United States Court of Appeals

for the Fifth Circuit

No. 17-11526

Ralph S. Janvey, in his capacity as court-appointed receiver for the 

Stanford International Bank Limited et al, 

Plaintiff—Appellant,

versus

GMAG, L.L.C.; Magness Securities, L.L.C.; Gary D. 

Magness; Mango Five Family Incorporated, in its capacity as 

trustee for the Gary D. Magness Irrevocable Trust, 

Defendants—Appellees.

Appeal from the United States District Court

for the Northern District of Texas

USDC No. 3:15-CV-401

Before Stewart, Dennis, and Willett, Circuit Judges.

Carl E. Stewart, Circuit Judge:

This case requires us to determine whether the Texas Uniform 

Fraudulent Transfer Act’s—or TUFTA’s—good faith affirmative defense 

allows Defendants-Appellees to retain fraudulent transfers received while on 

inquiry notice of a Ponzi scheme. We initially held it does not. We then

vacated that decision so that the Supreme Court of Texas could clarify 

whether good faith requires a transferee on inquiry notice to conduct an 

United States Court of Appeals

Fifth Circuit

FILED

October 8, 2020

Lyle W. Cayce

Clerk

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investigation into the fraud, or, alternatively, show that such an investigation 

would have been futile. Having received an answer to our question, we once 

again hold that the Defendants-Appellees’ good faith defense must fail. We

therefore REVERSE the district court’s judgment and RENDER judgment 

in favor of Plaintiff-Appellant.

I. FACTS & PROCEDURAL HISTORY

The Securities and Exchange Commission (“SEC”) uncovered the 

Stanford International Bank (“SIB”) Ponzi scheme in 2009. For close to two 

decades, SIB issued fraudulent certificates of deposit (“CDs”) that 

purported to pay fixed interest rates higher than those offered by U.S. 

commercial banks as a result of assets invested in a well-diversified portfolio 

of marketable securities. In actuality, the “returns” to investors were derived 

from new investors’ funds. The Ponzi scheme left over 18,000 investors with 

$7 billion in losses. The district court appointed Plaintiff-Appellant Ralph S. 

Janvey (the “Receiver”) to recover SIB’s assets and distribute them to the 

scheme’s victims. 

Defendants-Appellees are Gary D. Magness and several entities in 

which he maintains his wealth (collectively, the “Magness Parties”).

Magness was among the largest U.S. investors in SIB. Between December 

2004 and October 2006, Magness purchased $79 million in SIB CDs. As of 

November 2006, Magness’s family trust’s investment committee monitored 

Magness’s investments (including the SIB CDs). In July 2008, Bloomberg 

reported that the SEC was investigating SIB. On October 1, 2008, the 

investment committee met and, given its perceived risk associated with 

continued investment in SIB, persuaded Magness to take back, at minimum, 

his accumulated interest from SIB. Magness’s financial advisor, Tom Espy, 

then approached SIB for a redemption of Magness’s investments. SIB, 

however, informed Espy that redemption would not be possible at that time 

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since, “given the general market decline, SIB[] wanted to keep the asset value 

of the CDs on its balance sheet.” This statement contradicted SIB’s public 

claims of liquidity and strong financial health. On October 10, 2008, SIB 

agreed to loan Magness $25 million on his accumulated interest. Between 

October 24 and 28, 2008, Magness borrowed an additional $63.2 million 

from SIB. In total, Magness received $88.2 million in cash from SIB in 

October 2008. 

The Receiver sued the Magness Parties to recover funds under 

theories of (1) fraudulent transfer pursuant to TUFTA and (2) unjust 

enrichment. The Receiver obtained partial summary judgment as to funds in 

excess of Magness’s original investments, and Magness returned this $8.5 

million to the Receiver. The Receiver then moved for partial summary 

judgment, seeking a ruling that the remaining amounts at issue were 

fraudulent transfers. The Magness Parties also moved for summary 

judgment on a good faith defense under TUFTA and the Receiver’s unjust 

enrichment claims. On December 21, 2016, the district court granted the 

Receiver’s motion and denied the Magness Parties’ motions. 

The case proceeded to trial in January 2017. Right before trial, the 

district court sua sponte reconsidered its denial of summary judgment on the 

Magness Parties’ unjust enrichment claims and concluded that there had 

been no unjust enrichment. Thus, the only issue presented to the jury was 

whether the Magness Parties received the $79 million, already determined to 

be fraudulent transfers, in good faith. After the Magness Parties presented 

their case-in-chief, the Receiver moved for judgment on the grounds that (1) 

the Magness Parties were estopped from claiming that they took the transfers 

in good faith and (2) no reasonable jury could conclude that the Parties 

established the TUFTA good faith defense. The district court did not rule 

on the motion. The jury found that the Magness Parties had inquiry notice in 

October 2008 that SIB was engaged in a Ponzi scheme, but not actual 

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knowledge. The jury also found that further investigation by the Magness 

Parties into SIB would have been futile. 

The Receiver moved for entry of judgment on the verdict, arguing that 

the jury’s finding of inquiry notice meant that, as a matter of law, Magness 

could not have acted in good faith. The Receiver also renewed his motion for 

judgment as a matter of law. The district court denied the Receiver’s motions 

and held that the Magness Parties had satisfied their good faith defense. The 

Receiver renewed his post-trial motions and moved for a new trial. The

district court denied these motions and issued its final judgment that the 

Receiver take nothing aside from his prior receipt of $8.5 million. 

Appealing that judgment, the Receiver argued that (1) the Magness 

Parties were estopped from contesting their actual knowledge of SIB’s fraud 

or insolvency; (2) the jury’s finding of inquiry notice defeated the Magness 

Parties’ TUFTA good faith defense as a matter of law; (3) the district court’s 

jury instructions were erroneous and reduced the Parties’ burden to establish 

good faith; and (4) the district court erred by granting the Parties’ motion for 

summary judgment on the Receiver’s unjust enrichment claims. 

On January 9, 2019, we decided this case on the second argument. 

Relying on the text of TUFTA and caselaw from the Texas lower courts, this 

court, and the district courts in this Circuit, we reversed the trial court’s 

judgment and rendered judgment in favor of the Receiver. See Janvey v. 

GMAG, L.L.C., 913 F.3d 452, 458 (5th Cir. 2019). Magness then filed 

petitions for panel rehearing and rehearing en banc, in which he argued that 

we should certify a question to the Supreme Court of Texas regarding the 

proper test for determining TUFTA good faith. Because the Texas courts to 

consider TUFTA good faith had not considered whether it includes a diligent 

investigation requirement or a futility exception, we, on May 24, 2019,

vacated our prior opinion and certified the following question to the Supreme 

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Court of Texas: “Is the [TUFTA] ‘good faith’ defense against fraudulent 

transfer clawbacks . . . available to a transferee who had inquiry notice of the 

fraudulent behavior, did not conduct a diligent inquiry, but who would not 

have been reasonably able to discover that fraudulent activity through 

diligent inquiry?” See Janvey v. GMAG, L.L.C., 925 F.3d 229 (5th Cir. 2019). 

On December 20, 2019, the Supreme Court of Texas answered our

question in the negative and held that “[a] transferee on inquiry notice of 

fraud cannot shield itself from TUFTA’s clawback provision without 

diligently investigating its initial suspicions [of fraud]—irrespective of 

whether a hypothetical investigation would reveal fraudulent conduct.” 

Janvey v. GMAG, L.L.C., 592 S.W.3d 125, 133 (Tex. 2019). The Supreme 

Court of Texas, however, declined to clarify “under what circumstances a 

diligent investigation by a transferee on inquiry notice of fraud will be 

sufficient to establish good faith.” Id. at 132. It also took no position on 

whether the Magness Parties performed a diligent investigation into their 

initial suspicions of SIB’s Ponzi scheme. Id. at 128 n.1.

Because this case is resolved by our TUFTA good faith analysis, we 

once again only reach the second of the Receiver’s arguments. 

II. STANDARD OF REVIEW

We review de novo a renewed motion for judgment as a matter of law. 

Montano v. Orange County, 842 F.3d 865, 873 (5th Cir. 2016). If “there is no 

legally sufficient evidentiary basis for a reasonable jury to find for [a] party,” 

judgment as a matter of law is proper. Id. (quoting Williams v. Hampton, 797 

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F.3d 276, 282 (5th Cir. 2015)). Evidence is viewed “in the light most 

favorable to the nonmovant.” Id.

III. DISCUSSION

The Magness Parties offer several arguments for affirming the district 

court’s judgment. For the reasons that follow, we reject each one. 

TUFTA allows a transferee who receives a transfer in good faith and 

in exchange for reasonably equivalent value to avoid a clawback action by the 

defrauded creditor. Tex. Bus. & Com. Code § 24.009(a). The transferee 

bears the burden of proving TUFTA’s good faith affirmative defense. Flores 

v. Robinson Roofing & Constr. Co., 161 S.W.3d 750, 756 (Tex. App.—Fort 

Worth 2005, pet. denied). Under TUFTA, good faith means that “[a] 

transferee must show that its conduct was honest in fact, reasonable in light 

of known facts, and free from willful ignorance of fraud.” GMAG, 592 

S.W.3d at 129. Texas courts evaluating a TUFTA good faith defense 

consider whether a transferee received fraudulent transfers with actual 

knowledge or inquiry notice of fraud or insolvency. See, e.g., Citizens Nat’l 

Bank of Tex. v. NXS Constr., Inc., 387 S.W.3d 74, 85 (Tex. App.—Houston 

[14th Dist.] 2012, no pet.). A transferee on inquiry notice of fraudulent 

behavior cannot satisfy the good faith defense without first diligently

investigating his or her initial suspicions of fraud. GMAG, 592 S.W.3d at 133.

A. Record Evidence

The Magness Parties first argue that we should affirm the district 

court’s judgment in favor of them because the Parties presented extensive 

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evidence at trial that they “reasonably” investigated their initial suspicions 

of SIB’s fraud. 

Even assuming, without deciding, that “reasonably” equates to 

“diligently” for the purposes of TUFTA good faith, 1 we are not persuaded 

by the Magness Parties’ argument. The question we must answer for the 

purposes of the Parties’ good faith defense is whether they diligently 

investigated their initial suspicions of SIB’s Ponzi scheme during the time 

period—October 2008—the jury found them to be on inquiry notice. Yet

they assert:

Shortly after it was formed [in 2006], and as part of its fiduciary 

obligations to Magness, [the investment committee]

investigated the Stanford CDs because they were the 

investments about which the [] committee had the least 

existing knowledge. Then, in 2007, [the investment 

committee] asked a third-party consultant (Chuck Wilk), who 

was familiar with non-traditional investments, to further 

investigate the investment . . . . As the world economy roiled in 

the beginning of the mortgage crisis, [the Magness Parties]

again investigated Stanford in March 2008 by arranging for a 

phone conversation with [SIB’s] President, Juan RodriguezTolentino—who later turned out to be a figurehead that did not 

know Stanford was a Ponzi scheme—to assess SIB’s 

investments’ exposure to the mortgage markets. And, even 

after receiving the October 2008 loan transfers at issue here, 

because [the Magness Parties] still held their investments in 

SIB CDs, and had millions of [their] dollars on deposit, in 

1 Since, as discussed below, the Magness Parties have not shown that they 

diligently investigated SIB’s Ponzi scheme while on inquiry notice, we leave for another 

day the discussion of what actions a party must take to show that they diligently investigated 

fraud for the purposes of a TUFTA good faith defense. 

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January 2009, [they] arranged a further meeting with Stanford 

executives to discuss the health of SIB. 

As indicated by the above-quoted passage, the Magness Parties 

investigated Magness’s investments prior to and after October 2008. And

instead of investigations into suspected fraud, they were merely inquires by

the investment committee to inform itself of the nature and health of 

Magness’s investments. The record does not show the Parties accepted the

fraudulent transfers in good faith.

B. Receiver’s Statements

Next, the Magness Parties argue that the Receiver has conceded that 

they diligently investigated their initial suspicions of SIB’s fraud. The 

Magness Parties rely on two statements from opposing counsel that 

purportedly show that they conducted such an investigation during the 

relevant time period. The first statement was made during the Receiver’s 

opening statement in which counsel said that the Magness Parties asked 

SIB’s president in March 2008: “What exactly is this bank investigated in?” 

and “What strategies is this bank involved in that backs up these certificates 

of deposit?” But, as indicated above, the statement refers to questions that 

the Magness Parties posed to SIB’s president in March 2008, which predated 

the period during which the jury found them to be on inquiry notice by seven 

months. The second statement was made in the Receiver’s objections to the 

Magness Parties’ proposed jury instructions in which counsel asserted: 

“[T]he undisputed facts in this case show that the Magness Defendants . . . 

did investigate the facts that put them on notice of SIB’s fraud or 

insolvency.” But the statement does not conclusively show that this 

investigation occurred when the Magness Parties were found to be on inquiry 

notice (or whether it was conducted diligently). In sum, neither of the cited 

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statements demonstrate that they diligently investigated their initial 

suspicions of SIB’s Ponzi scheme while on inquiry notice. 

C. Remand for Retrial

The Magness Parties additionally argue that a remand for retrial is 

necessary since the district court erroneously instructed the jury to 

determine whether an investigation into SIB’s fraud would have been futile 

instead of whether the Parties diligently investigated their initial suspicions 

of the Ponzi scheme.2 They contend that “the record evidence is more than 

sufficient for a reasonable jury to conclude that the [Magness Parties’] 

investigation was diligent . . . .” But, as discussed above, that evidence is 

nowhere to be found. Not only do the Magness Parties’ citations to the record 

and the Receiver’s statements not support a conclusion that they diligently 

investigated their initial suspicions of SIB’s fraud while on inquiry notice, but 

other parts of the record also support an opposite conclusion. For instance,

when asked whether he requested additional information from SIB between 

October and December 2008, Magness testified, “I don’t think so.” And 

Magness’s witnesses testified that they did not see a need to inquire into 

whether SIB was committing fraud until several months after the Magness 

Parties were found to be on inquiry notice. The Magness Parties have

therefore not shown that there is any evidentiary basis for a reasonable jury 

to find that they diligently investigated their initial suspicions of SIB’s fraud

2 Curiously, the Magness Parties argue that a new trial is needed because the 

district court erred in providing a futility instruction even though the Parties requested that 

instruction. 

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while on inquiry notice.

3Thus, any error that the district court committed in 

instructing the jury on a futility exception was harmless. See Rubinstein v. 

Adm’rs of Tulane Educ. Fund, 218 F.3d 392, 404 (5th Cir. 2000) (“Even if an 

instruction erroneously states the applicable law or provides insufficient 

guidance, [we] will not disturb the judgment unless the error could have 

affected the outcome of the trial.”)

For this reason, we also reject the Magness Parties’ argument that a 

new jury trial is warranted since the Supreme Court of Texas’s response to 

our certified question “is a new pronouncement of Texas law that departs 

from the law the parties and the district court considered in crafting the jury 

instructions.” In support of their argument, the Parties rely on Lang v. Texas 

& Pacific Railway Company, in which we reversed the district court because 

we found that it had erred in refusing to give an instruction in a wrongful 

death action. 624 F.2d 1275, 1280 (5th Cir. 1980). “[R]elying upon the settled 

law in this circuit, the district court [in Lang] refused the proffered charge. 

However, . . . subsequent to the trial and while the appeal was pending, the 

Supreme Court,” in another case, “effectively changed the law in this area.” 

Id. at 1279 (internal citation omitted). Given this intervening Supreme Court 

precedent, we therefore held a new trial was warranted on the issue of 

damages. Id. at 1280. The Magness Parties’ reliance on Lang, however, is 

misplaced because we implicitly concluded there that the district court’s 

error in refusing to give the requested jury instruction was harmful. That is 

3 The Magness Parties assert that we erroneously concluded in a prior opinion that 

the Parties “did not undertake an investigation prior to accepting the transfers.” See 

GMAG, 925 F.3d at 233. They observe that we predicated this conclusion on a statement 

that “[d]efendants did not perform any inquiry before redeeming their CDs” from SIB, id.

(quoting Janvey v. Alguire, No. 09-CV-0724, 2016 WL 11271878, at *4 (N.D. Tex. Dec. 21, 

2016)), but that the “[d]efendants” referenced there do not include the Magness Parties. 

Regardless of our reliance on Alguire, the Parties have still not shown that they diligently 

investigated their initial suspicions of SIB’s fraud while on inquiry notice.

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not the case here. Nor does the Magness Parties’ reliance on Robinson v. 

Heilman, 563 F.2d 1304 (9th Cir. 1977), compel a different result. Robinson

addressed an unrelated issue, namely whether the defendant’s failure to 

object to a jury instruction prevented the defendant from arguing on appeal 

that the instructions violated intervening Supreme Court caselaw. Id. at 1307. 

Furthermore, the Magness Parties have not convinced us that 

depriving them of a second jury trial would violate their Seventh Amendment 

and due-process rights. In support of their argument, the Parties rely on three 

Supreme Court cases. Yet each of these cases is inapposite. 

The first case, Granfinanciera, S.A. v. Nordberg, held that parties who 

have not submitted a claim against a bankruptcy estate under § 548 of the 

Bankruptcy Code have a Seventh Amendment right to a jury trial when sued 

by a bankruptcy trustee to recover an allegedly fraudulent monetary transfer. 

492 U.S. 33, 64 (1989). To the extent that TUFTA is analogous to § 548 of 

the Bankruptcy Code,4 Granfinanciera stands at most for the proposition that 

actions to recover fraudulent transfers are entitled to be tried before a jury.

But our inquiry here is not whether the Receiver and the Magness Parties had

a right to have this case tried by a jury in the first instance. Rather, it is 

whether the Parties are entitled to another jury trial on a specific issue—

whether they diligently investigated their initial suspicions of SIB’s Ponzi 

scheme while on inquiry notice—when the record indicates that no 

reasonable jury could find for the Parties on that issue. We conclude that they 

are not. The Seventh Amendment does not require us to remand for a new 

4 A proposition that itself is questionable. See GE Capital Commercial, Inc. v. 

Worthington Nat’l Bank, 754 F.3d 297, 312 n.21 (5th Cir. 2014) (“Certain authorities 

indicate that § 548 is not necessarily substantively congruent with state-law counterparts, 

despite a common ancestry.”).

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trial when the verdict cannot be sustained on the trial record. See Weisgram 

v. Marley Co., 528 U.S. 440, 449–50 (2000).

The second case relied upon by the Magness Parties, Byrd v. Blue 

Ridge Rural Electric Co-op., Inc., observes that the Seventh Amendment

“assigns the decisions of disputed questions of fact to the jury.” 356 U.S. 

525, 537 (1958). But, as noted above, we have no disputed question of fact on 

whether the Parties diligently investigated their initial suspicions of SIB’s 

fraud while on inquiry notice.

The third case upon which the Magness Parties rely—Philip Morris 

USA v. Williams—notes that due process provides parties with “an 

opportunity to present every available defense.” 549 U.S. 346, 353 (2007)

(quoting Lindsey v. Normet, 405 U.S. 56, 66 (1972)). Yet the Parties have had 

an opportunity to establish the affirmative defense available to them—good 

faith—and so we would not violate the Parties’ due-process rights in forgoing 

a second jury trial. 

Consequently, the Magness Parties have not shown that the Seventh 

Amendment or due process requires us to remand for another jury trial.

D. Completeness of the Existing Record 

Finally, the Magness Parties contend that we cannot render a decision 

in favor of the Receiver without a jury finding “as to when [the Magness 

Parties] first—or initially—had suspicions [of SIB’s fraud] or when [they]

became charged with inquiry notice.” Yet requiring a jury to make these 

additional findings is not needed for us to adjudicate this case. As the 

Magness Parties concede, “the determination of whether one is on inquiry 

[notice] is measured by all things known at the time of transfer.” See GMAG, 

592 S.W.3d at 130 (“Whether inquiry notice exists is determined at the time 

of the transfer . . . .”). The Parties do not dispute—nor could they—that the 

fraudulent transfers at issue occurred in October 2008. So, the relevant 

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finding, which we have, is that the Magness Parties were on inquiry notice 

during this time period. And the Magness Parties have not shown that they 

diligently investigated their suspicions (initial or otherwise) of SIB’s Ponzi 

scheme while on inquiry notice. Hence, they have not demonstrated that, as 

a matter of law, we cannot render a decision in favor of the Receiver based on 

the existing record.

IV. CONCLUSION

For the foregoing reasons, we REVERSE the district court’s 

judgment and RENDER judgment in favor of the Receiver. 

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