Procter & Gamble Co. v. Haugen

179 F.R.D. 622, 1998 U.S. Dist. LEXIS 5689, 1998 WL 191309
CourtDistrict Court, D. Utah
DecidedApril 17, 1998
DocketNo. 1:95 CV 0094 K
StatusPublished
Cited by4 cases

This text of 179 F.R.D. 622 (Procter & Gamble Co. v. Haugen) is published on Counsel Stack Legal Research, covering District Court, D. Utah primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Procter & Gamble Co. v. Haugen, 179 F.R.D. 622, 1998 U.S. Dist. LEXIS 5689, 1998 WL 191309 (D. Utah 1998).

Opinion

MEMORANDUM DECISION AND ORDER

KIMBALL, District Judge.

The allegations of The Procter & Gamble Company and The Procter & Gamble Distributing Company (collectively, “P & G”) have been previously chronicled. See Proctor & Gamble Co. v. Haugen, 947 F.Supp. 1551 (D.Utah 1996). Presently before the court, and considered in turn in this order, are seven primary motions, as well as a variety of motions ancillary to them.

[627]*627A. Musgrove’s and Patton’s Motion to Dismiss.

Two of the individually named defendants, Roger Patton and Jeffrey Musgrove (and his dba, Musgrove Enterprises), move to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. Both are Texas residents who are involved in this suit because they passed the Satanism rumor over the Amvox voice messaging system. In April of 1995, Patton, living in Woodlands, passed the rumor to Musgrove, living in Katy, who allegedly passed the message to Randall Walker in Houston, who in turn, passed the message to Randy Haugen in Ogden, Utah. Haugen and his immediate upline sponsor, Don Wilson, live in Ogden and conduct their Amway businesses there.

1. Standard.

The principles applicable to this court in determining whether to assert personal jurisdiction were explicated by Judge Winder in Hamischfeger Engineers v. Uniflo Conveyor, Inc., 883 F.Supp. 608 (D.Utah 1995), and are only partly restated here. Personal jurisdiction can be either general or specific. General jurisdiction is proper if “the defendant has had continuous and systematic general business contacts with the forum such that the defendant could reasonably anticipate being haled into the forum’s court.” Id. at 612 (internal quotation marks and citation omitted).

Whether specific jurisdiction is proper depends on the basis of the court’s subject-matter jurisdiction. Here, subject-matter jurisdiction is based upon the existence of a federal question and diversity of citizenship. See 28 U.S.C. §§ 1331-32. To the extent subject-matter jurisdiction is based upon the existence of a federal question, specific jurisdiction is proper as long as it is consistent with the requirements of federal due process. To the extent subject-matter jurisdiction is based upon diversity of citizenship, specific jurisdiction is proper if: (1) the defendant’s act is one of those listed in Utah’s Long-Arm Statute, Utah Code Ann. § 78-27-21; (2) a nexus exists between the plaintiffs claim and the defendant’s acts or contacts; and (3) the exercise of jurisdiction is consistent with the requirements of federal due process. Hamischfeger, 883 F.Supp. at 612-13.

P & G asserts that the court has both general and specific jurisdiction over these defendants.

2. Musgrove’s and Patton’s Contacts.

Musgrove and Patton are both in the Haugen/Wilson organization, in the sense that they were recruited or sponsored by a distributor whose Amway chain of sponsorship included Wilson and Haugen. Musgrove is separated from Haugen by approximately 18 sponsor “links” and from Wilson by approximately 19. At the time Musgrove became an Amway distributor, his immediate upline Diamond distributors were Utah residents Kelly and Connie Robbins.

Musgrove’s contacts with Utah consist of: (1) yearly attendance at an Amway-endorsed seminar in Utah between 1989 and 1995 and active promotion of the seminar to other Amway distributors, (2) in-person business discussions with Kelly Robbins, Haugen, and Wilson in Utah immediately before such seminars in some years, (3) paid, speaking engagements at three seminars in Utah sponsored by Wilson and receipt of instructions and payment from Wilson for speaking at each of ten to twelve Wilson-sponsored seminars held elsewhere, (5) communications with Wilson via fax regarding Musgrove’s efforts to locate seminar facilities for Wilson in Texas, (5) receipt from Wilson of payment for selling tickets to Wilson-sponsored seminars, (6) approximately 181 Amway-related telephone calls to his Utah uplines over a two and one-half year period, (6) receipt of 50-60 Amvox messages originally sent by Haugen and Wilson, and (7) purchase of business planning calendars from a Utah merchant.

Patton is separated from Musgrove by at least three sponsor links. Patton’s contacts with Utah consist of: (1) attendance at two or three of the annual Amway-endorsed seminars over a five-year period, (2) promotion of the seminar to his downline recruits, (3) receipt of Amvox messages originally sent by [628]*628Haugen and Wilson, and (4) purchase of Haugen motivational tapes.

3. General Jurisdiction.

To establish the existence of general jurisdiction, P & G argues that the contacts of Musgrove and Patton demonstrate continuous and systematic contact in furtherance of their Amway businesses. And indeed, Mus-grove and Patton acknowledge that, although all Amway distributors act independently, they deal with each other frequently because Amway products are distributed through a complex multi-level marketing structure. Under this structure, distributors have an incentive to recruit new distributors and assist in the development of their businesses because they receive a portion of a commission on the sales made by distributors “under them.”

As a result of this structure, each individual distributor is simultaneously the leader of a group consisting of the distributors under him and a member of, depending on the perspective, any number of groups lead by distributors upline. That Haugen’s group was an operative one for Musgrove is evident from the fact that Musgrove sent an Amvox message to Haugen thanking him for leading the group as well as by references to the Haugen group that Musgrove made in Amway-endorsed speeches and by the course of dealing and communication between the two.

It is apparent from Musgrove’s deposition testimony that Haugen was actively mentoring the distributors in his downline organization, including Musgrove. It is similarly apparent from Musgrove’s deposition testimony that such mentoring — the provision of business' and motivational support — can constitute a significant, or even core, aspect of a distributor’s business.

Musgrove, for example, testified that his Amway business consisted of supplying products to his downline distributors and giving them advice on how to build their businesses, but that this role or “responsibility” of “helping people” had increased as his organization had grown. When Patton was similarly asked in a deposition to describe what he did as an Amway distributor, he responded that he “recruited other distributors and taught them to do the same.” He stated that “an active part of being a distributor is being on the tapes and going to the functions and things.” Patton testified that it was a corresponding Amway principle for downlines to “edify” their uplines, that is, to show “respect” for them and “build them up.”

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Cite This Page — Counsel Stack

Bluebook (online)
179 F.R.D. 622, 1998 U.S. Dist. LEXIS 5689, 1998 WL 191309, Counsel Stack Legal Research, https://law.counselstack.com/opinion/procter-gamble-co-v-haugen-utd-1998.