RALPH S. JANVEY, in his Capacity as Court-Appointed Receiver for the Stanford International Bank Limited et al, Plaintiff - Appellant
GMAG, L.L.C.; MAGNESS SECURITIES, L.L.C.; GARY D. MAGNESS; MANGO FIVE FAMILY INCORPORATED, in its Capacity as Trustee for the Gary D. Magness Irrevocable Trust, Defendants - Appellees
from the United States District Court for the Northern
District of Texas
STEWART, Chief Judge, and DENNIS and WILLETT, Circuit Judges.
PETITION FOR PANEL REHEARING
original opinion in this case was filed on January 9, 2019.
Janvey v. GMAG, LLC, 913 F.3d 452 (5th Cir. 2019).
There, we held that a transferee on inquiry notice of a
transfer's fraudulent nature is not entitled to the Texas
Uniform Fraudulent Transfer Act's ("TUFTA")
good faith affirmative defense. Because the jury determined
that the Defendants-Appellees were on inquiry notice of the
fraudulent nature of transfers received from a Ponzi scheme,
we reversed the district court's judgment and rendered
judgment in favor of the Plaintiff-Appellant.
Defendants-Appellees submitted a petition for panel rehearing
and a petition for rehearing en banc, which are now pending
before the court. In these petitions, Defendants-Appellees
requested, in the alternative, that we certify a question to
the Supreme Court of Texas on grounds that interpreting
TUFTA's good faith defense is a significant issue of
first impression, and the panel's interpretation differs
from that of other jurisdictions to analyze their own Uniform
Fraudulent Transfer Act ("UFTA") good faith
petition for panel rehearing is GRANTED, the original opinion
is VACATED, and the panel substitutes the following opinion
certifying a question to the Supreme Court of Texas.
FROM THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
TO THE SUPREME COURT OF TEXAS, PURSUANT TO THE TEXAS
CONSTITUTION ART. 5 § 3-C AND TEXAS RULE OF APPELLATE
uncovered the Stanford International Bank ("SIB")
Ponzi scheme in 2009. For close to two decades, SIB issued
fraudulent certificates of deposit ("CDs") that
purported to pay fixed interest rates higher than those
offered by U.S. commercial banks as a result of assets
invested in a well-diversified portfolio of marketable
securities. In fact, the "returns" to investors
were derived from new investors' funds. The Ponzi scheme
left over 18, 000 investors with $7 billion in losses. The
district court appointed Plaintiff-Appellant Ralph S. Janvey
("the receiver") to recover SIB's assets and
distribute them to the scheme's victims.
are Gary D. Magness and several entities in which he
maintains his wealth (collectively, "Magness").
Magness was among the largest U.S. investors in SIB. Between
December 2004 and October 2006, Magness purchased $79 million
in SIB CDs. As of November 2006, Magness's family
trust's investment committee monitored his investments,
including the SIB CDs.
reported in July 2008 that the SEC was investigating SIB. At
an October 2008 meeting, the investment committee persuaded
Magness to take back, at minimum, his accumulated interest
from SIB. The receiver asserts this decision was the result
of mounting skepticism about SIB. Magness asserts it was
because he was experiencing significant liquidity problems
given the tumbling stock market.
that month, Magness's financial advisor approached SIB
for a redemption. On October 9, 2008, SIB instead agreed to
loan Magness $25 million on his accumulated interest. SIB
applied Magness's outstanding "accrued CD
interest" to repay most of this loan. In other words,
Magness repaid $24.3 million of the $25 million loan with
"paper interest" and $700, 000 with cash. Between
October 24 and 28, 2008, Magness borrowed an additional $63.2
million from SIB. In total, Magness received $88.2 million in
cash from SIB in October 2008.
receiver sued Magness to recover funds under theories of (1)
TUFTA fraudulent transfer and (2) unjust enrichment. The
receiver obtained partial summary judgment as to funds in
excess of Magness's original investment, and Magness
returned this $8.5 million in fraudulent transfers to the
receiver moved for partial summary judgment, seeking a ruling
that the remaining amounts at issue were also fraudulent
transfers. Magness moved for summary judgment on his TUFTA
good faith defense and the receiver's unjust enrichment
claim. The ...