After an epic 13-year legal battle, four Amway distributors who spread a rumor linking Procter & Gamble (NYSE: PG) to Satanism have dropped their appeal of a $19.25 million jury award and reached a settlement with the consumer products giant.

The settlement mercifully ends a case that resulted in one of the largest awards ever for false advertising and no fewer than three published appeals court opinions (see table below). A Utah jury found Randy Haugen and three members of his Amway distributors' group liable in March 2007 for perpetuating the Satanism rumor to gain an unfair advantage over their competitor.

In an April 1995 message posted on the Amvox internal phone-mail system, Haugen said P&G's president had appeared on a TV talk show and “stated that a large portion of the profits from [P&G] products go to support his satanic church.” The message listed 43 specific products.

The defendants filed an appeal in July, but the following month U.S. District Judge Ted Stewart awarded nearly $13 million in prejudgment interest to P&G, bringing the total award to more than $32 million.

P&G attorney Tracy H. Fowler declined to comment on the settlement, citing confidentiality, but it's probably safe to say the award of interest encouraged the defendants to cut their losses. A court document filed Nov. 24 states only that the judgment “has been fully satisfied.”

If the appeal had failed, the defendants could have been liable for post-judgment interest. P&G had also cross-appealed for treble damages.

P&G's rumored associations with Lucifer go back to the 1980s when some claimed that its man-in-the-moon logo was a satanic symbol. Based on that history, the Amway distributors argued that P&G could not show its sales were specifically damaged by the Amvox message.

“Hundreds of thousands (perhaps millions) of people had been taken in by [the rumor] between 1980 and April 20, 1995,” the defense said.

But Stewart upheld the jury verdict in a June ruling, finding that

the evidence of the difference between the growth of sales of the [43] targeted products and those of Plaintiff’s nontargeted products, together with the other evidence at trial, provided “a broad basis from which” the jury as finder of fact could “arrive at a fair, if not precise amount with which to compensate” Plaintiff ...

P&G's expert estimated damages at $545 million. The company had profits of nearly $13 billion during the alleged damage period.

By Matthew Heller
12/16/08