834 F.3d 570
5th Cir.2016Background
- Stanford International paid $5.9 million to The Golf Channel for advertising designed to recruit investors into Stanford’s Ponzi scheme.
- After the SEC uncovered the scheme, the court-appointed receiver sued under the Texas Uniform Fraudulent Transfer Act (TUFTA) to recover the $5.9 million.
- The district court found the payments were fraudulent transfers but granted summary judgment for Golf Channel on the affirmative defense that it received the payments "in good faith and for a reasonably equivalent value."
- The Fifth Circuit initially reversed, holding advertising that fueled a Ponzi scheme provided no "value" under its prior fraudulent-transfer law analyses, then vacated and certified a question to the Texas Supreme Court about TUFTA’s definition of "value."
- The Texas Supreme Court (Janvey v. Golf Channel, Inc.) held that TUFTA’s "reasonably equivalent value" can be met if the transferee (1) fully performed under an arm’s-length contract for fair market value, (2) provided consideration with objective value at the time, and (3) acted in the ordinary course of business — and that consumable services can have objective value even if they deplete the debtor’s estate.
- The Fifth Circuit, bound by the Texas Court’s answer, affirmed the district court’s grant of summary judgment for Golf Channel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the $5.9M transfer was "for value" under TUFTA | Receiver: Advertising that extended the Ponzi scheme did not confer value because it depleted the estate and did not benefit creditors | Golf Channel: Services had objective market value and were fully performed under an arm’s-length contract | Texas Supreme Court/Fifth Circuit: Transfer was for "value" — services had objective value available at market rates and met TUFTA criteria |
| What showing satisfies TUFTA’s "reasonably equivalent value" defense | Receiver: Must show estate-preserving benefit or tangible economic benefit to debtor/creditors | Golf Channel: Show full performance under fair market, objective value at time, ordinary-course transaction | Held: Defense satisfied by (1) full performance under lawful arm’s-length contract for fair market value, (2) consideration with objective value then, (3) ordinary-course exchange |
| Whether the debtor’s status as a Ponzi scheme negates "value" inquiry | Receiver: Ponzi nature means services that recruit investors cannot be "value" as they harm creditors | Golf Channel: TUFTA’s value inquiry depends on market availability/value, not debtor solvency | Held: Under TUFTA, solvency/Ponzi status does not change whether consideration had objective market value (so long as services would have been available to others at market rates) |
| Whether Golf Channel’s forfeiture of antecedent-debt argument is fatal | Receiver: Forfeiture means no alternate antecedent-debt theory of value survives | Golf Channel: TUFTA’s list of transfers for value is nonexclusive; antecedent-debt theory was alternative | Held: Forfeiture not fatal — Texas Court treated antecedent-debt idea as alternative and TUFTA’s enumeration is nonexclusive |
Key Cases Cited
- Janvey v. Golf Channel, Inc., 487 S.W.3d 560 (Tex. 2016) (interpreting TUFTA’s "reasonably equivalent value" and holding consumable services can have objective value)
- Warfield v. Byron, 436 F.3d 551 (5th Cir. 2006) (holding services that furthered a Ponzi scheme were not "value" under Washington UFTA because transferor’s net worth was not preserved)
- Butler Aviation, Int’l, Inc. v. Whyte (In re Fairchild Aircraft Corp.), 6 F.3d 1119 (5th Cir. 1993) (analyzing "value" under Bankruptcy Code § 548(c) by asking whether consideration conferred tangible economic benefit on the debtor)
- Johnson v. United States, 559 U.S. 133 (2010) (federal courts are not bound by state-court interpretations of different statutes)
- Mercado v. Lynch, 823 F.3d 276 (5th Cir. 2016) (reciting the rule of orderliness that panels are bound by prior decisions of the same court)