This class action suit was filed in U.S. District Court, Eastern District of Pennsylvania, on July 20, 1994, naming Dexter Yager, Bill Britt, and Amway Corp. as the defendants. The suit was filed by John and Stacy Hanrahan. Brian Bohrer and Mark and Lori Mensack were also named as plaintiffs. A proposed settlement was entered into as of August, 1996.
Like most of the other lawsuits that I'm aware of, the Hanrahan lawsuit was chiefly concerned with abuses resulting from the covert "tools" business and with factual misrepresentations of the sort that have frequently been reported here and elsewhere by so many others.
The list of allegations included:
The following article from the 8/17/96 Philadelphia Enquirer summarizes the terms of the settlement.
Amway proposes settling lawsuit
Some distributors claim they lost money. The company wants to give them coupons good for Amway products.
By Julie Stoiber
Amway Corp., global purveyor of everything from insect repellent to lipstick, has agreed to a settlement in a class-action lawsuit—filed by a Delaware County couple—that actually could end up boosting the company’s sales.
The proposed settlement, filed this week in U.S. District Court in Philadelphia, calls for the Ada, Mich., company to compensate disgruntled distributors by giving them discount coupons for Amway’s most popular products.
Stacy and John Hanrahan of Springfield were the lead plaintiffs in the 1994 lawsuit in which they alleged that, as distributors, they lost money selling Amway products. They contended that their sales income didn’t cover the cost of motivational tapes that they were pressured to buy and the sales rallies they paid to attend.
In fiscal 1995, Amway had retail sales of $6.3 billion through its network of independent distributors.
The Hanrahans accused the company and two of its high-level distributors of luring Amway sales recruits with the promise of inflated earnings and of pressing them to buy company sales materials, which benefited the top dealers.
The distributors named in the suit were William Britt, of Carson City, Nev., and Dexter Yager, of Charlotte, N.C.
As part of the settlement, Britt and Yager agreed to put optional-purchase labels on motivational materials, and Amway said it would offer distributors a way to resolve disputes related to those materials. Amway also agreed to incorporate a statement in its distributor agreement affirming individual’s rights to religious and political independence.
Craig Meurlin, senior vice president of Amway, said that the company does not push religious or political philosophies on distributors, but agreed to the provision because “the plaintiffs were concerned with the topic.”
Amway and its codefendants will put $375,000 in to a fund for legal fees and costs. Two Philadelphia law firms represented the plaintiffs, Kohn, Swift & Graf and Conrad, O’brian, Gellman & Rohn.
"We’re just pleased to move on," Amway’s Meurlin said. "Stacy Hanrahan and the other plaintiffs had a very abnormal experience with the company."
In their suit, the Hanrahans described Amway as a pyramid scheme, in which dealers earn money for the distributors who recruited them, with a percentage of each dealer’s revenues passed on to those higher in the pyramid.
Amway and its codefendants have denied all allegations.
Britt and Yager were not in their offices yesterday when they were called for comment. The Hanrahans, who have established an Amway Lawsuit Information Line, did not respond to a message left there.
The proposed settlement could include up to 2.5 million distributors who sold Amway products between Jan. 1, 1990, and Aug. 1 of this year downline from the Britt and Yager distributorships. Any distributor who wants to opt out of the settlement must do so by Nov. 15. A hearing to debate the merits of the settlement will be held Dec. 16 in U.S. District Court in Philadelphia.
The discount coupons, good for six months for distributors, will knock 35% off the cost of products ranging in price from $5 to $50, Meurlin said, including Durashine Floor Polish and Hourgard Insect Repellent. Coupon users will also get a break on postage. Amway has agreed to mail the products at half the normal shipping rate.
Amway said it would not know the total cost of the settlement until the coupons were redeemed.
It is worth noting that, while there had been a number of previous similar lawsuits, this is the first time, to my knowledge, that Amway Corp. had been so strongly linked to the activities of distributors like Britt and Yager. It may be much more difficult for Amway to now claim in other such lawsuits that they have no knowledge of or responsibility for the abuses being perpetrated by its distributors. Also, any distributors who sell motivational materials will be under court order to abide by Amway's rules and Code of Ethics.
It should also be noted that Craig Meurlin, senior vice president of Amway, makes a couple of statements that are so ludicrously inaccurate that they deserve special mention. One is that the Hanrahan's "had a very abnormal experience with the company." An amazing claim, considering that Amway has been sued a number of times before over these very same issues, and that there have been a number of books and articles written describing the covert "tools" business and it's harmful effects on large numbers of distributors. It's even more amazing when we consider that Rich DeVos himself in a 1983 "Directly Speaking" tapes—fully 16 years ago—acknowleged the serious and widespread nature of the "power and pressure" being used by some distributor groups to "extract money" from victimized distributors.
Meurlin also claims that "the company does not push religious or political philosophies on distributors." Perhaps he's thinking of a different "Amway." One of the most common threads in all the research I've done is the extreme political and religious bias that permeates every level and aspect of Amway, to the extent that Amway has been likened to a combination of a Fundamentalist Christian church and a political fundraising organization.
Attorneys James J. Rohn, Karen Scheller and Judson A. Aaron of Conrad O'Brien Gellman & Rohn and Joseph C. Kohn and Robert J. LaRocca, of Kohn Nast & Graf, filed the antitrust and racketeering suit on behalf of John and Stacy Hanrahan of Springfield, Mark and Lori Mensack of Erie and Brian Bohrer of West Point, N.Y.
In the suit, the five say that distributors William Britt of Carson City, Nev., and Dexter Yager of Charlotte, N.C., built a "vast Amway sales organization through "fraud and restraint of competition."
They claim that neither Amway, Britt nor Yager told them that Amway distributors make an average of $65 a month and never informed them about the "considerable business expenses" in building a distributorship.
The suit says that Amway knew Britt and Yager lied to distributors, but did nothing to stop them.
"It was in Amway's 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," the suit says.
The suit also says that Amway is a "pyramid scheme" that allows distributors to profit from the sales of vendors beneath them. Amway vendors make money only when they recruit several vendors below them to sell products, the suit says.
Britt and Yager are at the top of two pyramids, the suit claims, and have used their position to force their so-called "down-line" distributors to buy their motivational materials and attend their motivational conferences.
The suit says that Britt and Yager make most of their money from selling
motivational materials. Their down-line vendors cannot buy materials from
anyone else, the suit says, and the two have "strictly controlled" the
resale prices for the materials. The case has been assigned to Senior U.S.
District Judge J. William Ditter, Jr.
Two distributors of the Amway Corporation, the multi-billion dollar multi- level marketing company which was the subject of a "Time Out" investigation earlier this year (June 22-29) have been served with a class action complaint in the Pennsylvania District Court by five former distributors.
The corporation, which sells a wide range of household good and products through a network of more than two million independent distributors around the world, is named in the 40-page complaint, along with two of its top distributors--know as "black hats"--Dexter Yager and Bill Britt. The complaint alleges that the latter two have built their vast sales organizations through the perpetration of fraud and restraint of competition and that Amway, while fully aware of this, had taken no action to halt such practices.
The lawsuit alleges that:
As a class action, the lawsuit represents not just the five named former distributors but also any other former or current distributors dating back to the time when the action is deemed to have begun--in this case January 1990. Amway is expected to contest the action.
"Time Out's" article investigated similar allegations which have emerged from some of the corporations 73,000 British distributors and also examined evidence that, while Amway itself is not a cult, the techniques used by high level distributors such as Britt, Yager and their British counterparts to motivate and recruit people into the network often displayed alarming similarities to those used by cults.
In her book on cults, "Dangerous Persuaders," published by Penguin Australia in March, author Louise Samways states: "Increasingly, Amway is adopting similar tactics to many cults in order to attract recruits then to keep them involved and committed to the cause... extremely large gatherings are held regularly and at these many techniques used by traditional cults are employed to reinforce values and enhance commitment, for instance confessions, success sharing and singing. Participants are expected to conform to strict dress codes, jacket and tie for men, smart dress and jackets for women."
The lawsuit, if successful, would indicate that there has been direct involvement and cooperation between the Amway Corporation and its senior distributors, though it would only be at the end of the case, which is expected to take at least a year to come to trial, that such a link could be proved.
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