from the United States District Court for the Western
District of Texas
SMITH, CLEMENT, and SOUTHWICK, Circuit Judges.
BROWN CLEMENT, Circuit Judge:
Raul Galaz ("Raul") and Segundo Suenos,
appeal the district court's judgment awarding actual and
exemplary damages to debtor Lisa Ann Katona, formerly known
as Lisa Galaz ("Lisa"). We AFFIRM the judgment of
the district court.
case is on appeal before this court for the second time.
See Galaz v. Galaz (In re Galaz I), 765
F.3d 426 (5th Cir. 2014). It is just the latest episode in a
series of lawsuits dating back ten years.
founded Artist Rights Foundation, LLC ("ARF") with
Julian Jackson ("Jackson") in 1998, and each
originally held a 50 percent membership interest in ARF. When
Lisa divorced Raul in 2002, she obtained a 25 percent
economic interest in ARF-half of his 50 percent interest.
ARF's assets consisted of the rights to the royalties
from the music of the Ohio Players, a former funk band.
2005, without the knowledge of Jackson or Lisa, Raul
transferred ARF's royalty rights to "Segundo
Suenos"-which at the time, "was not organized as a
business entity under the laws of any state." In re
Galaz I, 765 F.3d at 428. In September 2005, Raul
assisted his father, Alfredo Galaz ("Alfredo") in
establishing Segundo Suenos, LLC ("Segundo") in
Texas. Raul asserts that Alfredo is the "sole
owner" of Segundo. Soon after the transfer, the
royalties began to generate a substantial amount of revenue.
Segundo received nearly a million dollars from the transfer
until trial in February 2010. Lisa did not receive any share
of the revenue, despite her 25 percent interest in ARF. Raul
unilaterally dissolved ARF in December 2006.
filed for Chapter 13 bankruptcy in December 2007. In April
2008, Lisa brought this adversary proceeding against Raul,
Alfredo, and Segundo, alleging that they fraudulently
transferred the assets of ARF to Segundo and defrauded Lisa
of her interest. Raul, Alfredo, and Segundo filed a
third-party complaint against Jackson, and Jackson asserted
seven counterclaims against them. Id. at 429.
a five-day bench trial, the bankruptcy court found that the
transfer of assets from ARF to Segundo Suenos was invalid,
that it constituted a fraudulent transfer under TUFTA, that
Raul owed fiduciary duties to [Jackson] and had breached
those duties, and that Raul owed no fiduciary duties to
Lisa." Id. The bankruptcy court held Raul and
Segundo liable, but held Alfredo not liable. Id. at
429 & n.4. The bankruptcy court awarded actual and
exemplary damages to Lisa and Jackson. Id. at 429.
and Segundo appealed to the district court, which affirmed
the bankruptcy court's judgment as to liability but
vacated and remanded for redetermination of actual and
exemplary damages. Id. On remand, the bankruptcy
court awarded actual and exemplary damages consistent with
the district court's instructions. Id.
Appellants again appealed to the district court, which
affirmed. Id. Appellants then appealed to this
court vacated and remanded the bankruptcy court's
judgment on jurisdictional grounds, with instructions to
dismiss Jackson's third-party counterclaims for lack of
subject-matter jurisdiction. Id. at 431, 434. This
court also determined that Lisa's claims were non-core
bankruptcy claims, and remanded for the district court to
enter final judgment after further consideration.
remand, the district court referred this adversary proceeding
to the bankruptcy court. The bankruptcy court submitted
proposed findings of fact and conclusions of law pursuant to
28 U.S.C. § 157(c)(1). After de novo review,
the district court adopted those findings of fact and
conclusions of law, invalidating the transfer of assets ...