### Amway: The Untold Story

All-Tech Telecom Lawsuit

The world of business/franchise opportunities is fraught with hucksters and con artists. Along with 900 numbers, vending machines, rack merchandising, and pyramid schemes, pay phones are one of the more common scams used to separate the unwary from their cash. "It's easy...just buy and install these pay phones and then sit back and count your cash." In 1995 and 1996 the Federal Trade Commision took enforcement actions against 59 vendors of business/franchise opportunities; 6 of these involved the sale of "business opportunities for pay telephones" or "pay phone franchises." (You can find this data on the FTC's web site.)

You would think Amway's owners would have been satisfied with their tried-and-true method of sucking money out of the bank accounts of distributors by selling them starter kits, sales aids and overpriced products. Apparently not, as this lawsuit would indicate.

I don't know if Amway is still trying to sell the Amway Telecharge phone. If anyone has any more information on this, I'd be interested in hearing about it.

According to plaintiff's attorneys, this case is scheduled to go to trial on October 1 of 1997 (the previous trial date of August 13 was changed).

`UNITED STATES DISTRICT COURT`
`EASTERN DISTRICT OF WISCONSIN`

`ALL-TECH TELECOM, INC.,`
`a Wisconsin corporation,`

`Plaintiff, Civil Action File:`

`vs. COMPLAINT`

`AMWAY CORPORATION,`
`a Michigan corporation,`

`Defendant.`

`Plaintiff complains of the defendant as follows:`

`l. In February of 1988, representatives of All-Tech Telecom,`
`Inc. ("All-Tech") attended an Amway Corporation ("Amway") meeting`
`in Kearney, Nebraska conducted by Stan Evans, one of Amway's`
`distributors/representatives.`

`2. At this meeting, Amway's representatives informed`
`participants of a new product line which Amway was introducing to`
`the market.`

`3. The new product being marketed by Amway was the Amway`
`Telecharge Phone. The telecharge phone is a private coinless long`
`distance phone which allows callers to charge a call on a credit`
`card; make collect calls; or make third party calls.`

`4. At the meeting, it was represented to All-Tech that,`
`among other things, Amway had completed extensive research in the`
`long distance telephone market. It was further represented that`
`Amway was releasing a product, Amway Telecharge Phones, which was`
`projected to be the best phone program in the United States.`
`Additionally, it was represented that any existing business phone`
`line could be used; the phone works in any location; all states are`
`approved for use; the quality of the phone is the best in the world`
`because they were Amway products; and that no approval was needed`
`from AT&T to install the phone.`

`5. Amway further represented to All-Tech that International`
`Telecharge, Inc. ("ITI") was the largest Alternative Operator`
`Service Company in the United States, and was to act, and still`
`continues to act, as the phone company utilized by Amway for`
`programming the phones and handling the calls and billings of the`
`telecharge phones.`

`6. Amway represented to those in attendance that as`
`distributors they could market the telecharge phones by one of two`
`ways. First, Amway told them that they could sell the telecharge`
`phones to customers and share in a small monthly percentage of the`
`revenues obtained form all the telecharge phones sold.`
`Alternatively, Amway told them that they could purchase phones from`
`Amway and retain ownership of the phone and take a large percentage`
`of the revenues as owners. This marketing plan was termed`
`"vending" the phone and the distributors would pay certain`
`businesses for allowing them to install the telecharge phones at`
`that location. Both the distributor and the business owner were to`
`share in the revenues based on the number of calls made from that`
`location.`

`7. Amway represented to All-Tech that the Amway Telecharge`
`Phones had a one-year limited warranty and that Amway guaranteed`
`customer satisfaction.`

`8. Based upon the representations of the Amway's`
`representatives, All-Tech purchased phones from Amway on various`
`dates for installation throughout the United States.`

`9. As a result of the representations made by the Amway,`
`All-Tech was induced to enter into contracts with numerous`
`individuals and businesses for the installation of Amway's`
`telecharge phones.`

`10. The representations made to All-Tech by Amway's`
`representatives pertaining to the telecharge phones were not`
`accurate, and as a result, plaintiff encountered various problems`
`from the initial installation of Amway's telecharge phones up`
`through the time of the filing of this action.`

`11. In all the locations that plaintiff had contracts,`
`Amway's telecharge phones worked improperly and did not accurately`
`reflect the exact revenue produced from the use of said phones.`
`Both All Tech and the various businesses where the phones had been`
`installed received numerous customer complaints, all relating to`
`the quality of the phones, the service, and the missing calls. As`
`a result, these businesses lost customers and revenue.`

`12. In response to these complaints, plaintiff contacted`
`Amway on numerous occasions requesting its assistance with these`
`problems. Each time All-Tech was assured that Amway would correct`
`these problems. To this date, these problems have not been`
`resolved.`

`13. As a result of Amway's failure to perform as promised,`
`plaintiff has lost a significant amount of time, effort and money`
`in attempting to resolve the problems with the telecharge phones`
`and in trying to generate new business to pay for the losses`
`incurred to their customers. All-Tech has lost and continues to`
`lose the use of its property and its projected revenue as well as`
`existing and potential business relationships.`

`JURISDICTION`

`14. All-Tech is a Wisconsin corporation with its principal`
`place of business in the State of Wisconsin.`

`15. Amway is a Michigan corporation with its principal place`
`of business in the State of Michigan.`

`16. The complaint alleges that plaintiff has suffered damages`
`in an amount in excess of $50,000.00 exclusive of costs or interest`
`as a result of the defendant's actions and for which defendant is`
`liable.`

`17. The court has jurisdiction over the above described civil`
`action pursuant to 28 U.S.C. sec. 1332.`

`FIRST CAUSE OF ACTION`
`(Breach of Contract/Warranty)`

`18. Plaintiff incorporates by reference paragraphs 1-13 of`
`the Complaint as though fully set forth herein.`

`19. Plaintiff entered into written agreements with Amway to`
`act as its distributors in marketing Amway's products.`

`20. Amway represented that its products were quality products`
`and that customer satisfaction was guaranteed.`

`21. Amway breached its agreement to furnish plaintiff with a`
`quality product as promised and instead provided plaintiff with`
`phones that among other things had poor connections, produced`
`noise, required extensive reprogramming, were used as opposed to`
`new, inaccurately recorded calls and were, overall, defective.`

`22. Amway further breached its agreement by failing to`
`resolve the problems with the telecharge phones and provide`
`customer satisfaction as promised.`

`23. Amway breached both express and implied warranties by`
`providing phones to plaintiff which were not fit for their intended`
`purpose.`

`24. As a result of Amway's breach of contract with the`
`plaintiff, plaintiff has suffered damages in an amount in excess of`
`$50,000.00.`

`25. Prejudgment interest is claimed from the date of breach.`

`SECOND CAUSE OF ACTION`
`(Intentional Misrepresentation)`

`26. Plaintiff incorporates by reference paragraphs l-25 of`
`the Complaint as though fully set forth herein.`

`27. Amway's representatives made untrue representations of`
`fact to plaintiff, including but not limited to, representations`
`and statements pertaining to the quality and condition of the`
`telecharge phones, regulatory approval, the Amway's research and`
`development, the program's profitability, and the Company's`
`warranty.`

`28. Amway's representations were made knowing that the`
`representations were untrue or recklessly without caring whether`
`the representations were true or false.`

`29. Amway's representations were made with intent to deceive`
`plaintiff and induce it to act to its pecuniary damage.`

`30. Plaintiff reasonably believed the representations to be`
`true and relied upon them to its detriment.`

`THIRD CAUSE OF ACTION`
`(Strict Liability Misrepresentation)`

`31. Plaintiff incorporates by reference herein paragraphs 1-`
`30 of the Complaint as though fully set forth herein.`

`32. Amway's representatives made representations of fact,`
`including but not limited to, representations and statements`
`pertaining to the quality and condition of the telecharge phones,`
`regulatory approval, the Amway's research and development, the`
`program's profitability, and the Company's warranty, to plaintiffs`
`based upon its own knowledge and in circumstances in which they`
`ought to have known the truth or the untruth of the statements.`

`33. Amway and its representatives had an economic interest in`
`transaction and stood to gain financially if plaintiff entered into`
`transactions with Amway.`

`34. That the Defendant had a duty to fully and accurately`
`disclose all relevant information concerning the telecharge phone`
`product to All-Tech.`

`35. Plaintiff reasonably believed the representations to be`
`true and relied upon them to its detriment.`

`FOURTH CAUSE OF ACTION`
`(Negligent Misrepresentation)`

`36. Plaintiff incorporates by reference paragraphs 1-35 of`
`the Complaint as though fully set forth herein.`

`37. Amway's representatives were negligent in making`
`representations of fact to plaintiffs, including but not limited`
`to, representations and statements pertaining to the quality and`
`condition of the telecharge phones, regulatory approval, the`
`Amway's research and development, the program's profitability, and`
`the Company's warranty.`

`38. Ron Schumacher , acting as an agent of Amway , made some of`
`the representations referred to herein.`

`39. Plaintiff reasonably believed the representations to be`
`true and relied upon them to their detriment.`

`FIFTH CAUSE OF ACTION`
`(Section 100.18, Wis. Stats.)`

`40. Plaintiff incorporates by reference paragraphs 1-39 of`
`the Complaint as though fully set forth herein.`

`41. Amway's representations and statements, including but not`
`limited to, representations pertaining to the quality and condition`
`of the telecharge phones, regulatory approval, the Defendant's`
`research and development, the program's profitability and Company's`
`warranty were untrue, deceptive and or misleading.`

`42. As a result of Amway's false representations, plaintiff`
`suffered damages in an amount in excess of $50,000.00.`

`43. Amway is liable to plaintiff for these false`
`representations pursuant to sec. 100.18, Wis. Stats. Plaintiff is`
`entitled to the remedies afforded by the statute, including an`
`award of reasonable attorneys, fees under sec. 100.18(11)(b)2.`

`DAMAGES`

`44. Plaintiff incorporates by reference paragraphs 1-39 of`
`the Complaint as though fully set forth herein.`

`45. Amway's actions were outrageous and in willful, wanton`
`and reckless disregard of plaintiff's rights entitling plaintiff to`
`punitive damages.`

`WHEREFORE, plaintiff requests judgment against defendant in`
`accordance with the allegations of the Complaint, together with`
`costs, disbursements and reasonable attorneys' fees and any other`
`relief the court deems just and proper.`

`Dated: May 18, 1994.`

`DOAR, DRILL & SKOW, S.C.`

`Matthew A. Biegert (#1000368)`

`P.O. Box 69`
`103 North Knowles Avenue`
`New Richmond, WI 54017-0069`
`(715) 246-2211`

`and`

`Thomas S. Reavely`
`Suite 203`
`100 Court Avenue`
`Des Moines, IA 50309`
`Attorneys for Plaintiff`

`A TRIAL BY JURY IS DEMANDED.`