A new lawsuit over the motivational tools "system" has just been filed in St. Louis, Mo. Named as defendants are Jimmy Dunn, Hal Gooch, Bill Childers, and their respective "tools" and "functions" corporations, among others. The plaintiff are former Diamonds Charlie and Kim Schmitz, doing business as Netco; Emerald Joanne Schmitz, and Diamonds Kenny and Ritta Kelm, doing business as R.K. Kelm, Co., L.L.C.. The plaintiffs allege tortious interference, breach of contract, and other complaints which have become all too familiar in legal squabbles over the AMO "tools."

The plaintiffs' complaint outlines a scenario now very familiar to Amway watchers: because of some "crime" against the "system" -- real or imagined -- the upline gets together and develops a consistent strategy for raiding their downline's organization to divert tool monies out of the line of sponsorship and into their own pockets. Several large suits have been filed in recent years over this practice: Hayden v DiSalvatore, Hart v Gooch, Morrison et al v Wilson, Haugen et al to name just a few. The first two have been settled out of court, with accompanying gag orders. The last is ongoing.

Charlie and Kim Schmitz were Amway "wonderkids." Achieving Diamond status at a very young age, they were attractive, personable, and represented the epitome of the much-touted but rarely achieved "Diamond Lifestyle."

Then the Schmitzes somehow crossed the line into "unacceptable" (according to their upline) behavior, and the AMO juggernaut was launched against them. Their complaint outlines a systematic effort on the part of their sponsor, Jimmy Dunn. Dunn, a non-qualified Diamond, systematically routed the tools money from the Schmitz downline into his own pockets. And, as the complaint states:

"The income an Emerald or Diamond Amway distributor can potentially derive from the BSMs industry is vastly superior to that income that can be derived from the sale of Amway products . . ."

The Schmitzes were qualified Diamonds each year from 1990-1998. However, in 1998, after Dunn's machinations took effect, they saw attendance at functions dwindle from over 2,300 to 625, after which time they withdrew from the "business" of putting on functions.

In their attempt to divert income from Schmitz from the sale of "tools," Dunn and Gooch first told the Schmitz downline that Schmitz was "overcharging" for "tools," then offered the "tools" to them at lower prices. In fact, according to the complaint:

". . .the Upline Defendants concealed the fact that the BSM’s prices came straight from the Upline Defendants' own price lists supplied to Plaintiffs Netco and Schmitz Associates. When the Upline Defendants then began selling BSMs to Netco's downline, they provided the downline distributors favorable tool prices (a lesser price than Netco had charged them), to make it appear as if Netco and/or Schmitz Associates had, in fact, overcharged them. This was a deliberate, tortious and cleverly orchestrated scheme in the strictest sense to undermine Netco and Schmitz Associates by destroying their credibility with their downline distributors.

"Defendant Gooch tacitly acknowledged the aforesaid pricing scheme in an Amvox message to Charlie and Kim Schmitz. Defendant Gooch stated: 'If somebody jumps ship and goes somewhere else, you know, to buy tools - then they get a better price when they go there - then that is enticing for other people to do the same thing.' "

In fact, the complaint goes ever further, alleging that Gooch et al formed Pro Net/ Pro Net Global for the express purpose of selling "tools" to any member who chooses to buy them, regardless of their line of sponsorship, in direct contravention of Amway's rules.

"Pro Net has solicited and sold BSMs to any willing Amway distributor, disregarding the long-standing course of dealing and the implied agreement for BSMs, and ignoring the essential lines of sponsorship. Pro Net's website virtually invites Amway distributors to circumvent their line of sponsorship for BSMs while giving purely pretexual observance to the importance of the lines of sponsorship. Pro Net postures itself publicly to supposedly operate for the benefit of its "members." Yet, Pro Net in reality seeks to promote and preserve, over the interests of its "Regular Members," the interests of its "Founding Members," the same being, on knowledge and belief, high-level Amway distributors who seek to control the BSMs industry."

Charlie and Kim Schmitz are seeking $10 million in damages.

Eventually, Kim and Charlie Schmitz decided to get out of Amway, and sold their Amway interests to Joanne Schmitz, Charlie's mother and an Emerald in her own right. At this point, Dunn further decimated the organization, and reduced Joanne Schmitz' tape sales from about 2,800 tapes/week to about 80, while dropping the "commission" per tape from $1.40 (which is what Emeralds normally receive) to $0.10 (half of what a Direct or Platinum would normally get). Joanne Schmitz is looking for damages of $100,000.

Kenny and Ritta Kelm were Diamonds from 1989-1995. The Kelms' "crime" was getting involved in another business venture, called "Nationwide." As a result of this involvement which was completely separate from their Amway involvement, their upline Jimmy Dunn told them that

"either you're going to build Amway, and put this other thing aside, or you're going to build Nationwide and forget about the Amway business, because I can help you if you're going to build the Amway business, but I can't help you if you're going to do both. So, let me know, I think that's a key question, then I can respond accordingly."

His "response" was to divert the "tools" income from them, exactly as he had already done with Schmitz. R.K. Kelm, Co., L.L.C. is seeking damages of $5 million.

Amway's rules for distributor conduct expressly forbid the solicitation of any distributor not personally sponsored for purposes of selling "tools" and "functions."

The law firm representing Schmitz, Schmitz and Kelm has issued the following statement and request for information:

"On June 27, 2000, current and former Amway distributors filed suit in the Circuit Court of Buchanan County (St. Joseph) Missouri against upline IBOs and their associated business organizations, including Jimmy V. Dunn; Jimmy V. Dunn & Associates; Harold (Hal) Gooch, Jr.; Gooch Support Systems, Inc.; William (Bill) Childers; TNT, Inc. of Charlotte, N.C.; Jim Evans; Evans Corporation; Michael P. Abbey; Abbey Corporation; Gerald Pressely; Pressley Corporation; Pro Net Global Association; Global Support Services, Inc.; and other unnamed defendants.

"The civil lawsuit concerns the purchase and sale of Business Support Materials (BSM's), or "tools," including the functions and convention business. The five count Petition alleges tortious interference with business relationships, breach of implied in fact contract concerning the tool business, breach of duty of good faith and fair dealing concerning the contract governing the tool business, breach of implied in fact contract concerning the function business, and breach of duty of good faith and fair dealing concerning the contract governing the function business. The suit seeks actual damages exceeding $16 million, exemplary damages, and a request for an accounting.

"The lawsuit, styled Netco, Inc., et al. v. Jimmy Dunn, et al., is Case No. 00CV72142. Any individuals with knowledge or information relating to the facts of this lawsuit are encouraged to contact R. Dan Boulware or R. Todd Ehlert, WATKINS, BOULWARE, LUCAS, MINER, MURPHY & TAYLOR, L.L.P, 3101 Frederick Avenue, P.O. Box 6217, St. Joseph, Missouri, 64506, (816) 364-2117, attorneys for the Plaintiffs."

Attorney R. Todd Ehlert can be reached by email at todd.ehlert@WBLMMT.com .

Read Complete Text of Complaint
Similar Lawsuits

---

This page updated Aug-04-00