Court Opinion

ID: 2833600
Source: CourtListenerOpinion
Date Created: 2015-09-02 17:00:26.380346+00
Date Added: 2024-06-11T15:11:00.292974
License: Public Domain

PRECEDENTIAL

       UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT
                 _____________

                       No. 14-1228
                      _____________

                  REYNALDO REYES,
   on behalf of himself and all others similarly situated,
                                      Appellant

                             v.

 NETDEPOSIT, LLC; MP TECHNOLOGIES d/b/a Modern
Payments; TELEDRAFT, INC.; NATIONAL PENN BANK;
WELLS FARGO BANK, N.A.; WACHOVIA BANK, N.A.;
           ZIONS FIRST NATIONAL BANK

                    ________________

  APPEAL FROM THE UNITED STATES DISTRICT
    COURT FOR THE EASTERN DISTRICT OF
                  PENNSYLVANIA
               (D.C. No. 2-10-cv-00345)
      District Judge: Honorable Juan R. Sánchez
                  ________________

                         Argued
                    September 11, 2014
                      ____________

 Before: MCKEE, Chief Judge, SMITH and SHWARTZ,
                  Circuit Judges

           (Opinion Filed: September 2, 2015)
                   ______________

     Howard I. Langer, Esq. (ARGUED)
     John J. Grogan, Esq.
     Edward Diver, Esq.
     Irv Ackelsberg, Esq.

                                  1
Peter E. Leckman, Esq.
LANGER, GROGAN & DIVER, P.C.
1717 Arch Street, Suite 4130
Philadelphia, PA 19103

      Attorneys for Appellant

Jason A. Snyderman, Esq. (ARGUED)
Grant S. Palmer, Esq.
William R. Cruse, Esq.
Bridget E. Mayer, Esq.
Blank Rome LLC
One Logan Square
Philadelphia, PA 19103

      Attorneys for Appellees

Charles L. Becker, Esq. (ARGUED)
Kline & Specter, PC
1525 Locust Street, 19th Floor
Philadelphia, PA 19102

    Attorney for Amici Curiae
    Public Interest Law Center of Philadelphia and
Community Legal Services

Julie Nepveu, Esq.
AARP Foundation Litigation
Room B4-245
601 E Street, N.W.
Washington, DC 20049

      Attorney for Amici Curiae AARP, National
Association of Consumer Advocates, National
Consumer Law Center and Consumer Federation of
America

Richard B. Tucker, III, Esq.
Tucker Arensberg
1500 One PPG Place
Pittsburgh, PA 15222

      Attorney for Amici Curiae American Bankers

                           2
       Association and Independent Community Bankers of
       America

       Robert J. LaRocca, Esq.
       Kohn, Swift & Graf
       One South Broad Street
       Suite 2100
       Philadelphia, PA 19107

             Attorney for Amici Curiae Richard Blumenthal,
Robert Casey, Edward J. Markey and Allyson Y. Schwartz

       Francis X. Riley, III, Esq.
       Charles M. Rowan, Jr., Esq.
       Saul Ewing
       650 College Road East
       Suite 100
       Princeton, NJ 08540

             Attorney for Amicus Curiae Risk Management
       Association

                       ______________

                 OPINION OF THE COURT
                     ______________

       McKEE, Chief Judge.

       Reynaldo Reyes appeals the District Court’s denial of
his motion to certify a class to sue for alleged civil violations
of the Racketeer Influenced and Corrupt Organizations Act
(“RICO”), 18 U.S.C. §§ 1962(c), (d). The defendants are
Zions First National Bank (“Zions Bank”) and its payment-
processor subsidiaries, Netdeposit, LLC and MP
Technologies (together, “Modern Payments”).

       Reyes alleges that the defendants conspired to conduct
a fraudulent telemarketing scheme that caused unauthorized
debits from bank accounts owned by himself and members of
the proposed class.

                                   3
       The District Court held that class certification was
inappropriate because there were no issues common to the
class and Reyes could therefore satisfy neither the
commonality requirement of Federal Rule of Civil Procedure
23(a), nor the predominance requirement of Rule 23(b)(3).
This interlocutory appeal followed.1

I.     BACKGROUND

       Reyes alleges that the defendants conspired to conduct
a fraudulent scheme whereby certain telemarketing firms
would contact unsuspecting individuals and offer them
something of little or no value. Reyes alleges that, during
unsolicited phone calls with unsuspecting consumers, the
telemarketers would obtain bank account information which
was used to make unauthorized debits from the the
consumers’ bank accounts.2 In Reyes’ case, in an unsolicited
phone call in November 2007, telemarketer NHS Systems
told Reyes that he qualified for a free government grant.
NHS Systems then requested Reyes’ bank account
information, which he provided.

       Telemarketers such as NHS Systems cannot readily
obtain funds directly from consumers’ bank accounts because
most banks are extremely reluctant to allow them to debit
accounts. Accordingly, telemarketers usually contract with
payment processing entities that debit bank accounts on the

       1
         See 28 U.S.C. § 1292(e); Fed. R. Civ. P. 23(f). The
District Court also granted various amici curiae leave to file
briefs in support of Reyes’ motion for class certification.
       2
         Reyes alleges that, besides phone-based marketing,
the scheme included deceptive mailers, Internet solicitation,
and “slamming,” a process whereby a telemarketer acquires a
consumer’s bank account information from another entity and
either contacts the consumer under the pretense of attempting
to verify the information or simply transfers money from the
consumer’s account. JA 513-15.
        Because Reyes alleges that the merchants operated in
the same way and as part of a fraudulent enterprise, Appellant
Br. at 18, we refer to all of them as “telemarketers” for the
sake of simplicity.
                                   4
telemarketer’s behalf. In Reyes’ case, NHS Systems did
exactly that. It provided Reyes’ bank account information to
Modern Payments, a third-party payment processing agency
and subsidiary of Zions Bank. Modern Payments then caused
Zions Bank to initiate an Automated Clearing House
(“ACH”) debit of Reyes’ bank account at Commerce Bank.
Pursuant to Zions Bank’s request, Reyes’ funds on deposit
with Commerce Bank were transferred to Modern Payments’
account at Zions Bank, and ultimately transferred to NHS
Systems, the Originator. Two debits were processed from
Reyes’ account using this ACH debit process, one for $29.95
and another for $299.95.3 Reyes v. Zions First Nat’l Bank, ---
F. Supp. 2d ---, Civ. Action No. 10-345, 2013 WL 5332107,
at *1 (E.D. Pa. Sept. 23, 2013).

        The ACH debit process is an alternative to traditional
checking which is based on the transfer of paper instruments.
When an ACH transfer occurs, an Originating Depository
Financial Institution, like Zions Bank, initiates an ACH entry
at the request of an Originator (such as NHS Systems). Such
requests can also be made through third parties at the request
of the Originator. As we have just explained, Reyes alleges
that Modern Payments caused Zions Bank to take ACH debits
from bank accounts owned by him and other members of the
putative class at the request of the telemarketers, like NHS
Systems.

       The Originating Depository Financial Institution (here,
Zions Bank) aggregates payments from customers and
transmits the payments in batches to an ACH Operator (either
the Federal Reserve or the Clearing House). The Operator
receives and sorts the batched payments and makes the funds
available to the Receiving Depository Financial Institution.
That institution, in turn, debits or credits the relevant account
based on the ACH entry. Here, Reyes alleges that Modern

       3
         Although many (if not all) of the debits involved in
this appeal are sufficiently small to be considered de minimis
by some, the cumulative amount is substantial. In fact, the
conduct alleged here has attracted the attention of the
impressive array of amici who have filed briefs in this matter,
including the AARP, four members of the United States
Congress, and the American Bankers Association.
                                   5
Payments credited the accounts of each of the telemarketers
in the amount of funds fraudulently debited from
unsuspecting victims. Both Modern Payments, as payment
processor, and Zions Bank, as the processor’s bank, would
have collected a fee and then deposited the balance of
amounts debited from consumers directly into the account of
the telemarketer.4

       Reyes alleges that his bank account and the accounts
of other consumers subjected to this fraudulent enterprise did
not have sufficient funds to satisfy many of the unauthorized
debits.5 Reyes called NHS Systems to complain about the
two withdrawals from his account, but he alleges NHS
Systems provided him with a misleading audio recording.6

      Thereafter, Reyes initiated this action on behalf of
himself and a class of all individuals in the United States as to
whom ACH debit entries or [remotely created check] drafts
on their accounts were prepared by defendants Netdeposit,
Modern Payments, or Teledraft during the four-year period
immediately preceding the filing of this action and finally
charged to the class members’ bank accounts by a
Telemarketer, or pursuant to information provided to
defendants [Netdeposit, Modern Payments, or Teledraft] by

       4
         Though this sounds cumbersome, it is nothing more
than a series of computer entries or lines of computer code;
the entire series of transactions can easily be completed, and
the funds transferred and received, in one to two business
days.
       5
         It is not difficult to understand why the accounts did
not have a sufficient balance to pay the amount of the
attempted debits. If the depositors had never authorized the
debits, they would have had no way of knowing that the
balance in their accounts was not sufficient to satisfy the
amounts of the attempted withdrawals and no reason to take
steps to ensure that their balances were sufficient to cover
those debits.
       6
         According to NHS Systems, the recording
established that Reyes consented to the disputed debits.

                                   6
the Telemarketers, or who otherwise incurred any bank
charges as a consequence of such ACH debit entries or
[remotely-created checks].

JA 526 ¶ 63.

       The legal theory underlying this suit is that the
defendants were operating a RICO enterprise that was a total
sham.7 The proof that Reyes offers to support that claim
includes the inordinately high “return rates” of the
telemarketers who did business with Modern Payments and
Zions Bank. “Return rates” refer to how often an ACH debit
cannot be completed. There are many reasons why a
transaction may not be completed. These include (but are not
limited to) insufficient funds or a customer complaint
regarding the transaction. These complaints can result in the
debited funds being credited back to the consumer’s bank
account. Return rates are collected by NACHA (previously
known as the “National Automated Clearing House
Association”), a not-for-profit association that administers
and manages the ACH Network and other electronic
transactions.

      Reyes stresses that “the lowest return rate at issue
[here] was 25 times the national average of 1.25%.”
Appellant Br. at 26 (emphasis in original). Moreover, that
was the telemarketer with the lowest rate. As Reyes notes, he
produced testimony that “[m]ost were over 50 times that
average.” Id. at 25-26 (citing JA 661, 663). According to
Reyes, the high return rates establish that Zions Bank and
Modern Payments had reason to know that the telemarketers
were engaged in fraudulent conduct.

      Reyes produced additional evidence to support his
argument. That evidence included internal e-mails wherein
Zions Bank, Netdeposit, and Modern Payments discussed the

       7
         As noted, Reyes alleges that this fraudulent scheme
constituted an “enterprise” under RICO, 18 U.S.C. § 1962(c).
However, since the only issue before us is the District Court’s
refusal to certify a class under Rule 23, we need not discuss
the elements needed to prove a RICO conspiracy except
insofar as they may bear upon issues of class certification.
                                  7
“staggering” return rates, JA 686, and the “alarm” that their
high return rates had caused NACHA. Id. at 814-15.
According to Reyes, “[w]ithin the first three months of
opening Modern Payments, for example, Zions was notified
of the likelihood of fraud by the Federal Trade Commission
(“FTC”), NACHA, and its own officers.” Appellant Br. at
28.     There was also evidence that these defendants
communicated concern that they may be at risk for some of
their business lines being used for money laundering. JA
692.

        Reyes claims the evidence establishes that “[e]ach of
the[] frauds operated in the same way, luring consumers with
some kind of ‘card’ or ‘benefit’ to obtain their bank account
information.”     Appellant Br. at 18.8        These included
“promises of un-secured loans, pre-paid credit cards,
merchandise-club cards, identity-theft protection plans, and
health-care discount plans.” Meyer Decl., JA 1639-40 ¶ 19.
Thus, although there is some variation in the “benefits”
offered and the particular way each fraud was perpetrated,
Reyes asserts that there is no need to examine each individual
transaction “[b]ecause the business model of these schemes is
inherently fraudulent[.]” Appellant Br. at 19.

A.     REYES’ EXPERT WITNESSES

        Reyes offered several witnesses at the hearing on class
certification, including three experts. Amelia H. Boss, a
Drexel Law School Professor, testified as an expert on
banking and banking practices. Robert J. Meyer, a Wharton
Business School Professor, and Barbara A. Blake, a former
investigator for the Iowa Attorney General, both testified as
experts on fraudulent marketing practices. Although we refer

       8
         Reyes also cites numerous proceedings against some
of the telemarketers involving the FTC and other entities that
led to conclusions that the telemarketers were engaged in
fraud. See Appellant Br. at 4, 16, 20-21. The defendants
point out, and Reyes does not dispute, that the government
enforcement actions involving the telemarketers in this case
were initiated after the defendants stopped doing business
with them, and the defendants were not themselves parties to
any of those actions. Appellee Br. 49.
                                  8
to their testimony throughout our discussion, it is helpful to
provide an initial summary of the testimony of each.

1.     Amelia H. Boss

        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.

2.     Robert J. Meyer
                                   10
        Professor Robert Meyer testified that the Federal
Reserve Bank has concluded that 10% return rates are prima
facie evidence of fraud.10 Meyer Decl., JA 1636 ¶ 11.b.
Here, the return rates “rang[ed] from 30% to almost 90%[.]”
Id., JA 1636 ¶ 11.a. In addition, Professor Meyer pointed to
FTC enforcement actions and these telemarketers’ products
and services to conclude that the telemarketers operated
“schemes designed to obtain victims’ bank account
information by deception and to use that information to debit
victims’ accounts as quickly [and] as often as possible before
the victim understood what had occurred.” Id., JA 1634-35
¶¶ 8-9.

       According to Professor Meyer, telemarketers
NHS/PHS, the Platinum Benefit Group, Vexeldale (also
known as Market Power Marketing Solutions, Sourdale, and
ZaZoom), RxSmart, Low Pay, and Group One Networks
offered a variety of products that were either valueless or
significantly devalued. Id., JA 1633, 1639-40 ¶¶ 6, 19.
Although there was some variation in the manner in which
the unauthorized debits were accomplished, Professor Meyer
concluded that they had the same components of deception:
(1) each was obtained from a first party at a small or

       10
          The defendants contest this statement, noting that
“[t]here is no law or regulation supporting this contention.”
Appellee Br. at 47 (emphasis in original). Professor Meyer,
like Investigator Blake and Reyes, who also refer to the
Federal Reserve Bank’s prima facie evidence of fraud, fails to
include a source. The record presented, however, does
contain an unrelated complaint quoting an unnamed Federal
Reserve official as writing that a 10% return rate “would
likely be regarded by bank supervisory agencies and/or law
enforcement agencies as prima facie evidence that your bank
knew or should have known that your [third-party payment
processors and/or merchants] had engaged in fraudulent
activities.” JA 1695 ¶ 64 (alteration in original). Despite
whatever dispute the parties have regarding the Federal
Reserve Bank’s position on return rates, neither party disputes
that the vast majority of U.S. banks have rates of returns that
are close to (or actually are) zero, while here, that number is
30% to 90%.
                                 11
negligible cost; (2) all were used to debit consumer accounts
for exorbitant amounts, (3) none of these items conveyed any
net value to the consumers, and (4) all were sufficiently
complex, initially concealing their fraudulent nature to the
victim. Id., JA 1639-40 ¶ 19. Professor Meyer based his
opinion on his review of “telephone scripts and web landing
pages used in the marketing of the products and/or programs,
internal e[-]mails, and tables of ACH return rates for the
programs[.]” Id., JA 1633 ¶ 6.

3.    Barbara A. Blake

      Reyes’ expert Investigator Barbara Blake examined
each scheme in detail and also stated that return rates over
10% were prima facie evidence of fraud. Blake Decl., JA
1614-15 ¶ 19.

       Investigator Blake looked at the operations of each
entity and other evidence before concluding that the
telemarketers operate “fundamentally fraudulent schemes[.]”
Id., JA 1627-28 ¶ 85. She noted that the “[h]igh return rates
are the plainest hallmark of mass-marketing fraud conducted
through the banking system. This has been recognized in
publications of the Comptroller of the Currency, FinCen,
NACHA and the FDIC.” Id., JA 1614 ¶ 18.

       Investigator Blake concluded that “each of the
schemes at issue was a totally fraudulent mass-marketing
fraud” because each of them “uses purported ‘products’ and
‘services’ that are routinely used as part of mass-marketing
fraud schemes.” Id., JA 1613 ¶ 15. “Th[e] strong
presumption of fraud [evidenced by the high return rates] is
confirmed by the nature of the schemes . . . , which, once they
are understood, are plainly fraudulent on their face.” Id., JA
1615 ¶ 21. Investigator Blake’s conclusion was based on the
telemarketers’ sales scripts, the worthless nature of the
purported “products,” and the history of regulatory actions
taken against the telemarketers and their principals. Id., JA
1613-27 ¶¶ 15-84.

B.    FACT WITNESSES

                                 12
        The District Court also heard the testimony of two fact
witnesses whose testimony will be discussed in greater detail
below.11 They were: Wayne D. Geisser, who was installed as
the NHS Systems receiver after the FTC obtained a
preliminary injunction against NHS Systems, and Jeanette A.
Fox, who was a senior director of risk investigation at
NACHA. Appellant Br. at 12, 26. Geisser and Fox testified
that high return rates are not dispositive of fraud. Fox Dep.,
JA 2987-2991; Geisser Dep., JA 1155, 3055. Fox explained
that an unauthorized return could be the result of a dispute
over an agreement, the amount charged, or the timing of the
charge. Fox Dep., JA 2975. Nevertheless, Fox did believe
that the rate of returns here was high enough to warrant an
investigation. Id., JA 1145. Even she agreed that the rates
strongly suggested fraud. Id., JA 2977 (stating there is
“[p]robably not” a legitimate reason for excessive return
rates). Geisser testified that the NHS Systems health discount
program brochures, fulfillment packages, purchase orders,
and contracts with call centers appeared to be legitimate,
Geisser Dep., JA 3049-50, even though he agreed that NHS
Systems was totally fraudulent. Id., JA 1161.

C.    DEFENDANTS’ EXPERT WITNESSES

       The defendants presented two experts: Kathleen O.
Milner, an expert in the ACH Network and NACHA rules and
guidance, who worked for many years in private financial
services, and Peter G. Djinis, a lawyer who specializes in
compliance concerning federal anti-money laundering and
Bank Secrecy Act laws and regulations with experience in the
Department of the Treasury.

1.    Kathleen O. Milner

       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.

2.     Peter G. Djinis

       Peter Djinis discussed various laws and regulations not
at issue here, including Office of the Comptroller of the
Currency bulletins, the Bank Secrecy Act, and the U.S.
Patriot Act, Djinis Decl., JA 3767-70 ¶¶ 13, 16, 18-20, since
Reyes alleges a RICO violation. Djinis also opined that
Modern Payments and Zions Bank conducted adequate due

                                   14
diligence of the telemarketers at issue. Id., JA 3772-76, ¶¶
25-36.

D.     REYES’ USE OF THE EVIDENCE

        Reyes relies on this record to allege that the defendants
operated a RICO enterprise that was a “complete sham”
lacking any legitimate business substance. He draws upon
this theory to overcome potential challenges to the
predominance requirement for class certification. Under the
“complete sham” theory, the reviewing court can focus on the
defendant’s or defendants’ conduct as a whole in order to find
proof of elements that normally require evidence about each
plaintiff, like plaintiff’s reliance. Rosario v. Livaditis, 963
F.2d 1013 (7th Cir. 1992); Cullen v. Whitman Med. Corp.,
188 F.R.D. 226 (E.D. Pa. 1999); see also In re Cmty. Bank of
N. Va. Mortg. Lending Practices Litig., --- F.3d ---, Civ.
Action No. 13-4273, 2015 WL 4547042, at *19, *21 (3d Cir.
July 29, 2015). “[T]he causation element of fraud and breach
of contract can be satisfied through objective circumstantial
evidence on a classwide basis.” Elizabeth J. Cabraser, Trends
and Developments in the Filing, Certification, Settlement,
Trial and Appeal of Class Actions, SE99 A.L.I.-A.B.A. 743,
821 (2000) (“[I]t is unnecessary and unfair to impose
modalities of proof that are specific to such nonexistent
personal relationships to insulate defendants from classwide
liability to those with whom they related on a classwide
basis.”).

E.  THE DISTRICT COURT’S RESOLUTION OF
REYES’ LEGAL THEORY

       The District Court acknowledged the “complete sham”
theory, explaining that in order for Reyes to succeed on this
theory under Rule 23, he must demonstrate that the
“defendant’s conduct is so wrought with fraud as to be a
complete sham[.]” Reyes, 2013 WL 5332107, at *6. Thus,
the District Court realized that, in an appropriate case, “the
class members’ participation or involvement with the
defendant is sufficient evidence that each class member
suffered damages, rendering an analysis of individual
transactions unnecessary.” Id. As the District Court also
recognized, pursuant to the “complete sham” theory,

                                  15
misrepresentations by the defendant resulting in the plaintiffs
experiencing common damages can prove common injury in
a RICO class action. Id. (citing Cullen, 188 F.R.D. at 235).12
In fact, the District Court even went so far (with some
justification) as to compare this to the “fraud on the market”
theory. Id. (citing Lester v. Percudani, 217 F.R.D. 345, 352
(M.D. Pa. 2003).13

       However, the District Court concluded that class
treatment was inappropriate here because Zions Bank and
Modern Payments collaborated with separate mass-marketing
firms and did so in different ways. The District Court

       12
          As discussed further below, the Supreme Court has
held that predominance requires that plaintiffs show that their
individual injuries are capable of proof at trial through
common evidence and that their damages are measurable on a
classwide basis. Comcast Corp. v. Behrend, 133 S. Ct. 1426,
1430, 1432-33 (2013); but see In re Nexium Antitrust Litig.,
777 F.3d 9, 21 (1st Cir. 2015) (“But it is well-established that
the individuation of damages in consumer class actions is
rarely determinative under Rule 23(b)(3). Where common
questions predominate regarding liability, then courts
generally find the predominance requirement to be satisfied
even if individual damages issues remain.” (internal quotation
marks, alterations, and citation omitted)).
       13
          The fraud on the market theory is based on
       the hypothesis that, in an open and developed
       securities market, the price of a company’s
       stock is determined by the available material
       information regarding the company and its
       business. . . . Misleading statements will
       therefore defraud purchasers of stock even if the
       purchasers do not directly rely on the
       misstatements. . . . The causal connection
       between the defendants’ fraud and the
       plaintiffs’ purchase of stock in such a case is no
       less significant than in a case of direct reliance
       on misrepresentations.

Basic Inc. v. Levinson, 485 U.S. 224, 241-42 (1988)
(internal quotation marks omitted).
                                  16
stressed that “Reyes almost completely relies on the high
return rates as his proof of the complete sham, [but] the
returns are different for each telemarketer, [therefore] he
cannot prove this complete sham theory on evidence common
to the class since members of the class interacted with
different telemarketers.” Id. at *8. The District Court also
emphasized that, although the high return rates were common
to the telemarketers, they are insufficient to prove fraud.

       With this background as our analytical compass, we
will now discuss class certification within the context of
Reyes’ claim that he produced sufficient evidence of a sham
enterprise to satisfy the requirements for class certification
under Rule 23(b)(3).

II.    DISCUSSION

        “The class action is an exception to the usual rule that
litigation is conducted by and on behalf of the individual
named parties only.” Wal-Mart Stores, Inc. v. Dukes, 131 S.
Ct. 2541, 2550 (2011) (quotation marks omitted).

        Federal Rule of Civil Procedure 23 sets out
requirements for bringing a class action. All potential classes
must initially satisfy four prerequisites to be certified: (1)
numerosity, (2) commonality, (3) typicality, and (4) adequacy
of representation. Fed. R. Civ. P. 23(a). Additional
requirements must then be satisfied depending on whether a
plaintiff seeks certification under Rule 23(b)(1), (2), or (3).
Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 590 (3d Cir.
2012). Reyes is attempting to proceed under Rule 23(b)(3).
Accordingly, he must satisfy the additional requirements of
predominance and superiority.14 Fed. R. Civ. P. 23(b)(3).

       14
          When an action proceeds as a class action under
Rule 23(b)(3), “the court finds that the questions of law or
fact common to class members predominate over any
questions affecting only individual members, and that a class
action is superior to other available methods for fairly and
efficiently adjudicating the controversy.” Fed. R. Civ. P.
23(b)(3).
                                  17
      The District Court did not reach all of the prerequisites
of Rule 23(a) or the superiority requirement in Rule 23(b)(3)
because it concluded that Reyes had not established
commonality as required under Rule 23(a) or predominance
under Rule 23(b)(3).

       “Commonality” is a consideration of whether there are
“questions of law or fact common to the class[.]” Fed. R.
Civ. P. 23(a)(2). Commonality is satisfied when there are
classwide answers. Wal-Mart Stores, Inc., 131 S. Ct. at 2551-
52; Sullivan v. DB Invs., Inc., 667 F.3d 273, 298-300 (3d Cir.
2011) (en banc) (considering “whether the defendant’s
conduct was common as to all of the class members[]” and
common questions led to common answers such that the
“alleged misconduct and the harm it caused would be
common as to all of the class members[]”).

       The predominance inquiry then focuses on whether
“the questions of law or fact common to class members
predominate over any questions affecting only individual
members[.]” Fed. R. Civ. P. 23(b)(3). “Predominance tests
whether proposed classes are sufficiently cohesive to warrant
adjudication by representation[.]” In re Hydrogen Peroxide
Antitrust Litig., 552 F.3d 305, 310-11 (3d Cir. 2008)
(quotation marks omitted). Though related, this standard is
“‘far more demanding’ than the commonality requirement of
Rule 23(a),” id. (quoting Amchem Prods., Inc. v. Windsor,
521 U.S. 591, 623-24 (1997)), and requires “more than a
common claim.” Newton v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 259 F.3d 154, 187 (3d Cir. 2001).

       Reyes seeks to represent a class that may include tens
of thousands of claimants with potential civil RICO claims
arising from the defendants’ operation of a sham enterprise.
“Establishing liability under [§ 1962(c)] of the RICO statute
requires (1) conduct (2) of an enterprise (3) through a pattern
(4) of racketeering activity, plus an injury to business or
property.” In re Ins. Brokerage Antitrust Litig., 579 F.3d 241,
269 (3d Cir. 2009) (internal quotation marks and citations
omitted).

       Reyes must show that the racketeering activity was the
“but for” cause as well as the proximate cause of the injury

                                 18
purportedly suffered by the members of the proposed class.
Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268
(1992). Proximate cause requires “some direct relation
between the injury asserted and the injurious conduct
alleged.” Id.

       Accordingly, we must determine if Reyes produced
sufficient evidence to show that he could prove his RICO
claim based on facts or evidence common to the class, and
whether such proof predominates over facts and
circumstances that are particular to given individuals within
the proposed class.

       The District Court concluded that Reyes established
neither but-for cause, nor proximate cause because “Reyes
would not be able to establish there was an impact that
affected each class member in the same way.” Reyes, 2013
WL 5332107, at *8. In reaching that conclusion, the District
Court focused on the fact that potential class “[m]embers
were contacted by telemarketers through different mediums
about different products, and some, according to Reyes, were
not contacted at all because the telemarketers bought their
account information from other telemarketers.” Id.

       We must determine whether the District Court (1)
applied the proper standard for assessing predominance and
commonality, (2) appropriately reviewed Reyes’ experts’
opinions and the other evidence on the record, and (3)
properly determined that commonality and predominance
were not established based on the evidence presented. Much
of our inquiry is guided by our analysis in In re Hydrogen
Peroxide Antitrust Litigation.

A.    STANDARD OF REVIEW

       In reviewing a denial of class certification, we subject
the District Court’s legal rulings to de novo review. In re
Hydrogen Peroxide Antitrust Litig., 552 F.3d at 312; see also
In re Initial Pub. Offerings Sec. Litig., 471 F.3d 24, 32 (2d
Cir. 2006).

       We review the District Court’s findings of fact, its
application of law to facts, and its decision regarding class

                                 19
certification for an abuse of discretion. In re Hydrogen
Peroxide Antitrust Litig., 552 F.3d at 312, 320 (citations
omitted). “The district court abused its discretion if its
decision rests upon a clearly erroneous finding of fact, an
errant conclusion of law or an improper application of law to
fact.” Newton, 259 F.3d at 165-66 (footnote and quotation
marks omitted). “To illustrate . . . using the example of
numerosity, review of the factual finding as to the size of the
proposed class would be for clear error, review of the judge’s
articulation of the legal standard governing numerosity would
be de novo, and review of the ultimate ruling that applied the
correct legal standard to the facts as found would be for abuse
of discretion.” In re Initial Pub. Offerings Sec. Litig., 471
F.3d at 41.

B.     RULE 23 LEGAL STANDARDS

        “Class certification is proper only if the trial court is
satisfied, after a rigorous analysis, that the prerequisites of
Rule 23 are met.” In re Hydrogen Peroxide Antitrust Litig.,
552 F.3d at 309 (footnote and quotation marks omitted). In
conducting its inquiry, a district court must rigorously assess
“the available evidence and the method or methods by which
plaintiffs propose to use the evidence to prove impact at
trial.” Id. at 312 (citations omitted); see also Comcast Corp.
v. Behrend, 133 S. Ct. 1426, 1432 (2013) (“[T]he court’s duty
[is] to take a ‘close look’ at whether common questions
predominate over individual ones.” (quoting Amchem
Products, Inc., 521 U.S. at 615). On appeal, we do not
“speculate as to what the District Court must have intended
[regarding a Rule 23 requirement]. We cannot just assume
the District Court conducted the appropriate analysis under
Rule 23. ‘Rigorous analysis’ requires more of the District
Court than that[.]” Neale v. Volvo Cars of N. Am., LLC, ---
F.3d ---, Civ. Action No. 14-1540, 2015 WL 4466919, at *15
(3d Cir. July 22, 2015).

        We have also explained that the Rule 23 inquiry may
require the district court to “delve” behind the pleadings. In
re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 316
(quotation marks omitted).          This means that, at the
certification stage, the district court “cannot be bashful. It
must resolve all factual or legal disputes relevant to class

                                  20
certification, even if they overlap with the merits—including
disputes touching on elements of the cause of action.”
Marcus, 687 F.3d at 591 (quotation marks omitted).

       Without this searching inquiry, a district court cannot
determine if class certification is appropriate. Certification
“calls for findings by the court, not merely a ‘threshold
showing’ by a party, that each requirement of Rule 23 is met.
Factual determinations supporting Rule 23 findings must be
made by a preponderance of the evidence.” In re Hydrogen
Peroxide Antitrust Litig., 552 F.3d at 307.

1.     Reyes’ Burden of Proof

       The District Court imposed a burden of absolute proof
on Reyes at the certification stage. Reyes now correctly
argues that “the ‘absolute proof of fraud’ standard . . .
exceeds this Court’s holding that factual issues bearing on the
class certification ‘must be made by a preponderance of the
evidence.’” Appellant Br. at 35 (quoting In re Hydrogen
Peroxide Antitrust Litig., 552 F.3d at 320).

        The District Court realized that “[t]o obtain class
certification, a plaintiff must demonstrate the proposed class
satisfies all four elements of Federal Rule of Civil Procedure
23(a), along with one of the three requirements under Rule
23(b)[,]” and that “the court’s findings as to the Rule 23
requirements must be supported by factual determinations
made by a preponderance of the evidence[.]” Reyes, 2013
WL 5332107, at *3 (citations omitted). However, the District
Court’s analysis suffered from the same malady that troubled
us in In re Hydrogen Peroxide Antitrust Litigation. “[S]ome
statements in [the District Court’s] opinion depart from the
standards we have articulated.” 552 F.3d at 321. The District
Court stated the correct standard but misunderstood the
burden of proof placed on a plaintiff seeking class
certification.

       In concluding that there was insufficient commonality,
the District Court relied on the fact that “Reyes’s experts have
[not] testified that the return rates are . . . absolute proof of
fraud[.]” Reyes, 2013 WL 5332107, at *8. The District Court
also believed that proof must be so persuasive that the

                                  21
certifying court “cannot have any doubt as to whether the
Rule 23 requirements are met.” Id. at *7.

       The fact that the District Court imposed a burden of
absolute proof is illustrated by the following statement: “since
Reyes’s experts have testified that the return rates are only
‘red flags’ of fraud and not absolute proof of fraud, the
factfinder would have to analyze each telemarketer separately
to determine whether or not it is a complete sham.” Id. at *8
(emphasis added). The District Court also stated that it “must
assess how Reyes will use the evidence at trial to prove
impact on a classwide basis, and the Court cannot have any
doubt as to whether the Rule 23 requirements are met.” Id. at
*7 (emphasis added) (citation omitted).

       In re Hydrogen Peroxide Antitrust Litigation requires
that a district court “not suppress doubt as to whether a Rule
23 requirement is met[.]” 552 F.3d at 321 (internal quotation
marks omitted). While a district court must consider how the
evidence will be used at trial, id. at 311 & n.8, the plaintiff’s
burden is not proof beyond “any doubt” as the District Court
required, but whether the claims are supported by a
preponderance of the evidence. Id. at 320.

        We agree with the District Court’s conclusion that “it
is possible that not every telemarketer named in the Amended
Complaint is a complete sham.” Reyes, 2013 WL 5332107, at
*7. However, the standard is not whether it is mathematically
or scientifically possible that one of these telemarketers is not
a complete sham. Rather, Reyes must establish that it is more
likely than not that each of the telemarketers and the
defendants operated a complete sham as alleged. Reyes
“must affirmatively demonstrate his compliance” with Rule
23, Wal-Mart Stores, Inc., 131 S. Ct. at 2551, and “satisfy
[the trial court] through evidentiary proof [of] at least one of
the provisions of Rule 23(b).” Comcast Corp., 133 S. Ct. at
1432; see also Byrd v. Aaron’s Inc., 784 F.3d 154, 163 (3d
Cir. 2015). However, “the Rules and our case law have
consistently made clear that plaintiffs need not actually
establish the validity of claims at the certification stage.”
Sullivan, 667 F.3d at 306 (footnote omitted).

                                  22
        Here, as in In re Hydrogen Peroxide Antitrust
Litigation, in remanding this matter to the District Court, we
“recognize that the able District Court did not have the
benefit of the standards we have articulated.” 552 F.3d at
322. Nevertheless, it is now clear that the District Court must
(1) conduct rigorous analysis, (2) review all avenues of
inquiry in which it may have doubts (even if it requires
reviewing the merits) in order to (3) be satisfied and (4) make
a definitive determination on the requirements of Rule 23, or
even (5) require that a plaintiff demonstrate actual, not
presumed conformance with Rule 23 requirements. We
stress, however, that the preponderance of the evidence
standard governs. The perfection of proof that the District
Court demanded here is simply not required. Moreover, it is
important for the District Court to remember that an inability
to calculate damages on a classwide basis will not, on its own,
bar certification. Neale, 2015 WL 4466919, at *17 & n.10
(collecting cases). A district court errs when it holds a
plaintiff seeking class certification to a higher standard of
proof than proof by a preponderance of the evidence, and
remand is thus appropriate. See In re Hydrogen Peroxide
Antitrust Litig., 552 F.3d at 322 (“To the extent that the
District Court’s analysis reflects application of incorrect
standards, remand is appropriate.”).

2.    Evidence of Commonality and Predominance

       It is often appropriate to discuss commonality and
predominance together because the commonality inquiry is
subsumed into the predominance inquiry. See, e.g., Danvers
Motor Co. v. Ford Motor Co., 543 F.3d 141, 148 (3d Cir.
2008) (“[W]here an action is to proceed under Rule 23(b)(3),
the commonality requirement is subsumed by the
predominance requirement.” (internal quotation marks
omitted)). We have also concluded that “[r]eading the
District Court’s commonality and predominance analyses
together . . . is appropriate in [the RICO] context[.]” In re
Ins. Brokerage Antitrust Litig., 579 F.3d at 266-67 (citation
omitted).

       Therefore, we do not fault the District Court for
combining its discussions of commonality and predominance.
Reyes, 2013 WL 5332107, at *5-9. However, in the interest

                                 23
of clarity, we will address each requirement separately. We
will first discuss commonality, and then discuss
predominance. In re LifeUSA Holding, Inc., 242 F.3d 136,
145 (3d Cir. 2001) (“[C]ommon questions (commonality)
must be established before predominance can be found . . . .”
(emphasis added)); see generally Marcus, 687 F.3d at 597,
600-12.

a.     Commonality

       As explained above in relation to the different return
rates, the District Court concluded that because Reyes’
evidence “result[s] in individual inquiries as to each
telemarketer,” class certification is precluded. Reyes, 2013
WL 5332107, at *8. The focus of the District Court’s inquiry
was whether the proposed class would “generat[e] common
answers apt to drive the resolution of the litigation, such that
a determination of the truth or falsity of the contention will
resolve an issue that is central to the validity of each one of
the claims in one stroke.” Id. at *4 (emphasis in original)
(internal quotation marks omitted).

        Federal Rule of Civil Procedure 23(a)(2) merely
requires that there be “questions of law or fact common to the
class[.]” Commonality does not require perfect identity of
questions of law or fact among all class members. Rather,
“even a single common question will do.” Wal-Mart Stores,
Inc., 131 S. Ct. at 2556 (quotation marks and alterations
omitted); Baby Neal v. Casey, 43 F.3d 48, 56 (3d Cir. 1994)
(discussing how Rule 23(a)(2) “is easily met[]”). “A putative
class satisfies Rule 23(a)’s commonality requirement if the
named plaintiffs share at least one question of fact or law with
the grievances of the prospective class.” Rodriguez v. Nat’l
City Bank, 726 F.3d 372, 382 (3d Cir. 2013) (internal
quotation marks omitted). A court’s focus must be “on
whether the defendant’s conduct [is] common as to all of the
class members[.]” Sullivan, 667 F.3d at 298. “Again, th[e]
bar is not a high one.” Rodriguez, 726 F.3d at 382.

        When a party seeks to certify a class to bring a RICO
claim, the focus is on the defendant’s conduct. As we said in
In re Insurance Brokerage Antitrust Litigation:

                                  24
       [p]roving the first element of a RICO violation
       in this case would involve common questions
       about the activities of the . . . Defendants and, in
       particular, whether the . . . Defendants
       participated or engaged in conduct with other . .
       . Defendants. The second element also involves
       common questions of law and fact, namely
       whether an enterprise of . . . Defendants existed
       . . . either as an association in fact or as a more
       formal organization or entity. Proving the third
       and fourth elements would encompass common
       questions of law and fact as well, including
       whether activities that constitute racketeering
       were taking place through the enterprise (such
       as mail or wire fraud) and whether these
       racketeering activities were recurring such that
       a pattern could be established.
579 F.3d at 269-70 (emphasis added). These elements focus
on the defendants’ joint conduct vis-à-vis the plaintiffs.
Likewise, the District Court in this case noted that “the first
four elements of a RICO claim . . . focus[] on the defendants’
conduct and the effect of that conduct.” Reyes, 2013 WL
5332107, at *5 (citation omitted). Thus, a properly supported
RICO allegation will often contain common issues because,
like “commonality[, a RICO allegation,] is informed by the
defendant’s conduct as to all class members and any resulting
injuries common to all class members[.]” Sullivan, 667 F.3d
at 297; see also In re Ins. Brokerage Antitrust Litig., 579 F.3d
at 269-70. “Whether the evidence presented proves a RICO
conspiracy[]” is a question “common to each class member
and will generate common answers[.]” In re Cmty. Bank of
N. Va. Mortg. Lending Practices Litig., 2015 WL 4547042, at
*13-14.

       We also note that the elements of a RICO claim fit
Wal-Mart’s commonality requirement because determining
the “truth or falsity” of a “common contention[,]” here an
element of RICO, “will resolve an issue that is central to the
validity of each one of the claims in one stroke.” Wal-Mart
Stores, Inc., 131 S. Ct. at 2551; see In re Cmty. Bank of N.
Va. Mortg. Lending Practices Litig., 2015 WL 4547042, at

                                   25
*13 (distinguishing a putative RICO class action from the
pitfalls of the class action rejected in Wal-Mart).

       Reyes has presented evidence which, if accepted,
could establish by a preponderance of the evidence that (1)
“Zions and Modern Payments were processing transactions
for a number of entities -- in addition to NHS Systems -- that
government agencies [later] determined were fraudulent[,]”
Appellant Br. at 15; Appellee Br. at 48-49, (2) Zions Bank,
Netdeposit, and Modern Payments sent e-mails
communicating a sense of shock regarding the “staggering”
return rates, JA 686, and concerns that they may be at risk for
some of their business lines being used for “money
laundering[,]” id. at 692, (3) Zions Bank was aware that its
high return rates “alarm[ed]” NACHA,” id. at 814-15, and (4)
Modern Payments was “afraid of” a probe by the FTC
regarding potential fraud, id. at 693, and Zions Bank received
warnings from other banks that they “will disput[e] all
charges” generated by NHS Systems. Id. at 1061-62. On
remand, the District Court should consider whether this
evidence, if accepted as credible, is sufficient to conclude that
there is “actual, not presumed, conformance” with Rule 23.
Marcus, 687 F.3d at 591 (quotation marks omitted); see also
Wal-Mart Stores, Inc., 131 S. Ct. at 2551 (requiring “[a] party
seeking class certification [to] affirmatively demonstrate”
compliance with Rule 23).

        We are not persuaded that the evidence here is similar
to that which was deemed insufficient for class certification in
Wal-Mart. Wal-Mart affirmed that commonality can be
satisfied when there is “significant proof” that the defendant
“operated under a general policy of discrimination.” Id. at
2553-54 (quotation marks omitted).

       In Wal-Mart, the defendant operated in a discretionary,
and thus arguably individualized way toward the members of
the proposed class. The record did not establish a national
policy or any single individual or group of individuals
responsible for the exercise of discretion.

     Here, there are slight variations in the telemarketers’
and defendants’ conduct underlying the putative class
members’ claims. For example, some plaintiffs were offered

                                  26
government grants, while others were offered healthcare
discount cards, and still others had no direct involvement at
all as their account information was purchased by a
defendant. However, unlike Wal-Mart, we are not concerned
with damages that result from the exercise of anyone’s
discretion.

       Further, in Wal-Mart, the plaintiffs’ statistical and
anecdotal evidence failed to demonstrate a “common mode of
exercising discretion that pervades the entire company[.]” Id.
at 2554-55. Without that, commonality could not be
established.

        In stark contrast, the sham theory used here relies on a
“common mode” of behavior and a “general policy” of fraud.
See In re Cmty. Bank of N. Va. Mortg. Lending Practices
Litig., 2015 WL 4547042, at *13 (distinguishing Wal-Mart
and reasoning that “the Plaintiffs in this case have alleged that
the class was subjected to the same kind of illegal conduct by
the same entities, and that class members were harmed in the
same way, albeit to potentially different extents[]”).

        Reyes alleges that the defendants operated together in
a common, fraudulent scheme that was a complete sham
masquerading as a legitimate business undertaking. When a
plaintiff alleges that a defendant’s disputed conduct is a
complete sham, the relevant inquiry is whether there was an
ongoing scheme to defraud or deceive, Rosario, 963 F.2d at
1017-19, and whether the defendant fails to meet the most
basic standard of its purported commercial undertaking,
Cullen, 188 F.R.D. at 235. If so, a common harm will be
presumed from the mere fact that class members were all
similarly injured by the sham. A court can then conclude that
there are common issues and that those common issues will
predominate over individual issues.15

       When viewed at this macroscopic level, rather than the
microscopic level that may be required when allegations
implicate a defendant’s exercise of discretion, it is clear that
we are not faced with the individual circumstances that were

       15
         Because the “complete sham” theory also applies to
the predominance inquiry, it will be discussed further below.
                                  27
fatal to certification in Wal-Mart. As said, it is for the
District Court to determine in the first instance whether Reyes
has presented evidence that demonstrates commonality.

b.     Predominance

       Reyes also contends that the District Court erred in
finding that class claims did not predominate over individual
claims. He argues that the District Court mistakenly focused
on the return rates instead of considering that evidence in
context with all of the testimony of his three experts, the FTC
proceedings,16 and all other evidence that the defendants
knew that they were operating a fraudulent enterprise.

        “The Rule 23(b)(3) predominance inquiry tests
whether proposed classes are sufficiently cohesive to warrant
adjudication by representation.” Amchem Products, Inc., 521
U.S. at 623 (citation omitted). It is important to note that
Reyes is alleging a kind of consumer fraud. “[T]he Supreme
Court has observed that predominance is a test readily met in
certain cases alleging consumer or securities fraud or
violations of the antitrust laws.” In re Hydrogen Peroxide
Antitrust Litig., 552 F.3d at 321-22 (quotation marks
omitted).     One relevant “guidepost[] that direct[s] the
predominance inquiry[]” is “that commonality is informed by
the defendant’s conduct as to all class members and any
resulting injuries common to all class members[.]” Sullivan,
667 F.3d at 297. “[Wal-Mart v.] Dukes actually bolsters [this]
position, making clear that the focus is on whether the
defendant’s conduct was common as to all of the class
members, not on whether each plaintiff has a ‘colorable’
claim.” Id. at 299. Rule 23 does not require the absence of
all variations in a defendant’s conduct or the elimination of
all individual circumstances.      Rather, predominance is
satisfied if common issues predominate. In re Linerboard
Antitrust Litig., 305 F.3d 145, 162 (3d Cir. 2002). “[T]he

       16
         As noted supra note 8, the proceedings came after
the defendants’ involvement here. But, if admissible, it
would be for the factfinder to determine if the record, taken as
a whole, supports the conclusion (or an inference) that the
defendants were aware of the facts underlying the
proceedings, or the proceedings themselves.
                                  28
focus of Rule 23(b)(3) is on the predominance of common
questions[.]” Amgen Inc. v. Connecticut Ret. Plans & Trust
Funds, 133 S. Ct. 1184, 1195 (2013) (emphasis in original).
A district court “analyze[s] predominance in the context of
Plaintiffs’ actual claims.” Neale, 2015 WL 4466919, at *14.

        When Rule 23 is the mechanism to redress alleged
RICO violations, predominance and commonality are
satisfied if each element of the alleged RICO violation
involves common questions of law and fact capable of proof
by evidence common to the class. In re Ins. Brokerage
Antitrust Litig., 579 F.3d at 269-70. This is true even if
“establishing an injury is not as conducive to common
proof[,]” so long as a court is “satisfied that the plaintiffs
have presented a plausible theory for proving a class-wide
injury as a result of the racketeering activities of the alleged
enterprises at issue[.]” Id. at 270; see also Neale, 2015 WL
4466919, at *17 & n.10 (collecting cases regarding how an
inability to calculate damages on a classwide basis will not,
on its own, bar certification). “The question is not what valid
claims can plaintiffs assert; rather, it is simply whether
common issues of fact or law predominate.” Sullivan, 667
F.3d at 305 (citation omitted); In re Hydrogen Peroxide
Antitrust Litig., 552 F.3d at 311-12.

        The predominance inquiry seeks to resolve whether
there are “reliable means of proving classwide injury[.]” In
re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d 244,
252-53 (D.C. Cir. 2013); see also In re Nexium Antitrust
Litig., 777 F.3d 9, 21 (1st Cir. 2015). This is often done with
the assistance of experts.

       The District Court relied on Johnston v. HBO Film
Management, Incorporated, 265 F.3d 178, 190 (3d Cir.
2001), and In re LifeUSA Holding, Incorporated, 242 F.3d
136, 146 (3d Cir. 2001), to conclude that, because these
“telemarketers . . . interacted with consumers in different
ways (by telephone, internet, and slamming),” Reyes, 2013
WL 5332107, at *7, and because return rates are not absolute
proof that the defendants are a complete sham, “the only way
to determine if a class member was defrauded was to
individually examine the interaction between the defendant

                                  29
and each class member.” Id. at *6. Neither case persuades
us.

        In In re LifeUSA Holding, Incorporated, the fraud
involved a product that “was not sold according to standard,
uniform, scripted sales presentations.” 242 F.3d at 146. We
concluded that simply focusing on whether all potential class
members were misled by the same product was inappropriate.
Id. We also stated that when “the record is uncompromising
in revealing non-standardized and individualized sales
‘pitches’ presented by independent and different sales agents,
all subject to varying defenses and differing state laws, . . .
certification of individualized issues [is] inappropriate.” Id.
at 147; cf. Moore v. PaineWebber, Inc., 306 F.3d 1247, 1255
(2d Cir. 2002) (“[M]aterial uniformity in the
misrepresentations may be established without the use of a
standardized sales script[, for example.]”).

        In Johnston, we again held that oral misrepresentation
must be uniform in order to establish predominance under
Rule 23(b)(3). See 265 F.3d at 190. Thus, “it has become
well-settled that, as a general rule, an action based
substantially on oral rather than written communications is
inappropriate for treatment as a class action.” Id. (internal
citations omitted).

       However, both of those cases involved legitimate
businesses and Reyes relies upon that to distinguish the
circumstances here, arguing instead that the defendants and
telemarketers here were not legitimate business entities. See
In re Cmty. Bank of N. Va. Mortg. Lending Practices Litig.,
2015 WL 4547042, at *19, *21 (affirming the District Court’s
finding that individual issues of reliance will not predominate
when the plaintiffs “allege[] that [the defendant] performed
absolutely no services to earn the . . . fees[]”). Rather, Reyes
asserts that they all acted in concert to perpetrate fraud
through a sham enterprise and that each of the defendants had
to have known the real nature of that fraudulent enterprise.
He also claims that any variations in the manner in which
various individuals were defrauded is irrelevant and not
sufficient to preclude common issues of law from
predominating. The argument is based on his claim that the
defendants “engaged in systematic fraud and operated solely

                                  30
to debit victims’ accounts[]” and “there is no evidence of any
cohort of class members who were not victims.” Appellant
Br. at 64.

        Likewise, in Cullen, plaintiffs claimed that, while the
“defendants represented that they were providing a program
that would prepare students for careers as ultrasound
sonographers[,]” they “misrepresent[ed] the nature of the
ultrasound program, and failed to provide the education
represented.” 188 F.R.D. at 228. Even though the institution
was accredited, the program that the plaintiffs were enrolled
in was not. That prevented the program’s graduates from
sitting for the relevant registration examination. Id. at 228-
29. The plaintiffs contended that the “defendants’ operation
was a ‘complete sham,’ and did not provide even a minimal
education.” Id. at 228. Cullen held that the sham theory
satisfied the predominance requirement and it certified a
RICO class. Cullen explained: “plaintiffs’ proof will be
focused on the defendants’ conduct; plaintiffs’ case will
revolve around evidence that the school did not meet the most
basic standards of an educational program. It need not
involve time consuming proof of individual causation or
reliance.” Id. at 235. Instead, at trial, “[i]f the plaintiffs can
prove that [the defendant] was a complete sham, then a fact
finder can infer from the evidence that anyone who paid
tuition and attended the school suffered damage.” Id.

        Cullen relied on Rosario, which had similar facts and
involved a similar fraudulent scheme. The trial evidence in
Rosario established that the defendant failed to provide
students with the skills, equipment, or environment to prepare
for a cosmetology career for which the school was supposed
to train students. Rosario, 963 F.2d at 1016-17. The Court of
Appeals for the Seventh Circuit affirmed the District Court’s
certification of the class. It held that the operative question
was whether the “schools operated pursuant to an ongoing
scheme to defraud and deceive prospective students[,]” thus
applying a “complete sham” theory. Id. at 1018. The
defendants attempted to negate that approach by relying on
evidence that some students were satisfied with their
education and two students who graduated did become
licensed and were working in the field. The Seventh Circuit
refused to conclude that the defendant-institution was not a

                                   31
complete sham merely because “some class members were
satisfied with their teachers, and at least two class members
graduated from [the defendant’s] schools and passed the state
licensing exam.” Id. at 1017. Rather, the Court concluded
that “[t]he fact that there is some factual variation among the
class grievances will not defeat a class action.” Id. at 1017-18
(citation omitted).

        While the District Court here recognized Reyes’ theory
of a sham enterprise, it nevertheless concluded that the
evidence Reyes offered in support of that theory was
insufficient to satisfy predominance because different sales
pitches were used and different products were pitched.
However, if absolute conformity of conduct and harm were
required for class certification, unscrupulous businesses could
victimize consumers with impunity merely by tweaking the
language in a telemarketing script or directing some (or all) of
the telemarketers not to use a script at all but to simply orally
convey a general theme designed to get access to personal
information such as account numbers.

        We do not believe that our discussion of predominance
in our prior cases intended to either license such behavior by
placing it beyond the reach of Rule 23 or to supply a roadmap
that would guide the unscrupulous in designing fraudulent
schemes that would be beyond the reach of Rule 23.
Otherwise, although such subtle but irrelevant variations in
the manner of defrauding members of the public would not
insulate unscrupulous marketers from liability in individual
suits, it would -- for all practical purposes -- insulate them
from class actions. An interpretation of Rule 23 that places
class actions beyond the reach of consumers who have been
victimized by fraudulent schemers who are wise enough to
adopt schemes with subtle (but meaningless) variations would
invite the kind of consumer fraud that Reyes is alleging here.

       Class actions are often the only practical check against
the kind of widespread mass-marketing scheme alleged here.
The individual claims arising from such conduct are usually
too small to justify suit unless aggregated in a class action.
This is particularly true when, as is often the case, the scheme
targets unsophisticated consumers with little disposable
income and without the means or wherewithal to seek

                                  32
assistance of legal counsel. As a practical matter, the average
victim of such a scheme nearly always finds it far easier --
and much cheaper -- to reluctantly accept any loss and move
on than to undertake the expense and inconvenience endemic
in the protracted process of trying to recover a few dollars
years later.

         A class action “permit[s] the plaintiffs to pool claims
which would be uneconomical to litigate individually. . . .
[M]ost of [such] plaintiffs would have no realistic day in
court if a class action were not available.” Phillips Petroleum
Co. v. Shutts, 472 U.S. 797, 809 (1985). “[C]onsumers have
little interest in litigating their claims individually because of
the small amount of money per plaintiff that is at stake.”
Cabraser, supra, at 822 (quotation marks omitted).
Moreover, obtaining counsel to pursue such a claim is usually
the height of impracticality -- even for those who can afford
to do so. “What rational lawyer would have signed on to
represent the [party] in litigation for the possibility of fees
stemming from a $30.22 claim?” AT&T Mobility LLC v.
Concepcion, 131 S. Ct. 1740, 1761 (2011) (Breyer, J.,
dissenting).

       In such cases, the class action can “create[] greater
access to judicial relief[.]” Marcus, 687 F.3d at 594. “[I]t is[,
in fact,] possible to think of consumer class actions as
providing an indispensable mechanism for aggregating claims
when the individual stake is low and the similarity of the
challenged conduct is high.” Samuel Issacharoff, Group
Litig. of Consumer Claims: Lessons from the U.S.
Experience, 34 Tex. Int’l L.J. 135, 149 (1999).17 Thus, class
actions have the practical effect of allowing plaintiffs who
have suffered relatively de minimis loss to nevertheless
function as private attorneys general and thereby deter fraud
in the marketplace.

       17
          See Fed. R. Civ. P. 23 advisory committee’s note to
the 1966 amendment (“[A] fraud perpetrated on numerous
persons by the use of similar misrepresentations may be an
appealing situation for a class action, and it may remain so
despite the need, if liability is found, for separate
determination of the damages suffered by individuals within
the class.”).
                                   33
        The “complete sham” theory, if supported by an
appropriate record, can satisfy the predominance prong of
Rule 23(b)(3) by focusing on the overarching material and
defining aspects of a defendant’s conduct. This allows a
court to certify a class despite subtle (but meaningless)
variations that may occur while perpetrating a fraudulent
scheme. Thus, as Reyes contends “[u]ltimately, the question
is the extent to which fraud can be shown to have been
committed on the class by common evidence.” Appellant Br.
at 64. On remand, the District Court should consider the
entire record to determine if it supports that contention.

        Investigator Blake testified “each of the schemes at
issue was a totally fraudulent mass-marketing fraud.” Blake
Decl., JA 1613, ¶ 15. She concluded that these were all
“precisely the kind of fundamentally fraudulent schemes that,
in [her] experience, have been routinely adjudicated on the
basis of common evidence of fraud.” Id., JA 1627-28, ¶ 85.
Professor Meyer reviewed the evidence and concluded that
the proof of fraud was classwide. He identified four key
features common to the way each telemarketer obtained bank
account information and initiated debits from bank accounts.
He concluded that although “these ‘products and programs’
appear to vary, all had [those] four common features essential
to their use as props in the scheme of deception[.]” Meyer
Decl., JA 1639-40 ¶ 19. The court-appointed receiver for
NHS Systems, Geisser, testified that NHS Systems was
“totally fraudulent and that no consumer who . . . had money
taken from their account was not injured in the amount of
money taken from their account[.]” Geisser Dep., JA 1161.

       The District Court may consider that the defendants’
experts offer little reason to conclude that predominance
cannot be satisfied here. As noted above, Milner testified for
the defendant. Milner did not agree that a return rate in
excess of 10% was prima facie evidence of fraud. However,
she also explained that pursuant to its Operating Rules,
“NACHA gathers specific information concerning individual
Originators with high rates of unauthorized returns . . . [and]
may send the bank of an originator producing unauthorized
returns in excess of 1% a written request for information

                                 34
about specific originators.” Milner Decl., JA 3787, ¶ 25
(citation and footnote omitted).

         Professor Boss testified that “the overwhelming
majority of banks in the United States have no unauthorized
returns at all . . . .” Boss Decl., JA 590 ¶ 82. Reyes focuses
our attention on testimony that Zions Bank, like most U.S.
banks, had no unauthorized returns in August of 2006. It then
started working with its wholly-owned subsidiary, Modern
Payments, and its unauthorized returns began to “immediately
. . . increase dramatically from zero in August 2006 to 799 in
October, [and] 2,095 to 2,632 by February 2007.” Id., JA
587-88 ¶ 78 (emphasis in original). As noted earlier, when
adjusted for its size, Zions Bank had the highest rate of
returns of any U.S. bank.

      Reyes also offers the following chart summarizing the
evidence regarding the return rates of the telemarketers:

                                          Total Return Rates
                                                      First     Total   Return Rate as a
                                      Average       Month      Months   Multiple of 2007
                                       Return       Return      With    National Average
                Fraud Scheme           Rate*         Rate*     Zions*       (1.25%)**
       NHS                            64.79%        51.90%       15             52
       RX Smart                       54.21%        42.00%        3             43
       Market Power Entities
                  Market Power         86.73%      85.10%        11            69
                  Payday loan          73.46%      70.98%        4             59
                  Get Your Credit Rept 62.48%      55.94%        4             50
                  Vexeldale            74.09%      70.52%        4             59
       Platinum Benefit Group          30.83%      37.98%        39            25
       Group 1 Entities                51.67%      65.41%        21            41
       Low Pay Inc                     68.83%      65.41%        10            55
       * JA 661                       ** JA 663

Appellant Br. at 25 (footnote omitted).18

       18
          We are not, of course, suggesting that the District
Court had to accept the conclusions in the chart or the expert
testimony that the scheme here is susceptible to class
treatment. That determination remains left to the sound
discretion of the District Court. However, the District Court
                                    35
        The crux of the Rule 23(b)(3) predominance inquiry
here is whether a preponderance of the evidence supports
Reyes’ proposition that the defendants operated a complete
sham, and whether an affirmative answer to that inquiry
would establish the required element of predominance. Reyes
claims that if the evidence supports such a finding by a
preponderance of the evidence, the predominance
requirement of Rule 23(b)(3) is satisfied, even though the
telemarketers did not read from a uniform script or use the
same method of defrauding each of the members of the
putative class. Appellant Br. at 62-63 (distinguishing this
case from In re LifeUSA Holding, Incorporated and Johnston
because there is a “question about the legitimacy of the
[entity] itself[]” in which Reyes alleges the existence of one
“systematic fraud”).

        As we have reiterated, Reyes argues the District Court
erred in relying only on high return rates to deny class
certification. As detailed above, Reyes also introduced proof
of the structure of each of the schemes and FTC
investigations. In particular, Reyes points to “broader
eviden[ce] . . . includ[ing] three experts (all of whom opined
that the underlying mass-marketing schemes were completely
fraudulent), the related government proceedings, Mr.
Geisser’s testimony, and a wealth of documentary evidence
and deposition testimony reflecting Defendants’ knowledge
of the fraud they were furthering.” Id. at 54.19 According to

is not free to simply ignore such testimony without explaining
why it is rejecting it. That is the antithesis of the thorough
and rigorous inquiry that the law demands at the certification
stage.
      19
          See also Appellant Reply Br. at 9-12 (discussing
additional evidence, including “internal bank documents
showing that Defendants were aware that they were providing
services to frauds,” warnings from regulators, other banks,
and employees “directly inform[ing] [the defendants] that
they were carrying out transactions for frauds[,]” expert
testimony, testimony from Geisser, “documents and
declarations from both regulatory actions that identified each
of the mass-marketing entities as frauds and those that
                                 36
Reyes, the “evidence [presented about the fraudulent
companies] applies to the class as a whole, [therefore] the
jury’s consideration of th[e] evidence would apply to each
class member’s claim.” Id. at 37. If accepted, the District
Court may conclude that this evidence supports a finding that
there was a single fraudulent RICO enterprise, that each
defendant participated in that enterprise, and that all members
of the proposed class were damaged in the amount of the
funds debited from their bank accounts pursuant to the
fraudulent scheme. We leave it for the District Court to
assess this on remand.

       Reyes further asserts that the District Court could have
specified subclasses for each defendant if it were concerned
about proving fraud with respect to each entity. Id.;
Appellant Reply Br. at 6 n.4. On remand, to the extent that

ordered complete restitution of their victims[,]” data
demonstrating the “explo[sion]” of unauthorized returns
following the formation of the alleged RICO enterprise, and
“documents showing that Defendants closely monitored the
entities’ extreme return rates—which they openly
acknowledged were staggering[.]” (citations and quotation
marks omitted)).
        In mentioning this evidence, we in no way suggest that
we agree with the District Court’s conclusion that evidence of
high return rates cannot establish fraud on this record. We
refrain from concluding that return rates can never be prima
facie evidence of fraud or knowledge of fraud, no matter how
much they vary from industry norms. See Blake Decl., JA
1612-13 ¶ 14.d (“The schemes at issue here involve unusually
high numbers of returns even compared to other fraudulent
schemes I have investigated. It is therefore highly likely that
most of these schemes engaged in what is commonly known
as ‘slamming.’”); Boss Decl., JA 587-88, 590 ¶¶ 78, 82
(“Anyone in possession of the[] facts [about the return rates]
would have to have known fraud was involved. . . . It is
obvious that the high rates of unauthorized returns are
indicative of fraudulent activity by these companies.”); Meyer
Decl., JA 1637-38 ¶¶ 12.a, 14 (“For there to be such high
return rates there had to be fraud involved. . . . I conclude
with reasonable certainty that the return rates alone establish
that each of the entities at issue was fraudulent.”).
                                 37
the District Court is concerned with the commonality and
predominance requirements because of variations in the way
the affairs of the allegedly fraudulent enterprise was
conducted, it can consider whether Reyes’ proposed
subclasses would adequately address those concerns. Fed. R.
Civ. P. 23(c)(5), (d); see also Neale, 2015 WL 4466919, at
*15 (“[T]he District Court should evaluate the relevant claims
(grouping them where logical and appropriate) and rule on the
predominance [and commonality] question[s] in light of the
claims asserted and the available evidence.” (citation
omitted)); Tobias Barrington Wolff, Discretion in Class
Certification, 162 U. Pa. L. Rev. 1897, 1898 (2014)
(“[D]istrict courts sometimes exercise discretion in defining
the parameters of the class definition and deciding when
subclasses are necessary, often acting independently of any
proposals made by the parties.” (footnote omitted)).20 We
note, however, “[t]he court has no sua sponte obligation so to
act.” U.S. Parole Comm’n v. Geraghty, 445 U.S. 388, 408
(1980). “[I]t is not the District Court that is to bear the
burden of constructing subclasses. That burden is upon the
[plaintiff] . . . who is required to submit proposals to the
court.” Id.

        As we have already explained, Reyes is correct in
asserting that the District Court erred when it “examined one
piece of evidence -- the mass-marketers’ extreme return rates
-- and concluded that these rates alone were not ‘absolute
proof’ of fraud.” Appellant Br. at 37. The law does not
permit a district court to only consider and analyze the “most
significant evidence[.]” Reyes, 2013 WL 5332107, at *2.
Rather, the trial court must consider “all relevant evidence
and arguments, including relevant expert testimony of the
parties [unless there is a reason to reject certain testimony].”
In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 325
(emphasis added); see also In re Blood Reagents Antitrust
Litig., 783 F.3d 183, 187 (3d Cir. 2015). Moreover, as we
have also explained, we do not require “absolute proof.”
Indeed, such a burden would be prohibitive, as few things are
capable of absolute proof that removes all possibility of

       20
          For a very thorough development of the evolution of
discretion under Rule 23, see Wolff, Discretion in Class
Certification, 162 U. Pa. L. Rev. at 1911-39.
                                  38
doubt. Here, the District Court’s analysis singled out the
“most significant evidence” (return rates) and then improperly
applied a heightened standard to that evidence while ignoring
all of the other testimony.

        However, there is an even more fundamental flaw in
the District Court’s analysis. The District Court relied on fact
witnesses while ignoring expert testimony, and confused the
testimony of the witnesses it did consider.21 As noted above,
Reyes presented declarations from three expert witnesses:
Professors Boss and Meyer, and Investigator Blake.
However, the District Court failed to mention, let alone
closely scrutinize, any of Reyes’ experts. See Amchem
Products, Inc., 521 U.S. at 615-16 (referring to the trial
court’s “close look” before finding predominance and
superiority); In re Hydrogen Peroxide Antitrust Litig., 553
F.3d at 320 (“[A] district court errs as a matter of law when it
fails to resolve a genuine legal or factual dispute relevant to
determining the requirements.”). The District Court then
referred to Geisser and Fox as Reyes’ expert witnesses.
Reyes, 2013 WL 5332107, at *7. Geisser and Fox were not
expert witnesses, but fact witnesses. Geisser was installed as
the NHS Systems receiver after the FTC obtained a
preliminary injunction against NHS Systems; Fox was a
senior director of risk investigation at NACHA. Appellant
Br. at 10, 12, 26.

        Perhaps because it confused their role and expertise,
the District Court relied on a concession by the fact witnesses
to justify limiting its analysis to evidence of high return rates.
Reyes, 2013 WL 5332107, at *7 (relying on Geisser’s
concession and Fox’s silence to conclude that the high return
rates are not dispositive of fraud). However, not only did
Reyes’ expert witnesses fail to make this concession, Blake
Decl., JA 1612-13 ¶ 14.d; Boss Decl., JA 587-88, 590 ¶¶ 78,
82; Meyer Decl., JA 1637-38 ¶¶ 12.a, 14, they also based
their conclusions on the additional evidence discussed above.

       21
          Much of the confusion here is understandable. The
District Court inherited the rather voluminous record in this
case from another judge.
                                   39
        The defendants correctly remind us that “[d]istrict
courts are not required under Hydrogen Peroxide, or any
other authority, to cite specifically to the declarations of every
expert or every other piece of evidence relevant to class
certification merely to prove that they were considered in its
rigorous analysis of the Rule 23 requirements.” Appellee Br.
at 32-33 (emphasis in original) (citations omitted). That is
undoubtedly true.        However, a “rigorous analysis” is
nevertheless mandated, and the defendants do not contest
that.

       Quite obviously, an analysis of testimony that refers to
individuals as expert witnesses when they are merely fact
witnesses and confuses one party’s fact witnesses with
experts, while not correctly citing any expert testimony, is
inconsistent with the demanding scrutiny required under Rule
23. “[T]he court’s obligation to consider all relevant
evidence and arguments extends to expert testimony, whether
offered by a party seeking class certification or by a party
opposing it.” In re Hydrogen Peroxide Antitrust Litig., 552
F.3d at 307 (emphasis added).

        We have not required a district court to refer to, or cite,
every expert that either party presents and we do not do so
now.22 Rather, we merely apply the holding of In re
Hydrogen Peroxide Antitrust Litigation: “[T]he district court
must make whatever factual and legal inquiries are necessary
and must consider all relevant evidence and arguments
presented by the parties.” 552 F.3d at 307 (emphasis added)
(citation omitted).23

      The defendants argue that the District Court’s
mistaken reference to fact witnesses as Reyes’ experts did not

       22
          See, e.g., Marcus, 687 F.3d at 603 (failing to
interpret In re Hydrogen Peroxide Antitrust Litigation as
requiring a district court to explicitly discuss every expert
opinion).
       23
          As we have explained above, In re Hydrogen
Peroxide Antitrust Litigation merely “emphasize[s] the need
for a careful, fact-based approach, informed, if necessary, by
discovery.” 552 F.3d at 326.
                                   40
result in an abuse of discretion because the District Court
addressed the key arguments that each of Reyes’ experts
made. This record belies that argument. The District Court
merely focused on high return rates, without more. Reyes,
2013 WL 5332107, at *7-8. Not only did the District Court
minimize the probative value of that evidence by requiring
absolute proof of fraud, thereby undermining its relevance to
the requirements of Rule 23(a) and Rule 23(b)(3), it also
failed to confront Reyes’ experts’ arguments on the
importance of the return rates. See, e.g., Boss Decl., JA 582-
92 ¶¶ 66-87; Meyer Decl., JA 1637-38 ¶ 12.b. Further, as
discussed above, the District Court failed to confront Reyes’
experts’ arguments of “clear indications of fraud[]” based on
more than return rates. Boss Decl., JA 587 ¶ 77. See, e.g.,
Blake Decl., JA 1613 ¶ 15; Boss Decl., JA 592 ¶ 87; Meyer
Decl., JA 1639 ¶ 18.24

       A district court errs as a matter of law when it confuses
testimony, as the District Court did here, and fails to carefully
scrutinize the relevant, disputed testimony.25

III.   CONCLUSION

       For the reasons set forth above, we will vacate the
order denying class certification and remand for proceedings
consistent with this opinion.

       24
          Amici remind us that Milner testified that
“transactions may be returned to a merchant under 68
different return codes, each of which has a different definition
and covers different return scenarios. None of these codes are
defined to identity fraud.” American Bankers Ass’n & Indep.
Cmty. Bankers of America Br. at 5. That does not negate the
force of the evidence of rate of return of each of the defendant
merchants here. It is fair to assume that similarly situated
banks would generally have roughly equivalent return rates.
Indeed the testimony here supports that assumption.
       25
          We may have a different situation if the District
Court quoted the expert witnesses, but mistakenly referred to
them as fact witnesses. That is not what happened. Here, we
have the fact witnesses’ arguments and names, not the
experts’.
                                  41