State of Colorado and FTC Sue Russ Dalbey

On May 26th the State of Colorado and the FTC have filed against Russell T. Dalbey, his Company, and two of his partners.

Details of the case (Original Posting)

Plaintiffs: Federal Trade Commission and State of Colorado
Defendants: Russell T. Dalbey, DEI, LLLP, Dalbey Education Institute, LLC, IPME, LLLP, Catherine L. Dalbey and Marsha Kellogg
Case Number: 1:2011cv01396
Filed: May 26, 2011
Court: Colorado District Court
Office: Denver Office
County: Boulder
Presiding Judge: Christine M. Arguello
Nature of Suit: Other Statutes – Other Statutory Actions
Cause: 15:0053 Federal Trade Commission Act
Jurisdiction: U.S. Government Plaintiff
Jury Demanded By: None

Russ Dalbey is a popular work from home business guru who sells his materials online and via late night infomercials.  His product “Winning in the Cash Flow Business” is a how-to course that teaches people how to start a note buying business.

The course has been on the market for many years now and in that time has apparently amassed enough complaints from customers for the FTC to go after the company.

The cause for the suit falls under the Federal Trade Commission Act which empowers the commission to:

(a) prevent unfair methods of competition, and unfair or deceptive acts or practices in or affecting commerce; (b) seek monetary redress and other relief for conduct injurious to consumers; (c) prescribe trade regulation rules defining with specificity acts or practices that are unfair or deceptive, and establishing requirements designed to prevent such acts or practices; (d) conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce; and (e) make reports and legislative recommendations to Congress.” – FTC

Under the Federal Trade Commission Act:

  • Advertising must be truthful and non-deceptive;
  • Advertisers must have evidence to back up their claims; and
  • Advertisements cannot be unfair.

A detailed breakdown of the FTC’s process of ad reviews can be found in their Advertising FAQ’s page. Ultimately, when deciding if a company is running unlawful ads the FTC considers the case from the perspective of a “reasonable customer.”  They are looking to see if the ads are deliberately misleading, injurious to the consumer, or have unsubstantiated product claims.

What’s interesting about the FTC is that

Even though the FTC is considered to be a law enforcement agency it lacks punitive authority. It cannot punish violators but it can issue cease and desist orders and argue cases in federal and administrative courts.   If an FTC ruling—such as a cease and desist order—is ignored, however, the FTC can seek civil penalties in federal court and seek compensation for those harmed by the unfair or deceptive practice. The real function of the FTC is not to punish but rather to prevent those abuses to federal trade regulations and laws.” – Reference for Business

Dalbey Education customers should keep an eye on the outcome of this case to see if they might be eligible for monetary compensation.