Opinion ID: 2833600
Heading Depth: 3
Heading Rank: 1

Heading: Kathleen O. Milner

Text: Kathleen Milner provided an overview of the ACH system and NACHA. She explained that, although “NACHA Operating Rules are contractually binding on parties to ACH payments,” like the NACHA Operating Guidelines, they do not “have the force of law[.]” Milner Decl., JA 3781-82 ¶ 11. 11 Fox and Geisser were called by plaintiff’s counsel as “fact witnesses.” JA 2696; Fox Decl., JA 2972. 13 Milner also discussed high return rates, noting that high returns rates “may be indicative of fraud,” but believed that they are not “conclusive evidence of fraud.” Id., JA 3784 ¶ 17. In support of this assertion, Milner summarized various return codes that are used to identify transactions that are not properly authorized, highlighting the ones used in this case that are not dispositive of fraud. Id., JA 3785-89 ¶¶ 20-29. She believed that, “without investigating the facts and circumstances of each purported fraudulent transaction, you are left simply with conjecture[]” about whether fraud is involved. Id., JA 3789 ¶ 29. She also testified that, “[t]o conclude that the merchants were in fact complete frauds and to further conclude that the Zions Defendants knew them to be so would require an individualized analysis of each merchant and the Zions Defendants’ relationship with each merchant.” Id. Milner rejected Reyes’ assertion that the mislabeled codes (labeling “TEL” and “WEB” transactions as “PPD” transactions) indicate fraud. Rather, she concluded that the mislabeled classifications were the result of a problem with Modern Payments’ software. Id., JA 3791 ¶ 33. According to Milner, using the TEL code liberally, not solely when there was a preexisting relationship or consumer-initiated call was not fraud, but due, in part, to the fact that “the requirements of the TEL rule were broken up throughout the NACHA rulebook and were, therefore, difficult to locate and confusing to follow.” Id., JA 3794-95 ¶ 39. Finally, Milner asserted that charging a fee for returned transactions was also not indicative of fraud because it is “accepted industry practice” to do so “as a disincentive for Originators having returned transactions and an incentive to obtain proper authorizations.” Id., JA 3795 ¶ 40.