
Greenville, Texas. At all relevant times, Shinn was an agent of Amway and an
Amway distributor. Shinn's business is located in Texas. Shinn transacts
substantial business in Texas. Shinn was directly involved in the wrongful
conduct alleged herein. Shinn engaged in the wrongful conduct in his
individual capacity and in his capacity as a representative and agent of
Amway. Defendant Kevin Shinn may be served with process at County Road
1083, Greenville, Texas 75401.
30. Defendant Randy Haugen is a citizen of the State of Utah, residing in
Ogden, Utah. At all relevant times, Haugen was an agent of Amway and an
Amway distributor. Although Haugen's principal place of business is in Utah,
he transacts a substantial amount of business in Texas. Haugen's business
activities in Texas include, but are not limited to, sales of products to
Amway distributors in Texas, supervision, training and control of Amway
distributors in Texas, sending false and defamatory messages concerning
Procter & Gamble to Amway distributors in Texas and receiving benefits from
the activities of downline Amway distributors located in Texas. Haugen was
directly involved in the wrongful conduct alleged herein in his individual
capacity as a representative and agent of Amway and Defendant Freedom Tools,
Inc., and Freedom Associates, Utah corporations through which Haugen
conducts Amway business activities. Haugen and Defendants Freedom Tools,
Inc. and Freedom Associates are hereinafter collectively referred to as
"Haugen." Defendant Randy Haugen may be served with process at 2488
Bonneville Terrace, Ogden, Utah 84403. Defendant Freedom Associates, Inc.
may be served with process through its registered agent for service, Randy
Haugen, at 2488 Bonneville Terrace, Ogden, Utah 84403. Defendant Freedom
Tools, Inc. may be served with process through its registered agent for
service, Randy Haugen, at 2488 Bonneville Terrace, Ogden, Utah 84403.
31. Defendant Randy Walker is a citizen of the State of Texas, residing in
Spring, Texas. At all relevant times, Walker was an agent of Amway and an
Amway distributor. Walker's business is located in Texas. Walker transacts
business in Texas. Walker was directly involved in the wrongful conduct
alleged herein in his individual capacity as a representative and agent of
Amway and Defendant Walker International Network, a Texas partnership
through which Walker conducts Amway business activities. Walker and Walker
International Network are hereinafter collectively referred to as "Walker."
Defendant Randy Walker may be served with process at 17688 Kuykendahl Road,
Spring, Texas 77379. Defendant Walker International Network may be served
through Randy Walker, one of its principals, agents, or partners, at 17688
Kuykendahl Road, Spring, Texas 77379.
32. Defendant Gene Shaw is a citizen of the State of Texas, residing in
Whiteright, Texas. At all relevant times, Shaw was an agent of Amway and an
Amway distributor. Shaw's business is located in Texas. Shaw transacts
business in Texas. Shaw was directly involved in the wrongful conduct
alleged herein. Shaw engaged in the wrongful conduct in his individual
capacity and in his capacity as a representative and agent of Amway.
Defendant Gene Shaw may be served with process at Rural Route 1, Whiteright,
Texas 75491.
33. Defendant Robert Schmanski is a citizen of the State of Texas, residing
in Houston, Texas. At all relevant times, Schmanski was an agent of Amway
and an Amway Distributor. Schmanski's business is located in Texas.
Schmanski transacts business in Texas. Schmanski was directly involved in
the wrongful conduct alleged herein. Schmanski engaged in the wrongful
conduct in his individual capacity and in his capacity as a representative
and agent of Amway and Schmanski Enterprises. Schmanski and Schmanski
Enterprises are hereinafter collectively referred to as "Schmanski."
Defendant Robert Schmanski may be served with process at 17167 Beaver
Springs, Houston, Texas 77090. Defendant Schmanski Enterprises may be served
with process through its principal, agent or partner, Robert Schmanski, at
17167 Beaver Springs, Texas 77090.
34. Defendant Mark Pruitt is a citizen of the State of Texas, residing in
Houston, Texas. At all relevant times, Pruitt was an agent of Amway and an
Amway distributor. Pruitt's business is located in Texas. Pruitt transacts
business in Texas. Pruitt was directly involved in the wrongful conduct
alleged herein. Pruitt engaged in the wrongful conduct in his individual
capacity and in his capacity as a representative and agent of Amway.
Defendant Mark Pruitt may be served with process at 1607 Sweet Grass Trail,
Houston, Texas 77090.
35. Defendant William Bredemeyer is a citizen of the State of Texas,
residing in Channelview, Texas. At all relevant times, Bredemeyer was an
agent of Amway and an Amway distributor. Bredemeyer's business is located in
Texas. Bredemeyer transacts business in Texas. Bredemeyer was directly
involved in the wrongful conduct alleged herein. Bredemeyer engaged in the
wrongful conduct in his individual capacity and in his capacity as a
representative and agent of Amway. Defendant William Bredemeyer may be
served with process at 722 Sheldon Road, Channelview, Texas 77530.
36. Defendants John and Jane Does 1-5, whose complete identities and
addresses are unknown as this time, upon information and belief, are
individual distributors who are agents of Amway who conduct business in
Texas, and are involved in the sale and distribution of Amway consumer
products and the development of Amway business.
37. Defendants John and Jane Doe 6-10, whose complete identities and
addresses are unknown at this time, upon information and belief are business
entities who are agents of Amway and are involved in the sale and
distribution of Amway consumer products and the development of Amway
business in Texas.
38. Ja-Ri, Wilson, Rummel, Patton, Musgrove, Shinn, Haugen, Walker, Shaw,
Schmanski, Pruitt, Bredemeyer, John and Jane Does 1-5 and John and Jane Does
6-10, shall be hereinafter referred to as "Distributor Defendants" unless
expressly stated otherwise.
IV. FACTS
A. Amway and Multilevel Marketing
39. Defendants distribute Amway products through a complex network of
resellers that is sometimes referred to as a multilevel marketing scheme. In
the United States, this network comprises hundreds of thousands of
individuals organized in a pyramidal structure with Amway, Ja-Ri and members
of the ADAC at the top of the pyramid.
40. Amway was founded by two salesmen of vitamin supplements. These
salesmen, Richard M. DeVos, Sr. and Jay Van Andel, devised an elaborate
commission scheme through which they recruited others to sell products. They
offered the recruits a portion of the commission on any products sold and
retained a portion of the commission themselves. The commission structure
encouraged recruits to, in turn, recruit others below them. DeVos and Van
Andel named their marketing company "Ja-Ri." Eventually, DeVos and Van Andel
began marketing soap and detergent products under the label "Amway."
Amway's products compete directly against products distributed through more
traditional retail channels by Procter & Gamble.
41. Each new Amway recruit joined the organization below a "sponsor." Amway
defines a "line of sponsorship" as the "linkage between all distributors in
a specific Distributor organization." The recruiting of new members
eventually grew into an enormous chain of sponsors and recruits. In Amway
jargon, a recruit is "downline" from his or her sponsor, and a sponsor is
"upline" from the recruit.
42. It is estimated that certain members of Amway have more than a million
downline members. Ja-Ri is believed to be "upline" from all but one
distributor out of the 2-1/2 million Amway members. Ja-Ri technically has
one inactive upline sponsor from the early 1950's. In Amway jargon, recruits
who fill out an application to join Amway are termed "distributors."
B. Amway's Distributors are the Agents and Employees of Amway
43. Amway's distributors are the employees and agents of Amway. Amway and
its distributors collectively constitute a single business enterprise, and
are dependent upon each other.
44. Amway's "distributors" are commissioned sales agents who must follow an
extensive set of rules and regulations controlling the means and manner in
which the distributors market Amway products. For instance, Amway
distributors must present the "plan" for recruiting new members in
compliance with prescribed Amway literature and sales aids, are prohibited
from selling products to certain classes of persons, may not sell
products in certain places (such as out of their office), are significantly
restricted in their ability to sell non-Amway products, are prohibited from
resigning without Amway approval, and are even instructed on how to conduct
themselves in the event of a divorce. The most fundamental tenet of Amway
Distributorship is obedience to the upline distributors--which leads
ultimately to Amway itself.
45. Amway has a legally controlling relationship with ifs distributor
organization, because the same two families that control Amway also control
the highest active distributor (Ja-Ri) in the Amway Pyramid. Both Amway and
the distributor network are under common control.
46. The controlling "partnership" relationship between Amway and its
distributors is also demonstrated by the interworkings of Amway and the
Amway distributors Association Council ("ADAC") (formerly called the
"American Way Association" and "Amway Distributors' Association").
47. The ADAC states that its purpose is to give Distributors a "voice" and
"a means by which they could influence policy decisions" of Amway. In
reality, the ADAC is merely an arm and instrument of Amway, used as yet
another means by which to control its distributors.
48. Richard M. DeVos, Sr. and Jay Van Andel, and/or members of their
families, have served on the ADAC since its inception, in their capacities
as distributors. For example, Doug DeVos, son of Amway co-founder Richard M.
DeVos, Sr., was a member of the ADAC's Executive Council in 1995. Because
all members of the ADAC are required to be distributors, DeVos sat on the
ADAC as a distributor (Ja-Ri), and not as a representative of Amway.
49. The 30 members of the ADAC are typically those at the highest levels of
the Amway Pyramid. Fifteen of the 30 are elected by the less than 1% of
Amway distributors entitled to vote. The other 15 are elected by the first
15, from a list of nominees proposed by Amway.
50. The ADAC ostensibly serves as an advisor and paid consultant to Amway.
The ADAC also acts as a "board of arbitration." When Amway charges that a
distributor has violated an Amway rule, the distributor can appeal the
decision to the ADAC. The ADAC then conducts an evidentiary hearing, engages
in fact-finding and decides whether Amway's decision was correct. In-house
Amway attorneys attend and participate in the ADAC hearings. Theoretically,
the ADAC's determination is not binding on Amway, but the distinction is
meaningless given that Amway effectively controls the ADAC to begin with.
51. Amway is able to control the ADAC, through its membership (as
distributor Ja-Ri) on the ADAC and through its power to nominate ADAC
members. Amway therefore controls the purported trade association of its
distributors. This control augments Amway's ability to control distributors
through its rules and regulations and through Ja-Ri.
C. The Amway Pyramid
52. The principal purpose of Amway is not to sell consumer goods at retail
in fair competition with Procter & Gamble. Amway's purpose is to divert
consumers from the retail marketplace, creating a captive audience which
buys Amway products to the exclusion of all others in the false hope that
doing so will lead to riches. At present, Amway has successfully recruited
roughly 2.5 million consumers.
53. The bedrock of the Amway system is, in their terms, "dreambuilding." The
message is twofold: first, that money will solve all your problems; and
second, that Amway is a simple and easy way to make vast amounts of money.
54. Once hooked by the dream, the sales pitch to a new distributor switches
almost exclusively to the money to be made by recruiting additional
distributors. Through Amway's highly developed sliding scale of commissions,
the real money comes from a distributor's cut on those he or she recruits--
the distributor's "downline." One survives in Amway not by selling soap to
neighbors, but by reselling the dream over and over and exhorting one's
downline to do likewise. If new recruits will do as instructed, their
downlines should in theory expand exponentially, with each new layer of
recruits enriching those above.
55. To sell the dream one is required to buy Amway products. The dream is,
after all, ostensibly based upon the distribution of Amway goods. A
distributor must show faith in the "product." Becoming a 100% Amway
household is promoted as a key to Amway success. Hence Amway diverts
consumers from the marketplace not because of the merits of its products,
but because the consumer believes that purchasing the product is a
prerequisite to obtaining the dream. Meanwhile, Procter & Gamble loses any
prospect of fairly competing with Amway for sales to consumers misled into
becoming a part of the Amway scheme.
56. First, just 18% of Amway's products are sold to non-distributors; Amway
and its distributorship network is in reality a pyramid scheme. The Amway
distribution network is not intended to distribute products, but rather to
redistribute cash within the pyramid. Like all pyramids, the Amway scheme is
a closed system. If is a closed system in which money is funneled from the
base to the apex.
57. Second, the Amway model is patently unworkable as a product distribution
network. From the top of the distribution chain to the bottom spans dozens
of layers of distributors. If Amway were a business in which the objective
was to move products to market, it would fail for the sheer multiplicity of
middlemen, each of whom must rely upon the price of the product to produce
some measure of profit. Those who enter at the bottom of that pyramid face a
nearly insurmountable task of creating a downline large enough to generate
their own commissions, only worsening the problem. As one publication noted
in 1993, "for the present two million distributors to achieve financial
independence would mean that perhaps another 50 million distributors would
have to be signed up." Canadian Business (July 1993).
58. Third, Amway's data demonstrates the economic absurdity of its
distribution model. The average monthly gross income of all Amway
distributors before expenses for 1996 was $36.08. Meanwhile, only 1% of
Amway Distributors ever reach the first and most basic level of achievement--
direct distributorship, which signifies little more than a break-even
operation. Thus the odds are roughly 99 to 1 against a new distributor ever
developing a viable--much less thriving--Amway business. Yet all the while,
the 99% of Amway Distributors being exploited for the gains of a few
continue buying Amway products to the exclusion of Procter & Gamble.
59. Fourth, that Amway is a pyramid is demonstrated by its continual state
of collapse. Each year, half of Amway's distributors realize the futility of
the enterprise and quit. But Procter & Gamble cannot recoup the sales it
lost while those distributors were obediently following the Amway creed,
loyally supporting their uplines, and being exposed to the Amway
organization's vilification of Procter & Gamble.
60. Finally, Amway's pyramidal structure is revealed by the subsidiary
business in "tools" that uses the same network of downlines to distribute
products which have no commercial value to anyone outside the Amway Pyramid.
The "tools" consist of motivational tape recordings, books and rallies
produced or sponsored by the upper echelon of the Amway Pyramid. Recruits
are expected to buy the "tools" through standing orders--generally one a
week at $5 to $8 each. In fact, they are told that success only comes with
purchase of tools. The tools produce enormous profits for the uplines.
Sustaining that profit is in itself a substantial motivation to find and
keep new Amway recruits, removing consumers from the marketplace to generate
the cash necessary to sustain the Amway Pyramid.
61. Defendants' operation of an illegal pyramid by itself constitutes unfair
competition that significantly reduces Procter & Gamble's consumers. The
pyramid scheme, however, is only one aspect of Amway's pattern of unfair
competition.
D. Defendants' Other Conduct Specifically Directed at, and Injurious to,
Procter & Gamble
1. The Satanism Lie.
62. Procter & Gamble was formed in 1837, and in 1882, it registered a
trademark sometimes referred to as the "Moon and Stars" design. The design
depicts the man in the moon and 13 stars, one for each of the original
American states. Successive minor variations of this design were also
federally registered under United States Registration No. 298059.
63. The "Moon and Stars" trademark is a corporate symbol under which Procter
& Gamble has conducted business throughout the United States and around the
world for over one hundred years. Procter & Gamble's business has always
been based upon the principle of providing products of superior quality and
value that best meet the needs of consumers.
64. Beginning in the early 1980's, and continuing since that time, Amway
distributors have maligned Procter & Gamble and its products by circulating
a false and malicious statement to the effect that Procter & Gamble is
associated with Satan and that profits from the sale of Procter & Gamble
products are contributed to the "Church of Satan." Typically, the false and
malicious statement (the "Satanic Message") relates that the President of
Procter & Gamble appeared on the Phil Donahue television program and
stated that Procter & Gamble was associated with Satan. The Satanic Message
typically states that Procter & Gamble's Moon and Stars trademark is a
Satanic symbol which has appeared or will appear on Procter & Gamble product
labels along with the numbers "666," said to be the mark of the devil. The
Satanic Message typically urges that consumers boycott all Procter & Gamble
products, including some 40 specifically identified Procter & Gamble
products. (See Exhibit 6.)
65. The Satanic Message is a vicious misrepresentation and a false and
malicious disparagement of Procter & Gamble. Procter & Gamble is not, and
never has been, associated with Satan, the Church of Satan or any similar
religion or entity. No product ever manufactured, distributed or sold by
Procter & Gamble has been associated with Satan, the Church of Satan or any
similar religion or entity. No president or any other employee of Procter &
Gamble, including its current president, has ever appeared on the
Phil Donahue television program or any other television or radio program and
announced an association with the Church of Satan, because there is no
association. Procter & Gamble has never supported Satan, the Church of Satan
or any similar religion or entity in any manner whatsoever. The Satanic
Message, and every portion of it, is false and malicious and calculated to
negatively impact Procter & Gamble and the sales of Procter & Gamble
products.
66. Procter & Gamble complained to Amway in 1980's that a large number of
reports received by Procter & Gamble of circulation of the Satanic Message
identified Amway distributors as the source.
67. Amway responded by assuring Procter & Gamble that Amway would do all if
could to stop its distributors from further circulating the false and
malicious statement. Proctor & Gamble relied on Amway's promises and
assurances, which came from Amway's top officials.
68. Amway itself has admitted that the Satanic Message is false and
malicious and that its repetition by Amway distributors constitutes unfair
competition. Nevertheless, and despite its numerous assurances to Procter &
Gamble, Amway did little or nothing to stop its distributors from spreading
the Satanic Message. As of this date, Procter & Gamble has identified for
Amway dozens of Amway distributors who have circulated the false and
malicious statement. To date, Amway has taken no disciplinary action
whatsoever against any of those distributors. None have been censured. None
have been suspended. None have been terminated. In fact, other than a few
advisory letters to distributors and distributor organizations who were
caught spreading the Satanic Message, the sum total of Amway's efforts to
squelch the rumor in its distributor organization was primarily to twice
publish in articles buried in Amway periodicals that Amway "does not
condone" the spreading of the message about Procter & Gamble.
69. The Satanic Message was disseminated by Amway distributors again in 1995
on a massive scale in different forms and by different media. The first of
several known disseminations began in or about April 1995, when Defendant
Bredemayer, in Houston, Texas, distributed a written version of the Satanic
Message to Defendant Robert Schmanski, also an Amway distributor in Texas.
Schmanski, in turn, spread the Satanic Message to Texas Amway distributor
Defendant Roger Patton.
70. Roger Patton created a tape recording of the Satanic Message and sent it
by telephone to Defendant Jeffrey Musgrove, also an Amway distributor.
Patton's vehicle for transmitting the message to Musgrove was an interstate
long distance telephone transmission and recording service known as "Amvox."
Amvox is operated, sold and provided by Amway to its distributors. Amway
established and markets and controls the Amvox system in order to facilitate
mass communications between Amway and its distributors and among Amway
distributors themselves. Amvox allows an Amway distributor to instantly send
a recorded message by telephone to the telephone answering machines of
thousands of other Amway distributors throughout the world. Amway profits
from its distributors' subscriptions to the Amvox system.
71. Musgrove forwarded the Satanic Message via the Amvox system to Texas
Amway distributor Defendant Randy Walker. Walker, a Diamond level Amway
distributor, in turn forwarded the Satanic Message via the Amvox system to
Defendant Haugen, a top Amway distributor in Defendant Wilson's downline
organization. Haugen is, and at all material times was, an "Executive
Diamond" Distributor in the Amway Pyramid and a member of the ADAC and the
ADAC Executive Committee.
72. Haugen then transmitted the Satanic Message via the Amvox system to
thousands of his downline distributors. In accordance with standing orders
to pass along any instructions received from upline distributors, the
recipients of the Haugen transmission in turn sent the Satanic Message to
numerous other Amway distributors. A copy of the transcript of the Amvox
version of the Satanic Message is attached hereto as Exhibit 7.
73. The Satanic Message then proliferated through the enormous Haugen
organization. Amway itself admits that "thousands" of Amway distributors
received Haugen's broadcast of the Satanic Message or subsequent
transmissions of it. The false and malicious statement ran rampant through
Haugen's organization of over 60,000 downline Amway distributors. It is
believed that the message was sent to numerous other Amway distributors and
others throughout the United States and elsewhere, including South America.
74. At some point in this process, the Haugen Satanic Message crossed into
at least two other, large organizations of Amway distributors. First, the
message was sent by top Amway Diamond-level distributor Defendant Ronald A.
Rummel, via the Amvox system, of one or more members of Rummel's large
distributor organization. Second, the Haugen Amvox message was received by
members of another large distributor organization known as International
Connection and further disseminated among the many Amway distributors within
that group.
75. Concurrently with the transmissions and retransmissions of the Satanic
Message via the Amvox system, a written version of the Satanic Message was
being disseminated within the Amway distributor organization by numerous
Amway distributors. Texas Amway distributor Defendant Kevin Shinn placed
written copies of the Satanic Messages in packages of Amway products he
distributed to other Amway distributors.
76. Defendant Gene Shaw, another Texas Amway distributor, repeated the
Satanic Message from the stage to several hundred Amway distributors at an
Amway meeting in Texas.
77. Defendant Mark Pruitt, a Texas Amway distributor, handed out a written
version and/or verbally repeated the Satanic Message on a nightly basis to
many other Amway distributors during Amway meetings at Pruitt's house.
78. In addition, a flyer containing the Satanic Message and the further
suggestion that Procter & Gamble products are poisonous was disseminated by
a Texas Amway distributor to numerous other Amway distributors with
instructions to pass out copies door-to-door because doing so would help the
distributors' Amway business. The distributors complied and handed out
numerous copies of the false and malicious document, a copy of which is
attached as Exhibit 8.
79. Although Haugen later issued by Amvox a purported retraction of his
Amvox transmission of the Satanic Message, after he got caught, the
purported retraction was not received by all of the recipients of Haugen's
broadcast and the subsequent rebroadcasts of the false and defamatory
statement. Amway was aware that a month after Haugen's purported retraction,
the Satanic Message was still being transmitted among its distributors. (See
Exhibit 9.) In fact, Amway was made expressly aware that Haugen's
purported retraction was not received by those Amway distributors who were
still sending and receiving the Satanic Message through the Amway Amvox
system. Amway could have sent a clear message to its Amvox subscribers and
Amway distributors through the Amvox telephone message system denouncing
this deplorable conduct. It did not do so.
80. At about the same time, Amway distributors began asking their pastors to
tell their congregations that Procter & Gamble was associated with Satan.
Amway has asserted that churches, not Amway distributors, are the source of
the Satanic Message. However, when Amway was made expressly aware that one
or more of its distributors was spreading on the Amvox system a message that
told Amway distributors to contact every minister of churches and have them
tell their congregations about Procter & Gamble and the Satanic Message,
Amway, incredibly, did nothing to effectively address this deplorable,
malicious and unfair business conduct. (See Exhibit 9.) Amway knew that its
distributors were engaging in such conduct, but did nothing to effectively
stop it. During the same time period in which the Haugen-initiated rumor was
circulating, a 3.5 million member church in Brazil promulgated the rumor and
urged a boycott of Procter & Gamble products.
81. Amway did nothing to discipline any of the foregoing Amway distributors
who disseminated the false and malicious Satanic Message in 1995. Amway
further failed to take steps of effectively stop further dissemination of
the message by its distributors or effectively communicate to them that the
message was untrue, and that engaging in this conduct was an unfair and
illegal business practice. Indeed, Amway did not even inform Procter &
Gamble of the foregoing incidents in 1995, including the widespread
dissemination of the Satanic Message to thousands of distributors and
ministers of churches.
82. Amway knew the foregoing statements about Procter & Gamble were false.
Amway is directly responsible for the acts of its agents and employees in
spreading the rumor. Furthermore, by failing to act and to effectively stop
the spread of the Satanic Message by its distributors within its
organization, Amway has encouraged, acquiesced in and/or ratified the
foregoing vicious misrepresentations of fact and false statements concerning
Procter & Gamble and its products.
2. Additional False and Disparaging Statements by Amway Distributors
Concerning Proctor & Gamble and Its Products.
83. In addition to the foregoing false statements by Amway distributors
concerning Procter & Gamble, Amway distributors, with the knowledge,
encouragement, tacit approval and/or acquiescence of Amway, have made
numerous other false and misleading statements concerning Procter & Gamble
products.
84. In a publication to all Amway distributors, Amway made the clear
implication that Procter & Gamble's Tide laundry detergent will form
"sludge" in consumers' drain pipes which will clog such pipes. Amway's
suggestion concerning Tide was false and was made with knowledge of its
falsity. (See Exhibit 10.)
85. Amway distributors have stated to other Amway distributors and/or
consumers that Tide contains "fillers" consisting of sand, clay, peanut
shells, egg shells and walnut shells. Such statements are false and were
made with knowledge of their falsity; Tide has never contained any such
fillers.
86. Amway distributors have stated to other Amway distributors and/or
consumers that Tide will cause washing machines to rust and does not
effectively launder clothes. Such statements are false and were made with
knowledge of their falsity.
87. Amway distributors have stated to other Amway distributors and/or
consumers that daytime television programs sponsored by Procter & Gamble are
Satanic. Such statements are false and were made with knowledge of their
falsity.
88. Amway distributors have stated to other Amway distributors and/or
consumers that Procter & Gamble's Crest toothpaste contains harmful
abrasives that will injure the enamel on consumers' teeth. Amway
distributors also use false and misleading product demonstrations to
communicate this message. Such statements concerning Crest are false and
were made with knowledge of their falsity.
89. Amway distributors have stated to other Amway distributors and/or
consumers that Procter & Gamble's fabric softener products will damage the
motors of clothes-drying machines. Such statements are false and were made
with knowledge of their falsity.
90. Amway distributors have stated to other Amway distributors and/or
consumers that Procter & Gamble's Cascade dishwashing soap promotes the
growth of harmful bacteria on plates, glasses and eating utensils. Such
statements concerning Cascade are false and were made with knowledge of
their falsity.
91. In October of 1996, a concerned consumer called Procter & Gamble after
seeing an Amway distributor conduct a product demonstration using Tide and
Ivory Snow. The Amway distributor claimed these Procter & Gamble products,
when mixed with bleach, would lead to "solidification" in her plumbing. The
statements concerning Tide and Ivory Snow are false and were made with
knowledge of their falsity.
92. Amway distributors are believed to have made other false and disparaging
statements to the effect that Procter & Gamble's products contain harmful
ingredients and adulterants and/or are harmful to consumers or their
property.
3. Defendants' Disparaging Statements about Procter & Gamble and its
Products Were False, Malicious and Made for Improper Purposes
93. Defendants have published, circulated, encouraged, acquiesced in and/or
ratified the foregoing vicious misrepresentations of fact and false
statements concerning Procter & Gamble and its products, which were known to
be false and were made, or were allowed to be made, maliciously and/or with
reckless disregard as to their truth or falsity and which have caused great
harm and damage to Procter & Gamble, its products, and its business.
94. Defendants, individually and in concert, have made or have allowed to be
made the foregoing false, defamatory, and product-disparaging statements in
connection with the recruiting of additional Amway distributors and/or the
promotion and sale of Amway products in order to support their pyramid,
obtain economic gain, recruit new Amway distributors and persuade consumers
(including Amway distributors) to cease purchasing Procter & Gamble products
and instead purchase competing Amway products, all to the benefit of
Defendants and to the detriment of Procter & Gamble.
95. Amway distributors tell recruits to accept representations about Amway
"on faith." Amway distributors attempt to use religious faith as a
recruiting device, and also to mask the fraudulent nature of their illegal
pyramid. The Satanic Message is used in the same way, as a recruiting
device. Amway distributors state that Procter & Gamble is satanic in order
to buttress their false assertions that Amway is Godly. In addition, both
false statements are used to coerce Amway distributors to purchase Amway
products that they otherwise would not purchase, in lieu of the Procter &
Gamble products that they previously purchased and otherwise would be likely
to continue to purchase. The Satanic Message is, in short, an additional
means of preventing the collapse of the Amway Pyramid. One Amway distributor
confirmed that she was told at an Amway meeting: "when you buy of their
[Procter & Gamble's] products, you are giving to the devil to keep his work
going . . . Billy Graham, Jim Bakker . . . they are Amway people. When you
buy Amway, you give to Jesus."
96. The false and malicious statements published and circulated by Amway
distributors regarding Procter & Gamble and Procter & Gamble's products
deceived consumers, and caused consumers to stop purchasing Procter & Gamble
products. For example, a former Amway distributor in Texas stated that while
she was a distributor she heard the false Satanic Message and other
statements disparaging Procter & Gamble from her upline distributors. At the
time, she believed the statements to be true and as a result ceased buying
Procter & Gamble products for at least six months. Another Texas Amway
distributor stated that she still does not know whether the statements
concerning Procter & Gamble are false, because Defendants have failed to fully
retract and correct the false statements and representations. The
statements have caused distributors to take written versions of the Satanic
Message into stores in order of check to see if a Satanic symbol has appeared
on Procter & Gamble products. Further, as a result of Defendants' conduct, a
customer of Procter & Gamble canceled orders for Procter & Gamble products,
stating: "Based on your president's Satan worship and profits of your company
going to support Satan's purposes, YOU MAY CANCEL ALL FUTURE SHIPMENTS."
97. Amway's failure to discipline any Amway distributor in connection with
any of the activities and conduct alleged herein has been in spite of the
fact that Amway knew that its distributors were repeatedly and persistently
involved in the dissemination and circulation of such statements and
wrongful product disparagement activities and despite the fact that Amway
publicly pledged to help Procter & Gamble stop the spread of these false
statements.
98. Amway's statements, promises and assurances to Procter & Gamble in the
1980's that Amway would do whatever it could to stop its distributors from
disseminating the Satanic Message and false statements about Procter &
Gamble products were knowingly false, and were intended to induce Procter &
Gamble to rely on such statements, promises and assurances. Procter & Gamble
reasonably relied on Amway's statements, promises and assurances to Procter
& Gamble's detriment. Procter & Gamble refrained from bringing action
against Amway in the 1980's in reasonable reliance on Amway's statements.
Procter & Gamble only recently discovered that Amway's statements, promises
and assurances were fraudulent, and that Amway had done little or nothing to
stop its distributors from making the foregoing false statements about
Procter & Gamble and its products.
99. Despite Amway's control over its distributors and in direct conflict
with its representations to Procter & Gamble, Amway has acted with reckless
indifference and has failed to control its distributors, who on numerous
occasions over the last fifteen years have continued to spread defamatory
statements about Procter & Gamble, to disparage Procter & Gamble's products,
and to commit other wrongful conduct detrimental to Procter & Gamble.
COUNT ONE
BUSINESS DISPARAGEMENT
100. Plaintiffs incorporate as if fully restated herein their prior
allegations in Paragraphs 1 through 99 of this Complaint.
101. Defendants knowingly and intentionally, uttered, published and/or
allowed to be uttered or published the foregoing false, malicious and non-
privileged statements concerning Procter & Gamble and Procter & Gamble's
products.
102. At the time of the utterances and/or publications, Defendants knew of
the falsity of the statements and/or acted with reckless disregard as to
their falsity.
103. Defendants acted with ill will and intended to interfere in the
economic interests of Procter & Gamble in an unprivileged fashion.
104. The utterance and/or publication of the false, malicious, non-
privileged statements by Defendants induced others not to conduct business
with Procter & Gamble, and/or to cease purchasing Procter & Gamble's
products, which proximately caused special damage, including but not limited
to, loss of trade, lost sales, lost revenue, and harm to Procter & Gamble's
reputation, goodwill and prestige and standing with consumers or customers
and in the business community.
COUNT TWO
DEFAMATION
105. Plaintiffs incorporate as if fully restated herein their prior allegations
in Paragraphs 1 through 104 of this Complaint.
106. Defendants published or allowed to be published the false, malicious
and non-privileged statements concerning Procter & Gamble, its executives
and employees, and products.
107. The foregoing false statements concerning Procter & Gamble and/or its
products are slanderous, libelous and/or defamatory. The foregoing false
statements concerning Procter & Gamble and/or its products are, further,
slanderous, libelous and/or defamatory per se. Defendants knowingly,
intentionally and/or maliciously uttered or published such false and
defamatory statements and/or allowed, permitted and/or acquiesced in the
uttering or publication of such statements.
108. The false, malicious, non-privileged statements proximately caused harm
and damage of Procter & Gamble's reputation, prestige and standing as well
as Procter & Gamble's business and products.
109. As a proximate result of Defendants' conduct, Procter & Gamble has
suffered damages in an amount of be determined at trial.
110. Defendants' conduct was undertaken in bad faith, was malicious and
manifested a wanton disregard of, and/or reckless indifference towards, the
rights of Procter & Gamble, thereby entitling Procter & Gamble to punitive
or exemplary damages.
COUNT THREE
SECTION 16.29 OF THE TEXAS BUSINESS & COMMERCE CODE
INJURY TO BUSINESS REPUTATION OR TRADE NAME OR MARK
111. Plaintiffs incorporate as if fully restated herein their prior
allegations in Paragraphs 1 through 110 of this Complaint.
112. Defendants knowingly and intentionally uttered, published and/or
allowed to be published the aforesaid false and malicious statements
concerning Procter & Gamble, its executives and employees, and products.
113. These unlawful acts caused injury to Plaintiffs' business reputation.
114. Defendants' conduct, acts, and failures to act as alleged above have
directly and proximately caused Procter & Gamble irreparable injury, and
such conduct will continue to the irreparable harm of Procter & Gamble
unless enjoined by this Court.
115. Defendants' conduct constitutes a violation of Section 16.29 of the
Texas Business & Commerce Code.
116. As a result of Defendants' violation of Section 16.29 of the Texas
Business & Commerce Code, Procter & Gamble is entitled to a permanent
injunction restraining Defendants from the unlawful conduct described
herein.
COUNT FOUR
COMMON LAW UNFAIR COMPETITION
117. Plaintiffs incorporate as if fully restated herein their prior
allegations in Paragraphs 1 through 116 of this Complaint.
118. The foregoing conduct of Defendants violates numerous Texas civil and
penal statutes, including, but not limited to: Texas Business & Commerce
Code Section 17.12(a) (deceptive advertising); Texas Business & Commerce
Code Section 17.46 (false, misleading or deceptive acts or practices in the
conduct of any trade or commerce; Texas Business & Commerce Code Section
16.29 (injury of business reputation); Texas Business & Commerce Code
Section 17.461 (operation of illegal pyramid scheme).
119. Amway was at all material times, and is, engaged in a single business
enterprise with its distributors, including the Distributor Defendants, and
has profited from their efforts. The conduct alleged herein of Amway's
distributors, including the conduct of the Distributor Defendants, took
place within the scope of their conduct as a single business enterprise with Amway.
120. Certain of the Defendants conduct business under the fiction that they
are independent corporate entities. Such conduct of the corporate Defendants
tends to deceive others, violate confidence, and injure public interests,
and therefore represents a constructive fraud. Defendants are collectively
liable as a single business enterprise for damages proximately caused
thereby.
121. Defendants' tortious conduct, as alleged above and below in this
Complaint, and violations of civil and criminal laws has interfered with
Procter & Gamble's ability to conduct business and violated Procter &
Gamble's business and property rights, including but not limited to, the
right to operate business without unlawful interference, invasion or
injury and illegally diverting Procter & Gamble's consumers and customers.
122. Defendants have committed unfair competition and deceptive trade
practices in violation of Texas common law and the common law of other
states, which proximately caused harm and damage to Procter & Gamble's
business and its products.
123. As a result of Defendants' conduct, Procter & Gamble has suffered
damages in an amount to be proven at trial.
124. Defendants, conduct was undertaken in bad faith, was malicious and
manifested a wanton disregard of, and reckless indifference toward, the
rights of Procter & Gamble, thereby entitling Procter & Gamble to punitive
or exemplary damages.
125. Defendants should be permanently enjoined from committing further acts
of unfair competition.
COUNT FIVE
SECTION 43(a) OF THE LANHAM ACT
126. Plaintiffs incorporate as if fully restated herein their prior
allegations in Paragraphs 1 through 125 of this Complaint.
127. In the utterance, dissemination and/or publication in the promotion
and/or commercial advertising of their products in interstate commerce,
Defendants caused or acquiesced in the aforesaid false, misleading and
deceptive statements concerning their own products which are sold in
interstate commerce.
128. In the utterance, dissemination and/or publication in the promotion
and/or commercial advertising of their products, Defendants caused or
acquiesced in the aforesaid false, misleading and deceptive statements
concerning Procter & Gamble and its products, which are sold in interstate
commerce.
129. The false and deceptive statements include, but are not limited of the
following:
a. Advertising, publishing, disseminating, and communicating false and
misleading statements and unfounded misrepresentations about the
business, goodwill, and reputation of Plaintiffs, including false
statements that Plaintiffs and/or their corporate president were
involved in or connected with Satanism, the devil, or other undesirable
or negative associations.
b. Advertising, publishing, and communicating false and misleading
statements and unfounded misrepresentations about the Plaintiffs'
products, including lies that Plaintiffs' products contain sludge,
harmful abrasives, harmful ingredients, adulterants, and/or fillers,
are harmful to consumers, clothing, appliances, and homes, and that
Plaintiffs' products are less effective, more expensive, and/or
inferior to Amway's competing products.
c. Advertising, implying, and communicating false and misleading
misrepresentations about the economic benefits of using Amway's
products and the economic detriments of using Plaintiffs' products.
Such statements are false and misleading, constitute unfair competition,
unfair and deceptive trade practices and tortiously interfere with the
business relations that Plaintiffs have with customers and consumers,
including, but not limited to, Amway distributors.
130. As previously alleged, Defendants operate, control, participate in and
benefit from an illegal pyramid scheme whereby the Amway organization
obtains investments from new recruits, promises recruits that they will
become wealthy if they stop purchasing Procter & Gamble products and instead
purchase Amway products, and emphasizes the recruitment of new distributors
rather than the sale of product at retail. As a result, the primary focus of
the Amway organization is recruitment of new distributors, and selling to
those distributors, rather than selling product at retail. Amway
distributors derive substantially all of their Amway related income from
recruiting new distributors and the sale of motivational and other
recruitment tapes and materials, rather than from the sale of Amway products
at retail to the consumers who are not participants in Amway. These facts,
as well as the facts alleged above, render the Amway organization an illegal
pyramid scheme in violation of state and federal law. Defendants have used
the foregoing false statements concerning Procter & Gamble and its products
to recruit individuals into the Amway Pyramid and thereby and thereafter
coerce them not to buy Procter & Gamble products, all of which is done in
order to maintain the Amway Pyramid and prevent its collapse.
131. An illegal pyramid scheme is inherently fraudulent and deceptive. The
deceptions inherent in the Amway Pyramid cause consumers to join Amway,
purchase Amway products that they otherwise would not purchase and refrain
from purchasing Procter & Gamble products that they otherwise would
purchase. Defendants' operation of an illegal pyramid scheme constitutes
unfair competition and deceptive trade practices.
132. The aforementioned statements and acts actually deceived and had a
tendency to deceive a substantial segment of the intended audience of
potential and actual Procter & Gamble customers and consumers. These false,
misleading and disparaging statements and the deceptions practiced through
the operation of an illegal pyramid scheme influenced the purchasing
decisions of actual and potential Procter & Gamble customers and consumers.
133. Procter & Gamble has been injured as a direct and proximate result of
Defendants' conduct. Procter & Gamble suffered a direct diversion of its
sales from itself to Amway as well as injury to the goodwill and reputation
that it and its products enjoy with the buying public.
134. The publication of these false and deceptive statements and the other
acts and conduct of Defendants alleged above, constitutes false and
deceptive trade practices in violation of Section 43(a) of the Lanham Act,
15 U.S.C. § 1125(a), which proximately caused harm and damage of Plaintiffs'
business and products.
135. As a result of Defendants' conduct, Plaintiffs have suffered damages in
an amount to be proven at trial.
136. Defendants deliberately, willfully and in bad faith committed the
aforementioned violations of the Lanham Act. The aforesaid conduct of
Defendants constitutes an exceptional case under 15 U.S.C. § 1117(a). Thus,
Plaintiffs are therefore entitled to recover enhanced damages and reasonable
attorneys' fees incurred in this action.
COUNT SIX
TORTIOUS INTERFERENCE WITH PROSPECTIVE BUSINESS RELATIONS
137. Plaintiffs incorporate as if fully restated therein their prior
allegations in Paragraphs 1 through 136 of this Complaint.
138. Plaintiffs have had existing and potential economic relationships with
numerous customers and consumers. These customers and consumers include, but
are not limited to the following classes of individuals and entities:
a. Direct and indirect purchasers, consumers, and individual users of
products manufactured by Plaintiffs,
b. Grocery stores, department stores, convenience stores, pharmacies,
retailing establishments and chains, retail and wholesale buyers,
distributors, and other organizations, and
c. Past, present and future Amway distributors (including, but not
limited to, the upline and downline distributors of the named
Defendants), purchasers of Amway products, and individuals who are
considered recruiting prospects by Amway and its distributors.
Plaintiffs' customers reside in each state of the United States, including
Texas, as well as in many foreign countries.
139. Plaintiffs have a reasonable expectation that their customers will
continue to purchase Plaintiffs' products and have a reasonable expectation
of developing and maintaining business relationships with their prospective
customers in the future.
140. Defendants were aware of these business relationships and of
Plaintiffs' expectancy of continued future economic benefits by sales to
customers. However, despite this knowledge, Defendants intentionally engaged
in the foregoing non-privileged wrongful conduct which interfered with Plaintiffs' business relationships. The foregoing are false and misleading
statements, constitute unfair competition, unfair and deceptive trade
practices, and tortiously interfere with the business relations that
Plaintiffs have with customers and consumers, including but not limited to,
Amway distributors.
141. Defendants intentionally undertook this non-privileged wrongful conduct
for the purpose of damaging the business, reputation and goodwill of
Plaintiffs and their products, inflicting an economic and competitive injury
on Plaintiffs, decreasing the sales of Plaintiffs' products, increasing the
sales of Defendants' own products, and continuing the illegal enterprise of
an unlawful pyramid scheme.
142. Defendants have improperly used or have allowed others to improperly
use or their own benefit, as instrumentalities to achieve this wrongful
conduct, the Amvox system, Amway-related promotional literature, books,
pamphlets, tapes, videos, and other publications, face-to-face marketing
communications, presentations, speeches, and other marketing activities by
Amway distributors, Amway-related rallies, functions, seminars, and other
meetings, the interstate system of wires, and the interstate U.S. Mail
system.
143. As a result of the Defendants' wrongful, non-privileged and tortious
conduct, Procter & Gamble's past, present, and future customers, including
but not limited to Amway distributors, have refrained from purchasing,
consuming, and/or using Plaintiffs' products and, at the direction,
suggestion, and/or encouragement of Defendants, have further
disseminated false and misleading statements and misrepresentations about
Plaintiffs, Plaintiffs' products and Amway's products to other individuals.
144. As a direct and proximate result of such wrongful and tortious conduct
of the Defendants, Plaintiffs have suffered damages in an amount to be
proven at trial which include, but are not limited to, the profits that
Defendants received from the sales of Amway products which sales would not
have occurred if Defendants had not tortiously interfered with Plaintiffs'
business relationships.
145. Defendants undertook this wrongful and tortious conduct in bad faith,
with malicious and wanton disregard, and in reckless indifference towards
the rights of Plaintiffs, thereby entitling Plaintiffs to punitive or
exemplary damages.
COUNT SEVEN
NEGLIGENT SUPERVISION
146. Plaintiffs incorporate as if fully restated herein their prior
allegations in paragraphs 1 through 145 off this Complaint.
147. Through distributorship agreements, agencies, organizations and
entities such as ADAC, and through publications such as its Business
Reference Manual, Amway was, and is, in a position of authority, control and
supervision over its distributors, such as Distributor Defendants, and
profited from their efforts.
148. As such, Amway has a duty to Plaintiffs, as well as to the general
public, to ensure that its distributors, including Distributor Defendants,
engage in lawful and fair competition with their competitors in the sale and
marketing of Amway products and conduct themselves in such a fashion as to
prevent injury to third parties, including competitors such as Plaintiffs.
149. Amway assumed a duty to Plaintiffs in particular, as a result of its
representations to Plaintiffs that if would take all steps possible to stop
its distributors from engaging in the above-described illegal practices and
business conduct and from spreading the aforesaid false and malicious and
disparaging statements about Plaintiffs and their products.
150. In addition, Amway is a member of the Direct Selling Association
("DSA"). The DSA has adopted a Code of Ethics which is binding on its member
companies, such as Amway ("DSA Code"). Member companies of the DSA agree to
adhere to the DSA Code.
151. The DSA Code provides that:
(1) no member company will engage in deceptive, unlawful or unethical
sales or recruiting practices; (2) all statements made in connection
with the marketing of products will be accurate and truthful; (3) "In
the event any consumer shall complain that the salesperson or
representative offering for sale the products or services of a member
company has engaged in any improper course of conduct pertaining of the
sales presentation of its goods or services, the member company shall
promptly investigate the complaint and shall take such steps as it may
find appropriate and necessary...to cause the redress of any
wrongs"; (4) "Member companies will be considered responsible for Code
violations by their solicitors and representatives where the
Administrator finds...the member has either authorized such
practice found to be violative, condoned it, or in any other way
supported it. A member shall be considered responsible for a Code
violation by its solicitors or representatives, although it had no
knowledge of such violation, if...the member was culpably negligent
by failing to establish procedures whereby the member would be kept
informed of the activity of its solicitors and representatives"; (5)
"For the purposes of this code...companies shall voluntarily not
raise the independent contractor status of salespersons distributing
their products or services under its trademark or trade name as a
defense against Code violation allegations..." (emphasis added).
152. Amway, as a member of the DSA, adopted the foregoing duties of care and
industry standards set forth above from the DSA Code.
153. As a company engaged in direct marketing and multi-level marketing
Amway owes duties of care to the public to: (1 ) make reasonable effort in
the selection of its sales agents (distributors}; (2) actively monitor and
supervise the conduct, statements and representations of its sales agents;
(3) train sales agents to refrain from making false statements about
competitors or competing products; (4) investigate complaints of misconduct
on the part of its sales agents; (5) discipline any sales agent found to
have engaged in misconduct; and (6) prevent and correct misrepresentations
by its sales agents.
154. Amway has breached the foregoing duties of care, thereby enabling its
distributors, including but not limited to, the Distributor Defendants, to
engage in the conduct described herein. As such, Amway has breached its
duties owed to Plaintiffs.
155. Amway has known at least since 1980 that ifs distributors have engaged
in the foregoing unlawful and illegal business practices and the
dissemination of false, misleading and/or defamatory and disparaging
statements about Plaintiffs and their products and trademarks. Thus, if was
foreseeable that distributors would continue to engage in such unlawful
practices.
56. As a proximate result of Amway's negligence, Plaintiffs have suffered
damages in an amount to be proven at trial.
COUNT EIGHT
NEGLIGENCE
157. Plaintiffs incorporate as if fully restated herein their prior
allegations in paragraphs 1 through 156 of this Complaint.
158. Amway, through its agreements with its distributors and the DSA, and
through its adoption of rules and regulations governing the conduct of Amway
distributors, has undertaken duties to the public, including competing
companies, to use reasonable care in the supervision, training, education,
monitoring, policing, and disciplining of its distributors in order to
prevent or reduce the likelihood that such distributors would engage in
conduct harmful of members of the public, including competitors of Amway.
159. Amway's failure to adequately train, educate, monitor, police and
discipline its distributors, as alleged above, breached such duties owed by
Amway to Procter & Gamble.
160. Amway, further, undertook specific duties to Procter & Gamble, as
previously alleged, to do everything within Amway's power to stop the
dissemination within Amway's distributor organization of the Satanic Message
and other false and disparaging statements about Procter & Gamble and its
products.
161. Amway failed to do everything in its power, or to reasonably attempt to
do everything in its power.
162. Amway Distributors, by joining Amway, undertook duties to refrain from
engaging in unfair trade practices, and other conduct proscribed by Amway's
rules and regulations which is injurious to competitors of Amway. The
Distributor Defendants breached these duties owed to Procter & Gamble by
engaging in the conduct alleged above.
163. As a direct and proximate result of the foregoing breaches of duty by
Defendants, Procter & Gamble has been damaged in an amount to be proven at
trial.
COUNT NINE
VICARIOUS LIABILITY
164. Plaintiffs incorporate as if fully restated herein their prior
allegations in paragraphs 1 through 163 of this Complaint.
165. Through contractual agreements with ifs distributors, agencies,
organizations and entities such as ADAC, through publications, guidelines
and manuals such as the Business Reference Manual, through the exertion of
control by Amway as an upline distributor through Defendant Ja-Ri, and
through Amway's ability to control its distributors which was previously
alleged, Amway was at all material times, and is, in a position of
authority, control and supervision over its distributors such as Defendants
and has profited from their efforts.
166. Amway's distributors, including Distributor Defendants, were and
continue to be partners, agents and representatives of Amway and, as such,
stand in partnership, agent-principal, employer-employee, master-servant and
joint venture relationships with Amway.
167. The conduct alleged herein of Amway's distributors, including the
conduct of the Distributor Defendants, took place within the scope of their
partnership, agency, joint venture, employer-employee and master-servant
relationships with Amway.
168. Amway has acquiesced in the foregoing misconduct of its distributors by
accepting benefits from its association with its distributors and failing to
terminate or otherwise discipline such distributors. Amway has thereby
ratified their misconduct.
169. As such, Amway is vicariously liable for the aforesaid misconduct of
its distributors, agents, employees and servants as alleged herein. Amway
and the other Defendants are jointly and severally liable for the aforesaid
misconduct of their partners and joint adventurers.
170. As a result of this conduct of Defendants alleged herein, Plaintiffs
have suffered damages in an amount to be proven at trial.
171. Defendants' conduct as alleged herein was undertaken in bad faith and
manifested a wanton disregard of, and reckless indifference towards, the
rights of Plaintiffs, thereby entitling Plaintiffs to an award of punitive
or exemplary damages.
COUNT TEN
FRAUD
172. Plaintiffs incorporate as if fully restated herein their prior
allegations in Paragraphs 1 through 171 of this Complaint.
173. In furtherance of its illegal pyramid scheme and other false and
deceptive trade practices, Amway made or caused to be made the aforesaid
knowing and fraudulent misrepresentations of material facts to Plaintiffs
that Amway would stop the spread of the Satanic Message within its
organization and other false and disparaging statements made against
Plaintiffs by Amway distributors. Such fraudulent misrepresentations
included, but were not limited to, the following statements:
· On September 8, 1980 Eugene M. Rogstad, an Amway staff attorney, sent
a letter to Sydney McHugh of Procter & Gamble's Public Relations
Department stating with regards to the Satanism rumor ". . . I will
cooperate in any way I can to help better inform distributors of
Amway products of the fallacies of this rumor." (See Exhibit 11.)
· On April 30, 1982 Casey Wondergem, Amway's Director - Public
Relations, sent a letter to Kathy Gilbert of Procter & Gamble's
Public Affairs Division stating that Plaintiffs could "[b]e assured
that we'll do whatever we can to help clear the air if we're
contacted about this senseless rumor. . . .We'll do whatever we can
to assist in your difficult task of discrediting an irresponsible
tall tale." (See Exhibit 12.)
174. The aforementioned statements were false, and at the time Amway caused
these statements to be made, it knew they were false or acted with reckless
disregard as to their truth or falsity.
175. Amway made these statements with the intention that Plaintiffs forego
pursuing litigation or other action against Amway in connection with the
aforesaid misconduct of Amway's distributors.
176. Plaintiffs reasonably relied, to its detriment, on the representations
made by Amway. Plaintiffs' reliance is evidenced by the statements made by
Thomas Laco, Procter & Gamble's Executive Vice President, to Jay Van Andel,
Chairman of Amway, that he was "convinced that Amway management will do
everything in its power to stop some of the inaccurate statements about
Procter & Gamble that are being made by Amway distributors on occasion."
(See Exhibit 13.) Procter and Gamble first suspected that the
representations made by Amway as detailed above were false in or about July,
1995, when it discovered that Defendant Haugen was a member of the Executive
Committee of ADAC and agent of Amway. Procter & Gamble subsequently
discovered that, contrary to Amway's representations, Amway had done little
or nothing to stop its distributors from making the aforesaid false
statements about Procter & Gamble and its products.
177. But for the aforesaid fraudulent representations upon which Plaintiffs
justifiably relied to their detriment, Plaintiffs would have investigated
matters further and pursued any and all legal remedies available to them,
including but not limited of an action against Amway for negligent
supervision of its distributors.
178. Due to Plaintiffs' justifiable reliance on Defendants' fraudulent
representations, plaintiffs suffered injuries, including but not limited to
lost sales, loss of goodwill, injury to reputation, and out-of-pocket
expenses in responding to the rumor.
179. Amway's fraudulent conduct was undertaken in bad faith, and manifested
a wanton disregard of, and reckless indifference towards, the rights of
Procter & Gamble. Procter & Gamble is, therefore, entitled to an award of
punitive or exemplary damages.
COUNT ELEVEN
Violation of Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c)
180. Plaintiffs incorporate as if fully restated herein their prior
allegations in Paragraphs 1 through 179 of this Complaint.
181. Defendants are and were at all times mentioned herein "persons" as that
term is defined in 18 U.S.C. § 1961(3).
182. Amway and its distributors constitute an association-in-fact
"enterprise" as that term is defined in 18 U.S.C. § 1961(4), which is
engaged in and affects interstate and foreign commerce. The enterprise at
all times mentioned herein was and is engaged in the manufacture,
distribution and sale of products of millions of Amway distributors and
other consumers throughout the United States and around the world. The
enterprise is an ongoing organization with a common purpose, a defined
hierarchy, and a regularity of function.
183. Defendants are employed by or associated with the enterprise, and
knowingly and willfully conduct and participate in the conduct of the
enterprise's affairs, directly and indirectly, through a pattern of
racketeering activity in violation of 18 U.S.C. § 1962(c). Each of the
Defendants derives income, directly and indirectly, through their operation,
management or control of the enterprise.
184. The pattern of racketeering activity engaged in by Defendants involves
at least three separate but related schemes, carried out for a number of
decades and continuing to this time. These schemes include:
(a) Inducing consumers, through false promises of enormous wealth and
other misrepresentations, to join the Amway Pyramid;
(b) Inducing distributors and potential distributors, through further
misrepresentations, to purchase motivational tools and attend
motivational rallies, all with the purpose of fostering the Amway
Pyramid; and
(c) inducing distributors and other consumers, through false and
malicious disparagement of Procter & Gamble and its products (as well
as the products of other competitors), and through other
misrepresentations, to purchase Amway products instead of Procter &
Gamble or other competitive products. The pattern of racketeering is
separate and distinct from the legitimate manufacture, distribution and
sale of products undertaken by the enterprise.
185. The pattern of racketeering engaged in by Defendants involves schemes
and artifices to defraud constituting mail fraud (18 U.S.C. § 1341) and wire
fraud (18 U.S.C. § 1343), all of which is "racketeering activity" as defined
in 18 U.S.C. § 1961 (1)(B).
Defendants have engaged in these schemes and artifices with the specific
intent to defraud, causing damage to the property interests of Procter &
Gamble and multiple other victims.
186. There are thousands of predicate acts of mail and wire fraud relating
to Procter & Gamble and other victims that occur on an ongoing basis and
have so for years, and threaten to continue repeatedly into the future.
These predicate acts comprise the pattern of racketeering activity. All of
these predicate acts have a common purpose and effect--to promote the Amway
Pyramid. These predicate acts include mailings containing misrepresentations
or omissions made in furtherance of the schemes, telephone calls
containing misrepresentations or omissions made in furtherance of the
schemes, facsimile transmissions containing misrepresentations or omissions
made in furtherance of the schemes, as well as mailings, telephone calls and
facsimile transmissions that may not themselves contain misrepresentations
but were undertaken as an integral part of the schemes and in furtherance
thereof. For example, the acts of mail and wire fraud include, but are not
limited to, sending on a month-to-month or continuous basis to Amway
distributors and/or recruits: published manuals, newsletters and magazines
such as the "AMAGRAM" and "Newsgram", via United States mail; letters,
contracts and memoranda via United States mail; and messages via interstate
telephone wires through use of Amvox and Amway's site on the Internet. The
predicate acts committed by Defendants also
include, but are not limited to, those described above in the foregoing
paragraphs, as well as those set forth with specificity in Exhibit 14.
187. As a proximate result of the pattern of racketeering engaged in by
Defendants, Procter & Gamble suffered damage to its business and property,
including damage to its reputation and good will, as well as diverted
customers and lost sales, in an amount to be determined at trial.
COUNT TWELVE
Violation of Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §
1962(c)
188. Plaintiffs incorporate as if fully restated herein their prior
allegations in Paragraphs 1 through 187 of this Complaint, including the
descriptions of the predicate acts directed by Defendants against Procter &
Gamble and other victims, forming the basis of a pattern of racketeering
activity.
189. Defendants are and were at all times mentioned herein "persons" as that
term is defined in 18 U.S.C. § 1961(3).
190. Amway's distributor organization constitutes an association-in-fact
"enterprise" as that term is defined in 18 U.S.C. § 1961(4), which is
engaged in and affects interstate and foreign commerce. Said enterprise at
all times mentioned herein was and is engaged in the distribution and sale
of products to millions of Amway distributors and other consumers throughout
the United States and around the world. The enterprise is an ongoing
organization with a common purpose, a defined hierarchy, and a regularity of
function.
191. Defendants are employed by or associated with the enterprise, and
knowingly and willfully conduct and participate in the conduct of the
enterprise's affairs; directly and indirectly, through a pattern of
racketeering activity in violation of 18 U.S.C. § 1962(c). Each of the
Defendants derives income, directly and indirectly, through their operation,
management or control of the enterprise.
192. The pattern of racketeering activity engaged in by Defendants involves
at least three separate but related schemes, as previously set forth above,
carried out for a number of decades and continuing to this time. The pattern
of racketeering is separate and distinct from the legitimate distribution
and sale of products undertaken by the enterprise.
193. The pattern of racketeering engaged in by Defendants involves schemes
and artifices to defraud constituting mail fraud (18 U.S.C. § 1341) and wire
fraud (18 U.S.C. § 1343), all of which is "racketeering activity" as defined
in 18 U.S.C. § 1961 (1 )(B).
Defendants have engaged in these schemes and artifices with the specific
intent to defraud, causing damage to the property interests of Procter &
Gamble and multiple other victims.
194. The pattern of racketeering engaged in by Defendants involves thousands
of predicate acts constituting mail fraud and wire fraud, as previously set
forth above.
195. As a proximate result of the pattern of racketeering engaged in by
Defendants, Procter & Gamble suffered damage of its business and property,
including damage to its reputation and good will, as well as diverted
customers and lost sales, in an amount to be determined at trial.
V. RELIEF
WHEREFORE, Plaintiffs pray for relief as follows:
a. judgment against Defendants jointly and severally for compensatory
damages in excess of Seventy-Five Thousand Dollars ($75,000.00);
b. judgment against Defendants jointly and severally for punitive
damages in an appropriate amount to deter Defendants and others from
the conduct complained of;
c. judgment against the Defendants jointly and severally for
Plaintiffs' attorneys' fees;
d. for an order permanently enjoining and restraining Defendants and
their partners, agents, corporate subsidiaries and affiliates,
individually and jointly, from:
(1) publishing, circulating, or causing the publication or circulation of
the statements in Exhibits 6, 7, and 8 or any similar false statements
purporting to connect Plaintiffs or any of their subsidiaries or affiliated
corporations, employees, products or trademarks to Satanism, the devil, or
the Church of Satan; (2) publishing, circulating, or causing the publication
or circulation of any false and disparaging statement about Plaintiffs'
products, including, but not limited to, statements that Plaintiffs'
products are "negative," "evil," "the devil's work," or contain sludge,
harmful abrasives, harmful ingredients, adulterants, and/or fillers (such as
beach sand, peanut shells, walnut shells, or egg shells), or are harmful to
consumers, clothing, appliances, and homes, or that Plaintiffs' products are
less effective, more expensive, and/or inferior to Amway's competing
products; (3) publishing, circulating, or causing the publication or
circulation of any statement that misrepresents the economic benefits of
using Amway's products and the economic detriments of using Plaintiffs'
products; (4) committing any of the aforesaid unfair methods of competition,
unfair or deceptive acts or practices; and (5) operating and conducting an
illegal pyramid scheme, permitting distributors to spend the majority of
their Amway-related efforts in recruiting new Amway distributors, paying
commissions or bonuses to any Amway distributor whose Amway business volume
is not primarily attributable to retail sales, using misrepresentations to
recruit individuals into the Amway Pyramid, and coercing distributors
not to buy products of Plaintiffs or to purchase the competing products of
Amway exclusively;
e. for an order requiring all Defendants to affirmatively communicate to all
of their distributors (through such means as its written distributorship
applications, agreements, Business Reference Manual, Amvox system and other
publications, speeches, correspondence, guidelines and manuals) that the
following statements are false and must not under any circumstances or for
any purposes be published or circulated: (1) statements purporting to
associate Plaintiffs, any of their subsidiaries, affiliated corporations,
employees, products, or trademarks with Satanism, the devil, or the Church
of Satan or other undesirable or negative associations, (2) statements that
Plaintiffs' products are "negative," "evil," "the devil's work," or contain
sludge, harmful abrasives, harmful ingredients, adulterants, and/or fillers
(such as beach sand, peanut shells, walnut shells, or egg shells), or are
harmful of consumers, clothing, appliances, and homes, or that Plaintiffs'
products are less effective, more expensive, and/or inferior to Amway's
competing products; and (3) statements that misrepresent the purported
economic benefits of using Amway's products and the purported economic
detriments of using Plaintiffs' products;
f. under the provisions of the Lanham Act, 15 U.S.C. § 112 et seq., for
judgment against the Defendants jointly and severally for attorneys' fees,
because this case constitutes an exceptional case and entities Plaintiffs to
recover attorneys' fees and costs against Defendants, and
g. under the Lanham Act for an accounting of all profits of Defendants
attributable to their wrongful conduct, unjust enrichment and/or unfair
trade practices alleged herein and judgment awarding Plaintiffs all moneys
wrongfully obtained by Defendants' unfair trade practices, false and
deceptive trade practices, unfair competition, operation of an illegal
pyramid scheme and violation of the Lanham Act;
h. Under R.I.C.O. or the Lanham Act, attorneys' fees and treble damages.
i. for such other and further relief to which Plaintiffs are entitled.
VI. JURY DEMAND
Pursuant to Rule 38(b), Federal Rules of Civil Procedure, Plaintiffs demand
trial by jury.
Respectfully submitted this 16th day of July, 1997.
RICHARD A. SHEEHY
State Bar No.18178600
Fed. ID.# 2887
MCFALL, SHERWOOD & SHEEHY
Two Houston Center
909 Fannin, Suite 2500
Houston, Texas 77010-1003
(713) 951-1000
(713) 951-1199 - Telecopier
JOHN E. JEVICKY
CARL J. STICH
ROBERT HEUCK II
DINSMORE & SHOHL, L.L.P.
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
(513) 977-8200
STANLEY M. CHESLEY
THERESA L. GROH
WAITE, SCHNEIDER,
BAYLESS & CHESCEY
1513 Central Trust Tower
Cincinnati, Ohio 45202
(513) 621-0267
Attorneys for Plaintiffs The Procter &
Gamble Company and The Procter &
Gamble Distributing Company
OF COUNSEL:
THOMAS S. CALDER
DlNSMORE & SHOHL, L.L.P.
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
(513) 977-8200
JOSEPH P. SUAREZ
THE PROCTER & GAMBLE COMPANY
Legal Division
One Procter & Gamble Plaza
Cincinnati, Ohio 45202
(513) 983-4194
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