Procter & Gamble Co, et al v. Amway Corporation, e

REVISED - March 12, 2001
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
m 99-20590
_______________
THE PROCTER & GAMBLE COMPANY
AND
THE PROCTER & GAMBLE DISTRIBUTING COMPANY,
Plaintiff-Appellants,
VERSUS
AMWAY CORPORATION, ET AL.,
Defendants,
AMWAY CORPORATION; THE AMWAY DISTRIBUTORS ASSOCIATION COUNCIL;
JA-RI CORPORATION; DONALD R. WILSON; WOW INTERNATIONAL, INC.;
WILSON ENTERPRISES, INC.;
RONALD A. RUMMEL,
INDIVIDUALLY DOING BUSINESS AS RUMMEL ENTERPRISES;
KEVIN SHINN; RANDY HAUGEN; FREEDOM ASSOCIATES, INC.;
FREEDOM TOOLS, INC.; RANDY WALKER; WALKER INTERNATIONAL NETWORK;
GENE SHAW;
JOHN & JANE DOES 6-10,
BUSINESS ENTITIES;
DEXTER YAGER, SR.; BIRDIE YAGER;
AND
D&B YAGER ENTERPRISES, INC.,
Defendants-Appellees.

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2
_________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________
February 14, 2001
Before SMITH and DENNIS,
Circuit Judges, and ROETTGER,*
District Judge.
JERRY E. SMITH, Circuit Judge:
The Procter & Gamble Company (“P&G”)
appeals the dismissal of its lawsuit against Am-
way Corporation and other defendants for
defamation, fraud, and violations of the Lan-
ham Act, RICO, and Texas state law. We
affirm in part, reverse in part, and remand.
I.
P&G, a manufacturer and distributor of nu-
merous household products, has been plagued
by rumors of links to Satanism since the late
1970’s or early 1980’s. The most common
variant of the rumor is that the president of
P&G revealed on a television talk show that he
worships Satan; that many of P&G’s profits go
to the church of Satan; and that there is no
harm in such disclosure, because there are no
longer enough Christians left in the United
States for such devilish activities to make a
difference. The rumor often was circulated in
the form of a written flier that listed numerous
P&G products and called for a boycott.
P&G has spent considerable time and mon-
ey unsuccessfully trying to determine the origi-
nal source of the rumor and to squelch it.
P&G has not been able to prove how the ru-
mor began, although it asserts here that the ru-
mor was either started or spread by Amway1
or its distributors in the 1980’s. P&G offered
no proof that Amway originally started the
rumor, but it did offer evidence showing that
various Amway distributors spread it in the
*District Judge of the Southern District of Flori-
da, sitting by designation.
1 Amway manufactures and distributes house-
hold products, many of which compete directly
with P&G’s products. Amway distributes its prod-
ucts in a fairly distinctive manner, however, using
a system of direct marketing in which its distribu-
tors are recruited as independent contractors into a
hierarchical system of distribution. Amway has
more than a million distributors around the world,
each of whom is encouraged both to sell Amway
products directly to consumers (including the
distributor’s own household) and to recruit others
to be Amway distributors.
The distributors earn money both by a percent-
age of the income from Amway products they
personally sell and by a percentage of the income
from sales made by every distributor whom they
have directly recruited, and by those distributors
further “downline” who have been recruited as
recruits of recruits. Amway’s success depends on
the efforts of its distributors to encourage downline
distributors to buy Amway products and continu-
ally to recruit new distributors to replace those lost
to attrition. Amway encourages “upline” distribu-
tors to motivate those below them in the hierarchy
and downline distributors to “emulate” those
distributors above them.

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3
1980’s. Rather than suing Amway at that
time, however, P&G worked with Amway’s
corporate headquarters, which promised to
help stop the rumor.
The rumor re-surfaced on April 20, 1995,
when an Amway distributor named Randy
Haugen forwarded it to other Amway distribu-
tors via a telephone messaging system for
Amway distributors known as “AmVox.”2
Haugen is a highly successful Amway distribu-
tor with a network of tens of thousands to
possibly 100,000 distributors underneath him
throughout Utah, Nevada, Texas, Mexico, and
Canada. He also served on Amway’s Distribu-
tors Association Council (“ADAC”), which is
an advisory body for Amway distributors. De-
fendants Freedom Associates, Inc.; Freedom
Tools Inc.; Randy Walker; and Walker In-
ternational Network are Amway distributors in
Haugen’s distribution network.
There is no evidence that Haugen knew the
rumor was false when he spread it; in fact, he
testified that he believed it to be true. The
2 AmVox is a communication system that Am-
way sells to its distributors to facilitate communi-
cation between and among them. Haugen received
the rumor about P&G from another Amway dis-
tributor via AmVox and forwarded it to all his
distributors saying, “This is a great message.
Listen to it.” The message was:
Hey, Jeff, this is Roger Patton. I wanted to
run something by you real quick that I think
you’ll find pretty interesting. I was just
talking to a guy the other night about this
very subject and it just so happens that a
guy brings information in, lays it on my
desk this morning, so here it goes. It says
the president of Procter & Gamble appeared
on the Phil Donahue Show on March 1st of
’95. He announced that due to the openness
of our society, he was coming out of the
closet about his association with the Church
of Satan. He stated that a large portion of
the profits from the Procter & Gamble
products go to support a satanic church.
When asked by Donahue if stating this on
television would hurt his business, his reply
was there are not enough Christians in the
United States to make a difference. And
below it has a list of the Procter & Gamble
products, which I’ll read:
Duncan Hines Bounce
Cheer
Bold Cascade Joy
Comet Folgers Jif
(continued...)
2(...continued)
Dawn Crisco Always
Downy Puritan Attends
Undergar-
ments
Gain Secret Oil of Olay
Mr. Clean Sure Wondra
Oxydol Head and Shoulders
Camay Spic-n-Span Pert
Coast Tide Prell
IvoryTop Job Vidal Sassoon
Lava Luvs Safegard
Pampers Zest Pepto-Bismol
Charmin Scope Puffs
Crest Gleem
and says if you’re not sure about a product,
look for the symbol of the ram’s horn that
will appear on each product beginning in
April. The ram’s horn will form the 666
which is known as Satan’s number. I tell
ya, it really makes you count your blessings
to have available to all of us a business that
will allow us to buy all the products that we
want from our own shelf and I guess my real
question is, if people aren’t being loyal to
themselves and buying from their own busi-
ness, then whose business are they support-
ing and who are they buying from. Love ya.
Talk to you later. Bye.

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4
rumor circulated in his and other distribution
networks. Some Amway distributors printed
fliers containing the rumor, circulating them to
consumers, with a message saying, “We offer
you an alternative.” The fliers also gave con-
tact information for Amway distributors.
Although P&G has received complaints and
inquiries about this rumor for the last twenty
years, it offered evidence to show that, at the
time the rumor was circulating on AmVox, the
number of complaints and inquiries increased
substantially in the states in which the majority
of Haugen’s distributors live.3
Within days of the initial message contain-
ing the rumor, Haugen sent a short retraction
via AmVox.4 Shortly thereafter, an Amway
representative contacted Haugen and delivered
a copy of a P&G “truth kit,” which explains
that the rumor is false. The Amway represen-
tative asked Haugen to issue another retraction
via AmVox. Using the AmVox system, Hau-
gen then sent out a second, more detailed, re-
traction.5 Despite Haugen’s retractions, the
3 None of the complaints stated that the com-
plainant had heard the rumor via AmVox.
4 The retraction stated:
Hey gang. We sent a message down a while
back to do with Procter & Gamble. It can-
not be substantiated, that it happened (drop
out on tape) so I’m going to assume that it
didn’t actually happen. Um, please do not
call Phil Donahue and please do not call
Procter & Gamble and just drop it and don’t
talk about it anymore. We’d just appreciate
that a whole bunch. We do not think that it
happened. Thank you. Good-bye.
5 The second retraction stated:
(continued...)
5(...continued)
Hello guys. This message is going out to all
of Valerie and I’s frontline and also to every
diamond in the organization. Uh, we had an
Amvox that came down that talked about
Procter & Gamble. A lot of you I under-
stand did not get this Amvox, uh, but if you
didn’t get it, still pay attention to this be-
cause if this rumor ever comes up again you
need to stamp it out. Uh, it was rumored
that on a television show, on the Phil Dona-
hue show, and it is rumored on other talk
shows, that uh, the CEO or officers from
Procter & Gamble Company went onto the
show and told them that their symbol repre-
sents Satanism, the symbol on all their
products, and also that they practice Satan-
ism. I’m going to read you a statement here
and see if we can get this rumor cleared up
because I know a lot of you would like to
know the truth and it is very important that
you understand this. False rumors: Unfortu-
nately this familiar trademark has been
subjected to prosperous, excuse me, prepos-
terous unfounded rumors since 1980-81.
The rumors falsely allege that the trademark
is a symbol of Satanism or devil worship.
Typically the story reports a Procter &
Gamble executive discussed Satanism on a
national televised talk show. Another story
maintains that the trademark is a result of
Procter & Gamble being taken over by the
Moonies, followers of Reverend Sun Yung
Moon and his Unification Church. The
rumors are, of course, totally false. Their
trademark originated in 1851 as a symbol
for their Star brand candle. Later it was
designed to show a man in the moon looking
over a field of 13 stars commemorating the
original American colonies. It represents
only Procter & Gamble. So if you hear any
rumors saying anything to the effect that
they are practicing Satanism and their sym-
bols on their products, uh, are satanic, then
(continued...)

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5
rumor continued to circulate in Haugen’s net-
work and at least one other network for some
time.
II.
In response to the spread of the rumor
among Amway distributors, P&G filed a law-
suit in each of two federal district courts. In
1995, in Utah, it sued Haugen, Freedom Asso-
ciates, Inc., and Freedom Tools, Inc., for
spreading the Satanism rumor, claiming it lost
customers as a result of the actions of Haugen
and other Amway distributors. P&G later
joined Amway, Randy Walker, and Walker In-
ternational Network as defendants. In 1996,
P&G filed a second amended complaint con-
taining causes of action for defamation, com-
mon-law unfair competition, violations of the
Utah Truth in Advertising Act, tortious inter-
ference, negligent supervision, violations of
Lanham Act § 43(a), 15 U.S.C. § 1125(a), and
vicarious liability. P&G then filed a third
amended complaint alleging that Amway is an
illegal pyramid and alleging fraud and product
disparagement; that complaint was dismissed
in 1997. Later in 1997, P&G filed a motion
for leave to file a fourth amended complaint to
assert fraud and disparagement claims; the
Utah court denied the motion as untimely.
One day after its third amended complaint
was dismissed in the Utah action, P&G filed
the suit at issue in this appeal, in Texas. This
suit is based on the same transactions, and in-
volves substantially the same parties, as does
the Utah suit. It names Haugen, Amway Cor-
poration, ADAC, and various other Amway
Distributors (all hereinafter referred to as
“Amway”) as defendants.6 The Texas com
5(...continued)
it is absolutely 100% false. Uh, we
don’t want any bad rumors about any
competitors or non-competitor, any
company anywhere ever going out
from us. So if anybody you hear talk-
ing about this in the organization any-
where at all brings this up, it is abso-
lutely not true. Not only is not just
substantiated, but is not true, period.
Amway Corporation does not endorse
spreading false and malicious rumors
against Procter & Gamble or any other
company. Please do your part as inde-
pendent distributors by not spreading
this rumor any farther or nipping it if
you hear it from anybody else. We
appreciate that a whole lot, uh, so let’s
crush that, if you’re hearing any kind
of stuff anywhere let’s get rid of it and
let’s go on and build us a huge busi-
ness and not have any of this kind of
junk and that’s a good lesson to be
very, very, very, careful about putting
anything down on Amvox that’s not
substantiated, and if anybody could
take the blame on this, I can take it.
So, uh, we just don’t want anything to
do with it and it was a mistake. It did
go out to a few people . . . (drop out).
6 ADAC, Ja-Ri Corporation (“Ja-Ri”), Donald
Wilson, WOW International, Inc., Wilson Enter-
prises, Inc., Ronald Rummel, Kevin Shinn, Gene
Shaw, Dexter Yager, Sr., Birdie Yager, and D&B
Yager Enterprises (all listed as defendants on
P&G’s brief) were not defendants in the Utah suit,
but, as Amway distributors, they were in privity
with the distributors who were defendants there. It
is uncertain to what extent P&G is appealing the
dismissal of some of these defendants. Although
P&G’s brief claims error on the part of the district
court in the dismissals of ADAC and Ja-Ri, P&G
admits in its initial brief that, at the time the court
below dismissed the remaining claims, “[t]he
remaining defendants were Amway . . . Randy
Haugen, Randy Walker, Dexter Yager, and Donald
Wilson.”
(continued...)

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6
plaint sought remedies for the alleged conduct
of defendants in (1) spreading the Satanism
rumor, (2) disparaging P&G’s Crest tooth-
paste, and (3) allegedly harming sales of
P&G’s products by inducing people to become
Amway distributors and consumers by luring
them into an illegal pyramid scheme and mis-
leading them as to the financial rewards of
selling Amway. P&G asserted various causes
of action in its Texas suit, including common-
law fraud; several violations of § 43(a) of the
Lanham Act, 15 U.S.C. § 1125(a); violation of
the Racketeer Influenced and Corrupt Organi-
zations Act (“RICO”), 18 U.S.C. § 1962(c)
and (d); and violation of TEXAS BUSINESS AND
COMMERCE CODE § 16.29.7
The Texas district court granted Amway’s
FED. R. CIV. P. 12(b)(6) motion dismissing
P&G’s RICO claim, because P&G did not
allege that it had relied o n Amway’s alleged
predicate acts of mail and wire fraud. Then,
on summary judgment, the court held that
P&G lacked standing to bring its § 43(a) claim
based on Amway’s alleged illegal pyramid
scheme and that the fraud claim was time-
barred. In September 1998, the Utah
court granted defendants’ joint motion for
summary judgment and dismissed the § 43(a)
claim, stating that “the misrepresentation at
issue does not relate to a product within the
meaning of the Lanham Act.” Inexplicably, in
the Utah court, P&G claimed only that Am-
way’s actions constituted a violation of the
Lanham Act’s prohibition on the misrepresen-
tation of goods or services, even though that
act also provides a cause of action for misrep-
resentation of commercial activity.8
P&G did not argue that repetition of the
Satanism rumor constituted misrepresentation
of its commercial activities until its FED. R.
CIV. P. 60(b) motion for reconsideration of the
Utah court’s grant of summary judgment. The
Utah court denied P&G’s motion for reconsid-
6(...continued)
P&G does not contest the earlier dismissal of
any defendants except ADAC and Ja-Ri. WOW
International, Inc., Wilson Enterprises, Inc., Ron-
ald Rummel, Kevin Shinn, Gene Shaw, Birdie
Yager, and D&B Yager Enterprises are not even
mentioned in P&G’s initial brief other than on its
cover. Thus, P&G either does not appeal their
dismissals from the suit or has waived any argu-
ment against their dismissals. Cinel v. Connick, 15
F.3d 1338, 1345 (5th Cir. 1994).
7 The only claim that remains on appeal from
the Texas case that P&G did not assert in the Utah
case is for violation of TEXAS BUSINESS & COM-
MERCE CODE § 16.29. P&G brought a number of
other claims in its initial Texas complaint that it
had not raised in the Utah suit, but it does not
appeal the ruling as to those claims.
8 Section 43(a) provides:
Any person who, in or in connection with
any goods or services, or any container for
goods, uses in commerce any word, term,
name, symbol, or device, or any combina-
tion thereof, or any false designation of
origin, false or misleading description of
fact, or false or misleading representation of
fact, which SS
(A) is likely to cause confusion, or to cause
mistake, or to deceive as to the affiliation,
connection, or association of such person
with another person, or as to the origin,
sponsorship, or approval of his or her
goods, services, or commercial activities by
another person . . . . shall be liable in a civil
action by any person who believes that he or
she is or is likely to be damaged by such act.
15 U.S.C. § 1125(a)(1).

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7
eration, finding no excuse for P&G’s failure to
raise the commercial activities claim earlier.
In March 1999, the Utah court granted
summary judgment to defendants on the de-
famation per se, vicarious liability, and negli-
gent supervision claims. A few days later,
before the Texas case went to trial, the Utah
court entered a final judgment dismissing all of
P&G’s claims.
After the final judgment from the Utah
court, Amway moved for judgment as a matter
of law (“j.m.l.”) in the Texas case. The district
court denied the motion because it was filed
after the deadline for pre-trial motions. At the
close of P&G’s case, Amway again moved for
j.m.l. The court granted the motion and dis-
missed the § 43(a) claim against Amway, Wal-
ker, and Haugen based on the res judicata
effect of the Utah court’s decision. The Texas
court dismissed the § 43(a) claim for dispar-
agement of commercial activities against the
remaining defendants (and against Amway,
Walker, and Haugen for purposes of vicarious
liability), because it found that P&G had not
presented sufficient evidence of “actual mal-
ice,” which the court held to be a requirement
of § 43(a) suits brought by “limited-purpose
public figure” plaintiffs.9 The court also dis-
missed the TEXAS BUSINESS AND COMMERCE
CODE § 16.29 claim and all remaining claims.
After oral argument had been heard in this
court, the Tenth Circuit reversed the Utah
summary judgment. P&G v. Haugen, 222
F.3d 1262 (10th Cir. 2000). The Tenth Circuit
addressed P&G’s misrepresentation of com-
mercial activities claim, even though P&G had
not timely raised it before the Utah district
court. The Tenth Circuit explained its willing-
ness by stating that where an issue is purely a
matter of law, its resolution is certain, and
public interest is implicated, it should be ad-
dressed on appeal. Id. at 1271. The Tenth
Circuit concluded that the repetition of the Sa-
tanism rumor raised a claim under the “com-
mercial activities” prong of the Lanham Act,
and it therefore reversed and remanded as to
the Lanham Act claim and reversed the dis-
missal of P&G’s Utah state law tortious inter-
ference claim. Id. at 1280.
III.
The res judicata effect of the Utah judg-
ment is a question of law that we review de
novo. United States v. Brackett, 113 F.3d
1396, 1398 (5th Cir. 1997). This questionSSto
which both sides direct most of their
briefsSShas largely been answered for us by
the Tenth Circuit.
There is no res judicata effect from the
Utah case. The final judgment has been re-
versed and remanded, and therefore no judg-
ment blocks the Texas case from proceeding.
Of course, at the time the Texas court dis-
missed, there was a final judgment in Utah, so
the Texas court did not err. Now that the final
judgment has been reversed and remanded,
however, res judicata no longer binds us.
Amway argues that res judicata, or, alter-
natively, issue preclusion, settles this case, de-
spite the Utah remand. It contends that the
Tenth Circuit’s holding that it is not vicari-
9 The court ruled that P&G was a “limited-
purpose public figure” with regard to the Satanism
rumor and that thus the First Amendment protec-
tion of the New York Times v. Sullivan, 376 U.S.
254 (1964), “actual malice” test applied to shield
erroneous but non-malicious speech regarding an
issue of public concernSSin this case, P&G’s al-
leged links to Satanism.

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8
ously liable under Utah law for the acts of its
distributors precludes liability under the Lan-
ham Act in the Texas suit. This is a bold
assertion, for the Tenth Circuit did not reach
this conclusion, but, instead, “le[ft] it to the
district court to consider whether P&G has
met those elements of a § 43(a) Lanham Act
claim not before us in this appeal.” Haugen,
222 F.3d at 1276. Likewise declining to let a
decision on state law vicarious liability deter-
mine the outcome of a Lanham Act claim, we
conclude that neither res judicata nor collat-
eral estoppel bars the Lanham Act claim and
that the Texas case may proceed.10
IV.
P&G avers that the district court erred in
ruling that P&G was required to prove “actual
malice”11 to prevail on its § 43(a) claim for
disparagement of commercial activities. The
actual-malice standard has developed in cases
involving defamation of public figures. P&G
argues that strict liability and not actual malice
applies in a commercial speech12 case under
the Lanham Act.
Amway makes two arguments in response.
First, acknowledging that the Lanham Act
covers only commercial speech, Amway urges
that the speech here is not commercial and that
therefore a § 43(a) claim will not lie.13 Sec-
10 Of course, the Texas district court retains its
normal discretion in scheduling cases and granting
stays pending other developments or the outcomes
of similar trials. Should the court try this case to
conclusion before the Utah court does, however,
then the tables will be turned, and it will be left to
the Utah court and the Tenth Circuit to determine
the res judicata effect on the Utah case of the
Texas court’s decision.
11 “Actual malice” is a term of art meaning that
the speaker knew the statement was false when
spoken or in fact entertained serious doubt about
its truth. Peter Scalamandre & Sons, Inc. v.
Kaufman, 113 F.3d 556, 560 (5th Cir. 1997).
Actual malice must be proven by clear and con-
vincing evidence. Id.
12 The First Amendment affords less protection
to commercial speech and none to false commercial
speech. Va. State Bd. of Pharm. v. Va. Citizens
Consumer Council, Inc., 425 U.S. 748, 771-72
(1976). No party questions that the speech linking
P&G to Satanism is false.
13 In Seven-Up Co. v. Coca-Cola Co., 86 F.3d
1379, 1383 n.6 (5th Cir. 1996), we held that the
Lanham Act extends only to false or misleading
speech that is encompassed within the Supreme
Court's commercial speech doctrine:
The “commercial” requirement was inserted
to ensure that § 43(a) does not infringe on
free speech protected by the First Amend-
ment. See 135 Cong. Rec. H1216-17 (daily
ed. Apr. 13, 1989) (statement of Rep.
Kastenmeier) (“[T]he proposed change in
section 43(a) should not be read in any way
to limit political speech, consumer or edito-
rial comment, parodies, satires, or other
constitutionally protected material . . . . The
section is narrowly drafted to encompass
only clearly false and misleading commer-
cial speech.”); 134 Cong.Rec. 31,851 (Oct.
19, 1988) (statement of Rep. Kastenmeier)
(commenting that the reach of § 43(a)
“specifically extends only to false and mis-
leading speech that is encompassed within
the ‘commercial speech’ doctrine developed
by the United States Supreme Court”). See
generally Gordon & Breach Science Pub-
lishers S.A., STBS v. Am. Inst. of Physics,
859 F. Supp. 1521, 1533-34 (1994) (dis-
(continued...)

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9
ond, and alternatively, Amway argues that
even if the speech is commercial, the actual-
malice standard should apply, because the
Satanism rumor is an issue of public concern,
and P&G is a “limited-purpose public figure”
with respect to the rumor.
Thus, to determine what P&G is required
to prove to prevail on its § 43(a) claim that
Amway misrepresented its associations and
commercial activities, we first must determine
whether the spreading of the false Satanism ru-
mor is “commercial” speech. If we decide it
is, we must decide whether the fact that the
false speech was made about a “limited-pur-
pose public figure” on an issue of public con-
cern brings the actual-malice standard into
play. This effectively would trump the tradi-
tional view that there is no First Amendment
protection for false commercial speech. We
review these questions of law de novo. United
States v. Brackett, 113 F.3d 1396, 1398 (5th
Cir. 1997).
A.
We begin by examining what is meant by,
and what protections extend to, “commercial
speech.” First, we consider whether the com-
mercial speech line of cases, which mainly
deals with government regulation of speech,
should apply in this case of a private action for
false speech.14 Second, we examine the histor-
ical development of the commercial speech
exception to the full protections granted by the
First Amendment. In making this examination,
we pay particular attention to the characteris-
tics that the Supreme Court has said make
certain speech “commercial” and therefore
worthy of less protection. Third, we take the
facts of the case sub judice and apply the test
set out in Bolger v. Youngs Drug Products
Corp., 463 U.S. 60 (1983), for determining
whether a specific instance of speech is com-
mercial. Our application of the Bolger test is
what ultimately determines whether the speech
is commercial.
1.
P&G relies heavily on U.S. Healthcare, Inc.
v. Blue Cross, 898 F.2d 914 (3d Cir. 1990), to
argue that the commercial speech line of cases
developed in the context of government regu-
lation also should apply here in the context of
a private suit for false speech. In U.S. Health-
care, the two parties had waged an advertising
battle contrasting the benefits of HMO health
insurance plans with “traditional” and pre-
ferred provider organization (“PPO”) plans.
When U.S. Healthcare sued under the Lanham
Act, Blue Cross argued that the commercial
speech doctrine was inapplicable because the
Supreme Court “views damage claims
[brought by private citizens] and government
restrictions of speech as requiring distinctly
different analysis for First Amendment pur-
poses.” Id. at 927.
As we do now, the court treated the issue
as one of first impression. It began by noting
that under the First Amendment, the correct-
ness of ideas is judged not by courts, but in the
marketplace of ideas.15 With regard to com
13(...continued)
cussing the legislative history of the
Lanham Act).
14 This is a question of first impression in this
circuit.
15 The Third Circuit said:
Most speech is protected by the First
Amendment. Bose Corp. v. Consumers
Union of U.S., Inc., 466 U.S. 485, 503
(continued...)

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10
mercial speech, however, the court “believe[d]
the subordinate valuation of commercial
speech is not confined to the government
regulation line of cases[,]” but instead should
extend to defamation and Lanham Act cases as
well. Id. at 932. The court noted that the
Supreme Court
on many occasions has recognized that
certain kinds of speech are less central
to the interests of the First Amendment
than others. . . . In the area of protected
speech, the most prominent example of
reduced protection for certain kinds of
speech concerns commercial speech.
Such speech, we have noted, occupies a
“subordinate position in the scale of
First Amendment values.” Ohralik v.
Ohio State Bar Assn., 436 U.S. 447,
456 . . . (1978). It also is more easily
verifiable and less likely to be deterred
by proper regulation. Virginia Phar-
macy Bd. v. Virginia Citizens Consumer
Council, Inc., 425 U.S. 748, 771-772
. . . (1976). Accordingly, it may be
regulated in ways that might be imper-
missible in the realm of noncommercial
expression. Ohralik, . . . [436 U.S.] at
456 . . .; Central Hudson Gas & Elec.
Corp. v. Public Serv. Comm’n of New
York, 447 U.S. 557, 562-63 . . . (1980).
U.S. Healthcare, 898 F.2d at 932 (quoting
Dun & Bradstreet, Inc. v. Greenmoss Build-
ers, 472 U.S. 749, 758 n.5 (1985)) (some
ellipses and brackets added). Based on this
language, the U.S. Healthcare court concluded
that the lesser protection commercial speech
receives from direct government regulation
also must apply to private actions for defama-
tion and the like.
We agree. If commercial speech receives
less protection from government regulation,
then it also should receive less protection from
private suits, which are not much more likely
than are government regulation to infringe on
those values the First Amendment seeks to
protect. Furthermore, private suits can be a
form of government regulation.
2.
Having determined that the commercial
speech line of cases should apply here, we ex-
amine it and the characteristics of commercial
speech it reveals. We also review the instant
facts to determine whether they meet the char-
acteristics that the Supreme Court has said de-
fine commercial speech.
15(...continued)
(1984) (there are “few classes of
‘unprotected’ speech”). “Under the
First Amendment there is no such thing
as a false idea. However pernicious an
opinion may seem, we depend for its
correction not on the conscience of
judges and juries but on the competi-
tion of other ideas.” Gertz [v. Robert
Welch, Inc.], 418 U.S. [323,] 339-40
[(1974)] (footnote omitted), quoted in
Jenkins v. KYW, 829 F.2d 403, 408
(3d Cir. 1987). Even false statements
of fact are insulated from liability in
some situations. Hepps, 475 U.S.
[767,] 778 [(1986]; Gertz, 418 U.S. at
340-41. As Judge Learned Hand put
it, the First Amendment “‘presupposes
that right conclusions are more likely
to be gathered out of a multitude of
tongues, than through any kind of au-
thoritative selection.’” New York Times
Co. v. Sullivan, 376 U.S. 254, 270
(quoting United States v. Associated
Press, 52 F. Supp. 362, 372 (S.D.N.Y.
1943), aff'd, 326, U.S. 1 (1945)).
U.S. Healthcare, 898 F.2d at 928.

-- 10 of 32 --

11
Commercial speech has been defined, at its
core, as speech that merely proposes a com-
mercial transaction. Va. State Bd., 425 U.S. at
762. Because such speech traditionally has
been thought less valuable than political
speech, which is at the core of the First
Amendment, commercial speech is not ac-
corded the full protections given to political
speech, speech on matters of public concern,
and speech regarding public figures.16 In fact,
for a time it was thought that commercial
speech might not be worthy of any First
Amendment protection.17
In Virginia State Board, the Court finally
decided that commercial speech should receive
some protection, holding that a state may not
prohibit pharmacists from truthfully advertis-
ing the prices at which they sell drugs. The
Court suggested, however, that instead of the
strict scrutiny with which courts review most
restrictions on speech, a lower standard of
scrutiny is appropriate for commercial speech.
The Court noted that false or misleading
commercial speech should receive no pro-
tection,18 because commercial speech merely
gives information to consumers about a pro-
ducer’s goods, and any false information either
has no value or is harmful.
The Court since has held that speech is
commercial when it is an “expression related
solely to the economic interests of the speaker
and its audience.” Central Hudson, 447 U.S.
at 561 (citing Va. State Bd., 425 U.S. at 762
(other citations omitted)). Additionally, in de-
fining something as commercial speech, the
Court says we are to rely on “the ‘common-
sense’ distinction between speech proposing a
commercial transaction, which occurs in an
area traditionally subject to government regu-
lation, and other varieties of speech.” Ohralik
v. Ohio State Bar Ass’n, 436 U.S. 447, 455-56
(1978).
Further, although Amway argues that the
Satanism rumor is a matter of public concern,
which should make the speech noncommercial,
the Court “ha[s] made clear that advertising
which ‘links a product to a current public
debate’ is not thereby entitled to the constitu-
tional protection afforded noncommercial
speech.” Bolger, 463 U.S. at 68 (quoting
Central Hudson, 447 U.S. at 563, n.5). Thus,
in Bolger the Court held that informational
pamphlets mailed by a condom manufacturer
16 In Central Hudson Gas & Elec. Corp. v.
Public Serv. Comm’n, 447 U.S. 557, 564 n.6
(1980), the Court explained why commercial
speech may be more heavily regulated:
Two features of commercial speech permit
regulation of its content. First, commercial
speakers have extensive knowledge of both
the market and their products. Thus, they
are well situated to evaluate the accuracy of
their messages and the lawfulness of the
underlying activity. In addition, commercial
speech, the offspring of economic self-inter-
est, is a hardy breed of expression that is not
particularly susceptible to being crushed by
overbroad regulation.
17 See Valentine v. Christensen, 316 U.S. 52
(1942); Breard v. Alexandria, 341 U.S. 622
(1951); Murdock v. Pennsylvania, 319 U.S. 105,
111 (1943); Jamison v. Texas, 318 U.S. 413, 417
(1943).
18 Va. State Bd., 425 U.S. at 771-72 n.24
(“[T]here can be no constitutional objection to the
suppression of commercial messages that do not
accurately inform the public about lawful activity.
The government may ban forms of communication
more likely to deceive the public than to inform it .
. . .”).

-- 11 of 32 --

12
directly to the public constituted commercial
speech, even though the pamphlets spoke
about matters of public concern.19
A recent examination of Supreme Court
precedent explaining why commercial speech
receives less protection was made in U.S.
Healthcare, in which the court identified four
characteristics of commercial speech that have
been set out by the Supreme Court over the
years. First, commercial speech makes a qual-
itatively different contribution to the exposi-
tion of ideas.20 Second, commercial speech is
more durable than other speech because the
speaker has an economic motivation and is less
likely to be chilled in its speech.21 Third,
“commercial speakers have extensive knowl-
edge of both their market and their own prod-
ucts. Consequently, they are uniquely situated
to evaluate the truthfulness of their speech.”22
Fourth, “[t]o require a parity of constitutional
protection for commercial and noncommercial
speech alike could invite dilution, simply by a
leveling process, of the force of the [First]
Amendment’s guarantee with respect to the
latter kind of speech.”23
If we examine the facts of this case in light
of these four characteristics, we see that the
speech at issue here has some but not all of the
characteristics typically found in commercial
speech. The first characteristicSSthat commer-
cial speech makes a qualitatively different
contribution to the exposition of ideasSSdoes
not shed much light on whether the speech in
this case is commercial.
19 Youngs Drug Products Company sent out
two informational pamphlets. The first was called
“Condoms and Human Sexuality,” which specifi-
cally referred to the advantages of a certain brand
of condoms. The second informational pamphlet
was called “Plain Talk about Venereal Disease.”
It discussed venereal disease and condoms without
ever referencing any specific condoms. The only
reference to Youngs Drug’s products was at the
bottom of the last page, where Youngs Drug
identified itself as the manufacturer of the Trojan-
brand condoms. The Court noted that Youngs
Drug described itself as “the leader in the manufac-
ture and sale of contraceptives.” The Court opined
that simply because “a product is referred to
generically does not, however, remove it from the
realm of commercial speech. For example, a
company with sufficient control of the market for
a product may be able to promote the product with-
out reference to its own brand names.” Bolger,
463 U.S. at 67 n.13. Even though the Court
concluded that the speech in Bolger was commer-
cial, it nevertheless held that the federal statute was
an unconstitutional restriction on the distribution of
truthful information. Id. at 74.
20 U.S. Healthcare, 898 F.2d at 933-34 (citing
Central Hudson, 447 U.S. at 561 (defining com-
mercial speech as “expression related solely to the
economic interests of the speaker and its audi-
20(...continued)
ence”)).
21 Id. at 934 (quoting Va. State Bd., 425 U.S. at
772 n.24 (explaining that this quality “may make
it less necessary to tolerate inaccurate statements
for fear of silencing the speaker.”)); see also Dun
& Bradstreet, 472 U.S. at 748 n.5, 762 & n.8
(discussing durability “to show how many of the
same concerns that argue in favor of reduced con-
stitutional protection” in commercial speech ac-
tions also apply to defamation actions concerning
private speech).
22 Id. (citing Central Hudson, 447 U.S. at 564
n. 6; Bates v. State Bar, 433 U.S. 350, 381 (1977);
Va. State Bd., 425 U.S. at 772 n.24; Dun & Brad-
street, 472 U.S. at 758 n.5, 762 & n.8).
23 Id. (quoting Ohralik, 436 U.S. at 456).

-- 12 of 32 --

13
It might be that spreading the Satanism ru-
mor does not contribute to the exposition of
ideas. Despite the falsity of the rumor, how-
ever, it touched on the type of issues that are
at the heart of First Amendment protections,
namely: religious issues and issues of how
corporations act and influence society. Fur-
ther, it is uncertain whether the speech was
related solely to the economic interests of the
speaker or whether, instead, Haugen and other
distributors were sincerely, albeit mistakenly,
discussing the rumor.
The second characteristicSSthat the speak-
er’s economic motivation makes the speech
more durableSSfavors classifying Amway’s
speech as commercial. If the Satanism rumor
were true, it is doubtful that the requirement to
verify it before repeating it would stop distrib-
utors from spreading the rumor about one of
their competitors. We have some reservation
about stating this too strongly, however, for
we can imagine cases in which employees of
one company might legitimately but mistakenly
repeat and discuss news about the political,
religious, o r other beliefs of employees of a
competitor. It would violate First Amendment
principles to quell all speech on these issues
among members of a competing company until
the news was fully and exhaustively verified.24
The third characteristicSSthat competitors
have extensive knowledge of their market and
productsSSapplies imperfectly to these facts.
Amway has extensive knowledge of its market
and products and is in a good position to know
the acts of its competitors. In this case, how-
ever, the rumor discusses P&G’s use of its
profits and its charitable givingSStopics about
which Amway is likely to know less because
they do not relate directly to P&G’s products
or sales methods. Nevertheless, if Haugen had
checked with Amway, he could have verified
that the rumor was false, because Amway had
been aware of its falsity since the 1980’s.
The fourth characteristicSSa parity of con-
stitutional protection for commercial speech
would invite dilution of the First Amend-
mentSSis, as the Third Circuit noted, an extrin-
sic reason that cannot be applied to the facts of
any one case. We accordingly do not discuss
it.
In U.S. Healthcare, 898 F.2d at 935, the
court determined that the speech had all the
characteristics of commercial speech. The
court concluded that
[b]ecause the thrust of all of the adver-
tisements is to convince the consuming
public to bring its business to one of
these health care giants rather than the
other, there is no doubt that the adver-
tisements were motivated by economic
self interest. . . . [W]e believe it would
have to be a cold day before these cor-
porations would be chilled from speak-
ing about the comparative merits of their
products.
Id. The court added that
these are advertisements for products
and services in markets in which U.S.
24 A current example may help illustrate this
point. It was recently reported that some movie
studios have conducted advertising campaigns and
focus groups on children under the age of seventeen
to make some of their R-rated movies more attrac-
tive to them. Discussion of this issue may be of
true concern to members of competing movie
studios. Holding the accuracy of such discussion
to a strict-liability standard likely would violate
First Amendment values.

-- 13 of 32 --

14
Healthcare and Blue Cross/Blue
Shield dealSSand, presumably,
know more about than anyone else.
The facts upon which the advertise-
ments are basedSScomparative
price, procedures, and services
offeredSSare readily objectifiable.
These advertisements were pre-
cisely calculated, developed over
time and published only when the
corporate speakers were ready.
Consequently, the advertisements
were unusually verifiable.
Id.
Unlike the situation in U.S. Healthcare, the
testimony here is that at least some of the
speech at issue was made impulsively, without
time to verify the facts. The U.S. Healthcare
court stated that “[i]t is important to note that
we do not have a situation in which a cor-
poration addresses an issue of public concern
involving a competitor, but does so with
speech that is neither commercial nor chill re-
sistant.” Id. In the instant case, the primary
question is whether Amway’s distributors ad-
dressed an issue of public concern involving a
competitor with speech that was neither com-
mercial nor chill-resistant.
Our analysis of the general characteristics
of commercial speech and the reasons behind
its less protected status demonstrates that the
speech here does not sort cleanly into either
category: commercial or noncommercial. Al-
though Supreme Court precedent and the
Third Circuit’s thoughtful analysis of what is
commercial speech are helpful, we still are left
with a difficult issue.
3.
We now apply the test the Court has set out
to determine whether a specific instance of
speech is commercial. In Bolger, the Court
recognized three factors that help determine
whether speech is commercial: (i) whether the
communication is an advertisement, (ii) wheth-
er the communication refers to a specific
product or service, and (iii) whether the speak-
er has an economic motivation for the speech.
If all three factors are present, there is “strong
support” for the conclusion that the speech is
commercial. Bolger, 463 U.S. at 67.
Here we consider the Bolger factors in re-
verse order25 and conclude that the thirdSSthe
motivation of the speakerSSis determinative.
This factor has not yet been decided by the
trier of fact, so we remand for that to be done.
The second factor is easily satisfiedSSthe
message did refer to specific products of
P&G’s. The first factorSSwhether the speech
is an advertisementSSseems to collapse into
the third factor in this case. Certainly the
repetition of the rumor via AmVox was not an
advertisement in the classic sense, but whether
it could be considered as a negative advertise-
ment against P&G seems to depend on the de-
termination of the third factorSSwhether the
speaker had an economic motivation for the
speech. If Haugen or others who repeated this
25 The Bolger test easily disposes of any ques-
tion as to whether the fliers that were printed by
Amway distributors and given to customers or po-
tential customers were commercial speechSSthey
plainly were. These fliers, associating P&G with
Satanism and suggesting Amway products as
alternatives to P&G products, (i) were advertise-
mentsSSi.e., they proposed a commercial transac-
tion, (ii) they referred to specific products, and
(iii) the distributors plainly had an economic mo-
tive in distributing them.

-- 14 of 32 --

15
rumor did have economic motivations, then
the message resembles an advertisement seek-
ing to encourage downline distributors to es-
chew P&G and buy Amway. If the motivation
was not economic, then this looks more like a
case of individuals’ repeating false speech on
a matter of public concern.
This question of the speaker’s motivation
will also help to clear up the difficulty in deter-
mining whether the characteristics of com-
mercial speech summarized in U.S. Healthcare
were present here. If the speakers were eco-
nomically motivated, then issues of the quality
of the speech, its durability, and the knowledge
the speakers had of the relevant market and
products become both more relevant and
easier to determine.
Thus, on remand, if the trier of fact finds
that the motivation behind the Amway dis-
tributors’ repetition of the rumor to other dis-
tributors was not economic, the speech is not
commercial, and there can be no Lanham Act
claim. On the other hand, if an economic mo-
tivation is found, the speech is commercial,
and a violation of the Lanham Act may be
found.26
The question whether an economic motive
existed is more than a question whether there
was an economic incentive for the speaker to
make the speech;27 the Bolger test also re-
quires that the speaker acted substantially out
of economic motivation. Thus, for example,
speech that is principally based on religious or
political convictions, but which may also ben-
efit the speaker economically, would fall short
of the requirement that the speech was eco-
nomically motivated.28 We stress that we are
26 We are not simply repackaging the “actual
malice” requirement as a requirement of economic
motivation. A finding of actual malice turns on the
finding of false speech knowingly made, or of false
speech made with a reckless disregard for the truth.
The requirement of finding an economic motivation
to label something commercial speech does not
require a finding that the speech was false or that
the speaker knew the speech was false before
making it, but only a motive to profit by the
speech. Once that motive is found, and if the other
Bolger elements are present to provide strong
support that the speech is commercial, the speech
is dropped to the less-protected status of commer-
(continued...)
26(...continued)
cial speech, and a suit may be successful against
the speaker regardless of his knowledge of falsity.
27 Professor Farber has pointed out that the
mere existence of some economic motivation can-
not be enough to drop speech to the lower protected
status of commercial speech: “Economic motiva-
tion could not be made a disqualifying factor [from
maximum protection] without enormous damage to
the first amendment. Little purpose would be
served by a first amendment which failed to protect
newspapers, paid public speakers, political candi-
dates with partially economic motives and profes-
sional authors.” Farber, Commercial Speech and
First Amendment Theory, 74 NW. U. L. REV. 372,
382-383 (1979) (footnotes omitted).
28 We offer a specific example: A woman who
owns a small religious book and music store tells
customers that most rock and roll music is influ-
enced by the devil and that the only kind of rock
music they should buy is “Christian rock,” which
is, of course, the only kind she sells. The determi-
nation of whether a Lanham Act suit could be
brought will turn on her motivation.
Evidence that she started the bookstore because
of strongly-held religious beliefs that Christian
books and music need to be made available to
combat the evils of rock and roll and pulp fiction
would be compelling evidence of a primarily reli-
(continued...)

-- 15 of 32 --

16
not shortening the Bolger test to a single fac-
torSSwhether the speaker’s motive was eco-
nomicSSbut rather, we conclude that the other
two Bolger factors are not conclusive, and
therefore the motive factor is determinative.
This does not mean that whenever the pri-
mary motivation for speech is economic, the
speech is commercial.29 As the Court said in
Bolger, finding all three factors merely pro-
vides “strong support” for the proposition that
the speech is commercial. The difference be-
tween commercial speech and noncommercial
speech is, after all, “a matter of degree.” City
of Cincinnati v. Discovery Network, Inc., 507
U.S. 410, 423 (1993). We can well imagine
cases in which a speaker’s primary motivation
is economic, but the speech nonetheless is pro-
tected.30
Also, in determining whether there was an
economic motivation to the repetition of the
rumor, the finder of fact is free to take into
account, among other things, Amway’s unique
structure. Pertinent is the fact that Amway
distributors make money not simply by selling
Amway products to the public, but also by re-
cruiting other distributors into the organiza-
tion, who become “downline” distributors, and
upon whose sales the “upline” distributors then
get commissions.
This system gives the distributors a motiva-
tion not just to sell Amway products, but also
to recruit distributors and to encourage their
sales. Thus, when Haugen and other Amway
distributors spread the Satanism rumor via
AmVox to their downline distributors, they
were not simply repeating a rumor to co-
workers or fellow independent distributors;
they were repeating a rumor to persons analo-
gous to employees,31 in whose motivation and
sales they have a direct interest. These facts,
and all other relevant evidence, of course, may
be used by the finder of fact in determining
whether, as a matter of fact, those who circu-
lated the Satanism rumor via AmVox acted
out of economic motivation.
B.
Notwithstanding Supreme Court precedent
holding that false commercial speech receives
no First Amendment protection, Amway ar-
gues that we should require a finding of actual
malice whenever speech is made about a public
figure on an issue of public concern. In mak-
ing this argument, Amway looks to the line of
defamation cases setting out and developing
the actual-malice standard.
That standard was developed in New York
Times v. Sullivan, 376 U.S. 254 (1964).
28(...continued)
gious, rather than economic, motivation for her
speech. On the other hand, evidence showing that
she is agnostic and opened the bookstore only after
a case study in her MBA program showed that
Christian bookstores can be extremely profitable
when set up in the right locations would be strong
evidence that her speech was economically moti-
vated and thus commercial.
29 As the Court said in Gertz v. Robert Welch,
Inc., 418 U.S. 323, 344 (1974), “it is often true
that not all of the considerations which justify
adoption of a given rule will obtain in each particu-
lar case decided under its authority.”
30 Labor cases come to mind as an example.
31 We use the phrase “analogous to employees”
purposely. We are merely making an analogy and
are not ruling on whether Amway distributors are
employees or independent contractors. We have
not been asked to decide this question, nor do we
have sufficient evidence to do so.

-- 16 of 32 --

17
There, a group of black clergymen ran an ad-
vertisement in the Times in the form of an ed-
itorial; they spoke of the civil rights demon-
strations by black students then occurring in
the South and of the intimidation and violence
practiced against the protestors and against
Dr. Martin Luther King, Jr. The advertisement
complained of the police responses to the
demonstrators and asked for financial dona-
tions in support of the student movement, the
struggle for the right to vote, and the legal
defense of Dr. King. L.B. Sullivan, the Mont-
gomery commissioner in charge of police, sued
the clergymen and the Times for civil libel,
arguing that the actions ascribed to the “po-
lice” were necessarily imputed to his lead-
ership and that some of the accusations were
false. Sullivan further argued that the Times
could have discovered that the allegations
were false by checking its files of previously
published articles.
The Court agreed that references to the po-
lice could be imputed to Sullivan and that
some of them were false. Nevertheless, the
Court held that proof of more than factual in-
accuracies was required to prevent speech pro-
tected by the First Amendment from being
“chilled.” The Court held:
The constitutional guarantees require,
we think, a federal rule that prohibits a
public official from recovering damages
for a defamatory falsehood relating to
his official conduct unless he proves that
the statement was made with ‘actual
malice’SSthat is, with knowledge that it
was false or with reckless disregard of
whether it was false or not.
Id. at 279-80.32
Three years later, the Court extended the
protection of the actual malice standard from
public officials to public figures in the compan-
ion cases of Curtis Publishing Co. v. Butts and
Associated Press v. Walker, 388 U.S. 130
(1967). In Gertz v. Welch, 418 U.S. 323, 342
(1974), the Court explained why the actual-
malice standard is appropriate in defamation
cases involving public officials or public fig-
ures as plaintiffs. The Court gave the reasons
for the lower level of protection for these
plaintiffs:
Public officials and public figures usually
enjoy significantly greater access to the
channels of effective communication and
hence have a more realistic opportunity
32 See also New York Times, 376 U.S. 271-72
(stating that “erroneous statement is inevitable in
free debate, and . . . it must be protected if the
freedoms of expression are to have the ‘breathing
space’ that they ‘need . . . to survive’”) (quoting
N.A.A.C.P. v. Button, 371 U.S. 415, 433 (1963)).
The inevitability of erroneous statements being
made in free debate is not a new concept:
[T]o argue sophistically, to suppress facts
or arguments, to misstate the elements of the
case, or misrepresent the opposite opinion .
. . all this, even to the most aggravated
degree, is so continually done in perfect
good faith, by persons who are not consid-
ered, and in many other respects may not de-
serve to be considered, ignorant or incompe-
tent, that it is rarely possible, on adequate
grounds, conscientiously to stamp the mis-
representation as morally culpable; and still
less could law presume to interfere with this
kind of controversial misconduct.
J. Mill, ON LIBERTY, 47 (Oxford: Blackwell
1947).

-- 17 of 32 --

18
to counteract false statements than
private individuals normally enjoy.
Private individuals are therefore
more vulnerable to injury, and the
state interest in protecting them is
correspondingly greater.
Id. at 344 (footnote omitted).
A plaintiff becomes a general purpose pub-
lic figure by attaining pervasive power and in-
fluence in society. Id. at 345. Alternatively,
he may become a limited-purpose public figure
with regard to that controversy by thrusting
himself into a particular public controversy “to
influence the resolution of the issues in-
volved.” Id. “Hypothetically, it may be pos-
sible for someone to become a public figure
through no purposeful action of his own, but
the instances of truly involuntary public figures
must be exceedingly rare.” Id.
We are powerless to decide whether this is
one of those “exceedingly rare” cases in which
plaintiff P&G involuntarily has become a pub-
lic figure, because t hat issue has not been
properly raised on appeal. In its opening brief,
P&G noted that the district court found it to
be a “limited-purpose public figure” for the
purpose of analyzing whether it must prove
actual malice in its § 43(a) claim; that court
decided that the rumor is an issue of public
concern and has been associated with P&G
long enough to render P&G a limited-purpose
public figure for purposes of discussion of the
rumor. P&G did not assign error to this ruling
in its initial brief but, instead, asserted that the
repetition of the Satanism rumor constituted
commercial speech to which the New York
Times actual malice standard does not apply.
Amway correctly notes that because P&G
did not dispute this ruling, it is now bound
thereby for purposes of this appeal. Although
in its reply brief, P&G states that it “does not
concede that it is a ‘public figure’ for purposes
of defendants’ misrepresentations,” an “appel-
lant abandons all issues not raised and argued
in its initial brief on appeal.” Cinel v. Connick,
15 F.3d 1338, 1345 (5th Cir. 1994) (declining
to address argument discussed only in appel-
lant’s reply brief). Thus, we assume for pur-
poses of this appeal, without deciding the issue
as a matter of law, that P&G is a limited-
purpose public figure with regard to the Satan-
ism rumor.
Amway makes two arguments in support of
its theory that P&G must prove actual malice.
First, Amway turns to the well-reasoned opin-
ion in National Life Insurance Co. v. Phillips
Publishing, Inc., 793 F. Supp. 627, 647 (D.
Md. 1992), in which the court noted that there
is a tension in the law regarding the treatment
of false speech: “While defamation tolerates
some false statements, in order to give the
First Amendment the ‘breathing space’ it re-
quires; commercial speech does not forgive
false speech so easily.” Id. The court opined
that this tension should be considered rather
than ignored when dealing with cases of false
commercial speech about public figures.33
The National Life court reasoned that
denying constitutional protection to all false
33 The court cites two examples of the tension in
Supreme Court caselaw. It compares Gertz, 418
U.S. at 340 (holding that application of the malice
standard to public figure plaintiffs is predicated on
the recognition that error is “inevitable in free
debate”), with Central Hudson, 447 U.S. at 564
(stating that “there can be no constitutional objec-
tion to the suppression of commercial messages
that do not accurately inform. . . .”).

-- 18 of 32 --

19
commercial speech ignores the rationale of
Gertz: that the need to protect one from false
or misleading speech varies, depending on
whether he is a private or public figure. The
court pointed out that “[e]ven U.S. Healthcare
recognized that a state has only a ‘limited’ in-
terest in compensating public persons for in-
jury to reputation by defamatory statements,
but has a ‘strong and legitimate interest’ in
compensating private persons for the same
injury.” National Life, 793 F. Supp. at 648
(quoting U.S. Healthcare, 898 F.2d at 930).34
Thus, the court concluded that a state’s inter-
ests in regulating false commercial speech and
in providing some protection to public figures’
reputations must be balanced against the free
speech interest individuals have in being able
to comment freely on public issues and public
figures. The court held that the way to
achieve this balance, in cases of commercial
speech about a public figure, is to require that
the plaintiff prove actual malice.
Amway’s second argument is that the use
of the actual-malice standard in commercial
speech cases involving public figures avoids
unrealistically treating commercial and non-
commercial speech as though they do not
overlap. Amway contends that such treatment
ignores that political speech can arise from
commercial motives or may address areas of
great public concern.35
Although Amway raises legitimate points
about the overlap between commercial and
noncommercial speech, between economic and
non-economic motivation for speech, and
about the variable interest a state has in pro-
tecting a plaintiff’s reputation depending on
the plaintiff’s status as a public or private fig-
ure, Supreme Court precedent prevents us
from importing the actual-malice standard into
cases involving false commercial speech.
To begin with, the Court has rejected at-
tempts to blur the line between commercial
speech and other types of expression. In Cen-
tral Hudson, the majority rejected the rationale
set forth in a concurrence that “[a]pparent-
ly . . . would accord full First Amendment
protection to all promotional advertising that
includes claims ‘relating to . . . questions
frequently discussed and debated by our po-
litical leaders.’” Id. at 563 n.5 (quoting id. at
581 (Stevens, J., concurring). In rejecting this
approach, the majority reasoned that “we think
it would blur further the line the Court has
sought to draw in commercial speech cases.”
Id.36
34 In U.S. Healthcare, the court addressed the
same argument that Amway makes hereSSthat the
actual malice standard should apply to protect even
false commercial speech if it is made about a
limited-purpose public figure. The court did not
consider the argument directly, because it con-
cluded that the corporations that were the parties in
that case were not public figures. Nevertheless, it
stated that “the [commercial] speech at issue does
not receive heightened protection under the First
Amendment. Because this speech is chill-resistant,
the New York Times standard is not . . . ‘necessary
to give adequate “breathing space” to the freedoms
protected by the First Amendment.’” U.S. Health-
care, 898 F.2d at 939 (quoting Hustler Magazine,
Inc. v. Falwell, 485 U.S. 46, 56 (1988)).
35 Cf. Bolger (holding that First Amendment
protects contraceptive manufacturer’s unsolicited
mailing of informational and advertising pamphlets
to households, because contraception informa-
tionSSeven if distributed for commercial pur-
poseSSis a matter of public concern).
36 The Court noted that corporations
enjoy the full panoply of First Amendment
(continued...)

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20
Further, the Court has consistently said that
speech protected in one context is not pro-
tected when the purpose of the speech is com-
mercial. In Bolger, the Court held that “ad-
vertising which ‘links a product to a current
public debate’ is not thereby entitled to the
constitutional protection afforded noncommer-
cial speech.” 463 U.S. at 68 (quoting Central
Hudson, 447 U.S. at 563 n.5). “Advertisers
should not be permitted to immunize false or
misleading product information from govern-
ment regulation simply by including references
to public issues.” Id.
Somewhat more recently, in Zauderer v.
Office of Disciplinary Counsel of Supreme
Court, 471 U.S. 626 (1985), the Court af-
firmed its Central Hudson and Bolger hold-
ings. Zauderer was a lawyer who had been
sanctioned by the disciplinary committee of his
state supreme court for using deceptive news-
paper advertisements. He claimed that his
speech was protected because some of the
advertisements contained statements regarding
the legal rights of persons injured by a contra-
ceptive device. The Court held that these
statements “in another context, would be fully
protected speech,” but “[t]hat this is so does
not alter the status of the advertisements as
commercial speech.” Id. at 637 n.7.
Central Hudson, Bolger, and Zauderer,
combined with the Court’s plain statements
that false commercial speech receives no pro-
tection,37 foreclose us from importing the ac-
tual-malice standard from defamation into the
law of false commercial speech. Thus, if the
trier of fact determines that the Amway dis-
tributors’ motives in spreading the Satanism
rumor were economic and that the speech
therefore was commercial, this false commer-
cial speech cannot qualify for the heightened
protection of the First Amendment, so P&G is
not required to show actual malice in proving
its Lanham Act claim.
The Tenth Circuit concluded similarly in
this case, holding that the AmVox message
was economically motivated and rejecting Am-
way’s argument that such commercial speech
should receive higher protection because it
regarded a matter of public concern. P&G v.
Haugen, 222 F.3d at 1275.
In the present case, we are likewise
dealing with a message containing both
a noncommercial, “theological” compo-
nent and a commercial component. As
Bolger and Fox indicate, however, the
36(...continued)
protections for their direct comments
on public issues. There is no reason
for providing similar constitutional
protection when such statements are
made only in the context of commercial
transactions. In that context, for ex-
ample, the State retains the power to
“insur[e] that the stream of commercial
information flow[s] cleanly as well as
freely.” . . . As we stated in Ohralik,
the failure to distinguish between com-
mercial and noncommercial speech
“could invite dilution, simply by a
leveling process, of the force of the
[First] Amendment’s guarantee with
respect to the latter kind of speech.”
Id. (quoting Va. State Bd., 425 U.S. at 772, and
Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447,
456 (1978)).
37 E.g., Ibanez v. Fla. Dep’t of Bus. & Prof’l
Regulation, 512 U.S. 136, 142 (1994); Shapero v.
Ky. Bar Ass’n, 486 U.S. 466, 472 (1988); Fried-
man v. Rogers, 440 U.S. 1, 14-15 (1979); Va.
State Bd., 425 U.S. at 771-72 & n.24.

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21
bare fact that the subject message
contains a “theological” component
is insufficient to transform it into
noncommercial speech. If appellees
had argued that a significant theo-
logical, political, or other noncom-
mercial purpose underlay the sub-
ject message, the message might be
accorded the substantially greater
First Amendment protections en-
joyed by “core” religious speech
and the other varieties of noncom-
mercial First Amendment speech
such as political speech. See, e.g.,
Pleasant v. Lovell, 876 F.2d 787,
795 (10th Cir. 1989) (holding “that
the presence of some commercial
activity does not change the stan-
dard of first amendment review”
where the organization engaged in
such activity had a clear political
purpose (citing In re Grand Jury
Proceeding, 842 F.2d 1229, 1235
(11th Cir. 1988))). Significantly,
appellees in the instant case have
made no such claim. At no time
have they argued there is any theo-
logical purpose underlying the sub-
ject message or its dissemination
via their AmVox system.
Id.
Amway has argued here, as it apparently
did not in the Tenth Circuit, that there was a
theological concern underlying the speech.
We thus are foreclosed from merely calling the
speech commercial. Regardless, both the
Tenth Circuit and this court are using the same
test to determine commercial speech, and both
reject Amway’s argument that the actual-
malice standard should apply.
We recognize that alternative methods of
reconciling the law of commercial speech with
that of defamation have been suggested. Pro-
fessor Langvardt has suggested one tempting
alternative. He posits that courts should adopt
a negligence standard for private actions for
false commercial speech.38 After thoughtfully
considering this solution, we feel compelled to
reject it. While Professor Langvardt’s pro-
posal is compelling in a number of respects,
our approach more closely adheres to the case-
law and principles set out by the Supreme
Court in the areas of commercial speech and
First Amendment law.
Langvardt agrees with our analysis that the
full protection from chill that the actual malice
standard gives to core First Amendment
speech is inappropriate in the context of less-
protected commercial speech. He argues that,
instead, a standard should be used that gives
commercial speech an intermediate level of
protection from chill. In his view, “negligence
effectively provides an intermediate standard
that falls between the polar extremes of actual
malice and strict liability.” Langvardt, 78
MINN. L. REV. at 393. Under such a regime,
plaintiffs would be required to prove “that the
defendant failed to use the degree of care a
reasonable person would have exercised, under
the circumstances, to ascertain the truth or
falsity of the statement before making it.” Id.
at 393. To Langvardt, the use of a negligence
standard recognizes that commercial speech is
more durable than noncommercial speech, but
it still prevents the former from being overly
chilled by the possibility of private suits for
38 Arlen W. Langvardt, Commercial Falsehood
and the First Amendment: A Proposed Frame-
work, 78 MINN. L. REV. 309 (1993).

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22
strict liability under the Lanham Act.39
Langvardt would avoid Supreme Court pre-
cedent stating that false commercial speech re-
ceives no protection under t he First Amend-
ment by restricting this holding to the direct-
government-regulation line of cases from
which it sprang. He points out that the Court
has not heldSSand he believes would not
holdSSthat false commercial speech receives
no First Amendment protection from private
suits.40 According to Langvardt, the reason
the Court would not do so is that private suits
have a greater potential to chill commercial
speech than do direct government regulations.
He claims that private suits are not as narrowly
tailored and allow large damage awards, both
of which create greater potential for chill.
Although support for this theory may be
found in New York Times, 376 U.S. at 279-80,
in which the Court said that “[t]he fear of
damage awards . . . may be markedly more in-
hibiting than the fear of prosecution under a
criminal statute,” the Court has never limited
its holding that false commercial speech re-
ceives no First Amendment protection. It is
doubtful that the prospect of a private action is
a significantly greater deterrent to a commer-
cial speaker than is the prospect of the civil
and criminal penalties available to government
regulators. Further, a commercial speaker
may be chilled in his speech by the prospect of
having to pay the costs of a suit to have an
overly broad regulation narrowed by a court.
Additionally, Langvardt’s proposal, if
adopted, would result in differing amounts of
protection for false commercial speech de-
pending on whether the speaker discusses his
own goods or those of another. Langvardt ac-
knowledges that false advertising claims by a
defendant about its own products traditionally
have been subjected to strict liability under
§ 43(a), and he does not argue that this exces-
sively chills commercial speech. He maintains
that strict liability should continue to apply to
a defendant’s claims about its own products
but that a negligence standard should be ap-
plied to false statements about a competitor’s
products.
It seems, however, that this double standard
would further confuse commercial speech law.
The argument is not strong enough to justify
differing standards of liability,41 especially in
light of the admonition that we not “blur
further the line the Court has sought to draw
in commercial speech cases.” Central Hud-
39 Langvardt’s theory also would vary the stan-
dard by which a party must prove negligence,
based on whether the speech is a matter of public
or private concern. Allegations regarding the for-
mer should be proven by clear and convincing evi-
dence, and the latter should be proven by a mere
preponderance of the evidence. Id. at 393-95.
40 Langvardt points out that before its 1989
revision, no suit could be brought under the Lan-
ham Act for false advertising about a competitor.
The Act was amended effective November 16,
1989, by the Trademark Law Revision Act of
1988, 15 U.S.C. §§ 1051-1128 (1988). The pre-
1989 Act allowed only suits against companies for
a company’s false advertising about its own prod-
ucts. The post-1989 Lanham ActSSwith its strict
liability standard for false commercial
speechSSthus has a substantially greater potential
to chill truthful commercial speech, according to
Langvardt.
41 Moreover, such a double standard could be
subverted. Instead of saying that its product is the
best, a company could state that all other products
are inferior and by doing so move from a strict li-
ability regime to one of negligence.

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23
son, 447 U.S. at 563 n.5.
V.
The district court was correct in dismissing
P&G’s alter ego, single business enterprise,
and vicarious liability arguments against Ja-Ri
and ADAC, because P&G provided neither
sufficient evidence nor sufficient argument to
support its position. P&G assigns error to
these dismissals based on three grounds. First,
it argues that it was unfairly surprised when
the court applied Michigan rather than Texas
law to these claims. Second, it contends that
the court overlooked sufficient evidence to
hold Ja-Ri and ADAC liable under the single-
business-enterprise theory and vicariously
liable for Lanham Act violations of downline
distributors. Third, it avers that the court
erred in sua sponte entering j.m.l. in favor of
Ja-Ri, which P&G claims is a reversible viola-
tion of FED. R. CIV. P. 50(a)(2). We review a
j.m.l. de novo. King v. Ames, 179 F.3d 370,
373 (5th Cir. 1999).42
None of P&G’s arguments is adequately
supported in its brief. First, P&G could not
have been unfairly surprised that Michigan law
might be applied to ADAC’s motion for j.m.l.
ADAC moved for j.m.l. based on Michigan
law on May 7, 1999SSsix days before P&G
rested its caseSSand, on May 10, P&G filed a
memorandum in opposition to ADAC’s mem-
orandum on choice of law.
Second, P&G does not describe how it was
prejudiced by the application of Michigan law.
It does not provide examples of how the ele-
ments of Michigan and Texas law differ. Both
Texas and Michigan law require that to prevail
on an alter ego theory or otherwise to pierce
the corporate veil, one must prove that failing
to do so would promote injustice. See Man-
corp, Inc. v. Culpepper, 836 S.W.2d 844, 846
(Tex. App.SSHouston 1992, no writ); Wells v.
Firestone, 364 N.W.2d 650 (Mich. 1984);
Foodland Distributors v. Al-Naimi, 559
N.W.2d 379 (Mich. App. 1996). P&G does
not even claim to have offered such proof.
Thus, its argument that the court overlooked
evidence sufficient to find against Ja-Ri and
ADAC fails.
Third, rule 50 neither prohibits a court from
suggesting that a party move for j.m.l. nor
forbids a court from granting j.m.l. sua sponte.
The rule merely states that if there is no suffi-
cient evidentiary basis for the issue to go to
the jury, “the court may determine the issue
against that party and may grant a motion for
[j.m.l.] against that party . . .” (emphasis
added).
Finally, P&G advances not a single theory
as to why Ja-Ri and ADAC should be held li-
able under alter ego, single business enterprise,
or vicarious liability law. Instead, P&G merely
asserts that they should be. “A party who in-
adequately briefs an issue is considered to have
abandoned the claim.” Cinel v. Connick, 15
F.3d 1338, 1345 (5th Cir. 1994) (citation
omitted).
VI.
A.
The district court is correct that P&G does
not have standing to bring a § 43(a) claim
based on Amway’s alleged misrepresentations
to its distributors about its allegedly illegal
pyramid scheme. P&G asserted its claim
based on Amway’s alleged misrepresentations
to its distributors of the financial rewards of
42 See Boeing Co. v. Shipman, 411 F.2d 365,
374-75 (5th Cir. 1969) (en banc), overruled on
other grounds, Gautreaux v. Scurlock Marine,
Inc., 107 F.3d 331 (5th Cir. 1997) (en banc).

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24
being an Amway distributor. The court grant-
ed summary judgment based on its conclusion
that P&G lacks prudential standing to bring
this claim.
We review summary judgment rulings de
novo. Prytania Park Hotel, Ltd. v. Gen. Star
Indem. Co., 179 F.3d 169, 173 (5th Cir.
1999). Summary judgment is proper when,
taking the evidence in the light most favorable
to the non-moving party, there is no genuine
issue of material fact and the moving party is
entitled to a judgment as a matter of law. FED.
R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477
U.S. 317 (1986).
Standing has constitutional and prudential
components. Bennett v. Spear, 520 U.S. 154
(1997). To meet the constitutional standing
requirement, a plaintiff must show (1) an injury
in fact (2) that is fairly traceable to the actions
of the defendant and (3) that likely will be
redressed by a favorable decision. Bennett,
520 U.S. at 162; Lujan v. Defenders of Wild-
life, 504 U.S. 555, 560-61 (1992).
Prudential standing requirements exist in
addition to “the immutable requirements of
Article III,” ACORN v. Fowler, 178 F.3d 350,
362 (5th Cir. 1999), as an integral part of
“judicial self-government,” Lujan, 504 U.S. at
560. The goal of this self-governance is to de-
termine whether the plaintiff “is a proper party
to invoke judicial resolution of the dispute and
the exercise of the court’s remedial powers.”
Bender v. Williamsport Area Sch. Dist., 475
U.S. 534, 546 n.8 (1986).43
These judicially created limits concern
whether a plaintiff’s grievance arguably
falls within the zone of interests pro-
tected by the statutory provision in-
voked in the suit, whether the complaint
raises abstract questions or a generalized
grievance more properly addressed by
the legislative branch, and whether the
plaintiff is asserting his or her own legal
rights and interests rather than the legal
rights and interests of third parties.
ACORN, 178 F.3d at 363.
Although Congress cannot change constitu-
tional standing requirements, it “can modify or
even abrogate prudential standing require-
ments, thus extending standing to the full ex-
tent permitted by Article III.” Id. (citing Ben-
nett, 520 U.S. at 162) (other citation omitted).
We therefore look to the statute in question to
determine whether Congress expressed an in-
tent to negate the background of prudential
standing doctrine.44
B.
The question whether, in § 43, Congress in-
tended to abrogate the background of pruden-
tial standing doctrine is one of first impression
in this circuit. Congress did not expressly
negate the background of prudential standing
in § 43(a), which states:
43 See also Phillips Petroleum Co. v. Shutts,
472 U.S. 797, 804 (1985) (opining that federal
courts adopt prudential limits on standing “to avoid
deciding questions of broad social import where no
(continued...)
43(...continued)
individual rights would be vindicated and to limit
access to the federal courts to those litigants best
suited to assert a particular claim”) (quoting
Gladstone, Realtors v. Village of Bellwood, 441
U.S. 91, 99-100 (1979)).
44 See Bennett, 520 U.S. at 163 (“Congress leg-
islates against the background of our prudential
standing doctrine, which applies unless it is ex-
pressly negated.”).

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25
(1) Any person who, on or in connection
with any goods or services, or any con-
tainer for goods, uses in commerce any
word, term, name, symbol, or device, or
any combination thereof, or any false
designation of origin, false or misleading
description of fact, or false or mislead-
ing representation of fact, whichSS
(A) is likely to cause confusion, or to
cause mistake or to deceive as to the af-
filiation, connection, or association of
such person with another person, or as
to the origin, sponsorship, or approval
of his or her goods, services, or com-
mercial activities by another person, or
(B) in commercial advertising or promo-
tion, misrepresents the nature, charac-
teristics, qualities, or geographic origin
of his or her or another person’s goods,
services, or commercial activities,
shall be liable in a civil action by any
person who believes that he or she is or
is likely to be damaged by such act.
15 U.S.C. § 1125(a) (1994) (emphasis added).
The words “any person” might lead one to
conclude that Congress intended to abrogate
the background of prudential standing for pur-
poses of the Lanham Act and allow anyone to
sue who could achieve Article III standing.
Section 45, however, states in pertinent part:
The intent of this chapter is to regulate
commerce within the control of Con-
gress by making actionable the deceptive
and misleading use of marks in such
commerce; to protect registered marks
used in such commerce from interfer-
ence by State, or territorial legislation;
to protect persons engaged in such
commerce against unfair competition; to
prevent fraud and deception in such
commerce by the use of reproductions,
copies, counterfeits, or colorable imita-
tions of registered marks, and to provide
rights and remedies stipulated by treaties
and conventions respecting trademarks,
trade names, and unfair competition
entered into between the United States
and foreign nations.
15 U.S.C. § 1127 (1994).45 We agree with
Conte Bros. Automobile, Inc. v. Quaker State-
Slick 50, Inc., 165 F.3d 221, 229 (3d Cir.
1998):
This section makes clear that the focus
of the statute is on anti-competitive con-
duct in a commercial context. Confer-
ring standing to the full extent implied
by the text of § 43(a) would give stand-
ing to parties, such as consumers, hav-
ing no competitive or commercial inter-
ests affected by the conduct at issue. . . .
The congressionally-stated purpose of
the Lanham Act, far from indicating an
express intent to abrogate prudential
standing doctrine, evidences an intent to
limit standing to a narrow class of po-
tential plaintiffs possessing interests the
protection of which furthers the pur-
poses of the Lanham Act.
The court also pointed out that the Lanham
Act was passed to codify statutory and com-
mon law of unfair competition that had devel-
oped before Erie R.R. v. Tompkins, 304 U.S.
45 This language has been part of the Lanham
Act since it was enacted in 1946. See PUB. L. NO.
489, reprinted in 1946 U.S.C.C.A.N. 412, 429.

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26
64 (1938).46 The court analyzed the earlier
unfair competition laws and noted that “these
earlier acts were drafted against the backdrop
of common law doctrine similar to today’s
prudential standing doctrine that limited the
eligible plaintiff class. Conte Bros., 165 F.3d
at 230 (citing Inwood Labs., Inc. v. Ives Labs.,
Inc., 456 U.S. 844 (1982)). This led the court
to conclude that “[t]here is no indication that
Congress intended in any of the Lanham Act’s
statutory precursors, or in the Lanham Act it-
self for that matter, to abrogate the common
law limitations on standing to sue.”47 Having
found that § 45 of the Lanham Act plainly sets
out Congress’s intent to maintain prudential
standing requirements, we see no need to ex-
amine the legislative history or common law
background of the Act, as the Third Circuit
did. We nonetheless join that court in deciding
that Congress did not intend to abrogate
prudential standing limitations when it enacted
the Lanham Act.
C.
Also of first impression in this court is what
test we should adopt in determining whether a
plaintiff has statutory or “prudential” standing
under the Lanham Act.48 After a survey of the
caselaw of other circuits,49 we adopt the test
46 See Inwood Labs., Inc. v. Ives Labs., Inc.,
456 U.S. 844, 861 n.2 (1982) (White, J., concur-
ring) (opining that the “purpose of the Lanham Act
was to codify and unify the common law of unfair
competition and trademark protection”); see also
Bonita Boats, Inc. v. Thunder Craft Boats, Inc.,
489 U.S. 141 (1989) (stating that the “law of
unfair competition has its roots in the common-law
tort of deceit”); see generally 1 J.THOMAS MC-
CARTHY, MCCARTHY ON TRADEMARKS AND
UNFAIR COMPETITION § 5:2 (4th ed. 1996) (dis-
cussing common-law origins of Lanham Act).
47 Conte Bros., 165 F.3d at 230 (citing by an-
alogy Associated Gen. Contractors, Inc. v. Cal.
State Council of Carpenters, Inc., 459 U.S. 519,
531-34 (1983) (describing congressional intent to
incorporate common-law principles constraining
class of plaintiffs entitled to sue under Clayton
Act).
48 We have stated in dictum that consumers
should be denied prudential standing under the
Lanham Act. Seven-Up Co. v. Coca-Cola Co., 86
F.3d 1379, 1383 (5th Cir. 1996) (noting that “most
courts that have addressed the issue agree that in
light of the pro-competitive purpose language
found in § 45, ‘consumers fall outside the range of
“reasonable interests” contemplated as protected by
the false advertising prong of Section 43(a) of the
Lanham Act.’” (quoting Serbin v. Ziebart Int’l
Corp., 11 F.3d 1163, 1177 (3d Cir.1993))).
49 Much of our prudential standing jurispru-
dence in this circuit has focused on whether a par-
ticular injurious act is within the “zone of interests”
of a particular administrative statute. E.g., Stock-
man v. Fed. Election Comm’n, 138 F.3d 144 (5th
Cir. 1998); Asbestos Info. Ass’n/N. Am. v. Reich,
117 F.3d 891 (5th Cir. 1997). This is not an
administrative law case, however, so standing is
not governed by administrative law’s “zone of
interests” test. See Clarke, 479 U.S. at 400 n.16
(observing that the “zone of interest” test has been
applied primarily in claims brought under the Ad-
ministrative Procedure Act and “is most usefully
understood as a gloss on the meaning of § 702 [of
that Act] . . . . While inquiries into reviewability or
prudential standing in other contexts may bear
some resemblance to a ‘zone of interest’ inquiry
under the APA, it is not a test of universal applica-
tion.”); Bennett, 520 U.S. 154, 163 (1997) (“The
breadth of the zone of interests varies according to
the provisions of law at issue, so that what comes
within the zone of interests of a statute for pur-
poses of obtaining judicial review of administrative
action under the ‘generous review provisions’ of
the [APA] may not do so for other purposes.”)
(citations omitted); see also William A. Fletcher,
(continued...)

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27
recently set forth in Conte Bros.50 That court
adopted the test for prudential standing under
the Clayton Act that the Supreme Court set
forth in Associated General Contractors, 459
U.S. at 538-44,51 in which the Court identified
a number of factors to be considered in deter-
mining prudential standing: (1) the nature of
the plaintiff’s alleged injury: Is the injury “of
a type that Congress sought to redress in
providing a private remedy for violations of
the antitrust laws”?; (2) the directness or
indirectness of the asserted injury; (3) the
proximity or remoteness of the party to the
alleged injurious conduct; (4) the speculative-
ness of the damages claim; and (5) the risk of
duplicative damages or complexity in appor-
tioning damages.
The first factor directs us to decide whether
the alleged injury is of a type Congress sought
to redress in providing a private remedy for
violations of the Lanham Act. We conclude
that P&G’s injury based on Amway’s alleged
illegal pyramid scheme is not that type of in-
jury. As stated in Conte Brothers:
[T]he focus of the Lanham Act is on
“commercial interests [that] have been
harmed by a competitor’s false advertis-
ing,” Granite State Ins. Co. v. Aamco
Transmissions, Inc., 57 F.3d 316 (3d
Cir. 1995), and in “secur[ing] to the
business community the advantages of
reputation and good will by preventing
their diversion from those who have
created them to those who have not.”
S. Rep. No. 1333, 79th Cong., 2d Sess.
(1946), reprinted in 1946 U.S.C.C.A.N.
1274, 1275.
Conte Bros., 165 F.3d at 234.
The Lanham Act was enacted to provide
protection against the unfair and misleading
use of another’s trademark.52 Given this, it
seems unlikely that the injury alleged
hereSSfraudulent misrepresentations made to
potential employees to convince them to work
for and buy from Amway, resulting ultimately
in lower sales of some of P&G’s productsSSis
of a type that Congress sought to redress in
providing the Lanham Act. P&G has alleged
attenuated harm arising from the alleged fraud-
49(...continued)
The Structure of Standing, 98 YALE L.J. 221, 255-
63 (1988) (criticizing use of “zone of interest” test
outside of administrative context).
50 Both P&G and Amway used the test from
Conte Bros. in analyzing whether P&G met pru-
dential standing requirements in pursuing its
§ 43(a) claim based on Amway’s allegedly illegal
pyramid scheme.
51 Although the Third Circuit is the first circuit
to use this standing analysis in the context of the
Lanham Act, it noted, 165 F.3d at 233, that two
prominent commentaries have endorsed the adop-
tion of the standard. See 4 MCCARTHY, MCCAR-
THY ON TRADEMARKS AND UNFAIR COMPETITION
§ 27:32 n.1 (4th ed. 1996) (“In the author’s opin-
ion, some limit on the § 43(a) standing of persons
remote from the directly impacted party should be
applied by analogy to antitrust law, such as use of
the criteria listed in Associated General Contrac-
tors . . . .”); RESTATEMENT (THIRD) OF UNFAIR
COMPETITION § 3, cmt. f (1995) (“In determining
whether an asserted injury is sufficiently direct to
justify the imposition of liability, the Supreme
Court’s analysis of similar issues under federal
antitrust law may offer a useful analogy.”).
52 See S. REP. NO. 79-1333 (1946), reprinted in
1946 U.S.C.C.A.N. 1274, 1275 (stating that “there
is no essential difference between trade-mark in-
fringement and what is loosely called unfair com-
petition”).

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28
ulent inducements but not alleged loss of good
will or reput ation as a result of Amway’s
alleged pyramid scheme.
The second factorSSdirectness of the al-
leged injurySSalso suggests no standing. This
is not the case of one competitor’s directly
injuring another by making false statements
about his own goods and thus inducing cus-
tomers to switch from a competitor. Rather,
the injury is alleged to arise from a competi-
tor's fraudulently inducing a workforceSSnot
necessarily its competitor’sSSto work for it
and sell its product by promises to the workers
that they will be handsomely compensated.
There are no allegations that the workers
otherwise would have worked for P&G. In-
stead, the attenuated claimed harm is alleged
to come from the fact that an increase in sales
of Amway products eventually will lead to
lower sales for its competitor. If standing is
allowed here, one could argue that any competi-
tor’s fraudulent act in running its business that
gives it an advantage could be sued upon as a
violation of the Lanham Act. Opening up
standing to this extent would not be prudent.
The third factorSSthe proximity of the party
to the alleged injurious conductSSalso un-
dercuts standing in this case. In Associated
General Contractors, 459 U.S. at 542, the
Court held that “the existence of an identifiable
class of persons whose self-interest would
normally motivate them to vindicate the public
interest . . . diminishes the justification for
allowing a more remote party . . . to perform
the offices of a private attorney general.” The
distributors who are more immediate to the
injury than is P&G probably do not have
standing to sue under the Lanham Act, which
does not give consumers standing to sue. See
Seven-Up, 86 F.3d at 1383. These distributors
could vindicate the public interest, however,
by suing for fraud. Thus, there is no need to
empower P&G as a private attorney general in
this case.
The fourth factorSSspeculativeness of the
damagesSSalso weighs against standing. In
fact, P&G did not even attempt to submit evi-
dence on lost profits resulting from Amway’s
alleged pyramid scheme. In its reply brief,
P&G argues that it is not bound to submit such
evidence, but that damages instead should be
determined based on P&G’s relative market
share. Given the hundreds of P&G products
and potential competitors, as well as the diffi-
culty of determining what percentage of Am-
way’s distributors were fraudulently induced
to work for Amway, it is hard to see how any
damages awarded would not be highly specu-
lative.
Finally, the fifth factorSSthe risk of duplica-
tive damages or complexity of apportioning
damagesSSinforms us to deny standing. Not
only could every competitor in the market sue
Amway if P&G is allowed standing here, but
there would be nothing to stop other compa-
nies not in direct competition with Amway
from suing based on harm suffered by having
potential workers fraudulently induced away.
This analysis shows that all five factors
unanimously (though to various degrees)
counsel against granting standing in this cir-
cumstance. Granting prudential standing
“would result in a great increase in marginal
litigation in the federal courts and would not
serve the underlying purposes of the Lanham
ActSSto ferret out unfair competition methods
and protect businesses from the unjust erosion
of their good will and reputation.” Conte
Bros., 165 F.3d at 236.

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29
VII.
The district court dismissed P&G’s RICO
claims under FED. R. CIV. P. 12(b)(6). P&G
argues that Amway’s repetition of the Satan-
ism rumor and its alleged illegal pyramid
scheme constitute violations of RICO, 18
U.S.C. § 1962(c) and (d). P&G listed mail
fraud and wire fraud as the predicate acts for
its RICO claims but does not claim to have re-
lied on any of the misrepresentations that Am-
way allegedly made via mail and wire. Instead,
P&G argues that it is not required to allege
and prove reliance. We affirm in part and
reverse and remand in part on this issue.
We review de novo the dismissal of a com-
plaint for a failure to state a claim for which
relief can be granted under rule 12(b)(6). Fer-
nandez-Montes v. Allied Pilots Ass’n, 987
F.2d 278, 284 (5th Cir. 1993). A claim may
not be dismissed unless it appears beyond
doubt that the plaintiff cannot prove any set of
facts in support of his claim that would entitle
him to relief. Benton v. United States, 960
F.2d 19, 21 (5th Cir. 1992). For purposes of
our review, we must accept the plaintiff’s
factual allegations as true and view them in the
light most favorable to the plaintiff. Campbell
v. City of San Antonio, 43 F.3d 973, 975 (5th
Cir. 1995).
In civil RICO claims in which fraud is al-
leged as a predicate act, reliance on the fraud
must be shown: “[W]hen civil RICO damages
are sought for injuries resulting from fraud, a
general requirement of reliance by the plaintiff
is a commonsense liability limitation.” Summit
Props. Inc. v. Hoechst Celanese Corp., 214
F.3d 556 (5th Cir. 2000), petition for cert.
filed, 69 U.S.L.W. 3296 (Oct. 13, 2000) (No.
00-606).
P&G points out that in Summit we also set
out a narrow exception to this rule. “In gen-
eral, fraud addresses liability between persons
with direct relationshipsSSassured by the re-
quirement that a plaintiff has either been the
target of fraud or has relied upon the fraudu-
lent conduct of defendants.” Summit, 214
F.3d at 561.
Thus, in Summit we ruled that a target of a
fraud that did not itself rely on the fraud may
pursue a RICO claim if the other elements of
proximate causation are present.53 We cited
with approval Mid Atlantic Telecom, Inc. v.
Long Distance Services, Inc., 18 F.3d 260,
263-64 (4th Cir. 1994), which “held open the
possibility that a plaintiff company may not
need to show reliance when a competitor lured
the plaintiff’s customers away by a fraud di-
rected at the plaintiff’s customers.” Summit,
214 F.3d at 561.
Consequently, P&G’s RICO claims based
on Amway’s alleged spreading of the Satanism
rumor to lure customers from P&G are claims
on which relief can be granted. P&G has
alleged that using the wire and the mail,
Amway attempted to lure P&G’s customers
away by fraud. Although P&G did not rely on
the fraud, this falls into the narrow exception
carved out by Summit, in which we said that
“[i]n the current case, for example, the defen-
dants’ competitors might recover for injuries
to competitive position . . . .” Summit, 214
53 Although in Holmes v. Securities Investor
Protection Corp., 503 U.S. 258 (1992), the Court
held that simple “but-for” causation is not enough
to confer civil RICO standing, that conclusion “is
no more than that common law ideas about proxi-
mate causation inform the understanding of
RICO.” Israel Travel Advisory Serv., Inc. v. Is-
rael Identity Tours, Inc., 61 F.3d 1250, 1257 (7th
Cir. 1995).

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30
F.3d at 561. Thus, if P&G’s customers relied
on the fraudulent rumor in making decisions to
boycott P&G products, this reliance suffices to
show proximate causation.
P&G’s RICO claims for injury based on
Amway’s alleged illegal pyramid structure
cannot meet the requirement that the alleged
predicate acts proximately caused P&G’s dam-
ages, however. Although some Amway dis-
tributors may have bought more P&G prod-
ucts “but-for” being lured into joining Amway,
injury to P&G did not flow directly from such
inducements. Further, there are too many
intervening factors for proximate causation to
be proven here. Allowing RICO claims for
such tenuous causation would open floodgates
similar to those that we are unwilling to open
under the Lanham Act. See Holmes, 503 U.S.
at 267, 272. “Life is too short to pursue every
human act to its most remote consequences;
‘for want of a nail, a kingdom was lost’ is a
commentary on fate, not the statement of a
major cause of action against a blacksmith.”
Holmes, id. at 287 (Scalia, J., concurring).
We affirm the dismissal of P&G’s RICO
claims based on Amway’s allegedly illegal py-
ramid scheme, and we reverse the dismissal of
the RICO claims based on Amway’s spreading
of the Satanism rumor. The complaint, as
pleaded, does state a claim upon which relief
may be granted.
VIII.
The district court erred in dismissing
P&G’s claim for product disparagement under
the Lanham Act and its claims under § 16.29
of the TEXAS BUSINESS AND COMMERCE
CODE. During trial, P&G argued that Amway
had disparaged P&G’s Crest toothpaste by al-
leging that Crest scratches teeth. The district
court initially found that “there is evidence in
this case that was presented to the jury that the
challenge advertisement was literally false.
And, so, [the Crest claim] stays under the Lan-
ham Act.” Later, however, the court dis-
missed the remaining claims without address-
ing the disparagement claim. We review these
dismissals de novo. King v. Ames, 179 F.3d
370, 373 (5th Cir. 1999).
This presents an interesting dilemma. The
court first ruled that there was enough evi-
dence to go to the jury on the product dispar-
agement claim, but later dismissed the claim
with the rest of the case, without explanation.
We are left wondering whether the court in-
advertently dismissed the disparagement claim
along with the rest of the case or whether, in-
stead, the court realized that there was not
enough evidence to go to the jury. Because
there is nothing in the record to resolve this
puzzle, we reverse and remand the dismissal of
the disparagement claim under the Lanham
Act.
Amway argues in its brief that P&G has ef-
fectively waived this issue, “since P&G makes
no effort in this court to show that it even had
a case under either [the product disparagement
or the §16.29] claim. . . ” (citing Frazier v.
Garrison Indep. Sch. Dist., 980 F.2d 1514,
1528 (5th Cir. 1993) (“This court is entitled to
a reasoned statement of why the district court
erred. By the brief nature of their claim, the
[appellants] wholly fail to demonstrate any
error on the part of the district court.”)).
It would have been more helpful if P&G
had provided us with more information on the
product disparagement claim. It is enough,
however, that P&G points out that at one
point the district court found that there was
enough evidence of disparagement to get to a
jurySSincluding evidence that Amway had

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31
made a factually false claim that Crest scratch-
es teethSSand then later dismissed the claim
without explanation. This alone is sufficient to
show reversible error.
As to the § 16.29 claim, the court dismissed
it based on its finding that res judicata from
the Utah case barred the claims against Hau-
gen and Walker, and based on its ruling that
P&G was required to prove actual malice to
prevail on its Lanham Act claim. The court
stated:
[T]he only other issue that would have
been left alive in the case would have
been the Sect ion 1629 case under the
business of commerce code, which es-
sentially allows for injunctive relief with-
out any of the other claims in the case,
the Court dismisses as a matter of law
the Section 1629 of the TEXAS BUSI-
NESS & COMMERCE CODE claim for
injunctive relief.
Because we are reversing and remanding on
res judicata and actual malice, the dismissal of
which formed the basis for the dismissal of the
§ 16.29 claim, we also reverse and remand the
§ 16.29 claim.
IX.
The district court did not err in ruling that
P&G’s fraud claim was barred by the statute
of limitations. P&G alleged a claim of com-
mon law fraud against Amway arising from
falsely assuring P&G that Amway would help
fight the Satanism rumor. The court granted
summary judgment to Amway on this issue,
finding the claim time-barred. P&G assigns
error to this ruling, which we review de novo.
Prytania Park Hotel, 179 F.3d at 173.
In Texas, the statute of limitations for fraud
claims is four years. In Jackson v. Speer, 974
F.2d 676, 679 (5th Cir. 1992), we explained:
If, however, the injured part y is not
aware of the fraud or the fraud is con-
cealed, the statute of limitations begins
to run from the time the fraud is discov-
ered or could have been discovered by
the defrauded party’s exercise of reason-
able diligence. Knowledge of facts that
would lead a reasonably prudent person
to make inquiry which would lead to a
discovery of the fraud is knowledge of
the fraud itself.
(Emphasis added.)
P&G claims that, even exercising reason-
able diligence, it could not have discovered the
fraud until 1995. Evidence submitted by
Amway that was uncontroverted by P&G
shows, however, that P&G knew, or reason-
ably should have known, by the mid-to-late
1980’s that it could not rely on Amway’s
statements that Amway would help stop the
Satanism rumor. Gerald Gendall, head of pub-
lic affairs at P&G, testified that he “thought
P&G should have sued Amway almost on a
continuous basis.” Gendall also stated that
after 1983, he did not rely on any representa-
tions that Amway was doing all it could to
stop the rumor. Executive Vice-President
Laco also testified that he believed P&G could
have sued Amway for the acts of its distribu-
tors in the early to mid-1980’s. Finally, John
Smale, P&G’s CEO from 1981 to 1986, testi-
fied:
Q. When did you first come to the re-
alization that you should have gone after
Amway sooner?
A: I don’tSSI suspect in theSSI don’t

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32
know, towards the late ’80s as
these rumors continued and as we
got more and more lack of response
from Amway.
Given this undisputed testimony, a reason-
able jury could not have concluded that P&G
did not know that it could not rely on Am-
way’s representations that Amway would do
all it could to combat the Satanism rumor.
P&G’s argument that Amway is estopped
from arguing that this claim is time-barred be-
cause Amway concealed its fraudulent behav-
ior was also correctly dismissed on summary
judgment, for the same reason.
X.
We summarize, as follows: The judgment
is reversed as to the res judicata effect of the
Utah judgment. Further, the judgments of the
Utah court and the Tenth Circuit do not pres-
ent any issues of collateral estoppel that bind
the Texas court. P&G’s Lanham Act claim for
disparagement of its commercial activities is
remanded for fact-finding to determine wheth-
er the primary motivation of the Amway
disseminators of the Satanism rumor was eco-
nomic. If it was, then the speech is commer-
cial; if not, the speech was noncommercial,
and no Lanham Act claim is available. The
judgment that P&G must prove actual malice
to succeed on its Lanham Act claim for dispar-
agement of commercial activities is reversed;
no actual malice need be found.
The judgment dismissing P&G’s alter ego,
single business enterprise, and vicarious lia-
bility arguments against Ja-Ri and ADAC is
affirmed. The judgment that P&G did not
have prudential standing to bring a Lanham
Act claim based on Amway’s alleged misrepre-
sentations to its own distributors is affirmed.
The judgment dismissing P&G’s RICO claims
based on spreading the Satanism rumor is
reversed and remanded.
The judgment dismissing P&G’s RICO
claims based on Amway’s alleged illegal pyr-
amid structure is affirmed. The judgment dis-
missing P&G’s Lanham Act product dispar-
agement claim for the alleged disparagement
of Crest toothpaste is reversed, as is the judg-
ment dismissing P&G’s TEXAS BUSINESS AND
COMMERCE CODE § 16.29 claim. Finally, the
judgment that P&G’s fraud claim is time-
barred is affirmed.
AFFIRMED in part, REVERSED in part,
and REMANDED for further proceedings in
accordance with this opinion.

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