Proctor & Gamble v. Haugen

• Decision Date: 23 August 2000
• Docket Number: Nos. 99-4067,s. 99-4067
• Citation: 222 F.3d 1262
• Parties: (10th Cir. 2000) THE PROCTOR & GAMBLE COMPANY; PROCTOR & GAMBLE DISTRIBUTING COMPANY, Plaintiffs-Appellants and Cross-Appellees, v. RANDY L. HAUGEN, individually, doing business as Freedom Associates, Inc.; FREEDOM TOOLS INCORPORATED; FREEDOM ASSOCIATES, INC., a Utah corporation; STEVEN E. BRADY, individually; STEPHEN L. BYBEE, individually; EAGLE BUSINESS DEVELOPMENT, INC., a Utah corporation; TED RANDALL WALKER, individually; WALKER INTERNATIONAL NETWORK, a Texas Partnership; ROGER D. PATTON, individually, Defendants-Appellees, and AMWAY CORPORATION, a Michigan corporation, Defendant-Appellee and Cross-Appellant, and JEFFREY G. MUSGROVE, individually; MUSGROVE ENTERPRISES, a Texas partnership, Defendants. & 99-4090
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1262

222 F.3d 1262 (10th Cir. 2000)

THE PROCTOR & GAMBLE COMPANY; PROCTOR & GAMBLE DISTRIBUTING COMPANY, Plaintiffs-Appellants and Cross-Appellees, v. RANDY L. HAUGEN, individually, doing business as Freedom Associates, Inc.; FREEDOM TOOLS INCORPORATED; FREEDOM ASSOCIATES, INC., a Utah corporation; STEVEN E. BRADY, individually; STEPHEN L. BYBEE, individually; EAGLE BUSINESS DEVELOPMENT, INC., a Utah corporation; TED RANDALL WALKER, individually; WALKER INTERNATIONAL NETWORK, a Texas Partnership; ROGER D. PATTON, individually, Defendants-Appellees, and AMWAY CORPORATION, a Michigan corporation, Defendant-Appellee and Cross-Appellant,

and

JEFFREY G. MUSGROVE, individually; MUSGROVE ENTERPRISES, a Texas partnership, Defendants.

Nos. 99-4067 & 99-4090

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

August 23, 2000

Appeal from the United States District Court for the District of Utah (D.C. No. 95-CV-94-K) [Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Neil Peck (Thomas S. Nichols, Andrew M. Low, Martin J. Katz, Gale T. Miller, Kenzo S. Kawanabe and Shana M. Solomon with him on the briefs) of Davis, Graham & Stubbs, LLP, Denver, Colorado, for Plaintiffs - Appellants and Cross-Appellees.

James R. Sobieraj, Brinks Hofer Gilson & Lione, Chicago, Illinois (Cynthia A. Homan, Timothy Q. Delaney and Dominic P. Zanfardino of Brinks Hofer Gilson & Lione, Chicago, Illinois; Joseph J. Joyce and Kirstin A. Van Orman of Strong & Hanni, Salt Lake City, Utah, with him on the brief) for Defendants - Appellees and Cross-Appellant.

Before LUCERO, McKAY and MURPHY, Circuit Judges.

LUCERO, Circuit Judge.

The Proctor & Gamble Company and Proctor & Gamble Distributing Company ("P&G") appeal from a final judgment dismissing their lawsuit against parties who disseminated the rumor that P&G is a corporate agent of Satan. We decide whether the district court erred in granting summary judgment on P&G's Lanham Act claim on the ground that the message--associating P&G with Lucifer--does not relate to qualities or characteristics of P&G's products and hence falls outside the ambit of the Lanham Act. We also decide whether the district court properly dismissed for failure to state a claim and granted summary judgment as to P&G's Utah state tort claims, also arising out of the disseminated message linking P&G to Diabolus. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm in part and reverse in part.

I

The corporate butt of the Beelzebub canard in this case, P&G, is the manufacturer and distributor of numerous products for personal care, household use, and consumption.¹ (I App. at 127.) Defendant-appellee Amway Corporation ("Amway") likewise sells numerous consumer products, including detergents, cosmetics, nutrition supplements, housewares, and cleaning agents--some in direct competition with P&G's products (I App. at 106-08; IV App. at 2101)--as well as the brand-name products of third-party companies. (V App. at 1115-16, 1086-87; IX App. at 3078.) Amway sells through a network of distributors, who in turn sell the products to other distributors and consumers. (V App. at 1117.)

The relationships between Amway and its distributors and between the distributors themselves bear some explanation. Amway's distribution system consists of more than a million distributors around the world. (IX App. at 3078.) It sells its products to distributors who, in addition to selling directly to consumers, sell to and recruit further distributors, who in turn follow suit--in a cycle that replicates itself. (Id. at 3079-81.) There is record evidence that Amway distributors are responsible for inspiring and encouraging distributors to whom they sell, who in turn are encouraged to emulate those above them in the Amway distribution hierarchy. (IX App. at 2915:21-2916:20; X App. at 3213:16- 3214:15.) Although Amway distributors are strongly encouraged to purchase, distribute, and consume Amway products, they may also purchase and consume P&G products. (VII App. at 2265 ¶ 8; IX App. at 3080.)

To facilitate communication between its distributors, Amway sells them a communication system known as AmVox. Using AmVox, Amway and its distributors have the ability to send messages to, and receive messages from, other Amway distributors who subscribe to AmVox. (I App. at 172; IV App. at 2167; XI App. at 3863.)

Defendant-appellee Randy L. Haugen is a distributor of Amway products and a developer of Amway business in the Amway distribution chain. At the time this action was commenced, Haugen had established a network of an estimated 100,000 distributors of Amway products throughout Utah, Nevada, Texas, Mexico, and Canada and served on the Amway Distributors Association Council--an advisory and consultative body for Amway. (I App. at 438-39; II App. at 577, 615, 619.) Freedom Associates, Inc., Freedom Tools Inc., Roger D. Patton, Steven E. Brady, Stephen L. Bybee, Eagle Business Development, Inc., Ted Randall Walker, and Walker International Network (hereinafter "the distributor appellees") are Amway distributors in Haugen's distribution network. (II App. at 577.) Using AmVox, Haugen is capable of distributing any message to 25,000-30,000 of the distributors beneath him in the Amway hierarchy. (I App. at 438.)

In April 1995, defendant-appellee Haugen posted the following message ("the subject message") on AmVox after receiving the message from other Amway distributors:

I wanna run something by you real quick that I think you will find pretty interesting. Just talking to a guy the other night about this very subject and it just so happens that a guy brings information in and lays it on my desk this morning, so here it goes.

It says the president of Procter & Gamble appeared on the Phil Donahue Show on March 1, '95. He announced that due to the openness of our society, he was coming out of the closet about his association with the church of satan. He stated that a large portion of the profits from [P&G] products go to support his satanic church. When asked by Donahue if stating this on television would hurt his business, his reply was, "There are not enough Christians in the United States to make a difference." And below it has a list of the [P&G] products which I'll read: [the subject message then lists 43 P&G products]. It says if you are not sure about a product, look for the symbol of the ram's horn that will appear on each product beginning in April. The ram's horn will form the 666 which is known as satan's number. I'll tell you it really makes you count your blessings to have available to all of us a business that allows us to buy all the products that we want from our own shelf and I guess my real question is, if people aren't being loyal to themselves and buying from their own business, then whose business are they supporting and who are they buying from. Love you. Talk to you later. Bye.

(I Appellants' App. at 124-25.) Although it is unclear from the record how many distributors the subject message reached (VIII App. at 2638-2762.), it was spread via AmVox among at least two groups of distributors (VI App. at 1662; VIII App. at 2510, 2515:13-2516:2; IX App. at 2888:9-16). The record is replete with evidence that P&G received complaints and inquiries from a large number of individuals regarding similar allegations of affiliation with Satan that were disseminated by leaflet and otherwise, but not primarily through the subject message. (Id.)

After learning of the subject message, an Amway representative called Haugen, suggesting he post a retraction of the message designed to reach those distributors who had received it. (Appellees' Supp. App. at 46, 48-49, 60-61.) Amway also delivered to Haugen a copy of a P&G information package explaining the falsity of rumors of P&G's conspiracy with Satan. (Appellees' Supp. App. at 60-61.) Prior to his conversation with Amway, Haugen had posted a tentative retraction on AmVox describing the subject message as unsubstantiated. (X App. at 3365.) On April 26, 1995, after his conversation with Amway, Haugen again posted a retraction on AmVox stating:

It was rumored that on a television show (on the Phil Donahue) and it is rumored on other talk shows, that CEO or officers from [P&G] went on to the show and told them that their symbol represented Satanism symbol on all of their products and also that they practice Satanism. I'm going to read you a statement here and see if we can get this rumor, put it out, because I know a lot of you would like to know the truth. And it's very important that you understand this.

(I Appellants' App. at 224.) Haugen's retraction went on to categorically deny the allegation of an affiliation between P&G and the Evil One. (Id.) One or both of the retractions were sent to Haugen's entire distribution network, though the number of people receiving the retraction is unclear from the record. (Appellees' Supp. App. at 61.) The subject message continued to circulate on Amvox after the retractions. (XI App. at 3860.)

The subject message was not the first such missive regarding the Lucifer-P&G connection circulated by Amway distributors. Rumors of such a fiendish relation--some spread by Amway distributors--have been prevalent for nearly twenty years, dogging P&G despite its attempts to eliminate them through both public relations and litigation. (IV App. at 370-86, 425-30; IX App. at 3079.)

On August 28, 1995, P&G filed suit in United States District Court for the District of Utah against Haugen, the distributor appellees, and Amway, claiming that as a result of the subject message and other similar missives disseminated by defendants, P&G lost customers concerned about supporting Satan through their purchase of P&G's products.² The district court granted summary judgment to Haugen on P&G's Lanham Act and Utah state slander per se and vicarious liability claims (IV App. at 2102-05, 4163-72.) and dismissed under Fed. R. Civ. P. 12(b)(6) P&G...