Amway Corp., global purveyor of everything from insect repellent to lipstick, has agreed to a settlement in a class-action lawsuitfiled by a Delaware County couplethat actually could end up boosting the companys 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 Amways 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 didnt 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 individuals 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, Obrian, Gellman & Rohn.
"Were just pleased to move on," Amways 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 dealers 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.