Janvey v. Brown et al.

Summarized by Aaron Kaufman , Gray Reed LLP
11 years 6 months ago

Citation:

--- F.3d --- (5th Cir. 2014) [No. 13-10266 c/w 13-10272 c/w 13-10276 c/w 13-10279]

Tag(s):

Ruling:

Fifth Circuit AFFIRMED partial summary judgment in favor of the Stanford receiver on TUFTA claims against “net winner” investors. Most notably, the Fifth Circuit agreed that only the false interest paid to investors was subject to avoidance: “Unlike the interest payments, it is undisputed that the principal payments were payments of an antecedent debt, namely fraud claims that the investor-defendants have as victims of the Stanford Ponzi scheme.” Also notable was the conclusion that Texas law (not Antiguan law) applied because Texas had the “most significant relationship” to the Ponzi Scheme since the scheme was operated out of Houston (as compared to Antingua, where the entities were incorporated). The Court also held that the receiver had standing to pursue TUFTA claims for the Stanford entities, despite the principals’ prior bad acts, because the bad acts could not be imputed on the receiver or the entities over which the receiver was appointed. The Court also reiterated that there was no genuine fact issue on the transferor’s fraudulent intent—the defendants did not dispute the existence of the Ponzi scheme, and, as the Fifth Circuit previously held in connection with the Stanford receivership, “proving that [a transferor] operated as a Ponzi scheme establishes the fraudulent intent behind the transfers it made.” Finally, the Court agreed that the defendants failed to present evidence that they had legal rights to IRA funds such that the funds would be exempt from avoidance under TUFTA. Accordingly, the partial summary judgment was affirmed.

Procedural context:

The Stanford receiver moved for partial summary judgment alleging that no affirmative defenses could apply to the "net winner" defendants, because they gave no reasonably equivalent value in exchange for the transfers they received. The district court granted partial summary judgment in favor of the receiver, and the defendants appeal raising several grounds on appeal.

Facts:

Janvey was appointed receiver over the Stanford entities and pursued TUFTA claims against certain investors who were "net winners" in the Ponzi scheme because they withdrew their investments before losing money. In this decision, Janvey moved for partial summary judgment arguing that the defendants could not assert any affirmative defenses.

Judge(s):

HIGGINBOTHAM, CLEMENT, and HIGGINSON. Opinion by HIGGINBOTHAM.

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