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

Heading: Amelia H. Boss

Text: Professor Amelia Boss repeatedly highlighted “the excessively high rates of returns generated by Modern Payments and its clients, of which Zions was well aware,” and asserted that the rates provided clear evidence of fraudulent activity. Boss Decl., JA 582-92 ¶¶ 66-87. According to Professor Boss, most “banks never (or rarely) have debits returned as ‘unauthorized.’” Id., JA 582 ¶ 66. Indeed, Zions Bank did not have any unauthorized returns until it began working with Modern Payments. Boss pointed out that when Modern Payments and Zions Bank began working together in September 2006, the “number of unauthorized returns immediately began to increase dramatically from zero . . . to 799” in two months, and up to 2,632 unauthorized returns by February of the following year. Id., JA 587-88 ¶ 78 (emphasis in original). According to Professor Boss, when adjusted for size, Zions Bank had the worst return rate of any bank in the country. Id. Professor Boss also testified that Zions Bank had numerous NACHA violations, knew that many of its customers were high risk, and yet it completed inadequate due diligence. Id., JA 587 ¶ 77. She explained that NACHA “prohibits the use of the ACH system for telemarking payments initiated by outbound telemarketing.” Id., JA 575 ¶ 46.9 NACHA imposed this prohibition because it recognized that telemarketers have a high likelihood of fraud. Id., JA 575 ¶ 46. NACHA requires that transmission of debit and credit entries and entry of data over the ACH Network be entered with an appropriate label or code. Id., JA 561-63 ¶¶ 15-16, 9 See also Appellant Br. at 11-12 (discussing “rules that prohibit banks from entering transactions derived from outbound telemarketing (i.e., the type of cold-calling that Mr. Reyes experienced).”) (citing JA 672 (2008 ACH Rules, NACHA, Subsection 14.1.63)); Boss Decl., JA 597-601 ¶¶ 98-107. 9 18. For instance, transactions originating on the Internet, like those from the allegedly fraudulent Internet merchants here, are labeled “WEB,” while certain telephone-initiated debits, like those from telemarketers, are labeled “TEL.” Id., JA 562-63 ¶ 18. According to Professor Boss, Zions Bank and Modern Payments failed to adhere to this policy because Modern Payments often labeled TEL or WEB transactions as “PPD” transactions. “PPD” refers to transactions that are “obtained in pre-existing, signed writings.” Id., JA 597-98 ¶ 99. They are, therefore, the safest category of transaction. Mislabeling made it appear that the consumer had actually authorized his or her bank account to be debited even though there were no such written agreements. “Zions knew that th[ese] representation[s] w[ere] false.” Id., JA 597-98 ¶ 99. Yet, “[d]espite being advised of [its] use of improper codes[,] Zions continued to attach the false codes and continued to misrepresent the warranties.” Id., JA 598 ¶ 101. According to Reyes, the mislabeling made it possible to “hid[e] . . . the true source of the debits[]” “from victims’ banks and regulators[.]” Appellant Br. at 30 (citing Boss Decl., JA 597-99 ¶¶ 98-102). If accepted by a factfinder, this testimony could obviously establish that the PPD code was used to conceal the true nature of these transactions. Accordingly, Professor Boss concluded that Zions Bank knowingly allowed the system to be used by High Risk originators[, like Modern Payments,] whom it had to know were engaged in fraud in clear disregard of the governing rules and standards, . . . made knowing misrepresentations to the other participants in the ACH system (including the consumer receivers), . . . facilitated the misuse of the system by Modern Payments and its customers, and . . . did all this knowing of facts from which, as a banking institution, it had to know fraud was taking place. Boss Decl., JA 601 ¶ 107.