Opinion ID: 173386
Heading Depth: 3
Heading Rank: 1

Heading: Individual Liability Under the FTC Act

Text: Section 5 of the FTC Act prohibits deceptive acts or practices in or affecting commerce and imposes injunctive and equitable liability upon the perpetrators of such acts. 15 U.S.C. § 45(a). Businesses and individuals may cause consumer harm as contemplated by the FTC Act in a variety of ways. See FTC v. Neovi, Inc., ___ F.3d ___, ___, 2010 WL 2365956, at , 4-5 (9th Cir.2010) (affirming summary judgment against a software marketer that had shown a profound lack of diligence in response to a prodigious number of [consumer] complaints regarding fraudulent use of its software). In order to establish individual liability to make equitable restitution under the FTC Act, the FTC must prove that an individual had knowledge that the corporation or one of its agents engaged in dishonest or fraudulent conduct, that the misrepresentations were the type upon which a reasonable and prudent person would rely, and that consumer injury resulted. FTC v. Pub'l Clearing House, Inc., 104 F.3d 1168, 1170 (9th cir.1997) (internal quotation marks omitted) (emphasis added). Only the first elementknowledgeis disputed here. The FTC may establish knowledge by showing that the individual defendant had actual knowledge of material misrepresentations, [was] recklessly indifferent to the truth or falsity of a misrepresentation, or had an awareness of a high probability of fraud along with an intentional avoidance of the truth. Id. (quoting FTC v. Am. Standard Credit Syst., Inc., 874 F.Supp. 1080, 1089 (C.D.Cal.1994)). The FTC is not required to show that the defendant actually intended to defraud consumers. Id. As this court has previously observed: Questions involving a person's state of mind, e.g., whether a party knew or should have known of a particular condition, are generally factual issues inappropriate for resolution by summary judgment. However, where the palpable facts are substantially undisputed, such issues can become questions of law which may be properly decided by summary judgment. But summary judgment should not be granted where contradictory inferences may be drawn from such facts, even if undisputed. Braxton-Secret v. A.H. Robins Co., 769 F.2d 528, 531(9th Cir.1985) (internal citations omitted). Thus, the question we address here is whether the undisputed facts of this case admit of some reasonable inference other than the conclusion that Castro and High acted with either (1) actual knowledge, (2) reckless indifference to truth or falsity, or (3) an awareness of a high probability of fraud and an intentional avoidance of the truth with respect to any of the admitted misrepresentations. We concur with the district court that the undisputed facts admit of no other inference.