S.F. Law Firm Claims Dell Ads Are Deceptive

DALLAS Dell became the nation’s largest seller of personal computers through a customized ordering process that now faces a class-action lawsuit claiming the company used deceptive advertising and bait-and-switch tactics.

The lawsuit, filed in San Francisco by the firm Lerach Coughlin Stoia Geller Rudman & Robbins, names Dell and its finance partner CIT Bank, claiming they are “systematically deceiving customers who buy Dell products.”

Dell used multimedia advertising, bait-and-switch marketing tactics and false promises of low-cost financing to “lure and defraud purchasers with installment payment schemes offered by Dell Financial Services,” the suit claims.

Because Dell offers only pictures of its products to potential buyers, customers must trust the company to deliver what they promise in the ads, the law firm said. Dell disputed that, however, pointing out that the company has kiosks in 80 locations in 11 states.

Dell, based in Round Rock, Texas, said it has a policy of not commenting on pending litigation.

“This is something that’s new,” said spokesman Lionel Menchaca. “We’re still working through some of the details.”

While not commenting on the suit specifically, Menchaca said, “It’s been our strategy to offer customers products and services that are not only reliable but also a good value. That’s how we built the company.”

With $50 billion in revenue, Dell spends $300 million annually on TV, print and Internet advertising, according to the law firm. DDB Chicago is Dell’s lead agency, with other shops working on pieces of the account.

Attorney William Lerach, who became controversial for his class-action shareholder lawsuits filed against MCI, Enron and other corporations over the past decade, heads the law firm.

The lead plaintiff is a San Francisco nurse who responded in 2003 to a Dell ad, buying a notebook computer listed at $599, along with an $89 printer, the law firm said. She was billed $1,352 for her order and, at the urging of Dell’s sales person, financed her purchase through DFS at an undisclosed interest rate that turned out to be 27.74 to 38.82 percent, the firm said.

A second plaintiff responded to a Dell e-mail offer by ordering computer products online. He received a confirmation of his order and billing rate, but the products that arrived were of a lesser quality, according to the lawsuit. The law firm claimed the client was unable to resolve the conflict with Dell.

“We received too many complaints to ignore,” said Reed R. Kathrein, a Lerach partner who filed the suit Feb. 14. “Dell offers one low-priced product and then substitutes a higher cost or lower quality item. Dell promises ‘easy’ credit but no one qualifies. It then charges unconscionable high interest and other credit charges.”