Ralph Janvey v. GMAG, L.L.C., 977 F.3d 422

Background

Stanford International Bank (SIB) operated a Ponzi scheme uncovered in 2009, producing roughly $7 billion in investor losses; Ralph Janvey was appointed receiver to recover assets for victims.
Gary Magness and affiliated entities purchased $79 million in SIB CDs (2004–2006) and received about $88.2 million in cash from SIB in October 2008 (loans/redemptions).
The jury found the Magness Parties had inquiry notice of SIB’s fraud in October 2008 (but not actual knowledge) and also found that further investigation would have been futile.
The district court held the Magness Parties established TUFTA good faith and entered judgment for them (receiver recovered only $8.5M previously returned). The Fifth Circuit initially reversed, then vacated to certify a question to the Texas Supreme Court.
The Texas Supreme Court held that a transferee on inquiry notice cannot claim TUFTA good faith without diligently investigating its suspicions—even if a hypothetical investigation would have been futile.
Applying that rule, the Fifth Circuit concluded the Magness Parties did not show they diligently investigated while on inquiry notice, reversed the district court, and rendered judgment for the Receiver.

Issues

Issue	Plaintiff's Argument (Janvey)	Defendant's Argument (Magness)	Held
Whether a transferee on inquiry notice may assert TUFTA good faith without a diligent investigation or based on a futility defense	Inquiry notice defeats good faith unless transferee diligently investigates; no futility exception	Good faith should be available if investigation would have been futile; alternatively, Magness did investigate	Transferee on inquiry notice must diligently investigate; futility is not a substitute for investigation (Texas Supreme Court/Fifth Circuit)
Whether Magness actually performed a diligent investigation in Oct 2008	Record lacks evidence of a diligent investigation during the period of inquiry notice	Magness points to prior and subsequent inquiries and counsel statements as showing reasonable/diligent investigation	Evidence insufficient as a matter of law; no reasonable jury could find diligent investigation during the period at issue; judgment for Receiver
Whether erroneous jury instruction on futility and intervening Texas law require a new trial (Seventh Amendment/due process)	Any jury-instruction error was harmless; record supports entry of judgment rather than remand	Intervening Texas law changed the legal standard; a new jury trial is required; retrial needed to decide diligence	No new trial; error (if any) was harmless and Seventh Amendment/due-process rights do not entitle Magness to retrial when record cannot sustain verdict (Weisgram)
Whether additional jury findings about timing of initial suspicions are required before rendering judgment	Not necessary; inquiry notice is measured at time of transfer and the jury found inquiry notice at the transfers	Additional findings on when suspicions first arose are needed to vindicate Magness	Not required; existing finding that Magness was on inquiry notice at the time of transfers suffices

Key Cases Cited

Janvey v. GMAG, L.L.C., 592 S.W.3d 125 (Tex. 2019) (Texas Supreme Court: transferee on inquiry notice must diligently investigate to claim TUFTA good faith)
Janvey v. GMAG, L.L.C., 913 F.3d 452 (5th Cir. 2019) (Fifth Circuit initial decision reversing district court on inquiry-notice/good-faith issue)
Montano v. Orange County, 842 F.3d 865 (5th Cir. 2016) (standard of review for renewed JMOL)
Weisgram v. Marley Co., 528 U.S. 440 (2000) (court may enter judgment rather than remand when record cannot sustain verdict)
Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989) (jury right in fraudulent-transfer actions under bankruptcy law discussed)
Flores v. Robinson Roofing & Constr. Co., 161 S.W.3d 750 (Tex. App.—Ft. Worth 2005) (transferee bears burden of proving TUFTA good faith)
Rubinstein v. Adm'rs of Tulane Educ. Fund, 218 F.3d 392 (5th Cir. 2000) (harmless-error standard for jury instructions)