Janvey v. Golf Channel, Inc.

• Decision Date: 30 June 2015
• Docket Number: No. 13–11305.,13–11305.
• Citation: 792 F.3d 539
• Parties: Ralph S. JANVEY, In His Capacity as Court Appointed Receiver for the Stanford International Bank Limited, et al.; Official Stanford Investors Committee, Plaintiffs–Appellants, v. The GOLF CHANNEL, INCORPORATED; TGC, L.L.C., doing business as Golf Channel, Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

792 F.3d 539

Ralph S. JANVEY, In His Capacity as Court Appointed Receiver for the Stanford International Bank Limited, et al.; Official Stanford Investors Committee, Plaintiffs–Appellants

v.The GOLF CHANNEL, INCORPORATED; TGC, L.L.C., doing business as Golf Channel, Defendants–Appellees.

No. 13–11305.

United States Court of Appeals, Fifth Circuit.

June 30, 2015.

Kevin M. Sadler (argued), Baker Botts, L.L.P., Palo Alto, CA, Stephanie Frederique Cagniart, Scott Daniel Powers Baker Botts, L.L.P., Austin, TX, Timothy Stuart Durst, Esq., Baker Botts, L.L.P., Dallas, TX, for Plaintiff–Appellant Ralph S. Janvey, in his Capacity as Court Appointed Receiver for the Stanford International Bank Limited, et al.

Douglas J. Buncher, Nicholas A. Foley, Esq., Neligan Foley, L.L.P., Dallas, TX, Edward C. Snyder, Castillo Snyder, P.C., Edward Frazer Valdespino, Strasburger Price Oppenheimer Blend, San Antonio, TX, for Plaintiff–Appellant Official Stanford Investors Committee.

Theodore W. Daniel, Esq. (argued), Kyle Morris Schindler, Norton Rose Fulbright US, L.L.P., Dallas, TX, Jonathan S. Franklin, Norton Rose Fulbright US, L.L.P., Washington, DC, Katherine D. Mackillop, Esq., Norton Rose Fulbright US, L.L.P., Houston, TX, for Defendants–Appellees.

William Scott Hastings, Esq., Locke Lord, L.L.P., Dallas, TX, for Amicus Curiae University of Miami.

Mary L. O'Connor, Akin Gump Strauss Hauer & Feld, L.L.P., Dallas, TX, for Amici Curiae IMG Worldwide, Incorporated and International Players Championship, Incorporated.

Lisa Staler Gallerano, Akin Gump Strauss Hauer & Feld, L.L.P., Dallas, TX, for Amici Curiae PGA Tour, Incorporated and ATP Tour, Incorporated.

Before REAVLEY, ELROD, and SOUTHWICK, Circuit Judges.

Opinion

PER CURIAM:

The original opinion in this case was filed on March 11, 2015.¹ In that opinion we reversed the district court's judgment and rendered judgment in favor of the receiver pursuant to the Texas Uniform Fraudulent Transfer Act (TUFTA), codified at Texas Business and Commerce Code §§ 24.001 –.013. We held that, for purposes of the “good faith and for a reasonably equivalent value” affirmative defense in section 24.009(a), value must be measured from the standpoint of a debtor's creditors and proof of market value is insufficient. Because The Golf Channel, Inc. (Golf Channel) failed to offer any evidence showing that its advertising services benefitted the creditors of Stanford International Bank Limited, we rendered judgment in favor of the receiver. Golf Channel filed a petition for panel rehearing and a petition for rehearing en banc, which are now pending before the court. In its petitions, Golf Channel requested, in the alternative, that we certify a question to the Supreme Court of Texas given “the lack of any Texas case law ... interpreting TUFTA's definition of ‘value’ in the context of a good faith transferee of a Ponzi scheme.”

The petition for panel rehearing is GRANTED, the original opinion is VACATED, and a majority of the panel substitutes the following opinion certifying a question to the Supreme Court of Texas.

CERTIFICATION 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 PROCEDURE 58.1.

I. STYLE OF THE CASE

The style of the case is Ralph S. Janvey, In His Capacity as Court Appointed Receiver for the Stanford International Bank Limited, et al.; Official Stanford Investors Committee, Plaintiffs—Appellants, v. The Golf Channel, Incorporated; TGC, L.L.C., doing business as Golf Channel, Defendants—Appellees, Case No. 13–11305, in the United States Court of Appeals for the Fifth Circuit, on appeal from the judgment of the United States District Court for the Northern District of Texas, Dallas Division. Federal jurisdiction over the issues presented in the case is based on 15 U.S.C. §§ 77v(a), 78aa, and 28 U.S.C. § 754, as the district court, the court that appointed Janvey as receiver, has jurisdiction over any claim brought by the receiver to execute his receivership duties.

II. STATEMENT OF THE CASE

The facts are undisputed. For nearly two decades, Allen Stanford operated a multi-billion dollar Ponzi scheme² through more than 130 affiliated entities centered around Stanford International Bank Limited (Stanford).³ To sustain the scheme, Stanford promised investors exceptionally high rates of return on certificates of deposit (CD) and sold these investments through advisors employed at the affiliated entities. Some early investors received the promised returns, but, as was later discovered, these returns were merely other investors' principal. Before collapsing, Stanford had raised over $7 billion selling these fraudulent CDs.

Beginning in 2005, Stanford developed a plan to increase awareness of its brand among sports audiences. It targeted this group because of the group's large proportion of high-net-worth individuals, the people most likely to invest with Stanford. Stanford became a title sponsor of the Stanford St. Jude's Championship, an annual PGA Tour event held in Memphis, Tennessee. Upon hearing of Stanford's sponsorship, The Golf Channel, Inc. (Golf Channel), which broadcasted the tournament, offered Stanford an advertising package to augment its marketing efforts. In October 2006, Stanford entered into a two-year agreement with Golf Channel for a range of marketing services, including but not limited to: commercial airtime (682 commercials per year); live coverage of the Stanford St. Jude's Championship with interspersed messaging regarding Stanford's charitable contributions, products, and brand; display of the Stanford Logo throughout the event; promotion of Stanford as the sponsor of tournament-update segments that included video highlights every half-hour; and identification of Stanford as a sponsor of Golf Channel's coverage of the U.S. Open (one of the four major annual golf tournaments in the world). Golf Channel did not design Stanford's media strategy or develop the content of the advertisements. However, the agreement required Golf Channel's final approval. Stanford satisfied most of its monthly-payment obligations to Golf Channel and, before the agreement expired, entered into a four-year renewal. By the time this lawsuit was initiated, Stanford had paid at least $5.9 million to Golf Channel pursuant to the agreement.

In February 2009, the SEC uncovered Stanford's Ponzi scheme and filed a lawsuit in the Northern District of Texas against Stanford and related entities, requesting that the district court appoint a receiver over Stanford. The district court assumed exclusive jurisdiction, seized Stanford's assets, and appointed Ralph S. Janvey to serve as receiver. Pursuant to his powers, the receiver took custody of any and all assets owned by or traceable to the receivership estate, which included recovering any voidable transfers made by Stanford before going into receivership.

In the process of investigating Stanford's accounts, the receiver discovered the payments to Golf Channel, and in 2011, he filed suit under TUFTA to recover the full $5.9 million. After initial discovery, the parties filed cross-motions for summary judgment. Despite the fact that Golf Channel offered no evidence to show how its services benefitted Stanford's creditors, the district court granted Golf Channel's motion and denied the receiver's motion. The district court determined that although Stanford's payments to Golf Channel were fraudulent transfers under TUFTA, Golf Channel was entitled to judgment as a matter of law on its affirmative defense that it received the payments in good faith and in exchange for reasonably equivalent value (the market value of advertising on The Golf Channel). As the district court explained, “Golf Channel looks more like an innocent trade creditor than a salesman perpetrating and extending the Stanford Ponzi scheme.”

As discussed below, we initially reversed the district court's judgment and, relying on the text of TUFTA, the comments in the Uniform Fraudulent Transfer Act (“UFTA”), and our precedent, rendered judgment in favor of the receiver. Golf Channel, supported by several amici⁴ who have similar claims pending against them, filed petitions for rehearing en banc and panel rehearing, arguing that market value is sufficient proof of “value” for purposes of TUFTA's affirmative defense, and alternatively arguing that we should certify the question to the Supreme Court of Texas.

III. LEGAL ISSUES

To decide whether the receiver is entitled to disgorge the $5.9 million payment for advertising services from Golf Channel, we must interpret Texas law, specifically the meanings of “value” and/or “reasonably equivalent value” in TUFTA. To decide questions of Texas law, we normally look first to the final decisions of the Supreme Court of Texas. See Vanderbrook v. Unitrin Preferred Ins. Co. (In re Katrina Canal Breaches Litig.), 495 F.3d 191, 206 (5th Cir.2007). However, in the absence of a definite pronouncement from the Supreme Court of Texas on an issue, we may certify a question to the Supreme Court of Texas. Under Texas law, “[t]he Supreme Court of Texas may answer questions of law certified to it by any federal appellate court if the certifying court is presented with determinative questions of Texas law having no controlling Supreme Court precedent.” Tex.R.App. P. 58.1 ; see also Tex. Const. art. V, § 3–c (a) (conferring jurisdiction on the Supreme Court of Texas and the Texas Court of Criminal Appeals to answer questions of state law certified to them by a federal appellate court). “[C]ertification may be advisable where important state interests are at stake and the state courts have not provided clear guidance on how to proceed.” La. State v. Anpac La. Ins. Co. (In re Katrina Canal Breaches Litig.), 613 F.3d 504, 509 (5th Cir.2010) (internal quotation marks omitted).

Because there is no decision by the Supreme Court of Texas that resolves the determinative issue in ...