UPDATE: On 8/13/98 the judge in the Morrison case ordered that the plaintiffs in that case must first pursue their complaint through Amway's non-voluntary arbitration process. We may never know the outcome of the case, which is probably exactly what Amway had in mind when they cooked up this "agreement." The judge's order also applies to the Musgrove/Pruitt suits, and probably this suit as well.
NO. 95-17491
IN THE DISTRICT COURT OF HARRIS COUNTY, TEXAS
190TH JUDICIAL DISTRICT
DONALD and JACKIE GRIFFITH
VERNON and BONNIE HOLQUIN,
BRENDA and WILLIAM L.
CHRISTIAN, DONALD and LINDA
WEAD, BYRON and KENDRA
HALLMARK, and TED and MYRENE
MCDANIELS
VS.
AMWAY CORPORATION, ET AL.
PLAINTIFF'S FIRST AMENDED PETITION
TO THE HONORABLE JUDGE OF SAID COURT:
COME NOW PLAINTIFFS, DONALD and JACKIE GRIFFITH, VERNON and
BONNIE HOLQUIN, BRENDA and WILLIAM L. CHRISTIAN, DONALD and LINDA
WEAD, BYRON and KENDRA HALLMARK, and TED and MYRENE MCDANIELS.
who file this their First Amended Petition in the above-styled and numbered cause, and would show unto the Court and Jury the following:
I. PARTIES
Plaintiffs are citizens and residents of Harris County, Texas.
Defendant, AMWAY CORPORATION is a Michigan corporation whose principal place of business is located 7575 East Fulton St., Ada, Michigan 49355, and may be served with process through its registered agent for service, CT Corporation, at 350 North St. Paul Street, Dallas, Texas 75201.
Defendant, JA-RI Corporation is a Michigan corporation who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant to §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for JA-RI Corporation is the Secretary of State of the State of Texas, Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant to its registered agent for service, Kim S. Mitchell, at its business address of 7575 East Fulton Street, Ada, Michigan 49355.
Defendant, Rich DeVos is an individual residing in Ada, Michigan who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents
Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 7575 East Fulton Street, Ada, Michigan 49355.
Defendants, Randy and Susan Walker, Individually and d/b/a Walker International are individuals residing in Conroe, Texas, and may be served at 1450 Interstate 45 South F-13, Conroe, Texas 77304.
Defendants, Mark and Martha Hughes are individuals residing in Houston, Texas, and may be served at 13315 Pantheon, Houston, Texas 77065.
Defendants, Bill and Alyssa Bergfeld, Individually and d/b/a Bergfeld International, Inc. are individuals residing in Conroe, Texas. Bill Bergfeld may be served at The Feed Store, S. Main, Conroe, Texas 77304. Alyssa Bergfeld may be served at 202 Old Country Club Road, Conroe, Texas 77304.
Defendant, Jodi Victor, Individually and d/b/a Jevi Corporation is an individual residing in Clinton, Ohio, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at the business address of 740 Yager Road, Clinton, Ohio 44216.
Defendant, Mark Cordner is an individual residing in Ogden, Utah, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents
Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 2488 Bonneville Terrace, Ogden, Utah 84403.
Defendant, Billy Zeoli, Individually and d/b/a Gospel Films is an individual residing in Michigan. who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at the business address at 7575 East Fulton Street, Ada, Michigan 49355.
Defendant, Dennis James is an individual residing in Houston, Texas and may be served at 601 Cypress Station Drive, #203, Houston. Texas 77090.
Defendant, John Sims, Individually and d/b/a Sims Enterprises is an individual residing in Kaysville, Utah, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 1148 N. Highway 89, Kaysville, Utah 84037.
Defendants, Randy and Valorie Haugen, Individually and d/b/a Freedom Associates, Inc., Freedom Tools, Inc. and All Star Production Company are individuals residing in Ogden, Utah, who do business in Texas but do not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at their business address of 2488 Bonneville Terrace, Ogden, Utah 84403.
Defendant, Donald R. Wilson, Individually and d/b/a Wow International and Wilson Enterprises, Inc. is an individual residing in Ogden, Utah, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 6057 South 2950 East, Ogden, Utah 84403.
Defendant, Bob Kerkstra is an individual residing in Ada, Michigan, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 7575 East Fulton Street, Ada, Michigan 49355.
Defendant, Doug DeVos is an individual residing in Ada Michigan, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents
Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 7575 East Fulton Street, Ada, Michigan 49355.
Defendant, Dick DeVos is an individual residing in Ada, Michigan, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents
Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 7575 East Fulton Street, Ada Michigan 49355.
Defendant, Steve Van Andel is an individual residing in Ada, Michigan, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 7575 East Fulton Street, Ada, Michigan 49355.
Defendant, Jay Van Andel is an individual residing in Ada, Michigan, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 7575 East Fulton Street, Ada, Michigan 49355.
Defendant, Dexter Yager, Individually and d/b/a Yager Enterprises and Internet Services Corporation is an individual residing in Charlotte, North Carolina, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 12201 Steele Creek Road, Charlotte, North Carolina 28273.
Defendant, Jeff Yager, Individually and d/b/a Yager Enterprises and Internet Services Corporation is an individual residing in Charlotte, North Carolina, who does business in Texas but does not maintained a registered agent for service. Therefore, pursuant §17.045 of the Texas Civil Practices & Remedies Code, the agent for service for Rich DeVos is the Secretary of State of the State of Texas. Antonio O. Garza, Attn: Statutory Documents Section, P.O. Box 12887, Austin, Texas 78711, who in turn will immediately mail a copy of the process to Defendant at his business address of 12201 Steele Creek Road, Charlotte, North Carolina 28273.
Defendants, Dr. Joe and Dawn Morrison, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendant, Kelly Robbins, is an individual residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Randy and Janet Councill, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Dan and Helen Higgins, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Ron and Karen Green, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Victor and Cathy Brook, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Dr. Marion and Jean McMurtry, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Dan and Helen Higgins, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Dr. T.M. and Cynthia Hughes, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Dave and Rose Roberts, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Dr. Richard and Linda Werner, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Wade and Debbie McKay, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Tom and Kaye Yeaman, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Warne and Donna Bird, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendants, Tony and Mary Ann Cutala, are individuals residing in Houston, Texas, and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
Defendant, Richmond Eagle Corporation, is a corporation doing business in Texas and may be served with process by serving their attorney, Brock Akers, Phillips & Akers, 3400 Phoenix Tower, 3200 Southwest Freeway, Houston, Texas 77027, with a copy of this Petition by certified mail, return receipt requested.
II. PLAINTIFFS' CAUSES OF ACTION
This case is a fraud case relating to the Defendants' use of the Amway Corporation to enhance their own economic self-interests. Plaintiffs seek recovery for damages incurred as a result of Defendants':
1. Fraudulent inducement in causing Plaintiffs to participate in Defendants' illegal scheme to purchase and sell motivational tapes and tickets to Amway events;
2. Conspiracy to fraudulently induce Plaintiffs to enter into an agreement to execute what they believed to be the Amway Sales Plan;
3. Violations of the Texas Deceptive Trade Practices Act;
4. Violations of the Texas State Bribery Act;
5. Negligent misrepresentations regarding what the Plaintiffs believed to be the Amway Sales Plan;
6. Tortious interference with Plaintiffs' "down-line" distributors;
7. Defamatory statements about Plaintiffs to their "down-line" distributors;
8. Breach of contract; and
9. Breach of fiduciary duties.
III. FACTS
Plaintiffs are participants in the Amway Corporation as the "down-line" distributors in relation to the Defendants. Persons who occupy positions below a distributor in each branch of the distributors are called "down-line" distributors. At all times relevant to the litigation herein, Defendants, are also Amway distributors, who generate sales to non-Amway distributors as well as fellow distributors, in and around Houston, Harris County, Texas and elsewhere.
The Amway Corporation manufactures and sells a wide variety of consumer household products and products of other manufacturers nationwide through its distributors, many of whom are in Texas. Amway distributors earn significant profits by executing the Amway Sales Plan in a pyramid marketing scheme whereby "down-line" distributor networks are developed through recruitment and sponsorship. Any purchase or sale of Amway goods by a distributor financially benefits Amway and the Amway "up-line" distributors who occupy higher levels of the Amway distributorship network than that of the selling "down-line" distributors. Further, Defendants earned money through the complicated Amway system of commissions, bonuses, refunds, discounts, dividends and other considerations in the Amway program as a result of the sale of such goods or services to Plaintiffs and their "down-line" distributors.
Through illegal means, Defendants have sought to control the entire Amway Sales and Marketing Plan by illegal means through the sale of motivational tapes and tickets to Amway events to Plaintiffs and their "down-line" distributors. Defendants represented to Plaintiffs that Amway's success was/is directly related to the purchases of these motivational tapes and tickets to events authorized and held by Defendants as representatives of Amway. Instead of benefitting Amway, the Defendants engaged in a scheme or artifice to defraud your Plaintiffs and other "down-line" distributors in order to enhance their economic self interests.
Plaintiffs therefore seek damages incurred as a result of Defendants' acts and/or omissions in connection with Defendants' illegal scheme to further their economic self-interests via the Amway Corporation.
IV. DOCTRINE OF AGENCY
At all times material hereto, the Amway Corporation, and its board of directors, which included many of the Defendants herein, had apparent authority on the part of Amway to (1) execute the Amway Sales Plan in violation of the rules and regulations set out by the Amway Corporation; (2) solicit, sponsor, and influence Plaintiffs to participate in Defendants' illegal scheme while operating under the pretense they were executing the Amway Sales Plan; and (3) in general act on behalf of the Amway Corporation. These representations disguised the true nature of the arrangement created by the Defendants which was to enrich themselves at the cost of your Plaintiffs. Therefore, Amway is responsible for the acts and/or omissions of its agents, the other Defendants herein, under the doctrine of agency.
V. FIRST CAUSE OF ACTION: FRAUDULENT INDUCEMENT
Plaintiffs hereby incorporate the preceding paragraphs by reference.
Defendants fraudulently induced Plaintiffs into participating in their illegal scheme to further their economic self-interests by representing to the Plaintiffs that they were properly executing the Amway Sales Plan as "down-line" distributors. Defendants made material misrepresentations to Plaintiffs, that in order to benefit Amway and proper executed the Amway Sales Plan, Plaintiffs were required to purchase and sell tickets and attend the events authorized and held by Defendants; as well as to purchasing and selling motivational tapes created by Defendants. Defendants knew these representations were false when made, and/or asserted them without knowledge of their truth. Defendants intended for Plaintiffs to rely and act upon these misrepresentations; thus, carrying out what they believed to be the Amway Sales Plan.
As a result of Plaintiffs' reliance upon Defendants' misrepresentations, Plaintiffs suffered monetary damages. Further, Defendants' conduct was intentional and malicious. As such. Plaintiffs are entitled to recover exemplary damages to punish Defendants for their conduct and to deter others from acting similarly. Plaintiffs thus request that exemplary damages be awarded against Defendants.
VI. SECOND CAUSE OF ACTION: CONSPIRACY
Plaintiffs hereby incorporate the preceding paragraphs by reference.
Defendants entered into a conspiracy by fraudulently inducing Plaintiffs to become "down-line" distributors in the Amway Corporation. Defendants took overt steps to carry out the conspiracy by making false representations and promises to Plaintiffs regarding the execution of what Plaintiffs believed to be the Amway Sales Plan. As a result of Defendants' conspiracy, Plaintiffs were damaged.
As such, Plaintiffs are entitled to recover exemplary damages to punish Defendants for their conduct and deter others from acting similarly. Plaintiffs thus request that exemplary damages be awarded against Defendants.
VII. THIRD CAUSE OF ACTION: DTPA VIOLATIONS
Plaintiffs hereby incorporate the preceding paragraphs by reference.
Defendants' violated the Texas Deceptive Trade Practices Act contained in Articles 17.41 et seq. of the Texas Business and Commerce Code by causing confusion or misunderstanding as to the source, sponsorship, approval or certification of goods or services; causing confusion or misunderstanding as to the affiliation, connection, or association with, or certification by another; representing goods or services had characteristics or benefits that it in fact did not have; disparaging the goods, services, or business of another by false or misleading representation of facts; advertising goods or services with the intent not to sell it as advertised; representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law; misrepresenting the authority of a salesman, representative or agent to negotiate the final terms of a consumer transaction; using or employing a chain referral sales plan in connection with the sale or offer to sell of goods, merchandise, or anything of value, which uses the sales technique, plan, arrangement, or agreement in which the buyer or prospective buyer is offered the opportunity to purchase merchandise or goods and in connection with the purchase receives the seller's promise or representation that the buyer shall have the right to receive compensation or consideration in any form for furnishing to the seller the name of other prospective buyers if receipt of the compensation or consideration is contingent upon the occurrence of an event subsequent to the time the buyer purchases the merchandise of goods; selling or offering to sell, either directly or associated with the seal of goods or services, a right of participation in a multi-level distributorship and, by failing to disclose information concerning goods or services which was known at the time of the transaction since such failure was intended to induce Plaintiffs into a transaction which they would not have entered into had the proper information been disclosed. Furthermore, Defendants engaged in an unconscionable course of conduct.
Defendants' actions caused Plaintiffs to suffer actual damages. As such. Plaintiffs seek recovery of their actual damages. In addition, Defendants' acted intentionally, and, thus, Plaintiffs seek to recover three (3) times the amount of their actual damages, along with court costs, attorney's fees and other relief.
VIII. FOURTH CAUSE OF ACTION: TEXAS STATE BRIBERY ACT
Plaintiffs hereby incorporate the preceding paragraphs by reference.
The Defendants violated the Texas State Bribery Act by coercing Plaintiffs to carry out their illegal scheme which compromised the rules and regulations of the Amway Corporation. Defendants used their authority provided via Amway to legitimize their acts which influenced Plaintiffs to follow their orders. More precisely, in order for Plaintiffs to maintain their positions in Amway, they were bribed and coerced by Defendants to purchase and sell motivational tapes and tickets to Defendants' authorized events otherwise. Plaintiffs would be cut out of their own network and also be prohibited from attending or profiting from Defendants' events.
Plaintiffs therefore have been damaged by Defendants as a result of the above-described acts, and are entitled to actual damages, punitive damages and attorney's fees.
IX. FIFTH CAUSE OF ACTION: NEGLIGENT MISREPRESENTATION
Plaintiffs hereby incorporate the preceding paragraphs by reference.
The misrepresentations and false promises that Defendants made to Plaintiffs regarding the execution of the Amway Sales Plan as "down-line" distributors were made or communicated in a careless and/or negligent manner, without regard to the accuracy or truthfulness thereof. Plaintiffs justifiably relied on Defendants' misrepresentations and sold and purchased motivational tapes created by Defendants, as well as sold, purchased and attended the events authorized and held by Defendants.
Plaintiffs have suffered substantial damages due to Defendants' misrepresentations. Further, Defendants acted intentionally and maliciously. As such, Plaintiffs are entitled to recover exemplary damages to punish Defendants for their conduct and to deter others from acting similarly. Plaintiffs thus request that exemplary damages be awarded against Defendants.
X. SIXTH CAUSE ACTION: TORTIOUS INTERFERENCE
Plaintiffs hereby incorporate the preceding paragraphs by reference.
Defendants tortiously interfered with the business relationships of the Plaintiffs and their respective "down-line" distributors by contacting same thus, cutting Plaintiffs from the distributorship and impairing their distribution network development. On various occasions, Defendants sold and caused the sale of Amway and non-Amway products directly to Plaintiffs' "down-line" distributors without authorization from Plaintiffs, thereby tortiously interfering with and disrupting their distributorship network. Further, Defendants prohibited Plaintiffs from holding events independent from the Defendants' events by forbidding Plaintiffs from participating and profiting from events authorized by Defendants. Thus, Defendants effectively isolated Plaintiffs from their "up-line" support and assistance networking system.
Plaintiffs have been damaged by Defendants' tortiously interfering with Plaintiffs' "down-line" distributors. Effectively, Defendants have cut out Plaintiffs as distributors. These acts have caused damage to Plaintiffs.
XI. SEVENTH CAUSE OF ACTION: BREACH OF CONTRACT
Plaintiffs hereby incorporate the preceding paragraphs by reference.
Amway's continuous failure to enforce the rules and regulations it promulgated, including 4§B of the Rules of Conduct of Amway Distributors, constitutes a breach of Amway's contract with Plaintiffs. Specifically, Rule 4§B prohibits an Amway distributor from selling non-Amway products to a fellow distributor whom he/she does not personally sponsor. Even after numerous notices of the above-described violation, Amway allowed Defendants to use their position with Amway to carry out their scheme for their own economic self-interests.
As a result of Amway's refusal to enforce the above-described rules and regulation, Plaintiffs have suffered considerable economic loss and continue to suffer such loss for which Amway is liable.
XII. EIGHTH CAUSE OF ACTION: BREACH OF FIDUCIARY DUTY
Plaintiffs hereby incorporate the preceding paragraphs by reference.
In the Amway Corporation, a distributor develops his "down-line" network by soliciting and sponsoring others to participate as a distributor in Amway. Clearly, these distributors, namely Defendants, acquire influence over the recruits, namely Plaintiffs, because of their authority provided via Amway. Thus, Defendants influenced Plaintiffs because of their superior knowledge and information about the Amway Corporation.
Obviously, these relationships are ones of trust and confidence which impose fiduciary obligations upon the distributors, namely, Defendants. Defendants breached their fiduciary duties to Plaintiffs when they fraudulently induced Plaintiffs to participate in their scheme, cut out Plaintiffs and solicited their "down-line" distributors to purchase and sell motivational tapes and tickets to the Defendants' authorized events without Plaintiffs' knowledge.
Additionally, some of the Defendants are members of the Amway Distributors Association Board. Clearly, these members have a duty to Amway distributors to properly represent and practice the rules and regulations promulgated by Amway. Instead, several of the Defendants utilized their positions on the Board to enrich themselves at the expense of Plaintiffs. This breach of fiduciary duty has caused serious irreparable harm to Plaintiffs for which they now sue.
XIII. INJUNCTIVE RELIEF
Plaintiffs are also entitled to an Order from the Court that compels Defendants to abide by their contractual commitments to Amway. More precisely, Defendants have violated 4§B of the Amway Rules of Conduct as described in previous paragraphs. Plaintiffs will continue to suffer immediate and irreparable injury, loss and damages relating to Plaintiffs development of their "down line" network.
If a preliminary injunction is granted, the injury, if any, to Defendants will be minimal. To wit, the preliminary injunction will simply force Defendants to comply with the contractual obligations promulgated by Amway and bargained for with the Defendants.
XIV. ACCOUNTING
Plaintiffs demand that an accounting against Defendants be done to determine and recover monies owed to Plaintiffs by Defendants. Plaintiff`s' remedy at law for Defendants' actions is inadequate because without an accounting, Plaintiffs are unable to determine the precise amount of money owed to them by Defendants.
XV. JURISDICTION
Your Plaintiffs' damages greatly exceed the sum of ONE THOUSAND DOLLARS ($1,000.00), the minimum jurisdictional requirement of this honorable Court.
WHEREFORE PREMISES CONSIDERED, Plaintiffs, DONALD and JACKIE
GRIFFITH, VERNON and BONNIE HOLQUIN, BRENDA and WILLIAM L.
CHRISTIAN, DONALD and LINDA WEAD, BYRON and KENDRA HALLMARK, and
TED and MYRENE MCDANIELS, respectfully request and pray that upon final trial hereof they have and recover any and all actual and consequential damages, pre-judgment and post-judgment interest as allowed by law, reasonable and necessary attorney's fees, and costs of court and for any and all other relief to which Plaintiffs may be entitled at law or in equity.
Respectfully submitted, (May 22, 1998)
LAW OFFICES OF LENNON C. WRIGHT
Lennon C. Wright
TBA # 22048600
Adrienne Sherbert
TBA # 00798501
1150 Two Houston Center
Houston, Texas 77010
(713) 654-7878: Fax No.: (713) 654-7881
ATTORNEYS FOR PLAINTIFFS. DONALD and JACKIE GRIFFITH, VERNON and BONNIE HOLQUIN, BRENDA and WILLIAM L. CHRISTIAN, DONALD and LINDA WEAD, BYRON and KENDRA HALLMARK, and TED and MYRENE MCDANIELS
(The wordings of the two interventions are identical. I am including the headers from both without duplicating the text)
DONALD and JACKIE GRIFFITH § IN THE DISTRICT COURT OF
VERNON and BONNIE HOLQUIN, §
BRENDA and WILLIAM L. §
CHRISTIAN, DONALD and LINDA §
WEAD, BYRON and KENDRA §
HALLMARK, and TED and MYRENE § HARRIS COUNTY, TEXAS
MCDANIELS §
§
-VS- §
§
AMWAY CORPORATION, ET AL. § 190TH JUDICIAL DISTRICT
INTERVENTION OF STEWARTS, et. al
TO THE HONORABLE JUDGE OF SAID COURT:
COME NOW, INTERVENORS, Neal and Kim Stewart, Richard D. and Bonnie
Powell, Anthony and Glinda Cutaia, Jay and Gayle Cutaia, Michael Cutaia, Frank and
Karen Mazzola, Robert O. Price, Clay and Lisa Young, Robert and Dana Schmanski, Tim
and Marit Doucet, AND Larry and Suzanne Rogers, in the above-styled and numbered
cause and files this their intervention and complaining of AMWAY CORPORATION,
RICH DeVOS, JAY VAN ANDEL, DICK DeVOS, STEVE VAN ANDEL, DOUG
DeVOS, BOB KERKSTRA, JA-RI CORPORATION, DEXTER YAGER,
INDIVIDUALLY AND D/B/A YAGER ENTERPRISES AND INTERNET SERVICES
CORP., JEFF YAGER, DONALD R. WILSON, INDIVIDUALLY AND D/B/A WOW
INTERNATIONAL AND WILSON ENTERPRISES, INC., RANDY & VALORIE
HAUGEN, INDIVIDUALLY AND D/B/A FREEDOM ASSOCIATES, INC. AND
FREEDOM TOOLS, INC. AND ALL STAR PRODUCTION COMPANY, JOHN SIMS,
INDIVIDUALLY AND D/B/A SIMS ENTERPRISES, RANDY & SUSAN WALKER,
INDIVIDUALLY AND D/B/A WALKER INTERNATIONAL, MARK & MARTHA
HUGHES, WILLIAM BERGFELD, INDIVIDUALLY AND D/B/A BERGFELD
INTERNATIONAL, INC., JODY VICTOR, INDIVIDUALLY AND D/B/A JEVI
CORPORATION, MARK CORDNER, Defendants and in support thereof would show
unto this Court the following:
DONALD and JACKIE GRIFFITH § IN THE DISTRICT COURT OF
VERNON and BONNIE HOLQUIN, §
BRENDA and WILLIAM L. §
CHRISTIAN, DONALD and LINDA §
WEAD, BYRON and KENDRA §
HALLMARK, and TED and MYRENE § HARRIS COUNTY, TEXAS
MCDANIELS §
§
-VS- §
§
AMWAY CORPORATION, ET AL. § 190TH JUDICIAL DISTRICT
INTERVENTION OF HAMILTONS, et. al
TO THE HONORABLE JUDGE OF SAID COURT:
COME NOW, INTERVENORS, Herbert and Marilyn Hamilton, Karen Cutaia, in the above-styled and numbered cause and files this their intervention and complaining of AMWAY CORPORATION, RICH DeVOS, JAY VAN ANDEL, DICK DeVOS, STEVE VAN ANDEL, DOUG DeVOS, BOB KERKSTRA, JA-RI CORPORATION, DEXTER YAGER, INDIVIDUALLY AND D/B/A YAGER ENTERPRISES AND INTERNET SERVICES CORP., JEFF YAGER, DONALD R. WILSON, INDIVIDUALLY AND D/B/A WOW INTERNATIONAL AND WILSON ENTERPRISES, INC., RANDY & VALORIE HAUGEN, INDIVIDUALLY AND D/B/A FREEDOM ASSOCIATES, INC. AND FREEDOM TOOLS, INC. AND ALL STAR PRODUCTION COMPANY, JOHN SIMS, INDIVIDUALLY AND D/B/A SIMS ENTERPRISES, RANDY & SUSAN WALKER, INDIVIDUALLY AND D/B/A WALKER INTERNATIONAL, MARK & MARTHA HUGHES, WILLIAM BERGFELD, INDIVIDUALLY AND D/B/A BERGFELD INTERNATIONAL, INC., JODY VICTOR, INDIVIDUALLY AND D/B/A JEVI CORPORATION, MARK CORDNER, Defendants and in support thereof would show unto this Court the following:
I.
All Defendants have answered in the case in chief, are before the court for all
purposes, and may be served by and through their attorneys of record, which is
accomplished contemporaneously with the filing of this Intervention.
All Defendants are subject to jurisdiction in this court. Some of the Defendants
are residents of the State of Texas, as are Intervenors. There is no federal issue or
question which is raised or plead herein. All causes of action brought herein are pursuant
to common law issues or Texas statutory causes of action.
II. BACKGROUND FACTS
The Amway Corporation manufactures a wide variety of consumer household
products which it sells along with the products of other manufacturers nationwide
through hundreds of thousands of distributors, many of them are in Texas. The Amway
sales plan is a marketing scheme whereby any purchase or sale of Amway goods by a
distributor financially benefits not only Amway, but also those Amway distributors who
qualify and occupy levels of the Amway distributorship network higher than that of the
selling distributor. In Amway parliaments, those persons who occupy positions below
distributor in each branch of the network are called the distributor’s “downline”. Those
persons who occupy positions above a distributor in each branch of the network are
called the distributor’s “upline”. In order to earn significant profits as an Amway
distributor, one must develop a sizeable downline organization by recruiting and
sponsoring other distributors into the Amway sales organization.
Amway considers its distributors independent contractors and independent
businessmen and women. Such distributors earn money by the mark-up they make on
Amway and other related products sold to customers who are not Amway distributors and
other distributors, in a person’s direct downline organization. Distributors also earn
money through a complicated system of commissions, cross-commissions, bonuses,
refunds, discounts, dividends and other considerations in the Amway program as a result
of the sale of such goods or services to “downline” distributors and/or the recruitment of
additional participant distributors. This income is derived in one way or another from
either the sale of Amway products to customers who are not distributors or to other
distributors; and, the recruitment of new Amway distributors to one’s “downline”. A
downline distributor is expected and encouraged to purchase Amway products.
Once a distributor reaches a certain volume level of business generated by the
sale of Amway products to either their “downline” Amway distributors or to customers
who are not Amway distributors, that distributor may qualify as a “direct distributor” and
may begin buying their products directly from Amway without purchasing those products
from their “upline” distributor as they formally had done before they reached the direct
distributor level. A direct distributor may still qualify for certain monetary benefits,
commissions and awards from his downline organization even if that organization
contains other direct distributors. In short, a direct distributor does not share in the
profits generated by the sale of products from other direct distributors in his/her
downline; but, does obtain monetary awards directly from Amway because of the
increased volume created by direct distributors in his downline organization. Because it
is simply impossible for one person to generate a large amount of profit from the sale of
individual products, the overwhelming incentive in the Amway organization and the
Amway plan is to recruit more and more distributors into one’s downline to increase the
volume of products sold in the downline organization by other distributors, whether
direct or not direct, and thereby maximize the bonus and reward potential to be paid to
the person at the top of this downline organization by Amway.
Defendant Yager occupies a position at the top of his own vast Amway
distributorship network to which all the Plaintiffs and many of the Defendants belong.
Plaintiffs are all direct distributors with Amway and have been so for some time. In fact,
Plaintiffs are some of the most successful direct distributors in the entire Amway
organization. They have qualified at the Emerald and in one case, Diamond level.
The Diamond level is the highest level of achievement, and therefore, largest organization
headed by a single distributor, in the Amway organizational and marketing program.
III. INTERVENORS’ BUSINESSES AND DEFENDANTS’ CONDUCT
For several years, Intervenors have run their independent Amway businesses in
accordance with the edicts and instructions of the Amway business and marketing plan.
Intervenors developed very successful Amway distributorships each of which contained
tens of thousands of downline distributors. These organizations were among the most
successful in all of Amway. These distributorships generated significant revenue for the
Intervenors and in most cases became the Intervenors’ only source of revenue after they
retired from their regular line of work to devote their full time and attention to their
growing Amway businesses. Intervenors’ distributorships would have continued to grow
and generate even more revenue for Intervenors had it not been for the interference and
tortuous acts of Defendants.
When Intervenors first became Amway distributors, and as they began to build
their Amway distributorships upon the instruction and advice of Defendants, they were
sold materials, tapes and other documents which indicated that if a person worked hard,
there was no limit to the amount of financial reward that person could find as an Amway
distributor. They were shown a book called the “Profiles of Success” which showed the
lavish lifestyles of highly successful Diamond level distributors in the Amway
organization. They were told to attend seminars and rallies on a monthly and then a
weekly basis, where diamond level and emerald level distributors were paraded across
the stage and spoke about their tremendous financial success and lavish lifestyles they
were able to lead because of their Amway distributorship business. At all times,
Defendants stressed continually the “independent businessman” aspect of the Amway
business and reiterated on many occasions that all Amway distributors are independent
business people working for themselves.
Intervenors were told to purchase motivational tapes, as many as three per week,
and to sell as many of these tapes as they could to their downline distributors without
disclosing to Intervenors or other distributors the source of the tapes or whether or not
anyone was making a profit from the tapes. These tapes contained motivational talks by
many of the same Emerald direct distributors and Diamond level direct distributors who
spoke at the functions. In fact, only Emerald direct distributors and Diamond direct
distributors are allowed to speak at, organize or run functions and rallies. Defendants,
conspiring with one another and working in conjunction with one another, have devised
a system scheme or plan to take full control of all the distributors, including Intervenors,
within Defendant Yager’s downline Amway distributorship organization, by controlling the
production and distribution of motivational tapes, seminars and rallies to which all distributors
within the Yager organization must attend or subscribe or risk suffering tremendous financial
consequences.
Defendants derive the majority of their incomes from the sale of non-Amway
motivational materials such as tapes to persons in their downlines and from the money
earned through motivational rallies and seminars. Defendants regularly represented or
caused to be represented to Intervenors and others that their success as Amway
distributors and in fact the success of their entire distributorship organization was
contingent upon the purchase of these tapes published and/or distributed by Defendants
and attendance at meetings, seminars and rallies sponsored by them, and that without
such materials and attendance at such meetings, seminars and rallies, Intervenors would
be unable to build and maintain successful Amway distributorships. Defendants further
represented or caused to be represented to Intervenors that they should purchase only
those motivational materials produced and distributed by Defendants.
In fact, the Defendants took it one step further, because the sale of tapes and the
revenue from ticket sales to downline distributors and prospective distributors to monthly
or bi-monthly seminars and rallies had become such a vast majority of the revenue for
Defendants, Defendants conspiring with one another and others concocted a scheme
whereby all direct distributors in the Yager downline, including Intervenors, were forced
to sell aggressively and literally “push” these tapes on their own downlines and
Defendants coerced Intervenors through illegal means to require that as many of their
downline distributors as possible bought tickets to the various rallies, seminars and
functions operated by Defendants.
IV. DEFENDANTS’ ILLEGAL CONTROL OF INTERVENORS’ BUSINESSES
Defendants, Yager, Wilson, Haugan, Walker, Hughes, Bergfeld and Sims, conspiring
amongst themselves and with others, would select which Diamond direct distributors and
Emerald direct distributors within the Yager organization would be allowed to hold
functions, seminars or rallies in various places around the country on various dates
throughout the year. These were the only “approved” functions. All other direct
distributors in the particular geographic area where an “approved” event was being held
were coerced into selling tickets to that “approved” event to as many of their downline
distributors as possible. Only high level direct distributors who were “in the good
graces”, or “plugged in”, to Defendants were allowed to participate in and profit from
these events. Anyone trying to hold an event independent of one of the Defendants’
events was essentially “blackballed” and not allowed to participate and profit from
events authorized by Defendants. Further, Defendants, conspiring among themselves
would actively attempt to sabotage any “independent” event not associated with their
own and convince other distributors to “boycott” such events.
Further, Defendants conspiring with one another and with others then made
attempts to disrupt and tortuously interfere with the business relationships of the
Intervenors and their respective downline organizations by contacting other distributors
in Intervenors’ downlines and disparaging and defaming Intervenors by telling those
downline distributors that Intervenors were not “plugged in”, were not “team players,”
and were such that any continued relationship with Intervenors threatened their
businesses. This was done even though Defendants continually represented to
Intervenors and others that each Amway distributor is an independent business person
and not employed by or bound one to the other in any other relationship other than that of
an independent arm’s length business relationship.
Finally, the control of Defendants’ conspiracy and evil plan to reap hundreds of
millions of dollars at the expense of thousands and possibly millions of other people, got
to the point that Defendant Yager and the other Defendants conspiring among themselves
and with others, would decide within the Yager organization which individual would
next become an Emerald direct distributor or a Diamond level direct distributor
regardless of any other individual’s own achievement. They did this by manipulating the
Amway point system and by transferring points from one distributor to another,
realigning downline groups under a certain favored distributor and other such devices so
that Defendants could maintain complete and total control over the development of
Yager’s downline organization. In doing so, Defendants have destroyed the personal
independent businesses of Intervenors. Additionally, Defendants would personally direct
and coerce Intervenors concerning the conduct of their businesses by telling Intervenors
which functions to attend, which upline distributors to counsel with and the specific
upline distributors with whom to form associations. To do otherwise, Defendants
threatened, would mean total destruction of Intervenors and their businesses by
Defendants.
Intervenors are among the only direct distributors at a high enough level to stand
up to Defendants and stop their evil scheme. When Intervenors began to question the
business practices of Defendants, Defendants attempted to completely “cut off”
Intervenors from the motivational tape, seminar and rally system which is a major source
of income for any Amway distributor above the level of direct distributor. Further,
Defendants engaged in and continue to engage in tortuous interference by contacting
downline distributors in each of the Intervenors’ respective downlines and disparaging
and defaming Intervenors to these distributors without legal justification. Further,
Defendants have tortuously interfered in Intervenors’ attempts to hold independent
seminars, rallies and functions and have defamed Intervenors to other distributors in an
attempt to keep them away from Intervenors motivational events causing serious
irreparable financial harm to Intervenors as well as a loss of reputation and development
in their own business communities.
On June 2, 1997, a meeting was held in Houston, Texas at the Sheraton Hotel. At
that time, Don Wilson informed an assemblage of several hundred people, that certain
people within the Amway organization, namely your Intervenors, would not be permitted
to participate in the normal functions and tools business to which they had become
accustomed. Instead, two teams would be formed, the blue team and the green team.
Those on the green team would not enjoy the same economic and market privileges as
the blue team. Wilson purported to act on behalf of Amway Corporation, Dexter Yager,
Internet and the other related entities and parties within that line of sponsorship. Wilson
was at the time of the meeting, a member of the Amway Distributors Association, and he
exhibited authority and apparent authority to act on behalf of all of these Defendants.
V. PARTICIPATION OF AMWAY.
Defendants are attempting to control the entire Amway sales and marketing plan
through illegal means by tying success in the Amway organization to complete obedience
to the dictates of Defendants under the “Yager system” of motivational tapes, seminars
and rallies. This is all being done with Amway’s knowledge and consent; and in fact,
with the active support and collusion of many of its top level employees and executives.
Defendants continue to represent that a fortune may be made through the sale of Amway
products and the recruitment of other Amway distributors when in fact Defendants know
but do not disclose that the vast majority of their own revenue and income is derived
from the “Yager system” of motivational tapes, seminars and rallies. Such income
opportunities are not truly available to all to whom the “dream” is represented. This
motivational system controlled by Yager and the other Defendants is an illegal pyramid
scheme which has cooped and corrupted the very basics of what has been a
phenomenally successful Amway sales and marketing plan over the last thirty years.
Unfortunately, while Amway and its leaders and founders preach the concept of integrity,
this scheme has been done with the knowledge and cooperation of Amway all in the
name and the pursuit of greater and greater profits. Additionally, Amway and the
other Defendants ironically continue to benefit and derive income from motivational
materials produced and created by Intervenors which are in continuous use
throughout the Yager organization without sharing any of those incomes
or revenues with Intervenors. Intervenors bring this suit to put a stop to this fraud,
unjust enrichment and the tortuous interference of Defendants.
VI. CONTROL BY YAGER
Defendants further represented to Intervenors that despite anything the Amway
organization might say, the Amway rules and regulations were irrelevant and should be
disregarded, and that Amway would not dare interfere with the way the Yager
organization was run, because Yager could always pull his downline organization out of
Amway, which would significantly harm Amway.
VII. AMWAY AWARE OF WRONGFUL CONDUCT
At all time relevant hereto, Amway was aware that the aforesaid
misrepresentations regarding Defendant Yager’s motivational materials and motivational
rallies were being made to Intervenors and other Amway distributors, and that in
practice, sales of such materials within the Yager organization were consistently being
conducted in violation of Amway’s rules, including without limitation, Section B, Rule 4.
It was in Amway’s economic self-interest to permit such misrepresentations and rules
violations to continue, and although Amway has been aware of such practices for years,
Amway has never terminated the distributorship of Defendant Yager or made any
credible effort to halt his practices in violation of Amway’s rules. Since many of these
events have been brought to light, interestingly, Amway has attempted to change rules
and requirements in order to attempt to distance itself from the conduct of distributors
such as Yager, Wilson and others whose tools businesses are allegedly independent
enterprises, but which Amway attempts now to monitor and control.
VIII. DEFENDANTS’ INTERFERENCE
Defendants engaged in a regular practice of interfering with Intervenors’
respective downlines; cutting out the Intervenors from the distributorship. Such practice
is evident in, among other places, the June 2, 1997 meeting. Additional efforts to go
around, avoid, disparage and generally ostracize the Intervenors have occurred.
IX. DEFENDANTS’ INTERFERENCE WITH INTERVENORS’ DOWNLINE
On various occasions, Defendants herein sold or caused the sale of Amway and
non-Amway products directly to Intervenors’ downline distributors without authorization
from Intervenors, thereby interfering with Intervenors’ distributorship relationships.
X. DEFENDANTS’ DISPARAGEMENT AND DEFAMATION
On numerous occasions, Defendants disparaged and defamed Intervenors to
Intervenors’ own downline distributors and Intervenors’ upline distributors, in an effort
to interfere with Intervenors’ downline distributorship relationships, and to isolate
Intervenors from upline support and assistance.
XI. Violation of Texas Free Enterprise Act
At all material times, Yager, Internet, the Wilsons, Simms and Walkers
maintained a monopoly over the sales, marketing and distribution of business support
materials within the Yager distribution networks. Through a system of market controls
and price maintenance, these Defendants were able to maintain this monopoly power.
Amway turns a blind eye to this system. Among other reasons, this system is in violation
of the consent decree Amway entered into with the Federal Trade Commission.
However, since the duping of multiples of people through this scheme results profits for
and on behalf of Amway, the Amway Corporation and its principles choose to ignore
such conduct, hoping no one will notice. There is further a price fixing scheme that
exists in multiple distribution networks that function within the Amway system. The
Yager organization has agreed to maintain prices among other distribution networks so as
to inhibit competition. This monopoly is further maintained by tying essential distributor
support services such as training, education and advancement within the Yager system to
blind adherence and acceptance of the Yager market controls. These acts give rise to
violations of the Texas Free Enterprise Act, including attempts to create a monopoly, fix
prices, maintain resale prices, create boycotts and illegally divide the market. The June
2, 1997 announcement of a boycott destroyed the businesses of Intervenors, all to their
detriment in violation of the Texas Free Enterprise Act.
XII. INTERVENORS’ INJURIES
Intervenors have been injured as a result of the Defendants’ conduct and will
continue to be injured unless it is stopped. In this action, Intervenors seek to recover the
revenues actually lost in the past, and the future revenues that had been represented to
them would surely be theirs for the taking with the effort Intervenors have generated.
XIII. VIOLATIONS OF TEXAS STATE BRIBERY ACT
The actions of Defendants alleged above constitutes illegal activity within the
meaning of the Texas State Bribery Act and wire and mail fraud. Defendants’
participation in the affairs of the enterprise consisted of their guiding, managing,
directing or otherwise exercising some control of the affairs of the enterprise.
Through acts of mail and wire fraud, Defendants participated in the affairs of the
illegal enterprise which was comprised of a large international corporation (Amway),
Defendants, and their vast network of millions of individual distributors. The cloak of
legitimacy provided to Defendants by this seemingly legitimate enterprise afforded said
Defendants’ acts as to an influence over huge numbers of Amway distributors, thus
enabling Defendants to exercise their scheme to defraud Intervenors and others.
Defendants’ pattern of racketeering activity, was consisted of mail and wire fraud,
was perpetuated through direct telephone communications, the Am Vox telephone voice
mail system, and the mails, pursuant to and for the purpose of executing Defendants’
scheme to defraud Intervenors and others by communicating false and fraudulent
information as set out above.
Intervenors are persons injured by reason of Defendants’ violations and are
entitled to three times their actual damages sustained, as well as punitive damages and
attorneys’ fees.
XIV. FRAUD
Defendants made or caused to be made knowingly and fraudulent
misrepresentations to Intervenors and others as set out above when in fact, these
Defendants were engaged in the systematic violation of the Amway rules and were
operating an illegal scheme for their own profit through the sales of motivational
materials and the conduct of seminars, rallies and other events. These representations
were made or caused to be made by Defendants knowingly and continued to the present
day. These misrepresentations and omissions were made or caused to be made by
Defendants with the intent that they be relied upon and acted upon by Intervenors and
others for the purpose of generating larger profits for these Defendants from their illegal
selling scheme which was and is prohibited by the Amway rules and Texas law. But for
the aforesaid fraudulent representations, upon which Intervenors and others justifiably
relied to their detriment, and but for the aforesaid omissions and material facts,
Intervenors would not have entered into or maintained their Amway distributorship
businesses. Intervenors, in justifiable reliance upon Defendants’ fraudulent
misrepresentations, were damaged in an amount difficult to measure, but Plaintiffs
believe in excess of Ten Million Dollars ($10,000,000.00).
XV. BREACH OF CONTRACT
As more particularly described above, Intervenors entered into and continued in
the renewal of a distributorship agreement with Defendant, Amway, based in significant
part upon representations made to them concerning the Amway marketing system,
including the rules and regulations promulgated by Amway.
Amway’s failure and refusal after notice of numerous violations to enforce the
rules and regulations promulgated by it to govern its marketing system, and for colluding
in improper actions against Intervenors by Intervenors’ upline distributors including
Defendants, which actions were in direct violation of Amway’s rules and regulations,
constitutes a breach by Amway of its contract with Intervenors, as a direct result of which
Intervenors’ suffered considerable economic loss and continue to suffer such loss for
which Amway should be held liable.
XVI. TORTUOUS INTERFERENCE WITH CURRENT AND PROSPECTIVE
BUSINESS RELATIONSHIPS
Defendants, individually and conspiring among themselves and others, tortiously
interfered with Intervenors’ contractual relationship with Amway by selling both Amway
and non-Amway products directly without Intervenors’ permission to Intervenors’
downline distributors. Further, Defendants, acting individually and conspiring among
themselves and with others, tortuously interfered with Intervenors’ contractual relationship
with Amway and Intervenors’ respective own downline independent distributors by
contacting certain of Intervenors’ downline distributors for the purpose of making false
defamatory and damaging statements to them about Intervenors and such interference
with those relationships has resulted in actual damages suffered by Intervenors.
XVII. IMPLIED BREACH OF IMPLIED CONTRACT AND EXPRESS AND IMPLIED
WARRANTIES
Defendants engaged in devious and reprehensible conduct in perpetuating their
fraud upon Intervenors and pursuing their course of action intended to gain control of
Intervenors’ businesses solely for the financial enrichment of themselves and to the
financial, psychological and spiritual detriment of Intervenors. When Intervenors entered
into their Amway businesses and as they developed these businesses, they were told by
Defendants that it was very important to be “plugged in” and “associated with” their
upline distributors, including Defendants, in order to achieve success in the Amway
business. Defendants represented to Intervenors that they were not only Intervenors’
upline distributors and business associates, but also Intervenors were encouraged by
Defendants to believe that Defendants were financial and personal advisors, counselors,
friends, and even ministers. In fact, Defendants instructed Intervenors that they should
not make any financial or significant personal decision without consulting with
Defendants first.
Defendants encouraged and instructed Intervenors to immerse themselves in the Amway
business to the exclusion of all other activities. Defendants instructed Intervenors that
they should “give up” and “retire” from their respective jobs, successful professions and
other businesses in order to demonstrate to Intervenors’ downline how successful they
were becoming in the Amway business. In reality, Defendants’ purpose in doing this was
to increase Defendants’ control over Intervenors in every aspect of Intervenors’ lives.
Defendants instructed Intervenors on the sale of their businesses, the borrowing of
money, the entering into and dissolving of business relationships and transactions,
persons with whom and not with whom to associate, and virtually every other aspect of
Intervenors lives in order to gain control of Intervenors and their businesses solely for the
purpose of financially enriching Defendants at the expense and exclusion of Intervenors.
Because of these activities, Defendants established a fiduciary and special
relationship with Intervenors which gave rise to an extraordinary duty on the part of
Defendants to give Intervenors accurate and sound advice and instruction for the purpose
of benefiting Intervenors and without regard to any affects such advice and instruction
might have on Defendants. Defendants did not do so. Defendants were acting and
instructed Intervenors that they be allowed to act in the role of Intervenors attorneys,
accountants, business advisors, financial consultants, personal psychologist and minister
for the purpose of gaining control over Intervenors’ personal lives and businesses for the
sole purpose of financially enriching Defendants at the expense of Intervenors. All of the
above gave rise to an implied contract and extraordinarily high duty of care on the part of
Defendants toward Intervenors which Defendant have breached in every regard and such
breach has caused Intervenors serious and irreparable injury and harm for which
Intervenors now sue.
XVIII. DEFENDANTS’ WILLFUL CONDUCT
In committing the acts of which reference is made in this Original Petition,
Defendants have acted willfully, maliciously, wantonly, oppressively, intentionally,
knowingly, fraudulently, in bad faith, and with reckless disregard of the consequences
and with such entire want of care as raises the presumption of conscious indifference and
malice toward Intervenors such as to entitle Intervenors to punitive damages under Texas
law; further, that Defendants acted with the specific intent to cause serious harm to
Intervenors.
XIX. ATTORNEYS’ FEES
Intervenors seek recovery of their reasonable attorney fees and expenses in the
prosecution of this litigation and any related litigation caused by Defendants’ wrongful
conduct.
XX. DEFAMATION
Defendants published or allowed to be published false, malicious and
nonprivileged statements concerning Intervenors, their executives and employees. The
foregoing false statements concerning Intervenors are slanderous, libelous and/or
defamatory. The foregoing false statements concerning Intervenors 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.
The false, malicious, nonprivileged statements proximately caused harm and
damage to Intervenors’ reputation, prestige and standing as well as Intervenors’
respective businesses. As a proximate result of Defendants’ conduct, Intervenors have
suffered damages in an amount to be determined at trial.
Further, Defendants’ conduct was undertaken in bad faith, was malicious and
manifested a wanton disregard of and/or reckless indifference toward the rights of
Intervenors thereby entitling Intervenors to punitive or exemplary damages.
XXI. INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS
Defendants’ conduct as set out above in this Intervention was intentional and/or
reckless and designed to cause severe damage to Intervenors. Further, Defendants’
conduct was extreme and outrageous as those terms are defined in Texas law and without
justifiable legal excuse. Intervenors have suffered severe emotional distress because of
Defendants’ actions and have been unable to maintain or develop their respective
businesses.
XXII. TEXAS DECEPTIVE TRADE PRACTICES ACT
Defendants’ actions described more completely above constitute unfair methods
of competition, unconscionable acts or practices, and unfair and deceptive acts and
practices in the conduct of the Amway related business in violation of the Texas
Deceptive Trade Practices Act. Intervenors have been damaged by the Defendants’
deceptive and unfair trade practices in an amount exceeding Ten Million Dollars
($10,000,000.00). Intervenors are entitled to recover their actual damages, additional
damages to be proven at the trial of this matter, post costs, interests, and reasonable
attorney fees from the Defendants’ further deceptive and unfair trade practices.
XXIII. BREACH OF FIDUCIARY DUTY
The relationship of Amway personal direct distributor and distributor, and the
relationship between an Amway distributor and those who the distributor helps train and
counsel in his or her downline network is a relationship of trust and confidence. In the
network, the distributor-sponsor acquires influence over the distributors-recruits and is in
a position of superior knowledge and information. These relationships of trust and
confidence impose fiduciary obligations upon an Amway distributor.
At the time the Intervenors were recruited to become Amway distributors and
throughout their time as active distributors, they made their decision to become and
continue as distributors based in large part on their reliance on the representations made
by their direct upline distributors including Defendants. Among the representations these
Defendants made, are the following:
A. That Amway follows certain ethical guidelines and rules which are
imposed by contract upon each distributor and which Defendants were committed to
following.
B. That Defendants were committed to abiding by Rule 4 of §B of the Rules
of Conduct of Amway Distributors – which prohibits an Amway distributor from selling
non-Amway products to another Amway distributor whom he or she does not personally
sponsor as applied on a Diamond to Diamond basis in accordance with the course of
dealing and past business practices recognized by all distributors in the Amway network;
C. That Defendants would treat Intervenors fairly in the business support
materials business by compensating Intervenors for all sales of business support materials
due distributors in their downline network;
D. That Defendants are committed to Amway’s partnership principal in that
Intervenors can place their trust and confidence in these Defendants; and,
E. That Defendants are committed to Amway’s principals of teamwork,
commitment, and communication.
Defendants, individually and conspiring among themselves and others, have
abused and betrayed Intervenors’ trust and confidence by, among other things:
A. Seeking to acquire and take over Intervenors Amway related business
support materials business by violating Rule 4 of §B of the Rules of Conduct of Amway
Distributors as applied on a Diamond to Diamond basis in accordance with the parties
course of dealing and past business practices;
B. Fraudulently inducing Intervenors to allow these Defendants to continue
to directly serve a certain distributor in their downline organizations with Internets
business support materials;
C. On information and belief, misrepresenting the volume of business
support materials distributed to distributors in the Intervenors downline by Defendants;
and,
D. Agreeing and/or conspiring with Defendants and others and their
respective companies, to engage in an illegal group boycott of Intervenors in the market
for Amway related business support materials, motivational seminars, rallies and other
events and sponsorship of prospective Amway distributors.
E. Some of Defendants are members of the Amway Distributor’s Association
Board. This Board is the representative of all Amway Distributors before the Amway
Corporation itself. It and its members have a duty to all Amway distributors to represent
each individual independent Amway distributor’s best interests in their dealings with the
Amway Corporation and this includes Intervenors. Several of the Defendants by virtue
of their membership on this Board have used their position on this Board to enrich
themselves at the expense of Intervenors and other independent Amway distributors.
This is a breach of the fiduciary duty these Board members and the Board itself owes to
Intervenors and other independent Amway distributors and has caused serious irreparable
financial harm to Intervenors for which they now sue.
Defendants’ actions described above and throughout this Intervention constitute
breaches of their fiduciary duties to the Intervenors and are tortuous conduct separate and
independent from their contractual breaches alleged above. Intervenors have been
damaged and continue to be damaged by Defendants’ breaches of their fiduciary duties to
Intervenors in an amount exceeding Ten Million Dollars ($10,000,000.00). Intervenors
are entitled to recover this sum, additional damages proven at the trial of this matter,
sufficient punitive damages to deter Defendants from similar future conduct, plus costs,
interest and reasonable attorney fees from these Defendants for their breaches of
fiduciary duty.
XXIV. Texas Business Opportunities Act
Intervenors would further show that Defendants violated the terms and conditions
of the Texas Business Opportunities Act, Art. 5069-16.05.
XXV.
WHEREFORE, PREMISES CONSIDERED, Intervenors demand a trial by jury
that on the evidence shown before this Court may show the Intervenors recover damages:
A. Actual damages in excess of this court’s jurisdictional limits;
B. Exemplary damages in an amount to be determined by the jury;
C. Attorneys’ fees and costs of Court;
D. Pre-judgment and post-judgment interest as provided by law; and,
E. For such other equitable and legal relief to which Intervenors may justly entitled.
Respectfully submitted,
PHILLIPS & AKERS
By: ______________________________
Brock C. Akers
State Bar No. 00953250
Kevin G. Corcoran
State Bar No. 04819250
3400 Phoenix Tower
3200 Southwest Freeway
Houston, Texas 77027
(713) 552-9595
FAX (713) 552-0231
ATTORNEYS FOR
INTERVENORS
CERTIFICATE OF SERVICE
I hereby certify that a true copy of the foregoing document has been served in
compliance with Rules 21 and 21a of the Texas Rules of Civil Procedure on this TIME
August 11, 1998.
______________________________
Brock C. Akers