* Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion

should not be published and is not precedent except under the limited circumstances

set forth in 5th Cir. R.47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

No. 96-20154

Summary Calendar

_______________

In The Matter Of: 

MARY THERESA RAMIREZ RODRIGUEZ; 

T.R. NETWORK COMPANIES, INC.; 

T.R. FINANCIAL SERVICES, U.S., INC.; 

and AMICUS COMPUTER SYSTEMS, INC.,

Debtors.

SSSSSSSSSSSSSSSSSSSSSSSS

JAMES C. SHINDLER and BETTY SHINDLER,

Appellants,

VERSUS

BEN B. FLOYD, TRUSTEE,

Appellee.

_________________________

Appeal from the United States District Court

for the Southern District of Texas

(CA-H-95-926)

_________________________

August 2, 1996

Before GARWOOD, SMITH, and BENAVIDES, Circuit Judges.

JERRY E. SMITH, Circuit Judge:*
2

The Shindlers appeal a judgment affirming a bankruptcy court’s

grant of summary judgment against them in this action to recover a

preferential transfer. We affirm.

I.

Trustee Ben B. Floyd instituted an adversary proceeding

against James C. and Betty Shindler to avoid a preferential

transfer allegedly made to them by Mary Theresa Ramirez Rodriguez,

one of the debtors in the underlying bankruptcy. The Shindlers

chose not to file a proof of claim in the bankruptcy court and

instead timely demanded a jury trial.

The bankruptcy court granted summary judgment to the trustee.

In doing so, the court concluded from undisputed factsSSand the

expert opinion of an accountantSSthat Rodriguez had been operating

a Ponzi scheme. The Shindlers appealed to the district court,

which affirmed the bankruptcy court’s judgment under de novo

review. 

Most of the Shindlers’ arguments center on whether summary

judgment was properly granted. They also make Seventh Amendment

and Article III challenges, arguing that they were entitled to a

jury trial before an Article III court. We turn to the summary

judgment arguments first, as their resolution simplifies the

resolution of the constitutional issues.
3

II.

We review a summary judgment de novo. Hanks v. Transcontinental Gas Pipe Line Corp., 953 F.2d 996, 997 (5th Cir. 1992).

Summary judgment is appropriate “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with

the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to a

judgment as a matter of law.” FED. R. CIV. P. 56(c). The party

seeking summary judgment carries the burden of demonstrating that

there is an absence of evidence to support the non-moving party's

case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). After

a proper motion for summary judgment is made, the non-movant must

set forth specific facts showing that there is a genuine issue for

trial. Hanks, 953 F.2d at 997.

We begin our determination by consulting the applicable

substantive law to determine what facts and issues are material.

King v. Chide, 974 F.2d 653, 655-56 (5th Cir. 1992). We then

review the evidence relating to those issues, viewing the facts and

inferences in the light most favorable to the non-movant. Id. If

the non-movant sets forth specific facts in support of allegations

essential to his case, a genuine issue is presented. Celotex, 477

U.S. at 327.

III.
4

The Shindlers challenge the affidavit provided by an accountant, Jesse N. Collier, as part of the trustee’s summary judgment

evidence. They do not challenge, however, challenge the substance

of Collier’s affidavitSSwhich includes, inter alia, the opinion

that Rodriguez was running a Ponzi scheme. Rather, they attack

only the foundation for the affidavit. The Schindlers have not

adduced evidence showing that Rodriguez was not running a Ponzi

schemeSSi.e., they have not set forth specific facts showing that

the existence vel non of the Ponzi scheme is a genuine issue of

material fact.

As both lower courts correctly concluded, Collier was well

qualified to render an expert opinion under FED. R. EVID. 702. His

review of the debtors’ records was sufficiently comprehensive for

him to ascertain the underlying structure of a Ponzi scheme. His

statement that the debtors were operating such a scheme was a

further description of that underlying structure, not a legal

conclusion.

The fact that Collier relied on work performed by his

subordinates, without more, does not defeat this conclusion. As we

have stated:

While testimony based on the personal observations of the

expert is preferable, neither the rules nor our cases

have insisted on personal examinations. The reports and

statements of others such as doctors, nurses, or medical

personnel, while not as valuable as testimony based on

the expert’s own observations, can provide a reliable

basis for the expert’s opinion, at least when reliance on

such sources is the custom of the discipline.
1 Christophersen was abrogated in part on other grounds by Daubert v.

Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993), which held that the Federal

Rules of Evidence had superseded the “general acceptance” test for determining

the admissibility of expert scientific testimony, a test first announced in Frye

v. United States, 293 F. 1013, 1014 (D.C. 1923).

2 The Shindlers do not argue that Collier merely parroted the conclusions

of his subordinates. Consequently, we express no opinion on that issue.

3 The key cases relied upon by the Shindlers to support their challenge to

Collier’s affidavit are inapposite. For example, Engebretsen v. Fairchild

Aircraft Corp., 21 F.3d 721, 727-29 (6th Cir. 1994), involved a situation where

the district court had admitted, under rule 703, the otherwise inadmissible

materials upon which the expert in that case had relied. The Sixth Circuit held

that it was improper to admit those materials under rules 702 and 703, not that

the expert opinion itself was inadmissible. See id. at 728-29. In the case

before us, the Shindlers argue that the bankruptcy court erroneously relied on

Collier’s opinion, not that it erroneously relied on the materials underlying

(continued...)

5

Christophersen v. Allied-Signal Corp., 939 F.2d 1106, 1110-11 (5th

Cir. 1991) (en banc) (per curiam) (footnote omitted), cert. denied,

503 U.S. 912 (1992).1 Partners at law firms rely on the work of

associates without double-checking their research. On the basis of

such research, those partners give legal advice to their clients on

decisions. Similarly, partners at accounting firms rely on

calculations and analysis performed by their subordinates in

advising their clients.

The Shindlers have not set forth a specific reason to doubt

the reasonableness of the particular facts and data upon which

Collier relied, including the particular work performed by his

subordinates.2 We conclude, therefore, that Collier’s affidavit

relied on evidence of the type reasonably relied upon by accounting

experts in forming opinions or inferences on financial transactions. His affidavit was admissible under FED. R. EVID. 703.3
3(...continued)

that opinion.

In Paddack v. Dave Christensen, Inc., 745 F.2d 1254, 1261-62 (9th Cir.

1984), the court held that otherwise inadmissible materials relied on by an

expert are admissible, under rule 703, only to provide a basis for the expert’s

opinion, not to prove the truth of the matters contained in the materials. See

also Engebretsen, 21 F.3d at 728 (citing Paddack). The materials underlying

Collier’s opinion were admitted only in order to explain the basis of that

opinion. The bankruptcy court relied on Collier’s opinion to conclude that

Rodriguez had been running a Ponzi scheme.

Pelster v. Ray, 987 F.2d 514 (8th Cir. 1993), is even further afield than

the other cases cited by the Shindlers. The district court had never qualified

the witness at issue as an expert. Id. at 526. The Eighth Circuit, after noting

this threshold problem, further opined in dictum that the witness’s testimony

would have been inadmissible as expert testimony anyway, because he was

testifying as to matters well within the understanding of lay jurors. See id.

(“[A]ny lay person has the ability to compare the odometer readings on two

titles, odometer statements, or check-in sheets and decide whether and when the

vehicle’s odometer had been rolled back.”).

Finally, Vidrine v. Enger, 752 F.2d 107, 109-10 (5th Cir. 1984) (per

curiam), is inapposite, because it involved an attempt by the plaintiff, a lay

deponent, to introduce, by hearsay, the opinion of an expert. This is patently

distinct from a situation where an expert provides his own opinion. In Vidrine,

FED. R. EVID. 802 barred the testimony of the lay deponent. In the case before

us, rule 703 permitted the expert, Collier, to rely on inadmissible evidence in

forming his opinion.

6

IV.

The Shindlers argue that the trustee was required specifically

to plead the existence of a Ponzi scheme as an element of his case.

The trustee brought an action to recover a preferential transfer

under 11 U.S.C. § 547(b). The existence of a Ponzi scheme is not

an element of that cause of action. See 11 U.S.C. § 547(b) (1993).

The characterization of the underlying transactions in this case as

a Ponzi scheme is precisely that: a descriptive characterization,

nothing more. The Shindlers do not argue that the trustee has

otherwise failed to plead the elements of a § 547(b) action.
7

V.

The Shindlers aver that there is a genuine issue of material

fact as to whether the preferential transfer was made in the

“ordinary course of business,” which is an affirmative defense to

a § 547(b) action. See 11 U.S.C. § 547(c)(2) (1993). This

defense, however, is unavailable as a matter of law where, as here,

the transfer was made in furtherance of a Ponzi scheme. See Wider

v. Wooton, 907 F.2d 570, 572-73 (5th Cir. 1990).

VI.

The Shindlers argue that the trustee failed to put forth any

evidence proving that $82,151.60 of the preferential transfer was

paid by one of the debtors. That amount was paid out of a bank

account in the name of T&T Investments, a third-party non-debtor,

and the legal issue presented is whether that amount was earmarked

for the Shindlers.

In determining whether the earmarking doctrine applies to the

$82,151.60, it is critical to determine who had control over the

source of the funds (the bank account). Hansen v. MacDonald Meat

Co. (In re Kemp Pacific Fisheries), 16 F.3d 313, 316 (9th Cir.

1994) (per curiam); see Coral Petroleum v. Banque Paribas-London,

797 F.2d 1351, 1358 (5th Cir. 1986) (characterizing the issue of

control of funds as key to resolution of earmarking dispute). The

trustee presented two affidavits on this point. The first of these
4 Thus, we do not need to decideSSand we express no opinion regardingSSwhether earmarking is an affirmative defense that the Shindlers were

required to plead, or whether it is a denial of the first element of a § 547(b)

(continued...)

8

was Collier’s affidavit, which established that certain individualsSSi.e., other investors in the Ponzi schemeSShad made payments

to the bank account of T&T Investments prior to the preferential

transfer. Furthermore, Collier’s affidavit established that those

payments were transfers made to Rodriguez pursuant to the base

participation contracts and subcontracts that executed the Ponzi

scheme. The affidavit also established that, once Rodriguez

received funds from investors, she commingled them in various bank

accounts, none of which was segregated or treated as a trust

account.

The trustee also offered the affidavit of W. Patrick Collins,

who was employed by Rodriguez or her companies at the time the

preferential transfer occurred. Collins’s affidavit established

that he made wire transfers to the Shindlers from T&T Investments’

bank account, which he characterized as being controlled by his

employer, Rodriguez. Collins’s affidavit further established that

the funds he transferred were funds that had been delivered to the

bank account by other investors.

Taking both affidavits together, we agree with the district

court that the trustee has demonstrated that the $82,151.60 in

dispute was taken from commingled investor funds and that Rodriguez

had control over those funds.4 Thus, the earmarking doctrine does
4(...continued)

action, which requires that the allegedly preferential transfer be “an interest

of the debtor in property.” 11 U.S.C. § 547(b).

9

not apply to those funds.

VII.

Citing 11 U.S.C. § 547(c)(4), the Shindlers argue that they

gave new value to Rodriguez by executing subcontracts with

Rodriguez after the preferential payment was made. The Shindlers,

however, never established that they actually paid money to

Rodriguez; rather, they only executed the subcontracts, thereby

agreeing to invest money in Rodriguez’s venture. Merely executing

a subcontract without making a related paymentSSi.e., merely

agreeing to invest moneySSis not the same as (1) giving money or

money’s worth in goods, services, or new credit or (2) releasing

property as defined in § 547(a)(2). Cf. 11 U.S.C. § 547(a)(2)

(1993) (defining new value).

VIII.

Finally, the Shindlers contend that the bankruptcy court and

the district court violated their Article III right to adjudication

by an Article III court and their Seventh Amendment right to a

jury. The test for deciding whether a party has a right to an

Article III adjudication is the same as the test for deciding

whether a party has a right to a jury trial under the Seventh
10

Amendment. McFarland v. Leyh (In re Texas Gen. Petroleum Corp.),

52 F.3d 1330, 1336 (5th Cir. 1995) (decided by quorum). An action

brought by a trustee in bankruptcy to recover a preferential

payment is one to which Article III and the Seventh Amendment

apply. See In re Jensen, 946 F.2d 369, 373-74 (5th Cir. 1991)

(interpreting Schoenthal v. Irving Trust Co., 287 U.S. 92 (1932),

as “holding that a suit by a trustee in bankruptcy to recover

preferential payments on behalf of the estate should be tried

before a jury”).

The Shindlers’ right to an Article III adjudication was

vindicated. In core proceedings under title 11SSincluding actions

to recover a preference, see 28 U.S.C. § 157(b)(2)(F) (1993)SSa

bankruptcy court may enter final orders and judgments. 28 U.S.C.

§ 157(b)(1) (1993); Copeland v. Merrill Lynch & Co., 47 F.3d 1415,

1421 (5th Cir. 1995). The bankruptcy court in this case acted as

an adjunct to the district court, a role consistent with Article

III. See McFarland, 52 F.3d at 1337. The bankruptcy court ruled

in favor of the trustee on his pretrial motion for summary

judgment. The district court reviewed the grant of summary

judgment de novo, thus maintaining Article III control over the

adjunct. See id. In other words, the district court, as required,

“retain[ed] the essential attributes of judicial power.” Id.

The Shindlers’ right to a Seventh Amendment jury trial was

also not violated. This right does not apply where a litigant
5 The Seventh Amendment right to a jury trial does apply if a party can

survive summary judgment by presenting a genuine issue of material fact. Thus,

our conclusion that summary judgment was properly granted here forecloses the

possibility that the Shindlers’ Seventh Amendment right to a jury trial was

violated.

11

cannot survive pretrial motions for judgment as a matter of law.5

In other words, “[n]o right to a jury trial arises if no jury issue

is presented to the court.” Id. at 1339. A contrary holding would

necessarily imply that summary judgment procedures, including FED.

R. CIV. P. 56, are unconstitutional. Such a holding would be beyond

the pale: “Summary judgment is not unconstitutional; where there

are no disputed issues of material fact for a jury to decide, no

jury is necessary.” King v. Fidelity Nat’l Bank, 712 F.2d 188, 192

(5th Cir. 1983) (per curiam), cert. denied, 465 U.S. 1029 (1984).

Thus, the Shindlers’ complaints of constitutional violations

are without merit, as are their other arguments. Accordingly, we

AFFIRM.