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Rep. No. 93-1408, at 40 (1974), as reprinted in 1974 U.S.C.C.A.N. 7755, 7772). Further,
“[c]ircumstantial evidence regarding the individual’s ‘degree of participation in business affairs
is probative of knowledge.’” FTC v. Am. Fin. Benefits Ctr., 324 F. Supp. 3d at 1080 (quoting
FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 574 (7th Cir. 1989), overruled on other grounds by
FTC v. Credit Bureau Ctr., LLC, 937 F.3d 764, 785 (7th Cir. 2019)).
Defendants argue that actual knowledge of the “existence of the rule” is required, and
ignorance of the law may serve as a defense. Dkt. # 83 at 22. In Jerman v. Carlisle, McNellie,
Rini, Kramer & Ulrich LPA, the Supreme Court suggested, without deciding, that the FTC Act
contains a mistake of law defense. 559 U.S. 573, 584–85 (2010). The Ninth Circuit has never
considered this issue, but the Seventh Circuit noted that the FTC Act “includes a variation on an
ignorance-of-the-law defense; a business can be liable only if it either knew that the act was
unlawful or if it should have known the act was unlawful (‘knowledge fairly implied’).” United
States v. Dish Network L.L.C., 954 F.3d 970, 978 (7th Cir. 2020).
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But on a motion to dismiss
“the [c]ourt need not decide whether Defendants had actual knowledge of the [applicable law];
rather, Plaintiff need only plausibly state Defendants had knowledge or were on notice that the
[applicable law] applied to survive a motion to dismiss.” United States v. Stratics Networks Inc.,
No. 23-CV-0313-BAS-KSC, 2024 WL 966380, at *9 (S.D. Cal. Mar. 6, 2024). Thus, even if
Defendants claim that they did not have actual knowledge of the law, the FTC can bring a claim
for civil penalties by alleging constructive knowledge—that a “reasonable person under the
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In Jerman, 559 U.S. at 584, the Supreme Court held that there was no mistake of law defense in
the Fair Debt Collection Practices Act, distinguishing it from the FTC Act, which requires “actual
knowledge or knowledge fairly implied on the basis of objective circumstances that such act is unfair or
deceptive and is prohibited by such rule,” 15 U.S.C. § 45(m)(1)(A). “Given the absence of similar
language in § 1692k(c), it is a fair inference that Congress chose to permit injured consumers to recover
actual damages, costs, fees, and modest statutory damages for ‘intentional’ conduct, including violations
resulting from mistaken interpretation of the FDCPA, while reserving the more onerous penalties of the
FTC Act for debt collectors whose intentional actions also reflected ‘knowledge fairly implied on the
basis of objective circumstances’ that the conduct was prohibited.” Jerman, 559 U.S. at 583–84.
Case 2:23-cv-00932-JHC Document 165 Filed 05/28/24 Page 47 of 49