GORDON, THOMAS, HONEYWELL, MALANCA, PETERSON DAHEIM, P.L.L.C.

By: James B. Meade,WSBA No. 22852

Pro Hoc Vice Motion Pending

CAMPANA, CAMPANA & LOVECCHIO, LLP.

By: Marc F. Lovecchio, Esquire

ID No. 41244

ERIC and PATRICIA SCHEIBELER, husband and wife,

Plaintiffs,

VS.

AMWAY CORPORATION, a foreign corporation; QUIXTAR CORPORATION, a foreign corporation; JA-RI CORPORATION, a foreign corporation; RICHARD and HELEN DEVOS, husband and wife; JAY and "JANE DOE" VANANDEL, husband and wife; AMWAY DISTRIBUTOR'S ASSOCIATION, a foreign association; FRED and LINDA HARTEIS, husband and wife; HARTIES ENTERPRISES, INC., a Pennsylvania Corporation; LOUIS and JEAN MAZZANTE, husband and wife; LEE and LINDA FESSLER, husband and wife;

Defendants.

COURT OF COMMON PLEAS LYCOMING COUNTY
CIVIL ACTION - LAW

NO. 0 0 -0 1715

JURY TRIAL DEMANDED

COMPLAINT

COME NOW the plaintiffs, above-named and state claims based upon information and belief as follows:

PARTIES

1. Plaintiffs Eric and Patricia Scheibeler are husband and wife, residing in Williamsport, Pennsylvania.

2. Defendant Amway Corporations is a closely held (by Defendants Ja-Ri Corporation, the DeVos and VanAndel families) foreign corporation, doing business and fraud in Lycoming County, Pennsylvania. Defendant Quixtar Corporation, is a closely held foreign corporation (by Defendants Ja-Ri Corporation, the DeVos and VanAndel families), designed by the principles in Amway to continue Amway's and the other defendants fraud over the internet.

3. Defendant Ja-Ri Corporation is a foreign corporation, wholly owned by Defendants DeVos and VanAndel, doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Ja-Ri, Inc. were done individually and on behalf of the corporation, the marital communities of the DeVos', the VanAndel's,, and as agents and representatives of Amway and the other named defendants.

4. Richard and Helen DeVos are husband and wife, residing in Grand Rapids, Michigan and doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Richard and Helen DeVos were done individually and on behalf of their marital community and as agents and representatives of Amway and the other named defendants.

5. Jay and "Jane Doe" VanAndel are husband and wife, residing in Grand Rapids, Michigan and doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Jay and "Jane Doe" VanAndell were done individually and on behalf of their marital community and as agents and representatives of Amway and the other named defendants.

6. Amway Distributor's Association ("ADA"), now known as Independent Business Owner's Association ("IBOA"), a foreign association, is a mandatory association to which the plaintiffs and other Amway distributors are required to belong. All acts hereinafter alleged to have been performed by the ADA were done on behalf of Amway, and the other named defendants, for the purpose of perpetrating a fraud upon the plaintiffs and the Pennsylvania consuming public.

7. Fred and Linda Harteis are husband and wife, residing in Harrisburg, Pennsylvania, and doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Fred and Linda Harteis were done individually and on behalf of their marital community and as agents and representatives of Amway and the other named defendants.

8. Harteis Enterprises, Inc., is a Pennsylvania corporation, wholly owned by Defendants Fred and Linda Harteis, doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Harteis Enterprises, Inc, were done individually and on behalf of the Harteis' and as agents and representatives of Amway and the other named defendants.

9. Louis and Jean Mazzante are husband and wife, residing in Easton, Pennsylvania, and doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Louis and Jean Mazzante were done individually and on behalf of their marital community and as agents and representatives of Amway and the other named defendants.

10. Lee and Linda Fessler are husband and wife, residing in Williamsport, Pennsylvania, and doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Lee and Linda Fessler were done individually and on behalf of their marital community and as agents and representatives of Amway and the other named defendants.

11. Plaintiffs are informed and believe and therefore allege that at all times herein mentioned, each of the defendants was acting as the agent, employee and joint venturer of each and all of the remaining defendants in order to perpetrate a fraud upon the plaintiffs and the Pennsylvania consuming public. At all times material hereto the defendants and each of them had the authority to act and were acting within the course and scope of said agency, employment and joint venture relationships during their dealings with plaintiffs and the acts hereinafter alleged.

JURISDICTION AND VENUE

12. All of the defendants either reside in or conduct business and fraud in Lycoming County, Pennsylvania. Accordingly, jurisdiction and venue are proper in Lycoming County under Pennsylvania law.

DESCRIPTION OF EVENTS FORMING THE BASIS OF THE ACTION

A. The Defendants' "Businesses."

13. The individual defendants represent the "most successful" Amway Distributorships. By virtue of their purported success, each of the individual defendants, through various legal devices owned, operated and participated in a scheme to defraud the plaintiffs and others into purchasing, "motivational" materials which the defendants represented to the plaintiffs and others in the Harteis "organization" allowed the plaintiffs to grow their "Amway businesses" just like the defendants had done. Motivational materials include, but are not limited to books, audio tapes, videotapes, written materials and attending motivational seminars, rallies, meetings, and "functions," such as "Free Enterprise Day" and "Family Reunion." The defendants represented that they had developed a formula for success in the "Amway business" which had given them "financial freedom" and made them wealthy.

14. The defendants and each of them represented that if the plaintiffs and others followed their formula for success, they too could experience tremendous growth and financial success in their "Amway business." The defendants, however, never told the plaintiffs or others similarly situated that their publicly displayed wealth and success were derived from the sale of "motivational materials" to the plaintiffs and others in the Harteis organization, and not the Amway business as repeatedly represented.

15. Amway knew of Harteis organization's fraud upon the plaintiffs and others similarly situated. Instead of enforcing its "rules" to curb the known abuses of power, Amway allowed those abused to thrive. Amway profited from this decision and rewarded, instead of controlling the other defendants' fraud. (See Exhibit A which is a copy of checks that defendants circulated to substantiate their claims that their financial success and the financial success of their top distributors such as Fred Harteis and Dexter Yager, was in Amway, not the motivation business).

16. In order to induce the participation of plaintiffs and others, the defendants repeatedly assured the plaintiffs that none of the defendants made money from the sale of "motivation" and that their primary source of business and income was from Amway. (See Exhibit B). In fact, just the opposite is true. According to one published report, the defendants derive more than 95% of their professed seven and eight figure gross incomes from of the sale of "motivation" and not from their Amway businesses as repeatedly represented. In truth and in fact, the defendants do not have profitable "Amway businesses." The defendants' Amway businesses are merely a front for their real business - the sale of "motivation" through repeated and gross misrepresentations of the Amway Sales and Marketing Plan.

17. The plaintiffs never knew that the primary business they were being recruited into was the hawking of the defendants' "motivation" and not the "honest" marketing and sale of Amway's products and services. If the defendants had been truthful about their true business enterprise - the sale of motivation - their Amway "success" would melt away and they would be flooded with lawsuits similar to this one and would be enjoined from running their "business."

18. During their time in "the business" the plaintiffs never knew that the defendants' primary business was fraudulent and constituted an illegal pyramid scheme under Pennsylvania laws and violated the 1979 Federal Trade Cornmission's Decision regarding Amway's "business opportunity." In truth and in fact, the defendants repeatedly assured the plaintiffs that their business was legitimate according to the FTC's 1979 decision. These assurances were given even though the defendants knew that Amway had concluded that they constituted an illegal pyramid and were unlawful.

19. Only after the plaintiffs had invested enough money in the defendants' "motivation" did the defendants inform new recruits, such as the plaintiffs, that if they refused to purchase the Harteis organization's motivation that they would be cut off from their Amway "heroes" such as Fred and Linda Harteis and Dexter and Birdie Yager, who would no longer share with them the "secrets" of building a profitable Amway business. In truth and in fact, once the plaintiffs stopped following the defendants advice they were ostracized from their friends in the "Harteis organization" and Amway.

20. In theory, the Amway business or '"Amway Sales and Marketing 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." The persons who occupy positions above a distributor in his branch of the network are called the "Distributor's upline." Amway purportedly sells, distributes, or otherwise supplies for a valuable consideration, goods through "independent distributors" at different levels, wherein such distributors may recruit other distributors and wherein commissions, cross-commissions, bonuses, refunds, discounts, dividends, or other considerations in the program are or may be paid as a result of the personal consumption or wholesale of such goods or services to other distributors, who in turn either consume or wholesale those goods to other distributors downline.

21. The plaintiffs were told that in order to earn a significant profit in Amway they had to develop a sizeable downline organization by recruiting and sponsoring other distributors into the Amway sales organization. They plaintiffs were not aware that they were actually being recruited so that they could induce more people to join the defendants fraudulent motivational pyramid club.

22. Defendants' "motivational" goods and services are only sold to those in the Harteis line of sponsorship and not to consumers. These defendants repeatedly employed deception in the form of printed and oral lies which led them to believe that the prices charged were reasonable and only to reimburse the defendants for their expenses n producing the motivation. The defendants repeatedly represented that they sacrificially gave of their time and efforts at no cost to the downline distributors -out of "Christian love" for their downline business partners.

23. The Harteis organization requires a new Amway distributor to invest heavily in the purchase of motivational inventory such as, audiotapes, videotapes, books and meetings from Harteis, and his "upline" and "downline" Diamonds. When a person is first recruited into Amway through the Harteis line of sponsorship, they are told by Harteis that his "support organization" is non-profit and is solely there to help new distributors build their Amway businesses.

24. In the "Profiles of Success," a gaudy publication sold to the plaintiffs (excerpts of which, include the Harteis' photo display of their home, possessions and success, is attached hereto as Exhibit B) and others as a "marketing tool," the defendants repeatedly led the plaintiffs to believe that the wealth the defendants had obtained came from Amway sales.

B. The Scbeibelers Become Involved "in Amway"

25. In 1989, the defendants approached the plaintiffs under the guise of Amway and the Harteis organization and informed them of an opportunity to earn money operating their own business marketing products. Once the plaintiffs were interested in the concept of a multi-level marketing plan, the defendants revealed that the Amway Corporation was their "supplier." Based upon the representations made, the plaintiffs became extremely interested in "the business" and inquired how they could learn more. The defendants informed the plaintiffs that the Harteis' defendants had developed a successful business plan that had to be strictly followed in order for them to be successful in their Amway business. The defendants assured the plaintiffs that if they followed this plan they would be making a steady income from the beginning and their profitability would continue to grow with the investment of hard work and their continuous investments of time and money. Plaintiffs had no idea that they were being granted a license within the defendants' organizations to solicit new licensees for the further promotion of the defendants' illegal motivational scheme.

26. In the ensuing months and years, the plaintiffs became increasingly involved in Amway and the Harteis organization, devoting thousands of hours annually to what they had been led to believe was a legitimate business opportunity. In accordance with the instructions that they had been given, the Plaintiffs spent thousands of dollars purchasing, listening to, reading and stocking the "tools" Harteis required them to purchase and paid to attend the seminars and rallies sponsored by Amway, Harteis and the Hartels' upline Diamond level, Dexter Yager. In addition to these investments, the plaintiffs recruited friends, family and acquaintances to show "the Amway plan" in their homes and to have them invest in the purchase of Amway products, and have them purchase the defendants' motivation.

27. During this time, defendants continually made representations that the plaintiffs would become "financially independent" or wealthy, as they had by falsely representing that other members of the Harteis line had achieved this success through the sponsoring and managing of other Amway distributors. Plaintiffs were continually exhorted to spend their money on purchasing and stocking their product room with motivational materials prepared specifically for the Harteis organization.

28. All of the defendants continually exhibited signs of great wealth and explained to the plaintiffs that defendants had become wealthy through the "Amway business" by following the exact plan they were selling to the plaintiffs. Amway Corporation officers would often attend defendant Harteis "major events" and praise the Harteis and Yager lines of sponsorship as the "pride of Amway."

29. As the plaintiffs continued with Amway, they were repeatedly assured that the defendants were not making any money on the sale of Harteis motivational "tools" or motivational meetings. The manner in which the defendants cajoled and exhorted plaintiffs to spend their money on Harteis and his upline Diamonds' motivation induced them to stay with this marketing scheme with the hope of attaining "financial independence" that the defendants promised could be achieved in a legitimate and honest business by continuing to do as defendants required.

30. Plaintiffs followed the requirements of the defendants' plan for nearly ten years, working thousands of hours and investing thousands of dollars on the marketing scheme and doing everything that was required of them. After starting their business in 1989, and as a result of their enormous investments of time and money into the business, the plaintiffs attained Amway success, by achieving "Emerald status." Less than one-half of one percent of all Amway distributors ever attain this status. Even after achieving this success within the defendants' organization, they were exhorted to keep re-investing any money they made back into the business until they achieved "Diamond" status. For every year in the defendants' "business" the plaintiffs suffered significant financial losses.

31. Defendants told plaintiffs on numerous occasions if other distributors in either their up or downline, stopped ordering tapes, books or attending the defendants' profitable rallies, that they were to "cut out like cancer" these distributors from their social and business activities as these decisions not to be "plugged into the system" demonstrated a loser mentality and made clear that they were not serious about building a profitable Amway business.

C. Amway's Complicity.

32. Since 1981, Amway has known about the other defendants' significant abuses of authority to coerce the sale of motivation within their sales organizations. Instead of implementing and enforcing the rules to stop such practices, Amway uniformly fails to take action against a person who has achieved Diamond status. Amway's enforcement of rules is primarily for the protection of the Diamond's illegal tool business and Amway acts immediately and without hesitation in enforcing its rules against new distributors who cause "problems" or "challenges" for Amway's biggest fraud doers its "Diamond" and above distributors.

33. Instead of disciplining, or taking corrective action against the defendants or its other Diamonds for their multiple abuses of authority and known misrepresentations, Amway has joined in the other defendants' fraud in order to increase its own sales volume and profits. Amway supports the defendants' fraud by rewarding them financially and by glamorizing the life-styles of the defendants or other fraudulent "Diamonds" in its monthly magazine "Amagram".

34. Harteis and the Diamonds above and below him in his line of sponsorship, including the other defendants, are responsible for more than (65%) sixty-five percent of Amway's sales, Accordingly this line of sponsorship wields considerable influence at Amway's corporate headquarters in Ada, Michigan and by virtue of the volume of Amway sales he and his line of sponsorship generate, they have been granted immunity from the enforcement of rules designed to prevent the abuse of Amway distributors as alleged in this Complaint.

D. The Scheibelers Are Forced Under Fraud, Duress and Overreaching to Sign a New Agreement.

35. In 1996, following a purported class action settlement, the defendants, and each of them conspired to put an end to any future civil lawsuits that would expose their fraud and deter new recruits. With full knowledge of the crimes they were committing on the plaintiffs and other Pennsylvania distributors, the defendants forced the plaintiffs to sign a new agreement that purportedly provided for the confidentiality of all dealings with the defendants and for the private arbitration of all claims. The defendants told the plaintiffs that if they did not sign the new agreement their Amway business would be taken away from them. The plaintiffs were not given any new consideration for this new agreement and were forced to sign it under the economic duress created by the defendants and for the purpose of ensuring that the defendants' fraud would never become public.

 

FIRST CAUSE OF ACTION:

FRAUD/MISREPRESENTATION

36. Plaintiffs hereby reallege paragraphs 1 through 35 as though set forth herein.

37. In late November of 1998, plaintiffs began to realize that a fraud had been committed upon them. and that the representations made to them were not true.

38. The actions and statements of the defendants as indicated in the above paragraphs misrepresented the business opportunity available to the plaintiffs. At a minimum, the defendants' actions constituted misrepresentations about the benefits that had been and could be attained through the "Amway business." These misrepresentations were false and material and were made with the knowledge that the plaintiffs would not benefit as promised, but that they stood to reap all of the gain. The defendants knowingly made these misrepresentations with the intent to deceive plaintiffs and deprive them of their time and money. The plaintiffs were justifiably ignorant of the defendants' scheme to defraud and reasonably relied upon their untruthful statements. As a result of the defendants' fraud the plaintiffs suffered the economic damages set forth below and which will be proven at the time of trial.

Wherefore, plaintiffs demand judgment in their favor and against defendants, jointly and severally, in an amount in excess of $25,000, plus interest and costs of suit, and further aver that this amount, exclusive of interest and costs, exceeds the jurisdictional limitation requiring arbitration.

SECOND CAUSE OF ACTION

VIOLATION OF THE CHAIN DISTRIBURTORS

LAW, 73 PS 201-2 (4)(xiii)

39. Plaintiffs hereby reallege paragraphs 1 through 38 as though set forth herein.

40. By the actions and failure to disclose truthful information, defendants and each of them, made untrue and misleading statements of material fact, and omissions of material fact, in connection with what amounts to an offer to engage in an illegal "Pyramid Club" under 73 Pennsylvania Statute 201-2 (4)(xiii) and engaged in actions and conduct designed to defraud plaintiffs into participating in their illegal "Pyramid Club" and which operated as a fraud and/or deceit upon plaintiffs.

41. The conduct of the defendants described in the preceding paragraphs constitutes a violation of 73 P.S. 201-2 (4)(xiii), et seq, and entitles plaintiffs to a trebling of their actual damages, attorney's fees and costs and exemplary damages. As a result of the defendants' conduct, the plaintiffs suffered the economic damages set forth below and which will be proven at the time of trial.

Wherefore, plaintiffs demand judgment in their favor and against defendants, jointly and severally, in an amount in excess of $25,000, plus interest and costs of suit, and further aver that this amount, exclusive of interest and costs, exceeds the jurisdictional limitation requiring arbitration.

THIRD CAUSE OF ACTION:

VIOLATION OF THE PENNSYLVANIA

CONSUMER PROTECTION LAW, 73 PS 201, et seq.

42. Plaintiffs hereby reallege paragraphs 1 through 41 as though set forth herein.

43. Defendants' "business" causes substantial confusion and misunderstanding regarding the nature of the goods and services offered as part of their business opportunity and operates by making false, deceptive, misleading and fraudulent representations which creates a substantial likelihood of confusion of misunderstanding. The defendants unfair business practices affect public interest because, among other things, they were committed in the course of defendants' businesses, the activities were part of a pattern or generalized course of conduct, the defendants' conduct has caused harm to Pennsylvania consumers, and there is a real or substantial potential for repetition by the defendants.

44. As a result of defendants' actions, misrepresentations and omissions, plaintiffs have sustained harm to their property, in that they invested thousands of dollars in defendants' fraudulent and misrepresented business scheme.

45. Defendants, and each of them, have engaged in unfair methods of competition and unfair or deceptive acts or practices in the conduct of their businesses, in violation of 73 PS 201 et seq, As a result of the defendants' conduct as alleged, the plaintiffs suffered the economic damages set forth below and which will be proven at the time of trial.

Wherefore, plaintiffs demand judgment in their favor and against defendants, jointly and severally, in an amount in excess of $25,000, plus interest and costs of suit, and further that this amount, exclusive of interest and costs, exceeds the jurisdictional limitation requiring arbitration.

FOURTH CAUSE OF ACTION

BREACH OF CONTRACT

46. Plaintiffs hereby reallege paragraphs 1 through 45 as though set forth herein.

47. In 1989 when the Plaintiffs became Amway distributors, they signed an agreement with Amway which provided that their distributorship would only be taken away by Amway if they failed to follow Amway's rules. This covenant in the agreement implied that the rules would be applied fairly and reasonably to all distributors. Plaintiffs abided by Amway's rules and defendant Amway breached the Agreement by failing to take action that would have prevented them from being defrauded by the non-Amway defendants. Amway had control over the non-Amway defendants' actions, but chose not to enforce rules purportedly designed to stop such abuses because it was in Amway's financial best interests to do so.

48. Amway failed to properly supervise defendants and take appropriate action to insure that defendants were properly presenting the Amway sales and marketing plan. Such failure breached a duty of reasonable care owed to the plaintiffs and resulted in significant general and special damages.

49. At the time the plaintiffs began to realize that the defendants had misrepresented the business opportunity available to them, they had no idea that Amway knew the fall extent of the fraud which had been perpetrated against them or that Amway was an active participant in allowing the defendants' fraud to continue unabated and without any meaningful enforcement of rules designed to protect the plaintiffs. By such failure, defendant Amway breached a duty of reasonable care owed to plaintiffs, resulting in substantial general and special damages to plaintiffs.

50. By the actions alleged above, all of the named defendants, and each of them, intentionally or, alternatively, negligently misrepresented the business opportunity available to the plaintiffs and breached a duty of reasonable care owed to the plaintiffs in continuing to exhort plaintiffs to invest their money into their "businesses" and in continuing to promise plaintiffs "financial independence" by failing to disclose the true percentage of distributors who actually achieved the earnings, profits or sales which defendants promised that plaintiffs would achieve.

51. Defendant Amway breached its contract with the plaintiffs by failing to enforce it own rules. As a result of defendants' breach, the plaintiffs suffered the economic damages set forth below and which will be proven at the time of trial.

Wherefore, plaintiffs demand judgment in their favor and against defendants, jointly and severally, in an amount in excess of $25,000, plus interest and costs of suit, and further aver that this amount, exclusive of interest and costs, exceeds the jurisdictional limitation requiring arbitration.

DAMAGES

52. As a direct and proximate result of defendants' conduct as aforesaid, plaintiffs have suffered compensable damages in the nature of lost wages, lost profits, loss of job opportunities, loss of investment, loss of fringe benefits, mental anguish and emotional suffering, all of which will be proven at the time of trial. Plaintiffs have incurred costs of investigation, attorney's fees and costs of suit. Additionally, plaintiffs are entitled to the trebling, of their actual damages, as well and punitive damages under Pennsylvania law.

WHEREFORE, - Plaintiffs pray as follows:

1. For such damages to Plaintiffs as may be proven at the time of trial;

2. For treble and punitive damages as permitted under Pennsylvania law;

3. For reasonable attorneys' fees,

4. For reasonable investigative costs:

5. For costs of suit;

6. For injunctive relief under 73 PS 201-4. 1; and

7. For such other and further relief as this Court deems just and equitable.

RESPECTFULLY SUBMITTED this day of October, 2000.

GORDON, THOMAS, HONEYWELL, MALANCA, PETERSON & DAHEIM, P.L.L.C.

James B. Meade, WSBA No. 22852

GORDON, THOMAS, HONEYWELL, MALANCA,

PETERSON DAHEIM, P.L.L.C.

By: James B. Meade,WSBA No. 22852

Pro Hoc Vice Motion Pending

CAMPANA, CAMPANA & LOVECCHIO, LLP.

By: Marc F. Lovecchio, Esquire

ID No. 41244

ERIC and PATRICIA SCHEIBELER, husband

and wife,

Plaintiffs,

VS.

AMWAY CORPORATION, a foreign corporation; QUIXTAR CORPORATION, a foreign corporation; JA-RI CORPORATION, a foreign corporation; RICHARD and HELEN DEVOS, husband and wife; JAY and "JANE DOE" VANANDEL, husband and wife; AMWAY DISTRIBUTOR'S ASSOCIATION, a foreign association; FRED and LINDA HARTEIS, husband and wife; HARTIES ENTERPRISES, INC., a Pennsylvania Corporation; LOUIS and JEAN MAZZANTE, husband and wife; LEE and LINDA FESSLER, husband and wife;

Defendants.

COURT OF COMMON PLEAS LYCOMING COUNTY

CIVIL ACTION - LAW

NO. 0 0 -0 1715

JURY TRIAL DEMANDED

COMPLAINT

COME NOW the plaintiffs, above-named and state claims based upon information and belief as follows:

PARTIES

1. Plaintiffs Eric and Patricia Scheibeler are husband and wife, residing in Williamsport, Pennsylvania.

2. Defendant Amway Corporations is a closely held (by Defendants Ja-Ri Corporation, the DeVos and VanAndel families) foreign corporation, doing business and fraud in Lycoming County, Pennsylvania. Defendant Quixtar Corporation, is a closely held foreign corporation (by Defendants Ja-Ri Corporation, the DeVos and VanAndel families), designed by the principles in Amway to continue Amway's and the other defendants fraud over the internet.

3. Defendant Ja-Ri Corporation is a foreign corporation, wholly owned by Defendants DeVos and VanAndel, doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Ja-Ri, Inc. were done individually and on behalf of the corporation, the marital communities of the DeVos', the VanAndel's,, and as agents and representatives of Amway and the other named defendants.

4. Richard and Helen DeVos are husband and wife, residing in Grand Rapids, Michigan and doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Richard and Helen DeVos were done individually and on behalf of their marital community and as agents and representatives of Amway and the other named defendants.

5. Jay and "Jane Doe" VanAndel are husband and wife, residing in Grand Rapids, Michigan and doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Jay and "Jane Doe" VanAndell were done individually and on behalf of their marital community and as agents and representatives of Amway and the other named defendants.

6. Amway Distributor's Association ("ADA"), now known as Independent Business Owner's Association ("IBOA"), a foreign association, is a mandatory association to which the plaintiffs and other Amway distributors are required to belong. All acts hereinafter alleged to have been performed by the ADA were done on behalf of Amway, and the other named defendants, for the purpose of perpetrating a fraud upon the plaintiffs and the Pennsylvania consuming public.

7. Fred and Linda Harteis are husband and wife, residing in Harrisburg, Pennsylvania, and doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Fred and Linda Harteis were done individually and on behalf of their marital community and as agents and representatives of Amway and the other named defendants.

8. Harteis Enterprises, Inc., is a Pennsylvania corporation, wholly owned by Defendants Fred and Linda Harteis, doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Harteis Enterprises, Inc, were done individually and on behalf of the Harteis' and as agents and representatives of Amway and the other named defendants.

9. Louis and Jean Mazzante are husband and wife, residing in Easton, Pennsylvania, and doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Louis and Jean Mazzante were done individually and on behalf of their marital community and as agents and representatives of Amway and the other named defendants.

10. Lee and Linda Fessler are husband and wife, residing in Williamsport, Pennsylvania, and doing business and fraud in Lycoming County, Pennsylvania. All acts hereinafter alleged to have been performed by Lee and Linda Fessler were done individually and on behalf of their marital community and as agents and representatives of Amway and the other named defendants.

11. Plaintiffs are informed and believe and therefore allege that at all times herein mentioned, each of the defendants was acting as the agent, employee and joint venturer of each and all of the remaining defendants in order to perpetrate a fraud upon the plaintiffs and the Pennsylvania consuming public. At all times material hereto the defendants and each of them had the authority to act and were acting within the course and scope of said agency, employment and joint venture relationships during their dealings with plaintiffs and the acts hereinafter alleged.

JURISDICTION AND VENUE

12. All of the defendants either reside in or conduct business and fraud in Lycoming County, Pennsylvania. Accordingly, jurisdiction and venue are proper in Lycoming County under Pennsylvania law.

DESCRIPTION OF EVENTS FORMING THE BASIS OF THE ACTION

A. The Defendants' "Businesses."

13. The individual defendants represent the "most successful" Amway Distributorships. By virtue of their purported success, each of the individual defendants, through various legal devices owned, operated and participated in a scheme to defraud the plaintiffs and others into purchasing, "motivational" materials which the defendants represented to the plaintiffs and others in the Harteis "organization" allowed the plaintiffs to grow their "Amway businesses" just like the defendants had done. Motivational materials include, but are not limited to books, audio tapes, videotapes, written materials and attending motivational seminars, rallies, meetings, and "functions," such as "Free Enterprise Day" and "Family Reunion." The defendants represented that they had developed a formula for success in the "Amway business" which had given them "financial freedom" and made them wealthy.

14. The defendants and each of them represented that if the plaintiffs and others followed their formula for success, they too could experience tremendous growth and financial success in their "Amway business." The defendants, however, never told the plaintiffs or others similarly situated that their publicly displayed wealth and success were derived from the sale of "motivational materials" to the plaintiffs and others in the Harteis organization, and not the Amway business as repeatedly represented.

15. Amway knew of Harteis organization's fraud upon the plaintiffs and others similarly situated. Instead of enforcing its "rules" to curb the known abuses of power, Amway allowed those abused to thrive. Amway profited from this decision and rewarded, instead of controlling the other defendants' fraud. (See Exhibit A which is a copy of checks that defendants circulated to substantiate their claims that their financial success and the financial success of their top distributors such as Fred Harteis and Dexter Yager, was in Amway, not the motivation business).

16. In order to induce the participation of plaintiffs and others, the defendants repeatedly assured the plaintiffs that none of the defendants made money from the sale of "motivation" and that their primary source of business and income was from Amway. (See Exhibit B). In fact, just the opposite is true. According to one published report, the defendants derive more than 95% of their professed seven and eight figure gross incomes from of the sale of "motivation" and not from their Amway businesses as repeatedly represented. In truth and in fact, the defendants do not have profitable "Amway businesses." The defendants' Amway businesses are merely a front for their real business - the sale of "motivation" through repeated and gross misrepresentations of the Amway Sales and Marketing Plan.

17. The plaintiffs never knew that the primary business they were being recruited into was the hawking of the defendants' "motivation" and not the "honest" marketing and sale of Amway's products and services. If the defendants had been truthful about their true business enterprise - the sale of motivation - their Amway "success" would melt away and they would be flooded with lawsuits similar to this one and would be enjoined from running their "business."

18. During their time in "the business" the plaintiffs never knew that the defendants' primary business was fraudulent and constituted an illegal pyramid scheme under Pennsylvania laws and violated the 1979 Federal Trade Cornmission's Decision regarding Amway's "business opportunity." In truth and in fact, the defendants repeatedly assured the plaintiffs that their business was legitimate according to the FTC's 1979 decision. These assurances were given even though the defendants knew that Amway had concluded that they constituted an illegal pyramid and were unlawful.

19. Only after the plaintiffs had invested enough money in the defendants' "motivation" did the defendants inform new recruits, such as the plaintiffs, that if they refused to purchase the Harteis organization's motivation that they would be cut off from their Amway "heroes" such as Fred and Linda Harteis and Dexter and Birdie Yager, who would no longer share with them the "secrets" of building a profitable Amway business. In truth and in fact, once the plaintiffs stopped following the defendants advice they were ostracized from their friends in the "Harteis organization" and Amway.

20. In theory, the Amway business or '"Amway Sales and Marketing 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." The persons who occupy positions above a distributor in his branch of the network are called the "Distributor's upline." Amway purportedly sells, distributes, or otherwise supplies for a valuable consideration, goods through "independent distributors" at different levels, wherein such distributors may recruit other distributors and wherein commissions, cross-commissions, bonuses, refunds, discounts, dividends, or other considerations in the program are or may be paid as a result of the personal consumption or wholesale of such goods or services to other distributors, who in turn either consume or wholesale those goods to other distributors downline.

21. The plaintiffs were told that in order to earn a significant profit in Amway they had to develop a sizeable downline organization by recruiting and sponsoring other distributors into the Amway sales organization. They plaintiffs were not aware that they were actually being recruited so that they could induce more people to join the defendants fraudulent motivational pyramid club.

22. Defendants' "motivational" goods and services are only sold to those in the Harteis line of sponsorship and not to consumers. These defendants repeatedly employed deception in the form of printed and oral lies which led them to believe that the prices charged were reasonable and only to reimburse the defendants for their expenses n producing the motivation. The defendants repeatedly represented that they sacrificially gave of their time and effortss at no cost to the downline distributors -out of "Christian love" for their downline business partners.

23. The Harteis orcanization requires a new Amway distributor to invest heavily in the purchase of motivational inventory such as, audiotapes, videotapes, books and meetings from Harteis, and his "upline" and "downline" Diamonds. When a person is first recruited into Amway through the Harteis line of sponsorship, they are told by Harteis that his "support organization" is non-profit and is solely there to help new distributors build their Amway businesses.

24. In the "Profiles of Success," a gaudy publication sold to the plaintiffs (excerpts of which, include the Harteis' photo display of their home, possessions and success, is attached hereto as Exhibit B) and others as a "marketing tool," the defendants repeatedly led the plaintiffs to believe that the wealth the defendants had obtained came from Amway sales.

B. The Scbeibelers Become Involved "in Amway"

25. In 1989, the defendants approached the plaintiffs under the guise of Amway and the Harteis organization and informed them of an opportunity to earn money operating their own business marketing products. Once the plaintiffs were interested in the concept of a multi-level marketing plan, the defendants revealed that the Amway Corporation was their "supplier." Based upon the representations made, the plaintiffs became extremely interested in "the business" and inquired how they could learn more. The defendants informed the plaintiffs that the Harteis' defendants had developed a successful business plan that had to be strictly followed in order for them to be successful in their Amway business. The defendants assured the plaintiffs that if they followed this plan they would be making a steady income from the beginning and their profitability would continue to grow with the investment of hard work and their continuous investments of time and money. Plaintiffs had no idea that they were being granted a license within the defendants' organizations to solicit new licensees for the further promotion of the defendants' illegal motivational scheme.

26. In the ensuing months and years, the plaintiffs became increasingly involved in Amway and the Harteis organization, devoting thousands of hours annually to what they had been led to believe was a legitimate business opportunity. In accordance with the instructions that they had been given, the Plaintiffs spent thousands of dollars purchasing, listening to, reading and stocking the "tools" Harteis required them to purchase and paid to attend the seminars and rallies sponsored by Amway, Harteis and the Hartels' upline Diamond level, Dexter Yager. In addition to these investments, the plaintiffs recruited friends, family and acquaintances to show "the Amway plan" in their homes and to have them invest in the purchase of Amway products, and have them purchase the defendants' motivation.

27. During this time, defendants continually made representations that the plaintiffs would become "financially independent" or wealthy, as they had by falsely representing that other members of the Harteis line had achieved this success through the sponsoring and managing of other Amway distributors. Plaintiffs were continually exhorted to spend their money on purchasing and stocking their product room with motivational materials prepared specifically for the Harteis organization.

28. All of the defendants continually exhibited signs of great wealth and explained to the plaintiffs that defendants had become wealthy through the "Amway business" by following the exact plan they were selling to the plaintiffs. Amway Corporation officers would often attend defendant Harteis "major events" and praise the Harteis and Yager lines of sponsorship as the "pride of Amway."

29. As the plaintiffs continued with Amway, they were repeatedly assured that the defendants were not making any money on the sale of Harteis motivational "tools" or motivational meetings. The manner in which the defendants cajoled and exhorted plaintiffs to spend their money on Harteis and his upline Diamonds' motivation induced them to stay with this marketing scheme with the hope of attaining "financial independence" that the defendants promised could be achieved in a legitimate and honest business by continuing to do as defendants required.

30. Plaintiffs followed the requirements of the defendants' plan for nearly ten years, working thousands of hours and investing thousands of dollars on the marketing scheme and doing everything that was required of them. After starting their business in 1989, and as a result of their enormous investments of time and money into the business, the plaintiffs attained Amway success, by achieving "Emerald status." Less than one-half of one percent of all Amway distributors ever attain this status. Even after achieving this success within the defendants' organization, they were exhorted to keep re-investing any money they made back into the business until they achieved "Diamond" status. For every year in the defendants' "business" the plaintiffs suffered significant financial losses.

31. Defendants told plaintiffs on numerous occasions if other distributors in either their up or downline, stopped ordering tapes, books or attending the defendants' profitable rallies, that they were to "cut out like cancer" these distributors from their social and business activities as these decisions not to be "plugged into the system" demonstrated a loser mentality and made clear that they were not serious about building a profitable Amway business.

C. Amway's Complicity.

32. Since 1981, Amway has known about the other defendants' significant abuses of authority to coerce the sale of motivation within their sales organizations. Instead of implementing and enforcing the rules to stop such practices, Amway uniformly fails to take action against a person who has achieved Diamond status. Amway's enforcement of rules is primarily for the protection of the Diamond's illegal tool business and Amway acts immediately and without hesitation in enforcing its rules against new distributors who cause "problems" or "challenges" for Amway's biggest fraud doers its "Diamond" and above distributors.

33. Instead of disciplining, or taking corrective action against the defendants or its other Diamonds for their multiple abuses of authority and known misrepresentations, Amway has joined in the other defendants' fraud in order to increase its own sales volume and profits. Amway supports the defendants' fraud by rewarding them financially and by glamorizing the life-styles of the defendants or other fraudulent "Diamonds" in its monthly magazine "Amagram".

34. Harteis and the Diamonds above and below him in his line of sponsorship, including the other defendants, are responsible for more than (65%) sixty-five percent of Amway's sales, Accordingly this line of sponsorship wields considerable influence at Amway's corporate headquarters in Ada, Michigan and by virtue of the volume of Amway sales he and his line of sponsorship generate, they have been granted immunity from the enforcement of rules designed to prevent the abuse of Amway distributors as alleged in this Complaint.

D. The Scheibelers Are Forced Under Fraud, Duress and Overreaching to Sign a New Agreement.

35. In 1996, following a purported class action settlement, the defendants, and each of them conspired to put an end to any future civil lawsuits that would expose their fraud and deter new recruits. With full knowledge of the crimes they were committing on the plaintiffs and other Pennsylvania distributors, the defendants forced the plaintiffs to sign a new agreement that purportedly provided for the confidentiality of all dealings with the defendants and for the private arbitration of all claims. The defendants told the plaintiffs that if they did not sign the new agreement their Amway business would be taken away from them. The plaintiffs were not given any new consideration for this new agreement and were forced to sign it under the economic duress created by the defendants and for the purpose of ensuring that the defendants' fraud would never become public.

 

FIRST CAUSE OF ACTION:
FRAUD/MISREPRESENTATION

36. Plaintiffs hereby reallege paragraphs 1 through 35 as though set forth herein.

37. In late November of 1998, plaintiffs began to realize that a fraud had been committed upon them. and that the representations made to them were not true.

38. The actions and statements of the defendants as indicated in the above paragraphs misrepresented the business opportunity available to the plaintiffs. At a minimum, the defendants' actions constituted misrepresentations about the benefits that had been and could be attained through the "Amway business." These misrepresentations were false and material and were made with the knowledge that the plaintiffs would not benefit as promised, but that they stood to reap all of the gain. The defendants knowingly made these misrepresentations with the intent to deceive plaintiffs and deprive them of their time and money. The plaintiffs were justifiably ignorant of the defendants' scheme to defraud and reasonably relied upon their untruthful statements. As a result of the defendants' fraud the plaintiffs suffered the economic damages set forth below and which will be proven at the time of trial.

Wherefore, plaintiffs demand judgment in their favor and against defendants, jointly and severally, in an amount in excess of $25,000, plus interest and costs of suit, and further aver that this amount, exclusive of interest and costs, exceeds the jurisdictional limitation requiring arbitration.

SECOND CAUSE OF ACTION
VIOLATION OF THE CHAIN DISTRIBURTORS

LAW, 73 PS 201-2 (4)(xiii)

39. Plaintiffs hereby reallege paragraphs 1 through 38 as though set forth herein.

40. By the actions and failure to disclose truthful information, defendants and each of them, made untrue and misleading statements of material fact, and omissions of material fact, in connection with what amounts to an offer to engage in an illegal "Pyramid Club" under 73 Pennsylvania Statute 201-2 (4)(xiii) and engaged in actions and conduct designed to defraud plaintiffs into participating in their illegal "Pyramid Club" and which operated as a fraud and/or deceit upon plaintiffs.

41. The conduct of the defendants described in the preceding paragraphs constitutes a violation of 73 P.S. 201-2 (4)(xiii), et seq, and entitles plaintiffs to a trebling of their actual damages, attorney's fees and costs and exemplary damages. As a result of the defendants' conduct, the plaintiffs suffered the economic damages set forth below and which will be proven at the time of trial.

Wherefore, plaintiffs demand judgment in their favor and against defendants, jointly and severally, in an amount in excess of $25,000, plus interest and costs of suit, and further aver that this amount, exclusive of interest and costs, exceeds the jurisdictional limitation requiring arbitration.

THIRD CAUSE OF ACTION:
VIOLATION OF THE PENNSYLVANIA
CONSUMER PROTECTION LAW, 73 PS 201, et seq.

42. Plaintiffs hereby reallege paragraphs 1 through 41 as though set forth herein.

43. Defendants' "business" causes substantial confusion and misunderstanding regarding the nature of the goods and services offered as part of their business opportunity and operates by making false, deceptive, misleading and fraudulent representations which creates a substantial likelihood of confusion of misunderstanding. The defendants unfair business practices affect public interest because, among other things, they were committed in the course of defendants' businesses, the activities were part of a pattern or generalized course of conduct, the defendants' conduct has caused harm to Pennsylvania consumers, and there is a real or substantial potential for repetition by the defendants.

44. As a result of defendants' actions, misrepresentations and omissions, plaintiffs have sustained harm to their property, in that they invested thousands of dollars in defendants' fraudulent and misrepresented business scheme.

45. Defendants, and each of them, have engaged in unfair methods of competition and unfair or deceptive acts or practices in the conduct of their businesses, in violation of 73 PS 201 et seq, As a result of the defendants' conduct as alleged, the plaintiffs suffered the economic damages set forth below and which will be proven at the time of trial.

Wherefore, plaintiffs demand judgment in their favor and against defendants, jointly and severally, in an amount in excess of $25,000, plus interest and costs of suit, and further that this amount, exclusive of interest and costs, exceeds the jurisdictional limitation requiring arbitration.

FOURTH CAUSE OF ACTION
BREACH OF CONTRACT

46. Plaintiffs hereby reallege paragraphs 1 through 45 as though set forth herein.

47. In 1989 when the Plaintiffs became Amway distributors, they signed an agreement with Amway which provided that their distributorship would only be taken away by Amway if they failed to follow Amway's rules. This covenant in the agreement implied that the rules would be applied fairly and reasonably to all distributors. Plaintiffs abided by Amway's rules and defendant Amway breached the Agreement by failing to take action that would have prevented them from being defrauded by the non-Amway defendants. Amway had control over the non-Amway defendants' actions, but chose not to enforce rules purportedly designed to stop such abuses because it was in Amway's financial best interests to do so.

48. Amway failed to properly supervise defendants and take appropriate action to insure that defendants were properly presenting the Amway sales and marketing plan. Such failure breached a duty of reasonable care owed to the plaintiffs and resulted in significant general and special damages.

49. At the time the plaintiffs began to realize that the defendants had misrepresented the business opportunity available to them, they had no idea that Amway knew the fall extent of the fraud which had been perpetrated against them or that Amway was an active participant in allowing the defendants' fraud to continue unabated and without any meaningful enforcement of rules designed to protect the plaintiffs. By such failure, defendant Amway breached a duty of reasonable care owed to plaintiffs, resulting in substantial general and special damages to plaintiffs.

50. By the actions alleged above, all of the named defendants, and each of them, intentionally or, alternatively, negligently misrepresented the business opportunity available to the plaintiffs and breached a duty of reasonable care owed to the plaintiffs in continuing to exhort plaintiffs to invest their money into their "businesses" and in continuing to promise plaintiffs "financial independence" by failing to disclose the true percentage of distributors who actually achieved the earnings, profits or sales which defendants promised that plaintiffs would achieve.

51. Defendant Amway breached its contract with the plaintiffs by failing to enforce it own rules. As a result of defendants' breach, the plaintiffs suffered the economic damages set forth below and which will be proven at the time of trial.

Wherefore, plaintiffs demand judgment in their favor and against defendants, jointly and severally, in an amount in excess of $25,000, plus interest and costs of suit, and further aver that this amount, exclusive of interest and costs, exceeds the jurisdictional limitation requiring arbitration.

DAMAGES

52. As a direct and proximate result of defendants' conduct as aforesaid, plaintiffs have suffered compensable damages in the nature of lost wages, lost profits, loss of job opportunities, loss of investment, loss of fringe benefits, mental anguish and emotional suffering, all of which will be proven at the time of trial. Plaintiffs have incurred costs of investigation, attorney's fees and costs of suit. Additionally, plaintiffs are entitled to the trebling, of their actual damages, as well and punitive damages under Pennsylvania law.

WHEREFORE, - Plaintiffs pray as follows:

1. For such damages to Plaintiffs as may be proven at the time of trial;

2. For treble and punitive damages as permitted under Pennsylvania law;

3. For reasonable attorneys' fees,

4. For reasonable investigative costs:

5. For costs of suit;

6. For injunctive relief under 73 PS 201-4. 1; and

7. For such other and further relief as this Court deems just and equitable.

RESPECTFULLY SUBMITTED this day of October, 2000.

GORDON, THOMAS, HONEYWELL, MALANCA, PETERSON & DAHEIM, P.L.L.C.

James B. Meade, WSBA No. 22852

Pro Hoc Vice Motion Pending

Campana Campana & Lovecchio

Attorneys for Plaintiffs

Pending

Campana Campana & Lovecchio

Attorneys for Plaintiffs