Federal Trade Commission et al v. Dalbey et al

Filing 307

ORDER granting in part 304 Motion for Order of disgorgement. Final judgment to enter. By Judge R. Brooke Jackson on 3/6/2015.(tscha, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge R. Brooke Jackson
Civil Action No. 11-cv-1396-RBJ-KLM
FEDERAL TRADE COMMISSION, and
STATE OF COLORADO, ex rel.
JOHN W. SUTHERS, ATTORNEY GENERAL
Plaintiffs,
v.
RUSSELL T. DALBEY;
DEI, LLLP;
DALBEY EDUCATION INSTITUTE, LLC;
IPME, LLLP; and
CATHERINE L. DALBEY
Defendants.

ORDER

This matter arises from a lawsuit filed by the Federal Trade Commission and the
Colorado Attorney General against Mr. and Mrs. Dalbey in May 2011. The case was settled in
July 2013 pursuant to a Stipulated Order in which the defendants agreed to pay their maximum
ability to pay (“MAP”) – which was to be determined by the government through extensive
financial discovery – in lieu of the full judgment. As part of the agreement the Dalbeys reserved
the right to challenge the MAP determination. If they did so, the Court was required to review
the amount. If the Court found that the MAP was not “objectively unreasonable,” the Dalbeys
were bound to pay the sum in full within ten business days. See [ECF No. 283 Part V, A]. If
they failed to do so, the entire judgment in the amount of $330,084,354.70 would enter against

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them “as equitable monetary relief, which . . . represents consumer injury and disgorgement
alleged in the Complaint.” Id.
In July 2014 the government notified the Dalbeys that their MAP had been calculated at
$1,715,808.61. On motion by the Dalbeys, and after conducting a hearing on the matter, this
Court held that the MAP was objectively unreasonable. [ECF No. 303]. However, after making
a number of factual findings, the Court held that it would not be objectively unreasonable if the
MAP were reduced to $858,665. Id. The Court issued its order on December 29, 2014. The
Dalbeys have since failed to make any settlement payments and now the government is back
seeking another order from this Court.
On February 2, 2015 the government filed the present motion seeking an order of
disgorgement of $858,665 in partial satisfaction of the judgment. [ECF No. 304]. I have
reviewed the briefs, and to put one dispute to rest, when the Court determined that it was not
objectively unreasonable to conclude that the Dalbeys could afford to pay $858,665, it was
determining in substance that the Dalbeys can afford to pay that amount. To any extent that
might have been unclear – and I do not believe it was unclear to the Dalbeys or counsel – I now
make it absolutely clear: the Court finds based upon the evidence presented that the Dalbeys
have the present ability to pay $858,665 towards the massive judgment to which they stipulated.
Nevertheless, the government is putting the cart before the horse. Both sides seem to
assume that a judgment has been entered. This Court has not entered any final judgment for any
monetary amount, nor has it been asked to do so. I interpret the government’s motion as
implicitly asking that such a judgment enter. Accordingly, the Court directs that a final
judgment will enter in favor of the Federal Trade Commission and the State of Colorado

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and against Russell T. Dalbey and Catherine L. Dalbey, jointly and severally, in the
amount of $330,084,354.70.
Mr. and Mrs. Dalbey are liable for disgorgement of the full amount as equitable monetary
relief. Pursuant to this Court’s recent determination of their maximum ability to pay, the
Dalbeys are hereby ordered immediately to disgorge $858,665. The government may enforce
the Court’s judgment by moving for civil contempt (and/or through other collection procedures
authorized by law) at any time after 10 days following entry of the Final Judgment. In response
to any such civil contempt motion by the government, the defendants may assert any legally
permissible defense. However, the defendants may not put forward any claim that they are
unable to pay the $858,665, as their ability to pay this amount has already been fully litigated.
As to the remaining $329,225,689.70 due, the government may enforce the Court’s judgment
through any collection procedures authorized by law, including future orders for disgorgement if
it can be ascertained that Mr. and Mrs. Dalbey are able to pay the amounts claimed.
If a motion for contempt is filed, please bear in mind that we are in the Tenth Circuit.
Case law from the United States Court of Appeals for the Tenth Circuit or from the United States
Supreme Court is binding on this Court. Law from other jurisdictions may well be persuasive
for its reasoning, but this Court always looks first at appellate law that is binding here in
Colorado.
ORDER
Final Judgment will enter as indicated above. The motion for an order of disgorgement
[ECF No. 304] is GRANTED IN PART.
DATED this 6th day of March, 2015.
BY THE COURT:

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___________________________________
R. Brooke Jackson
United States District Judge

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