Procter & Gamble Co. v. Amway Corp.

Decision Date26 April 1999
Docket NumberNo. CIV.A. H-97-2384.,CIV.A. H-97-2384.
Citation80 F.Supp.2d 639
PartiesThe PROCTER & GAMBLE COMPANY, et al., Plaintiffs, v. AMWAY CORPORATION, et al., Defendants.
CourtU.S. District Court — Southern District of Texas

Michael T. Gallagher, Gallagher Lewis & Downey, Houston, TX, Richard A. Sheehy, McFall Sherwood & Sheehy, Houston, TX, W.B. Markovits, Markovits & Greiwe, Cincinnati, OH, Stanley M. Chesley, Theresa L. Groh, Paul M. DeMarco, Fay E. Stilz, Waite Schneider et al., Cincinnati, OH, for Plaintiff.

David Owen Cluck, Lorance & Thompson, Houston, TX, Charles L. Babcock, Jackson Walker, Houston, TX, Byron G. Lee, Coasts Rose et al., Houston, TX, James R. Sobieraj, Brinks Hofer Gilson and Lione, Chicago, IL, Michael A. Mohr, Sharon D. Grider, AMWAY Corp., Ada, MI, Sean M. Sullivan, Dominic P. Zanfardino, Ralph J. Gabric, Timothy Q. Delany, Richard A. Kaplan, Brinks Hofer Gilson and Lione, Chicago, IL, for AMWAY Corp.

Edward B. McDonough, Jr., McDonough & Associates, Houston, TX, William J. Abraham, Rick J. Abraham, Abraham Law Offices, Columbus, OH, for AMWAY Distributors Ass'n Council.

Robert L. DeJong, Miller Canfield Paddock & Stone, Grand Rapids, MI, Byron G. Lee, Coasts Rose et al., Houston, TX, for Ja-Ri Corp.

Byron G. Lee, Coasts Rose et al., Houston, TX, for Donald R Wilson, Wow Intern., Inc., Wilson Enterprises, Inc., Ronald A. Rummel, Randy Haugen, Freedom Associates Inc., Freedon Tools Inc., Randy Walker, Walker Intern., Inc., Dexter Yager, Birdie Yager, D & B Yager Enterprises Inc.

Warren Royal Taylor, Taylor & Taylor, Houston, TX, for Kevin Shine.


GILMORE, District Judge.

Pending before the Court is Amway Corporation's ("Amway's") Motion for Summary Judgment. (Instrument No. 267). Based on the parties' submissions and the applicable law, the Court finds that Amway's should be GRANTED in PART and DENTED in PART.

I. Background

On July 17, 1997, Plaintiffs Proctor & Gamble Company and Proctor & Gamble Distributing Company ("P & G") filed this action against Amway Corporation ("Amway"), Amway Distributors Association Council ("ADA"), and several other defendants. Plaintiffs asserted claims for business disparagement, defamation, violations of the Texas Business and Commerce Code, unfair competition, violations of the Lanham Act, tortious interference with prospective business relations, negligent supervision, negligence, vicarious liability, fraud, and violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) and (d).

P & G and Amway compete for consumers of household products such as laundry detergent and toothpaste. Amway sells its products through a multi-level distribution plan for door-to-door sales. As it argued unsuccessfully in prior Federal Trade Commission litigation, P & G argues in this case that the Amway distribution plan is an illegal pyramid scheme.

P & G alleges that since the early 1980s Amway and its distributors have circulated false statements that P & G is associated with Satanism and that profits from the sale of P & G products are contributed to the "Church of Satan." P & G claims that it complained to Amway and Amway assured P & G that the circulation of the false statements would stop. P & G maintains that, contrary to these alleged assurances, the rumors were again circulated in 1995, beginning in Texas.

P & G insists that Amway and its distributors have also issued false statements about P & G's products. As an example, P & G alleges that Amway distributors have told potential customers that P & G's laundry detergent causes "shudge" which clogs drain pipes and that P & G's toothpaste contains harmful abrasives which can damage tooth enamel.

In 1995, P & G sued Amway and one of its distributors in Utah challenging the Satanism rumors. An amended complaint filed in the Utah federal court also challenged Amway's distribution method as a pyramid scheme. The amended complaint was dismissed by the Utah Court on July 15, 1997.

On July 17, 1997, P & G sued Amway, ADA, and other distributors in this Court again challenging the Satanism rumors and the Amway distribution plan, as well as the alleged false statements which were product-specific. Most of P & G's claims are based on 148 statements allegedly made by Amway or its distributors since 1980. (Amway's Motion, Instrument No. 267, Exh. 1).

On November 12, 1998, the Court dismissed P & G's claims for unfair competition, negligent supervision, negligence, and Civil RICO. (Instrument No. 156). Consequently, the seven (7) remaining causes of action in this case are business disparagement, defamation, violation of section 16.29 of the Texas Business and Commerce Code, violations of the Lanham Act, tortious interference with prospective business relations, vicarious liability, and fraud.

On March 11, 1999, Amway filed a motion for summary judgment, asserting several challenges to all seven (7) of the remaining claims. In particular, Amway contends that a majority of the allegations underlying P & G's claims are barred by the applicable statute of limitations. Amway also maintains that it is entitled to summary judgment on its affirmative defenses of estoppel and waiver. In addition, Amway argues that a majority of the statements are not reasonably capable of a defamatory meaning. Amway also maintains that P & G's business disparagement claim must fail because the statements were either not "of and concerning" P & G or its products, not disparaging, not published with actual or common law malice, or not the sole cause of P & G's damage. Furthermore, Amway continues, section 16.29 of the Texas Business and Commerce Code is inapplicable to the allegations made by P & G.

Amway also contends that P & G's tortious interference with prospective business relations claim is meritless since P & G fails to present evidence of specific prospective relationships that did not materialize and cannot show that Amway or its distributors interfered with any prospective relationships or that they committed an intentional of malicious act. With respect to the Lanham Act, Amway asserts that the Satanism statements are not actionable because they do not misrepresent the features of any products and do not constitute commercial speech. Moreover, Amway argues that there is no definitive evidence that the challenged statements were false or misleading or that there was any deception of a substantial portion of the intended audience. Amway also argues that P & G does not have standing to sue under the Lanham Act based on the alleged pyramid scheme. Next, Amway points out that vicarious liability does not constitute an independent cause of action, but rather is a theory used to attach liability to one party for the acts of another. Amway then claims that there is no showing of justifiable reliance by P & G, as required to establish fraud.

In response, P & G argues that none of its claims are barred by statute of limitations and that the disparaging statements constitute a continuing tort. In addition, P & G maintains that Amway is estopped from raising the statute of limitations defense. P & G insists that the disparaging statements concerned P & G and its products, were made with legal and actual malice, and caused P & G to suffer pecuniary loss. P & G also contends that its claims for defamation, violation of section 16.29 of the Texas Business and Commerce Code, violation of the Lanham Act, tortious interference with prospective business relations, and fraud are actionable. Lastly, P & G argues that Amway failed to prove its defenses of estoppel and waiver.

II. Standard of Review

Summary judgment is appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56. A fact is "material" if its resolution in favor of one party might affect the outcome of the suit under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). An issue is "genuine" if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party. Anderson, 106 S.Ct. at 2510. If the evidence rebutting the motion for summary judgment is only colorable or not significantly probative, summary judgment should be granted. Anderson, 106 S.Ct. at 2511; see Lewis v. Glendel Drilling Co., 898 F.2d 1083, 1088 (5th Cir.1990), cert. denied, 502 U.S. 857, 112 S.Ct. 171, 116 L.Ed.2d 134 (1991).

Under Rule 56(c) of the Federal Rules of Civil Procedure, the moving party bears the initial burden of informing the district court of the basis for its belief that there is an absence of a genuine issue for trial, and for identifying those portions of the record that demonstrate such absence. Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); Leonard v. Dixie Well Serv. & Supply, Inc., 828 F.2d 291, 294 (5th Cir.1987).

Where the moving party has met its Rule 56(c) burden, the nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts ... [T]he nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita, 475 U.S. at 586-87, 106 S.Ct. at 1356 (quoting FED. R. CIV. P. 56(e)) (emphasis in original); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Leonard, 828 F.2d at 294. To sustain the burden, the nonmoving party must produce evidence admissible at trial. Anderson, 477 U.S. at 255, 106 S.Ct. at 2514; Thomas v. Price, 975 F.2d 231, 235 (5th Cir.1992) ("To avoid a summary judgment, the nonmoving party must adduce admissible evidence which creates a fact issue....").

III. Statute of Limitations


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