Last year we wrote about Janvey v. Golf Channel, 780 F.3d 641 (5th Cir. 2015), in which the U.S. Court of Appeals for the Fifth Circuit held that advertising fees accepted by Golf Channel could be recovered as a fraudulent transfer by the court-appointed receiver of the failed Stanford International Bank Ponzi scheme. At that time, the circuit court reasoned that such advertising services, as a matter of law, provided no “value” from the perspective of creditors of the defunct scheme, as the entity providing these services contributed to a perpetuation of the scheme, albeit unintentionally. We expressed concern that this holding created uncertainty and risk for trade creditors who have unwittingly done business with a counterparty that operates a Ponzi scheme. On rehearing, however, the court vacated its holding and submitted a certified question to the Supreme Court of Texas to determine the applicability of the “reasonably equivalent value” defense under the Texas Uniform Fraudulent Transfer Act (TUFTA). Disagreeing with the federal circuit court, the Texas Supreme Court, in Janvey v. Golf Channel, No. 15-0489, (Texas April 1, 2016), ruled that “reasonably equivalent value” is determined objectively as of the time of the transfer, without reference to whether the transfer actually benefited creditors in retrospect.
Background
Fraudulent transfer statutes like TUFTA generally provide an affirmative defense for transferees who can prove that they accepted a transfer in good faith and gave the debtor “reasonably equivalent value” in return. At issue in Janvey was whether approximately $5.9 million in advertising fees, accepted in good faith by Golf Channel, could be recovered by the court-appointed receiver of the failed Stanford Ponzi scheme.
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