I previously commented on a controversial fraudulent transfer opinion issued by the Fifth Circuit Court of Appeals. In Janvey v. The Golf Channel, 780 F.3d 641 (5th Cir. 2015) (the “First Janvey Opinion”), the Fifth Circuit concluded that $5.9 million of payments made by the “Stanford Financial” Ponzi scheme were voidable pursuant to the Texas Uniform Fraudulent Transfer Act (“TUFTA”). The key issue was whether the Golf Channel (“GC”) provided Stanford something of “reasonably equivalent value.” The Fifth Circuit rejected GC’s argument that its advertising services were of “value” and specifically rejected the argument that the advertising services had been fairly priced in the advertising marketplace. The Fifth Circuit instead held “we measure value from the standpoint of the creditors, not from that of a buyer in the market place”. The Court concluded that because Stanford was an illegal Ponzi-scheme, its creditors received nothing of value as a result of GC’s advertising services.

GC then filed a motion to reconsider. On June 30, 2015, in a highly unusual order, the Fifth Circuit vacated the First Janvey Opinion, and substituted a new opinion (the “Second Janvey Opinion”).

In the First Janvey Opinion, the Fifth Circuit noted it was required to make an “Erie-guess” as to Texas law because there was no definite pronouncement from the Texas Supreme Court on the issue of what constitutes “value” under the TUFTA. In the Second Janvey Opinion, the Fifth Circuit eliminated its guesswork by certifying this important issue for decision by the Texas Supreme Court.

The Texas Supreme Court may be influenced by a relatively recent opinion issued by the Minnesota Supreme Court involving another Ponzi-scheme. In Finn v. Alliance Bank, 2015 WL 672406 (Minn. Feb. 18, 2015), the Minnesota Supreme Court rejected the presumption that a Ponzi-scheme operator can never receive “reasonably equivalent value” for payments, and rejected any rigid presumption that payments made by the Ponzi cannot be for “reasonably equivalent value.” It observed that “satisfaction of an antecedent debt can constitute reasonably equivalent value” and concluded that “any legally enforceable right to payment against the debtor is sufficient to qualify as an antecedent debt” under the Minnesota statute.

If the Minnesota Supreme Court’s reasoning is persuasive to the Texas Supreme Court, GC may ultimately prevail on its defense. It is plausible that GC had a legally enforceable right to payment from Stanford for advertising services rendered. Also, it should be noted that the federal fraudulent transfer statute within the Bankruptcy Code contains a definition of “value” that is similar to that found in the state law fraudulent transfer acts. Stay tuned for more developments!