### Amway: The Untold Story

Procter & Gamble Lawsuit (Texas)

This lawsuit was filed on 7/16/97 in the U.S. District Court for the Southeastern District of Texas in Houston. (Those wishing to obtain a photocopy of the complaint can do so by calling Ikon Document Services at (713) 236-0903 and asking for case #H-97-2384, Procter & Gamble v. Amway. The cost will be around $44.)

This lawsuit differs significantly in several respects from that previously filed by P&G in Utah.

1. Amway Corp. is named as a defendant in both lawsuits. In this one, however, Ja-Ri (Rich Devos and Jay Van Andel's downline organization) and the ADAC (the Amway Distributors Association Council) are also named.
2. The continued spreading of the satanism rumor was the primary complaint addressed by the Utah lawsuit. It was only well after that lawsuit was filed that P&G's attorneys discovered (through information on this web site and other sources) that Amway, while legal "on paper," operates as a illegal pyramid scheme for reasons detailed in the complaint below. Amway's illegal operation as a pyramid scheme is the primary basis for the complaint in the Texas lawsuit, with the satanism rumor (and other "false and disparaging statements" made by Amway distributors concerning P&G and its products) included in their proper roles as devices used to fuel the continuous recruitment necessary to prevent the collapse of that pyramid.
Obviously the pyramid scheme charges, if proven, could have very serious implications for Amway. If P&G is successful in showing that Amway competes for customers unfairly by operating a pyramid scheme in which most of Amway's product is consumed by Amway distributors, other companies that manufacture and distribute competing products may follow P&G's lead and file similar lawsuits against Amway.
3. In the Utah lawsuit, P&G is asking for "compensatory damages in excess of $50,000," plus punitive damages, plus attorney's fees (in addition to a court order prohibiting Amway and its agents from making any further false and defamatory statements about P&G.) In the Texas lawsuit, P&G is also asking the court for "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." The consequences of this to Amway, should a jury finds in favor of P&G, would obviously be devastating.
4. P&G in this case is also asking the court to order Amway to cease "...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..." Quite a few state Attorneys General have already imposed like requirements on other MLM companies--e.g. Nuskin, NSA and Herbalife--that were ruled to be illegal pyramid schemes because a high percentage of the product purchased by distributors was consumed by the distributors themselves rather than being sold to non-distributors. Again, the consequences to Amway and its distributor force would be devastating.

`The Procter & Gamble Company :`
`One Procter & Gamble Plaza :`
`Cincinnati, Ohio 45202, :`

`and :`

`The Procter & Gamble Distributing :`
`Company :`
`One Procter & Gamble Plaza :`
`Cincinnati, Ohio 45202, :`

`Plaintiffs, :`

`-vs- :`

`Amway Corporation :`
`7575 East Fulton Street :`
`Ada, Michigan 49355, :`

`and :`

`The Amway Distributors Association :`
`Council :`
`7575 East Fulton Street :`
`Ada, Michigan 49355, :`
`and :`

`Ja-Ri Corporation :`
`7575 East Fulton Street :`
`Ada, Michigan 49355, :`

`and :`

`Donald R. Wilson :`
`1190 E. 5425S :`
`Ogden, Utah 84403, :`

`and :`

`WOW International Inc. :`
`9190 E. 5425S :`
`Ogden, Utah 84403, :`

`and :`
`Wilson Enterprises, Inc. :`
`1190 E. 5425S :`
`Ogden, Utah 84403, :`

`and :`

`Ronald A. Rummel, Individually, and :`
`d/b/a Rummel Enterprises :`
`11875 Forestgate Drive :`
`Dallas, Texas 75243, :`

`and :`

`Roger D. Patton :`
`40818 Pipestone :`
`Magnolia, Texas 77355, :`

`and :`

`Jeffrey G. Musgrove, Individually, and :`
`d/b/a Musgrove Enterprises :`
`6110 Plantation Bay Drive :`
`Katy, Texas 77449, :`

`and :`

`Kevin Shinn :`
`County Road 1083 :`
`Greenville, Texas 75401, :`

`and :`

`Randy Haugen :`
`2488 Bonneville Terrace :`
`Ogden, Utah 84403, :`

`and :`

`Freedom Associates, Inc. :`
`2488 Bonneville Terrace :`
`Ogden, Utah 84403, :`

`and :`

`Freedom Tools, Inc. :`
`2488 Bonneville Terrace :`
`Ogden, Utah 84403, :`

`and :`
`Randy Walker :`
`17688 Kuykendahl Road :`
`Spring, Texas 77379, :`

`and :`

`Walker International Network :`
`1450 (Interstate 45 S #F-13 :`
`Conroe, Texas 77304, :`

`and :`

`Gene Shaw :`
`Box 131 :`
`Whiteright, Texas 75491, :`

`and :`

`Robert Schmanski, Individually, and :`
`d/b/a Schmanski Enterprises :`
`17167 Beaver Springs :`
`Houston, Texas 77090, :`

`and :`

`Mark Pruitt :`
`1607 Sweet Grass Trail :`
`Houston, Texas 77090, :`

`and :`

`William Bredemeyer :`
`722 Sheldon Road :`
`Channelview, Texas 77530, :`

`and :`

`John and Jane Does, 1-5, Individuals, :`

`and :`

`John and Jane Does, 6-10, Business :`
`Entities, :`

`Defendants. :`

`COMPLAINT FOR INJUNCTIVE RELIEF AND DAMAGES`

`The Procter & Gamble Company and the Procter & Gamble Distributing Company`
`(collectively "Procter & Gamble" or "Plaintiffs"), for their complaint in`
`this action, state as follows:`

`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. Procter & 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 Procter & 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`