10th Cir. Resurrects 'Satan' Suit Filed by Procter & Gamble

A federal appeals court has reinstated a lawsuit brought by Procter & Gamble Co. alleging that a distributor for competitor Amway Corp. made accusations of Satanism against the consumer products giant.

P&G, which has been plagued with false accusations of Satanism for decades, is seeking damages from Amway distributor Randy Haugen and two related Utah companies.

At some point in the late 1970s or early 1980s, P&G learned of a rumor that its president told a television talk show host that he worships Satan and that a substantial portion of P&G's profits goes to the Church of Satan.

P&G has since spent considerable time and money trying to determine the origin of the rumor and eventually discovered evidence demonstrating that Amway distributors spread such rumors during the 1980s.

Despite efforts to informally resolve the matter with Amway, the Satanism rumors resurfaced in April 1995 when Amway distributor Randy Haugen allegedly sent voice-mail messages to "thousands" of Amway distributors saying the president of P&G was a Satanist and that profits from 43 P&G products were earmarked for the Church of Satan.

Since the filing of P&G's suit in 1995 in the U.S. District Court for the District of Utah, Amway and several other corporate defendants have been dismissed from the action, along with all of the state tort claims.

P&G's economic-damages expert, Harvey Rosen, was excluded in a 2003 order by U.S. District Judge Dale A. Kimball. The judge then sanctioned P&G by dismissing its suit for failing to comply with prior discovery orders.

"Since plaintiff's damages evidence would not be admissible, plaintiff's claims must fail," the judge wrote.

But in overturning the lower court, a unanimous three-judge panel of the U.S. Court of Appeals for the 10th Circuit said the judge's sanction was excessive and failed to comport with the circuit's precedent governing judicial review of scientific evidence and testimony under Dodge v. Cotter Corp., 328 F.3d 1212 (10th Cir. 2003).

"[T]he extreme sanction of dismissal was clearly inappropriate," the panel said.

Until Judge Kimble's 2003 order of dismissal, P&G's Lanham Act claims for false representations against Haugen and his companies were still in play.

The dismissal of those remaining claims two years ago was based on arguments by Haugen that P&G had failed to comply with prior discovery orders related to electronic marketing information. That information was used in part by Rosen to calculate damages, the panel noted.

The electronic data on consumer purchases, including P&G products, is compiled by Chicago-based Information Resources Inc. and sold to companies for marketing purposes, according to the panel. P&G had a contract to follow its products' sales online via IRI's database and had access to numerous marketing statistics.

However, P&G chose to base its loss damages on an analysis by Rosen of five products — Tide, Crest, Pampers, Downy and Charmin — and paid IRI $75,000 to gather sales data specifically on those products, the panel said.

The Haugen defendants demanded the online information P&G had access to through its IRI contract. P&G declined and offered only the data used by Rosen to prepare his expert report on the five targeted products.

Judge Kimble ordered broader disclosure and P&G's purported refusal led to Haugen's motion for sanctions and the judge's consequent dismissal of the case, according to the appellate court.

In reversing and remanding, the panel noted that judges have a gatekeeper role under Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 579 (1993), to make sure that all expert testimony is scientifically reliable.

However, the panel further said Dodge requires judges to develop the court record on the expert issue before making a ruling.

In this case the panel said no briefing on Rosen was ever filed with the court and that his disqualification came without warning in Judge Kimble's dismissal order.

"[T]he circumstances of the District Court's ruling (i.e., its surprise nature and its lack of specificity) strongly suggest that the District Court 'simply made an off-the-cuff decision to [exclude] the expert testimony,'" the panel said. "For these reasons, we conclude the District Court abused its discretion in ruling that Dr. Rosen's testimony was inadmissible and in dismissing P&G's claims on that basis."