At the end of the day, we at the Council represent both corporations and the societies/communities in which they operate. As part of this we can’t stand frivolous lawsuits against companies, and we do believe that corporations should aggressively enforce their own legal rights.

However, at what point does “aggressively enforce” possibly go too far? That point is reached when a companies own existing employees would call into question that actions of its own employer. When that point is reached, the company runs the risk of disaffecting the very people that it needs to generate its profit and develop its future.

There are two cases in the news this week worth following in that regard: Masco Industries $2.2 million RICO judgement against 80 former employees; and P&G’s $19.5 million judgment against four former Amway distributors over allegedly defamatory rumors circulated by the Amway personnel in the mid-1990s linking P&G to satanism.

Both Masco and P&G are operating fully within their legal rights. However, both companies are running significant reputational risks with the way that they are pursuing these cases.

The Masco case involves the closure of a manufacturer in 2002 in NJ, resulting in a layoff of the entire workforce of 111 people. An attorney, Michael Policasto, of the firm Ginarte O’Dwyer Winograd and Laracuente convinced more than 80 of laid off employees to file workers comp claims. Allegedly the claims were largely identical except for personal identifying information and supposedly employees were also directed to provide false information to doctors. Subsequent exams by company doctors found virtually no disability attributable to work.

In response, the company sued the law firm and the employees in federal court under the RICO statute. By this time, Policastro had left the law firm, and the firm decided to settle out of court. This left the 84 workers to defend themselves, which they did not, and thereby Judge Chesler ruled in favor of Bath Unlimited, signing a default judgment of $2.2 million against the former employees.

The P&G case involves a lawsuit filed by P&G in 1995. It was one of several the company brought over rumors alleging a link with the company’s logo and Satanism. Rumors had begun circulating as early as 1981 and the company alleged that Amway Corp. distributors revived those rumors in 1995, using a voice mail system to tell thousands of customers that part of Procter & Gamble profits went to satanic cults.

A federal judge had dismissed the lawsuit involving Amway, and a three-judge panel of the U.S. Circuit Court of Appeals in Denver agreed in 2003, saying the rumors were not defamatory and that P&G had not made a case for specific damages. P&G, however, got the case reinstated on a further appeal.

Along the way Amway allegedly issued several public retractions and apologies. In the words of the distributors’ attorney however, “Despite the public apology, P&G has spent 12 years destroying their lives,” Makled said. “P&G is a $68 billion company. What they got out of this case was what they could earn in about 2 1/2 hours. We think that’s shameful.”

Commentary: In our opinion – re: Masco, the former employees were stupid and criminal to file the false workers comp against the company. However, these in all likelihood were not terribly educated people. Perhaps it is the law firm that allegedly encouraged the claims filing which is getting off easy. Masco has made its point and helped a lot of other corporations avoid frivolous lawsuits. However, at this juncture if Masco aggressively pursues these former workers for payment, we think that is overkill and could backfire. Re: P&G, we neither are big fans of MLM companies like Amway. We might have settled for expensive (read: paid advertising) and apologies by this point and moved on and gotten these satanic rumors out of the ongoing media coverage -particularly when the case was dismissed previously. But we may not have all the facts behind P&G’s motives. We do expect, however, that the distributors will appeal if possible (at the insistence of their liability insurance carriers), while will ensure further coverage and expense for everyone.