American Cancer Society v. Cook
675 F.3d 524
5th Cir.2012Background
- Receivership appointed over Giant Operating entities after SEC alleged federal securities violations.
- Giant contributed at least $240,000 to ACS’s Cattle Baron's Ball from 2007–2009; donations sought to be recovered for the receivership.
- District court held donations were fraudulent transfers under TUFTA and entered judgment for $240,000.
- Court reversed, finding no sufficient Ponzi-scheme evidence to justify the presumption of fraudulent intent.
- Court also rejected constructive trust and independent-grounds arguments for recovery, citing due process and equitable concerns.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Giant's donations to ACS were fraudulent transfers under TUFTA | Cook argues transfers were fraudulent under TUFTA | ACS contends no fraudulent transfer proved | Not proven; reversal of TUFTA finding. |
| Whether the Ponzi-scheme presumption applies to Giant's transfers | Cook relies on Ponzi-like scheme presumption from Warfield | ACS challenges sufficiency of Ponzi evidence | Presumption not supported by the record; clear error to rely on Ponzi finding. |
| Whether a constructive trust should be imposed on ACS's assets | Cook seeks constructive trust to disgorge donations | ACS argues equitable remedy inappropriate | Constructive trust rejected; equities do not favor disgorgement. |
| Whether the receivership order independently justified the judgment | Cook argues turnover authority supports recovery | Transfers occurred before receivership; order cannot justify | Boils down to due process; not independent justification. |
Key Cases Cited
- Warfield v. Byron, 436 F.3d 551 (5th Cir. 2006) (Ponzi presumption of fraudulent intent when scheme is insolvent from inception)
- Janvey v. Alguire, 647 F.3d 585 (5th Cir. 2011) (defines Ponzi scheme and supports evaluating credibility of evidence)
- Cadle Co. v. Duncan (In re Duncan), 562 F.3d 688 (5th Cir. 2009) (clearly erroneous standard for Ponzi-scheme finding; substantial evidence needed)
- N.W. Enters. Inc. v. City of Houston, 352 F.3d 162 (5th Cir. 2003) (circumstantial evidence may establish fraudulent intent; conclusory affidavits insufficient)
- Hayes v. Rinehart, 65 S.W.3d 286 (Tex.App. 2001) (valid gift elements; transfers require intent and delivery)
- Scholes v. Lehmann, 56 F.3d 750 (7th Cir. 1995) (complaint not evidence of charges; relevance to evidence standards)