In a decision hailed by both companies as a victory, a federal appeals court has reinstated part of a 1995 lawsuit filed by Procter & Gamble Co. against a high-ranking Utah Amway dealer accused of spreading a false rumor linking his competitor with satanic worship.
But the three-member panel of the U.S. 10th Circuit Court of Appeals in Denver also ruled this week that Amway Corp. was properly dismissed from the lawsuit, noting there was no evidence to indicate the corporate parent had anything to do with the distributor's alleged wrongdoing.
P&G's lawsuit claimed Amway distributor Randy Haugen of Ogden used Amway's electronic voice-mail system to spread a false rumor that P&G's president had appeared on a talk show and announced "he was coming out of the closet about his association with the church of Satan."
A lawyer for P&G said he is reviewing the decision to determine if the company will seek further appeal. If not, the case will return to Salt Lake City, where Cincinnati-based P&G said it would seek a trial.
"We are certainly pleased with the ruling and we believe our case will prevail when it is heard in the courts of Utah," said Linda Ulrey, a spokeswoman for P&G.
Amway also claimed vindication, saying the decision should "finally put to rest Procter & Gamble's unjust efforts to hold Amway responsible for the false rumor." The company said it was confident the claims reinstated against Haugen and several other independent distributors would be dismissed.
"Those individuals did nothing more than the thousands of other people who innocently talked about a rumor that they did not know at the time to be false," said Mike Mohr, general counsel for Michigan- based Amway. "And the Amway distributors promptly retracted and denounced the message once they learned that it was false."
Amway distributors technically are not employees of the company but independent business owners who earn commissions on product sales made by people they have recruited to sell products.
For nearly 20 years, P&G, one of the nation's largest producers of household and consumer products including everything from Mr. Clean to Sunny Delight to Pampers, said it has been fighting the false rumors, which typically claim the company's former trademark, a moon- and-stars logo, is a satanic symbol.
"The rumors are, of course, totally false," the company says on its Web site, which has a section devoted to public information about the trademark, including statements from national religious leaders offering support. "The P&G trademark originated about 1851 as a symbol for Star brand candles. Later it was designed to show a 'man- in-the-moon' looking over a field of thirteen stars commemorating the original American colonies. It represents only P&G."
Since the early 1980s, the company said it has filed 15 lawsuits, six against Amway distributors, to fight the rumors.
Concerned calls to P&G from consumers "spiked dramatically" in 1995 after Haugen's message to the Amway voice-mail system.
At the time of the lawsuit, Haugen had established a network of distributors of Amway products through Utah, Nevada, Texas, Mexico and Canada and served on the Amway Distributors Association Council, an advisory board for the corporation, according to the appeals court decision. Using the Am Vox message system, he was reportedly capable of distributing messages to 25,000 to 30,000 of the distributors beneath him in the Amway hierarchy. Although it was unclear how many people received the message, the appellate judges cited evidence that the message passed among at least two groups of his distributors, some of whom are named as defendants in the lawsuit.
After learning of the message, an Amway corporate representative urged Haugen to post a retraction and sent him a copy of a P&G information package explaining the false rumor, according to the decision. Even before that, Haugen had posted a tentative retraction. Then on April 26, 1995, after his conversation with Amway, he posted a full retraction to "categorically deny the allegation of an affiliation between P&G and the Evil One," the appellate judges wrote.
But P&G said the damage had been done, including a boycott of its products by some customers, and filed suit in 1995 alleging defamation and unfair competition.
Three Utah judges heard various stages of the lawsuit and issued rulings that eventually dismissed P&G's claims, prompting the appeal to the 10th Circuit.
The appeals panel agreed with lower-court rulings that dismissed the defamation claims and ruled out Amway Corp. as a defendant. But the panel said the court should reconsider the claims of P&G, described by the judges as the "corporate butt of the Beelzebub canard," that are based on a state "tortious interference" law and a major federal unfair competition statute.
"[The federal statute] is designed to prevent dirty tricks in the marketplace and to ensure consumers have accurate information about commodity products," said Neil Peck, a Denver attorney representing P&G. "The message at issue in this case is just the kind of dirty trick which that statute is designed to eliminate from the marketplace."
Amway, which says it has long tried to stop the spread of the rumor, contends P&G lost on the same claims after bringing suit in Texas against Haugen and other distributors involving the same message.
The Utah court will be allowed to consider whether the reinstated claims against the distributors in Utah constitutes the civil equivalent of double jeopardy.
"[Haugen] should not have to stand trial again," Mohr said. Haugen could not be reached for comment Thursday.