Amway: The Untold Story: Hanrahan Lawsuit
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
JOHN and STACY HANRAHAN, : CIVIL ACTION N0.
129 Kent Road : 94-4615
Springfield, Pennsylvania 19064, :
:
and :
:
BRIAN BOHRER, :
649 Montroyale Drive :
Erie, Pennsylvania 16504, :
:
and :
:
MARK and LORI MENSACK, :
523H South Moore Loop :
West Point, New York 10996, :
: JURY TRIAL DEMANDED
on behalf of themselves and all :
others simirlarly situated, :
:
Plaintiffs, :
:
v. :
:
WILLIAM BRITT, individually and : CLASS ACTION
t/a, d/b/a AMERICAN MULTIMEDIA, :
INC.; BRITT MOTIVATION, INC.; :
BRITT LEASING, INC.; BRITT :
MANAGEMENT, INC.; BRITT :
RESOURCES, INC.; EXECUTIVES :
UNLIMITED, INC.; EXECUTIVE :
PLANNERS, INC., :
2533 N. Carson Street :
Carson City, Nevada 89706, :
:
and :
:
DEXTER YAGER, individually and :
t/a, d/b/a YAGER ENTERPRISES; :
DEXTER R. YAGER, SR. & FAMILY :
ENTERPRISES, INC.; D & B YAGER :
ENTERPRISES, INC.; DEXTER YAGER :
SECURITIES, INC.; DEXTER YAGER :
MOTIVATION, INC., INTERNET :
SERVICES CORPORATION; INTERNET :
SERVICES, INC.; INTERNATIONAL :
COMMUNICATION CORPORATION OF :
AMERICA; YAGER RESORT PROPERTIES, :
INC.; DREAMBUILDERS REVIEW, :
12201 Steele Creek Road :
Charlotte, North Carolina 282?3, :
:
and :
:
AMWAY CORPORATION, INC., :
7575 East Fulton Road :
Ada, Michigan 49355, :
:
Defendants. :
CLASS ACTION COMPLAINT
Plaintiffs, John and Stacy Hanrahan, Mark and Lori Mensack
and Brian Bohrer (hereinafter "plaintiffs"), on behalf of
themselves and all others similarly situated, for their complaint
allege as follows:
l. This is a class action brought to remedy defendants'
violations of the Sherman Act, 15 U.S.C. § l, the Racketeer
Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et
seq., and state common law arising from defendants' efforts to
build their vast Amway sales organizations through the
perpetration of fraud and restraint of competition. The
fraudulent, deceitful and coercive behavior of defendants, as
described herein, continues to cause substantial injury to the
members of the Class, for which the Class seeks monetary and
injunctive relief.
I. PARTIES
2. Plaintiffs John and Stacy Hanrahan are individuals and
citizens of the Commonwealth of Pennsylvania residing at 129 Kent
Road, Springfield, Pennsylvania 19064, who were distributors of
products marketed by the Amway Corporation from in or about
January 1992 through in or about August 1992.
3. Plaintiffs Mark and Lori Mensack are individuals and
citizens of the state of New York residing at 523H South Moore
Loop, West Point, New York 10996, who were distributors of
products marketed by the Amway Corporation from in or about April
1991 through in or about August 1992.
4. Plaintiff Brian Bohrer is an individual and citizen of
the Commonwealth Pennsylvania residing at 649 Montroyale Avenue,
Erie, Pennsylvania 16504, who was a distributor of products
marketed by the Amway Corporation from in or about July 1992
through in or about February 1993.
5. Defendant William Britt ("Britt"), individually and t/a,
d/b/a American Multimedia, Inc., Britt Motivation, Inc., Britt
Leasing, Inc., Britt Management, Inc., Britt Resources, Inc.,
Executives Unlimited, Inc. and Executive Planners, Inc., is a
distributor of Amway products who is involved in the promotion of
Amway distributorships, the distribution of Amway products, the
production and distribution of motivational materials for use by
Amway distributors, the sale of motivational materials to Amway
distributors, and the organization of motivational rallies for
attendance by Amway distributors.
6. Defendant Dexter Yager ("Yager"), individually and t/a,
d/b/a Yager Enterprises, Dexter R. Yager, Sr. & Family
Enterprises, Inc., D & B Yager Enterprises, Inc., Dexter Yager
Securities, Inc., Dexter Yager Motivation, Inc., Internet
Services Corporation, Internet Services, Inc., International
Communications Corporation of America, Yager Resort Properties,
Inc. and Dreambuilders Review, is a distributor of Amway products
who is involved in the promotion of Amway distributorships, the
distribution of Amway products, the production and distribution
of motivational materials for use by Amway distributors, the sale
of motivational materials to Amway distributors, and the
organization of motivational rallies for attendance by Amway
distributors.
7. Defendant Amway Corporation, Inc. ("Amway") is a
corporation which is engaged in the manufacture, distribution and
sale of Amway products, and the promotion of Amway
distributorships.
II. JURISDICTION AND VENUE
8. This Court has jurisdiction over this action under 28
U.S.C. § 1331, as this action arises under the laws of the
United States, and has supplemental jurisdiction over the state
law claims under 28 U.S.C. § 1367.
9. Venue properly lies in the Eastern District of
Pennsylvania pursuant to 28 U.S.C. 1391(b) because this is the
judicial district in which a substantial part of the events or
omissions giving rise to the claim occurred, and defendants do
business in the Commonwealth of Pennsylvania in this judicial
district.
10. By the acts, conduct, combination, conspiracy, schemes
and other wrongs complained of herein, defendants directly and
indirectly used the means and instrumentalities of interstate
commerce.
III. FACTUAL STATEMENT
11. Amway manufactures a wide variety of consumer household
products which it sells nationwide through hundreds of thousands
of distributors.
12. The Amway sales plan is a pyramid type scheme, whereby
any purchase or sale of Amway goods by a distributor financially
benefits not only Amway, but also those Amway distributors who
occupy higher levels in the Amway distributorship pyramid. In
Amway parlance, those who occupy positions below a distributor in
his or her branch of the pyramid are called the distributor's
"downline." In order to earn significant profits as an Amway
distributor, one must develop a sizeable downline by recruiting
and sponsoring other distributors into the Amway sales
organization.
13. Plaintiffs and members of the Class all became Amway
Distributors by entering into Distributorship Agreements with
Amway, whereby they acquired the right to sponsor new Amway
distributors, and to sell Amway products primarily to their
sponsored distributors.
14. Defendant Britt occupies a position at the top of his
own Amway distributorship pyramid. Defendant Britt runs his own
vast Amway distributorship network comprised of tens of thousands
of downline distributors and, upon information and belief, earns
millions of dollars annually through his Amway business
organization. Plaintiffs John and Stacy Hanrahan and Brian Bohrer
were Amway distributors in the downline of defendant Britt.
15. Defendant Yager occupies a position at the top of his
own Amway distributorship pyramid. Defendant Yager runs his own
vast Amway distributorship network comprised of tens of thousands
of downline distributors and, upon information and belief, earns
millions of dollars annually through his Amway business
organization. Plaintiffs Mark and Lori Mensack were Amway
distributors in the downline of defendant Yager.
16. Defendants Britt and Yager's wrongful conduct, as
described herein, was carried out by and through defendants'
business organizations, which organizations are comprised of and
include defendants individually, the various corporations and
entities through which defendants conduct their respective
businesses, and the employees, agents and representatives of
defendants' respective business organizations.
17. The success of defendants Britt and Yager is integral to
the success of defendant Amway, as Amway directly benefits
financially from the sponsorship of each Amway distributor within
the Britt and Yager organizations, and from the sale of Amway
products by and to each Amway distributor within the Britt and
Yager organizations.
Misrepresentations Concerning Potential Earnings
18. At all times relevant hereto, defendants Britt and Yager
routinely and intentionally misrepresented to plaintiffs the
amount of profits Amway distributors could realistically expect
to earn, which misrepresentations included by were not limited
to:
(a) statements that grossly exaggerated the
profitability of Amway distributorships;
(b) representations that as Amway distributors
plaintiffs could expect to earn tens of thousands and even
hundreds of thousands of dollars, when in fact defendants know
that during the relevant time period the average monthly gross
income for active Amway distributors was approximately $65;
(c) representations that plaintiffs' recruiting and
sponsoring efforts would result in geometrical increases in the
number of Amway distributors in plaintiffs' downlines, when in
truth Amway distributors are unlikely to recruit and sponsor
substantial numbers of other distributors or earn substantial
profits from the efforts of their downline distributors;
(d) representations that as Amway distributors
plaintiffs would earn substantial profits in only a few months;
and
(e) representations that plaintiffs would earn
substantial profits by working on only a part-time basis as Amway
distributors.
19. In addition to the aforesaid material
misrepresentations, at all times relevant hereto defendants Britt
and Yager intentionally failed to disclose material facts to
plaintiffs, which material omissions included but were not
limited to:
(a) defendant's failure to advise plaintiffs of the
substantial business expense involved in building and maintaining
a profitable Amway distributorship;
(b) defendants' failure to advise plaintiffs of the
substantial investment of time required to build and maintain a
profitable Amway distributorship;
(c) defendants' failure to advise plaintiffs of the
high turnover rate prevalent among Amway distributors;
(d) defendants' failure to advise plaintiffs that they
were likely to earn profits comparable to the average gross
income for active Amway distributors, which during the relevant
time period was approximately $65.00.
20. At all times relevant hereto, Amway was aware of and
encouraged the aforesaid material misrepresentations, and Amway
was further aware that the aforesaid material facts were not
being disclosed to Amway distributors. It was in Amway's economic
self-interest to permit such practices to continue, and although
Amway has been aware of such practices for years Amway has never
terminated the distributorships of defendants Britt and/or Yager.
21. Contrary to defendants' misrepresentations that
plaintiffs would reap significant profits as Amway distributors,
upon which misrepresentations plaintiffs relied to their
detriment, plaintiffs all lost money as Amway distributors.
Misrepresentations Concerning Amway's Affiliation
22. In order to induce persons to become Amway distributors,
at all times relevant hereto defendants Britt and Yager falsely
represented to plaintiffs that Amway distributors are involved in
profitable business relationships--variously described as, inter
alia, "joint partnerships," "network marketing," and "joint
ventures"--with major corporations, including Fortune 500
companies. Defendants represented that plaintiffs could expect to
reap substantial financial benefits as a result of the
aforementioned business relationships with numerous major
companies.
23. At all times relevant hereto, Amway was aware of and
encouraged the aforesaid misrepresentations regarding Amway's
affiliation. It was in Amway's economic self-interest to permit
such misrepresentations to continue being made to Amway
distributors, and although Amway has been aware of such practices
Amway has never terminated the distributorships of defendants
Britt and/or Yager.
24. Contrary to defendants' aforementioned representations,
plaintiffs were not involved with other companies in any
profitable business relationships, nor did they benefit
financially from any "joint ventures," "partnerships," "network
marketing," or other such business relationships in which Amway
may have been involved.
25. By their aforesaid misrepresentations, defendants
intentionally distorted the true nature of the Amway
distributorship and overstated the financial value of the Amway
distributorship. In truth, by entering into their Amway
distributorships Amway distributors simply acquired the right to
sell Amway products and sponsor other distributors.
26. Plaintiffs entered into their Amway distributorships in
reliance upon defendant's misrepresentations that Amway
distributors are involved in and reap substantial financial
benefits from business relationships with numerous companies as
described hereinabove.
The Coerced Sale of Motivational Materials
27. Defendants Britt and Yager have created their own
independent businesses that publish motivational materials, such
as books and audio cassette tapes, and that organize and promote
motivational rallies for Amway distributors throughout the United
States. Through their independent businesses, defendants Britt
and Yager sell vast quantities of motivational materials to their
respective downline distributors and hold rallies throughout the
United States that their downline distributors must pay to
attend.
28. Defendants Britt and Yager derive a substantial portion
of their incomes not from the sale of Amway products, but from
the sale of motivational materials to persons in their downlines
and from the money earned through their rallies.
29. At all times relevant hereto, defendants Britt and Yager
regularly represented to plaintiffs that their success as Amway
distributors was contingent upon the purchase of defendants Britt
and Yager's motivational materials, and that without such
materials plaintiffs would be unable to build and maintain
successful Amway distributorships. Defendants Britt and Yager
further represented to plaintiffs that they should purchase only
those motivational materials produced and/or distributed by
defendants Britt and Yager.
30. At all times relevant hereto, defendants Britt and Yager
further represented to plaintiffs that they should purchase a
weekly supply of defendants' motivational audio tapes through a
tape-of-the-week program that defendants Britt and Yager
described as the "standing order" tape program and, moreover,
defendants represented that such weekly purchases of defendants'
audio tapes we essential to plaintiff's success as Amway
distributors.
31. At all times relevant hereto, defendants Britt and Yager
further represented to plaintiffs that their regular attendance
at the motivational rallies organized and promoted by defendants
was essential to plaintiffs'success as Amway distributors.
32. In fact, the motivational materials produced and/or
distributed by defendants Britt and Yager and the motivational
rallies organized and promoted by defendants Britt and Yager were
unnecessary to the success of Amway distributors, and plaintiffs
all lost money as Amway distributors despite their purchase of
said materials and attendance at said rallies.
33. At all times relevant hereto, Amway was aware that the
aforesaid misrepresentations regarding defendants Britt and
Yager's motivational materials and motivational rallies were
being made to Amway distributors. It was in Amway's economic
self-interest to permit such misrepresentations to continue being
made to Amway distributors, and although Amway has been aware of
such practices for years Amway has never terzninated the
distributorships of defendants Britt and/or Yager.
34. In reliance upon the misrepresentations of defendants
Britt and Yager, plaintiffs purchased massive quantities of
defendants Britt and Yager's motivational materials and attended
defendants Britt and Yager's motivational rallies, all of which
contributed significantly to the financial loss sustained by
plaintiffs.
Customer Allocation and Price Fixing in Connection with
Defendants' Motivational Materials
35. At all times relevant hereto, defendants Britt and Yager
allocated customers for their motivational materials in the
following way: Defendant Britt regularly represented to
distributors in his downline that their success as Amway
distributors was contingent upon their purchasing only those
motivational materials distributed by defendant Britt, and that
distributors in defendant Britt's downline should not purchase
motivational materials distributed by others. Similarly,
defendant Yager regularly represented to distributors in his
downline that their success as Amway distributors was contingent
upon their purchasing only those motivational materials
distributed by defendant Yager, and that distributors in
defendant Yager's dowlnine should not purchase motivational
materials distributed by others.
36. In reliance upon defendants' representations, plaintiffs
and members of the Class in defendant Britt's downline purchase
only those motivational materials distributed by defendant Britt,
and plaintiffs and members of the Class in defendant Yager's
downline only those motivational materials distributed by
defendant Yager.
37. At all times relevant hereto, defendants Britt and Yager
fixed the prices charged for their motivational materials by
strictly controlling the resale price of their motivational audio
tapes, such that at all times relevant hereto the resale price
charged for motivational audio tapes distributed by defendant
Britt was the same or substantially the same as the resale price
charged for motivational audio tapes sold by defendant Yager.
38. At all times relevant hereto, Amway was aware of and
encouraged defendants Britt and Yager's aforesaid practices of
customer allocation and price fixing in connection with the sale
of their motivational materials, and it was in Amway's economic
self-interest to permit such practices to continue. Indeed,
although Amway has been aware of Britt and Yager's aforesaid
activities for years, Amway has never terminated the
dstributorships of defendants Britt and/or Yager.
39. Defendant Britt and Yager's aforementioned practices of
customer allocation and price fixing in connection with the sale
of their motivational materials had the effect of preventing
plaintiffs and members of the class of availing themselves of
legitimate motivational materials and sales aids produced by
third parties.
IV. CLASS ACTION ALLEGATIONS
40. Plaintiffs bring this action, on behalf of themselves
and all others similarly situated, as a class action pursuant to
Rule 23(a) and Rule 23(b)(3) of the Federal Rules of civil
Procedure, on behalf of the following class :
all persons in the United States who, since January of 1990,
have been or are Amway distributors and have been or are in
the sales organizations or downlines of defendants William
Britt and/or Dexter Yager, excluding from the proposed Class
the defendants herein, any entity in which the defendants
have a controlling interest, and the officers and directors,
affiliates, legal representatives, heirs, successors, or
assignees of the defendants or their officers and directors.
41. A class action is superior to other available methods
for the fair and efficient adjudication of this controversy since
the members of the Class are so numerous and their residence so
widespread that joinder of all members is impracticable.
42. This action satisfies the requirements for class
certificatiort under Federal Rules of Civil Procedure 23(a)(1)-
(4) and 23 (b)(3), in that:
(a) The Class is so numerous that the individual
joinder of all members is impracticable under the standard of
Fed. R. Civ. P. 23 (a)(1). While the exact number of class
members is unknown to plaintiffs at this time, it is known to
defendants and is ascertainable by appropriate discovery, and
plaintiffs are informed and believe that the Class includes
thousands of members.
(b) Common questions of law and fact exist as to all
members of the Class, and predominate over any questions which
affect only individual members of the Class. These common
questions of law and fact include:
i) whether defendants violated the Sherman Act by
engaging in an unreasonable restraints of trade in connection
with the sale of defendants' motivational materials to plaintiffs
and members of the Class through defendants' practices of
customer allocation and price fixing;
ii) whether defendants violated RICO by conducting
the affairs of an enterprise through a repeated and continuing
pattern of wire and mail fraud, in connection with the promotion
of Amway distributorships, the sale of motivational materials and
the promotion of motivational rallies to plaintiffs and members
of the Class;
iii) whether Amway aided and abetted defendants
Britt and Yager's RICO violations;
iv) whether defendants violated state common law
as alleged herein in connection with the promotion of Amway
distributorships, the sale of motivational materials and the
promotion of motivational rallies to plaintiffs and members of
the Class;
v) whether defendants misrepresented the amount of
profits plaintiffs and members of the Class could expect to earn
as Amway distributors and/or the financial success plaintiffs and
members of the Class could expect to achieve as Amway
distributors;
vi) whether defendants misrepresented the
financial benefits plaintiffs and members of the Class could
expect to reap from Amway's purported affiliations with other
major companies, and/or whether defendants misrepresented that as
Amway distributors plaintiffs and members of the Class would
become involved in profitable business relationships with major
companies other than Amway;
vii) whether defendants fraudulently represented
to plaintiffs and members of the Class the need to purchase
defendants' motivational materials and attend defendants'
motivational rallies in order to succeed as Amway di stributors;
viii) whether the aforesaid acts and/or omissions
of defendants, as directed towards plaintiffs and members of the
Class, were done fraudulently;
ix) the amount of revenues and profits obtained by
defendants attributable to defendants' misconduct;
x) the appropriate nature of classwide equitable
relief; and
xi) whether the members of the Class have
sustained damages as a result of defendants' wrongdoing and, if
so, what is the proper measure and appropriate formula to be
applied in determining such damages.
(c) Plaintiffs' claims are typical of the claims of the
members of the Class, since plaintiffs entered into their Amway
distributorships, maintained their Amway distributorships,
purchased defendants' motivational materials, and attended
*defendants' motivational rallies in reliance upon fraudulent
misrepresentations made by or caused to be made by defendants,
thereby suffering damages. Plaintiffs and members of the Class
sustained damages arising out of defendants' common course of
conduct in violation of federal and state laws as complained of
herein. The losses of each member of the Class were caused
directly by defendants' wrongful conduct in violation of federal
and state common law and statutory law as alleged herein.
(d) Plaintiffs will fairly and adequately protect the
interests of the members of the Class. Plaintiffs have no
interests which are antagonistic to the interests of the Class.
(e) Plaintiffs have retained counsel who are
experienced in class action litigation and complex litigation
involving claims of consumer fraud and violations of the
antitrust and racketeering laws.
(f) The issues which affect plaintiffs and members of
the Class in common predominate over any issues which affect the
interests of individual Class members.
(g) A class action is superior to any other available
methods for the fair and efficient adjudication of this
controversy under Fed. R. Civ. P. 23(b)(3) since individual
joinder of all members of the Class is impracticable.
Furthermore, the cost and burden to the court system of
adjudication of such individualized litigation would be
substantial.
V. CLAIMS FOR RELIEF
COUNT I
[Against Defendants Britt and Yager and Amway
For Violation of the Sherman Act, 15 U.S.C. § 1]
43. Plaintiffs, on behalf of themselves and all others
similarly situated, reallege, as if fully set forth, each and
every allegation contained in paragraphs 1 through 42 hereof, and
further allege as follows.
44. The unreasonable restraint of trade alleged herein
occurred in the market for motivational materials and sales aids
for use in the marketing of consumer household products.
45. Competition in the market for motivational materials and
sales aids for use in the marketing of consumer household
products was unreasonably restrained by defendants Britt and
Yager's practices of allocating customers for and fixing the sale
prices of their motivational materials, including but not
necessarily limited to cassette audio tapes.
46. Defendants Britt and Yager engaged in an illegal scheme
to allocate customers for their motivational materials, as set
forth in more detail in paragraphs 27 through 39 hereinabove,
whereby defendant Britt used fraudulent and coercive conduct to
compel his downline distributors to purchase only those
motivational materials produced and/or distributed by the Britt
organization, and whereby defendant Yager used similarly
fraudulent and coercive conduct to compel his downline
distributors to purchase only those motivational materials
produced and/or distributed by the Yager organization.
47. Defendants Britt and Yager's scheme to allocate
customers for their motivational materials constituted a
combination or conspiracy that unreasonably restrained, hindered,
frustrated, suppressed and eliminated competition in the market
for motivational materials and sales aids for use in the
marketing of consumer household products.
48. Defendants Britt and Yager's unlawful scheme to allocate
customers for their motivational materials began at least as
early as January of 1990 and continues today.
49. The object of defendants Britt and Yager's combination
or conspiracy to allocate customers for their motivational
materials was to control customer markets for their motivational
materials by restricting the supply of motivational materials to
their downline distributors, and by employing fraudulent and
coercive tactics to ensure that distributors in defendant Britt's
downline purchased only those motivational materials produced
and/or distributed by defendant Britt, and that distributors in
defendant Yager's downline purchased only those motivational
materials produced and/or distributed by defendant Yager.
50. Defendants Britt and Yager's unlawful scheme to allocate
customers for their motivational materials constituted an
unreasonable restraint of interstate trade and commerce in
violation of Section 1 of the Sherman Act.
51. At all times relevant hereto, defendant Amway had
knowledge of and participated in defendants Britt and Yager's
combination or conspiracy to allocate customers for their
motivational materials. Amway encouraged and permitted such
practices to continue, as it was in Amway's economic self-
interest to permit such practices to continue, and indeed Amway
has never terminated the distributorships of Defendants Britt
and/or Yager.
52. Defendants Britt and Yager further engaged in an illegal
scheme to fix the prices charged for their respective
motivational materials, as set forth in more detail in paragraphs
27 through 39 hereinabove, whereby defendants Britt and Yager
fixed the same or substantially the same sale price for the
cassette audio tapes produced and/or distributed by defendants
Britt and Yager.
53. Defendants Britt and Yager's scheme to fix the prices
charged for their respective motivational materials constituted a
combination or conspiracy that unreasonably restrained, hindered,
frustrated, suppressed and eliminated competition in the market
for motivational materials and sales aids for use in the
marketing of consumer household products.
54. Defendants Britt and Yager's unlawful scheme to fix the
prices charged for their respective motivational materials began
at least as early as January of 1990 and continues today.
55. The object of defendants Britt and Yager's combination
or conspiracy to fix the prices charged for their motivational
materials was to control customer markets for their motivational
materials by restricting the supply of motivational materials to
their downline distributors, and by ensuring that distributors in
their respective downlines purchased only those motivational
materials produced and/or distributed by each de f endant.
56. Defendants Britt and Yager's unlawful scheme to fix the
prices charged for their motivational materials constituted an
unreasonable restraint of interstate trade and commerce
inviolation of Section 1 of the Sherman Act.
57. The effect of defendants Britt and Yager's combination
or conspiracy to allocate customers and fix prices was to ensure
that plaintiffs purchase substantial quantities of defendants'
motivational materials, and to deprive plaintiffs of the
opportunity to avail themselves of motivational and sales
training materials from other sources outside of the combination
or conspiracy.
58. At all times relevant hereto, defendant Amway had
knowledge of and participated in defendants Britt and Yager's
combination or conspiracy to fix prices charged for their
motivational materials. Amway encouraged and permitted such
practices to continue, as it was in Amway's economic self-
interest to permit such practices to continue, and Amway has
never terminated the distributorships of defendants Britt and/or
Yager.
59. Defendants' illegal practices of allocating customers
and fixing prices in connection with the nationwide distribution
and sale of their motivational materials had a substantial and
adverse effect on interstate commerce.
60. Plaintiffs and members of the Class were damaged by the
aforesaid illegal practices of allocating customers and fixing
prices for their motivational materials in an amount in excess of
$100,000, in that plaintiffs and members of the Class expended
significant amounts of money on unwanted and unnecessary
motivation materials distributed by defendants, and were further
deprived of the opportunity to avail themselves of motivational
and sales training materials produced and distributed by third
parties which could have assisted them in developing their Amway
distributorships. Plaintiffs and the Class are entitled to
recover from defendants Britt, Yager and Amway treble damages,
costs and attorneys' fees as a result of the aforesaid violation
of the Sherman Act.
COUNT II
[Against Defendants Britt and Yager
for Violation of RICO, 18 U.S.C. § 1962(c)]
61. Plaintiffs, on behalf of themselves and all others
similarly situated, reallege, as if fully set forth, each and
every allegation contained in paragraphs 1 through 60 hereof, and
further allege as follows.
62. Defendants Britt and Yager are "persons" as that term is
defined in 18 U.S. C. § 1961.
63. The association-in-fact of defendant Amway and its
network of Amway distributors is an "enterprise" as that term is
defined in 18 U.S. C. § 1961, which is engaged in and affects
interstate commerce.
64. In violation of 18 U.S.C. § 1962 (c), defendants Britt
and Yager, as persons associated with the aforesaid enterprise,
participated in the affairs of the enterprise through a pattern
of racketeering activity consisting of wire fraud, 18 U.S.C. §
1343, and mail fraud, 18 U.S.C. § 1341. Defendants' participation
in the affairs of the enterprise consisted of their guiding,
managing, directing or otherwise exercising some control over the
affairs of the enterprise. Through acts of mail and wire fraud
these two individuals, William Britt and Dexter Yager,
participated in the affairs of the RICO enterprise, which was
comprised of a large international corporation (Amway) and its
vast network of hundreds of thousands of individual distributors.
The cloak of legitimacy provided to defendants Britt and Yager by
this seemingly legitimate enterprise afforded said defendants
access to and influence over huge numbers of Amway distributors,
thus enabling defendants Britt and Yager to execute their scheme
to defraud plaintiffs and members of the Class, as described at
length herein.
65. Defendants Britt and Yager's pattern of racketeering
activity, which consisted of mail and wire fraud, was perpetrated
through direct telephone communications, the Amvox telephone
voice mail system and the mails, pursuant to and for the purpose
of executing defendants'scheme to defraud plaintiffs and members
of the Class by communicating false and fraudulent information,
including but not limited to:
(a) statements that fraudulently represented the amount
of profits plaintiffs could expect to earn as Amway distributors;
(b) statements that fraudulently represented that
plaintiffs'success as Amway distributors was contingent upon
purchasing substantial quantities of the motivational materials
produced and/or distributed by defendants Britt and Yager,
(c) statements that fraudulently represented that
plaintiffs'success as Amway distributors was contingent upon
attending motivational rallies organized and promoted by
defendants Britt and Yager; and
(d) statements that fraudulently represented that Amway
distributors were involved in profitable business relationships
with other major companies, as described in paragraphs 22 through
26 herein.
66. Defendants Britt and Yager's patterns of mail and wire
fraud included but were not necessarily limited to:
(a) numerous direct telephone communications to inter
alia, plaintiffs and members of the Class, made by and caused to
be made by defendants Britt and Yager, regarding Amway and
defendants' Amway sales organizations;
(b) numerous messages communicated over the Amvox
telephone voice mail system to, inter alia, plaintiffs and
members of the Class, which telephone voice mail communications
were made by and caused to be made by defendants Britt and Yager,
regarding Amway and defendants' Amway sales organizations;
(c) numerous mailings of defendants Britt and Yager's
motivational materials to, inter alia, plaintiffs and members of
the Class, which mailings were made by and caused to be made by
defendants Britt and Yager;
(d) numerous mailings of defendants Britt and Yager's
publications to, inter alia, plaintiffs and members of the Class,
which publications included but were not necessarily limited to
Dreambuilders Review, Dreambuilders Newsletter and Dreambuilders
Review Magazine;
(e) numerous mailings of documents to, inter alia,
plaintiffs and members of the Class, which mailings included but
were not necessarily limited to travel itineraries and
confirmations, pursuant to the organization and promotion of
defendants Britt and Yager's motivational rallies; and
(f) numerous mailings of Amway publications, including
but not necessarily limited to the Amagram magazine.
67. Defendants Britt and Yager's participation in the
affairs of the enterprise through a pattern of racketeering
activity commenced no later than January of 1990, continued
throughout the relevant time period, and projects into the future
with a threat of repetition, posing a threat of continuing harm
to the businesses and property of members of the Class.
68. Plaintiffs and members of the Class were injured in
their business or property by reason of defendants' foregoing
pattern of racketeering activity in violation of 18 U.S.C. § 1962
(c), in an amount in excess of $100,000. Plaintiffs and the Class
are entitled to recover from defendants Britt and Yager treble
damages, costs and attorneys' fees as a result of defendants'
RICO violations.
COUNT III
[Against Defendants Britt and Yager
for Violation of RICO, 18 U.S.C. § 1962(d)]
69. Plaintiffs, on behalf of themselves and all others
similarly situated, reallege, as if fully set forth, each and
every allegation contained in paragraphs 1 through 68 hereof, and
further allege as follows.
70. Defendants Britt and Yager are "persons" as that term is
defined in 18 U.S.C. § 1961.
71. The association-in-fact of defendant Amway and its
network of Amway distributors is an "enterprise" as that term is
defined in 18 U.S.C. § 1961, which is engaged in and affects
interstate commerce.
72. In violation of 18 U.S.C. § 1962(d), defendants Britt
and Yager conspired to violate 18 U.S.C. § 1962(c), in that
defendants Britt and Yager agreed to commit the aforesaid
predicate acts of mail and wire fraud with knowledge that such
acts were part of a pattern of racketeering activity. Through the
aforesaid acts of mail and wire fraud these two individuals,
William Britt and Dexter Yager, participated in the affairs of
the RICO enterprise, which was comprised of a large international
corporation (Amway) and its vast network of hundreds of thousands
of individual distributors. The cloak of legitimacy provided to
defendants Britt and Yager by this seemingly legitimate
enterprise afforded said defendants access to and influence over
huge numbers of Amway distributors, thus enabling defendants
Britt and Yager to execute their scheme to defraud plaintiffs and
members of the Class, as described at length herein.
73. The RICO conspiracy was composed of defendants Britt and
Yager and had as its objective the sponsorship of persons into
the Amway organization and the maintenance of persons as Amway
distributors, in order that defendants could further, continue
and perpetuate the conspiracy for their own financial gain.
74. The aforesaid RICO conspiracy commenced no later than
January of 1990, continued throughout the relevant time period,
and projects into the future with a threat of repetition, posing
a threat of continuing harm to the businesses and property of
members of the Class.
75. In furtherance of the RICO conspiracy, defendants Britt
and Yager communicated to plaintiffs and members of the Class
false and fraudulent information, including but not limited to:
(a) statements that fraudulently represented the amount
of profits plaintiffs could expect to earn as Amway distributors;
(b) statements that fraudulently represented that
plaintiffs'success as Amway distributors was contingent upon
purchasing substantial quantities of the motivational materials
produced and/or distributed by defendants Britt and Yager;
(c) statements that fraudulently represented that
plaintiffs'success as Amway distributors was contingent upon
attendin motivational rallies organized and promoted by
defendants Britt and Yager;
(d) statements that fraudulently represented that Amway
distributors were involved in profitable business relationships
with other major companies.
76. Plaintiffs and members of the Class were injured in
their business or property by reason of defendants' foregoing
RICO conspiracy in violation of 18 U.S.C. 1962(d), in an amount
in excess of $100,000. Plaintiffs and the Class are entitled to
recover from defendants Britt and Yager treble damages, costs and
attorneys' fees as a result of defendants' RICO violations.
COUNT IV
[Against Defendant Amway for Aiding and Abetting
Violation of RICO, 18 U.S.C. § 19 61 et seq.]
77. Plaintiffs, on behalf of themselves and all others
similarly situated, reallege, as if fully set forth, each and
every allegation contained in paragraphs 1 through 76 hereof, and
further allege as follows.
78. Defendant Amway is a "person" as that term is defined in
18 U.S.C. § 1961.
79. At all times relevant hereto Amway was aware of the
aforementioned pattern of racketeering activity, consisting of
wire and mail fraud, that was perpetrated pursuant to and for the
purpose of executing defendants Britt and Yager's scheme to
defraud plaintiffs and members of the Class by communicating
false and fraudulent information, including but not limited to:
(a) statements that fraudulently represented the
profits Amway distributors couldexpect to earn;
(b) statements that fraudulently represented that the
success of Amway distributors was contingent upon purchasing
substantial quantities of the motivational materials produced and
Jor distributed by defendants Britt and Yager;
(c) statements that fraudulently represented that the
success of Amway distributors was contingent upon attending
motivational rallies organized and promoted by defendants Britt
and Yager; and
(d) statements that fraudulently represented that Amway
distributors were involved in profitable business relationships
with other major companies.
80. At all times relevant hereto Amway has been aware of
complaints by Amway distributors that they have been injured
financially and in their family and personal lives as a result of
the aforementioned pattern of racketeering activity perpetrated
by defendants Britt and Yager, and it was in Amway's economic
self-interest to permit such activity to continue. Indeed,
although Amway has been aware of Britt and Yager's aforesaid
activities for years, Amway has never terminated the
distributorships of defendants Britt and/or Yager.
81. In allowing the pattern of racketeering activity of its
distributors, defendants Britt and Yager, to continue, Amway
financially benefits, in that AmWay earns substantial profits
from the sale of Amway products by and to distributors in
defendants' Britt and Yager's downlines.
82. Amway has aided and abetted the pattern of racketeering
activity perpetrated by its distributors, defendants Britt and
Yager, by giving substantial assistance to said defendants, in
that at all times relevant hereto Amway associated itself with
the business activities of defendants Britt and Yager and
permitted defendants Britt and Yager to associate themselves with
Amway.
83. Plaintiffs and members of the Class were injured in
their business or property by reason of defendant Amway's aiding
and abetting of the foregoing pattern of racketeering activity in
violation of 18 U.S.C. § 1962 (c) and (d), in an amount in excess
of $100,000. Plaintiffs and the Class are entitled to recover
from Amway treble damages, costs and attorneys' fees as a result
of defendants' RICO violations.
COUNT V
[Against Defendants Britt and Yager for Fraud]
84. Plaintiffs, on behalf of themselves and all others
similarly situated, reallege, as if fully set forth, each and
ever y allegation contained in paragraphs 1 through 83 hereof,
and
further allege as follows.
85. Defendants made knowing and fraudulent
misrepresentations to plaintiffs by misrepresenting the amount of
profits Amway distributors could expect to earn, and the amount
of time in which Amway distributors could expect to earn such
profits, which fraudulent misrepresentations are set forth in
more detail in paragraphs 18 through 21 hereinabove.
86. Defendants knowingly and fraudulently misrepresented to
plaintiffs that Amway distributors were involved in profitable
business relationships with numerous major companies, variously
described as, inter alia, "joint partnerships," "network
marketing," and "joint ventures," through which business
relationships plaintiffs could expect to reap substantial
financial benefits, as set forth in more detail in paragraphs 22
through 26 herein above.
87. Defendants knowingly and fraudulently misrepresented to
plaintiffs that their recruiting efforts would result in
geometric increases in the number of distributors in their
downlines, and that such geometric increases would occur in a
relatively short period of time.
88. Defendants knowingly and fraudulently misrepresented to
plaintiffs that they could earn substantial profits as Amway
distributors by working only on a part-time basis.
89. Defendants failed to disclose to plaintiffs the high
turnover rate prevalent among Amway distributors.
90. Defendants failed to disclose to plaintiffs the
substantial business expense and time involved in building and
maintaining a profitable Amway distributorship.
91. Defendants failed to disclose to plaintiffs that they
were in fact likely to earn profits comparable to the average
income for Amway distributors.
92. Defendants made the aforesaid misrepresentations of
material fact, and failed to disclose the aforesaid material
facts, intending that plaintiffs become Amway distributors.
93. But for the aforesaid fraudulent representations upon
which plaintiffs justifiably relied to their detriment, and but
for the aforesaid omissions of material facts, plaintiffs would
not have entered into or maintained their Amway distributorships.
94. Defendants knowingly and fraudulently misrepresented to
plaintiffs that their success as Amway distributors was
contingent upon the purchase of motivational materials produced
and/or distributed by defendants.
95. Defendants knowingly and fraudulently misrepresented to
plaintiffs that their success as Amway distributors was
contingent upon attending defendants' motivational rallies.
96. Defendants made the aforesaid misrepresentations of
material fact intending that plaintiffs purchase defendants'
motivational materials and expend money to attend defendants'
motivational rallies in the belief that such expenditures were
necessary to plaintiffs'success as Amway distributors.
97. But for the aforesaid misrepresentations of material
fact, upon which plaintiffs justifiably relied to their
detriment, plaintiffs would not have purchased substantial
quantities of defendants' motivational materials and would not
have expended significant amounts of money traveling to and
attending defendants' motivational rallies, which motivational
materials and rallies were in fact unnecessary to
plaintiffs'success as Amway distributors.
98. Plaintiffs, in justifiable reliance upon defendants'
fraudulent representations, were damaged in an amount in excess
of $100,000, in that plaintiffs entered into their unprofitable
Amway distributorships and expended significant amounts of money
on unwanted and unnecessary motivation materials and rallies.
Plaintiffs and the Class are entitled to recover from defendants
Britt and Yager compensatory damages unitive damages, costs and
attorneys' fees and such other relief as this Court deems just.
COUNT VI
[Against Defendants Britt and Yager for
Negligent Misrepresentation]
99. Plaintiffs, on behalf of themselves and all others
similarly situated, reallege, as if fully set forth, each and
every allegation contained in paragraphs 1 through 98 hereof, and
further allege as follows.
100. Defendants failed to exercise reasonable care in
communicating information to plaintiffs concerning the amount of
profits which Amway distributors could expect to earn, the amount
of time in which Amway distributors could expect to earn such
profits, Amway's affiliation with other entities, and the need to
purchase defendants' motivational materials and attend
defendants' motivational rallies, which misrepresentations are
set forth in more detail in paragraphs 18 through 39 herein
above.
101. In addition to the aforesaid negligent
misrepresentations, defendants negligently failed to disclose to
plaintiffs the high turnover rate prevalent among Amway
distributors, the substantial business expense and time involved
in building and maintaining a profitable Amway distributorship,
and that plaintiffs could expect earnings comparable to the
average earnings of Amway distributors.
102. Plaintiffs, in justifiable reliance upon defendants'
negligent representations, were damaged in an amount in excess of
$100,000, in that plaintiffs entered into their unprofitable
Amway distributorships and expended significant amounts of money
on unwanted and unnecessary motivation materials and rallies.
Plaintiffs and the Class are entitled to recover from defendants
Britt and Yager compensatory damages, costs and attorneys' fees
and such other relief as this Court deems just.
COUNT VII
[Equitable (Injunctive and/or declaratory) Relief]
103. Plaintiffs, on behalf of themselves and all others
similarly situated, reallege, as if fully set forth, each and
every allegation contained in paragraphs 1 through 102 hereof,
and further allege as follows:
104. Based upon the facts set forth above, plaintiffs, on
behalf of themselves and all others similarly situated, request
the following equitable relief:
(a) That a judicial determination and declaration be
made of the rights of plaintiffs and Class members and the
responsibilities of the defendants; and
(b) That defendants be enjoined to cease and desist all
practices described in the FACTUAL STATEMENT section of this
Class Action Complaint relating to the unlawful, fraudulent,
coercive and anticompetitive practices described herein.
VI. DEMAND FOR A JURY TRIAL
105. Plaintiffs demand a jury trial for themselves and the
Class on all claims so triable.
VII. PRAYER FOR RELIEF
WHEREFORE, the representative plaintiffs, on behalf of
themselves and all others similarly situated, pray for judgment
against defendants as follows:
l. An order confirming the class certification of the Class
and appointing plaintiffs and their counsel to represent the
Class;
2. For treble damages and/or equitable relief under the
Sherman Act, the Racketeer Influenced Corrupt Organizations Act
and state common law as alleged herein;
3. For any additional and consequential damages suffered by
plaintiffs and the Class;
4. For punitive damages against defendants for fraud in an
amount sufficient to punish defendants and deter others from
similar wrongdoings;
5. For attorneys' fees;
6. For pre- and post- judgment interest;
7. For cost of suit; and
8. For such other and further relief as this Court may deem
just and proper.
Respectfully submitted,
James J. Ron, Esquire Joseph C. Kohn
Pa. I.D. No. 21636 Pa. I.D. No. 36565
Karen M. Scheller, Esquire Robert J. La Rocca, Esquire
Pa. I.D. No. 25751 Pa. I.D. No. 26203
Judson A. Aaron, Esquire Kohn, Nast & Graf, P.C.
Pa. I.D. No. 63794 2400 One Reading Center
Conrad 0'Brien Gellman 1101 Market Street
& Rohn, P.C. Philadelphia, PA 19107
1515 Market Street, l6th Floor (215) 238-1700
Philadelphia, PA 19102-1916
(215) 864-9600
ATTORNEYS FOR PLAINTIFFS
AND THE CLASS
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