Take the Fifth

• Janvey v. GMAG, LLC, 17-11526, appeal from N.D. Tex., designated for publication
  • Stewart, J. (Stewart, Dennis, Willett), Texas Uniform Fraudulent Transfers Act, fraudulent transfer
  • After earlier vacating prior panel decision and referring to Texas Supreme Court to answer legal question regarding Texas Uniform Fraudulent Transfers Act (“TUFTA”), Court entered new opinion reversing district court’s judgment and rendering judgment in favor of plaintiff.
  • Plaintiff, the Receiver appointed to recover assets of the Stanford Investment Bank (“SIB”) Ponzi scheme and return them to the scheme’s victims, brought suit against Gary Magness and the Magness entities, among the largest investors in the SIB scheme, to recover SIB funds that had been loaned back out of SIB to Magness and that the Receiver claimed were fraudulently transferred from SIB to Magness. After receiving partial summary judgment as to $8.5 million that was in excess of Magness’s original investments in SIB, the Receiver moved for partial summary judgment for a ruling that the remaining amounts (~$79 million) were fraudulent transfers under TUFTA; Magness cross-moved for summary judgment on a good faith defense under TUFTA (and under the additional unjust enrichment claim). The summary judgment granted the Receiver’s motion and denied Magness’s, such that trial was on the issue of whether Magness was in good faith when he received the funds fraudulently transferred to him by SIB. The jury found that the Magness parties had inquiry notice of SIB’s Ponzi scheme in October 2008, but not actual knowledge; and that further investigation by Magness into SIB would have been futile. The district court held that the Magness parties had satisfied their good faith defense and that the Receiver was therefore only entitled to the $8.5 million already the subject of the earlier motion for partial summary judgment.
  • In January 2019, the panel issued its first opinion, holding that the jury’s holding of inquiry notice defeated the good faith defense under TUFTA as a matter of law. Pursuant to a petition for panel rehearing, in May 2019 the panel vacated its opinion and certified the question to the Texas Supreme Court. In December 2019, the Texas Supreme Court answered the legal question, holding 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). That court, 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.
  • Court held that a transferee bears the burden under TUFTA of proving the good faith defense. “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.” The Court found that neither the record evidence nor statements by the Receiver show that the Magness parties had engaged in a diligent investigation of possible fraud by SIB. The Court then held that the record evidence overwhelmingly supported a conclusion that Magness had failed to engage in a diligent investigation of the proper inquiry–SIB’s fraud–such that there was no harmful error in the district court’s instructing the jury as to futility of an investigation rather than into diligence of the investigation, and that a remand for retrial would be unnecessary. The Court held that the Seventh Amendment did not compel a remand for a new jury trial where the original verdict could not be sustained on the record. The Court held that the record on the issue of diligent investigation by Magness into SIB’s fraud was complete and that it was undisputed on that record that such a diligent investigation did not occur.

• U.S. v. Napper, 18-10442, appeal from N.D. Tex., designated for publication
  • Davis, J. (Owen, Davis, Southwick), criminal, sentencing
  • Affirming sentence of 37 months’ imprisonment for revocation of prior supervised release term. Defendant had originally pled guilty to possession of a firearm in the act of a drug-trafficking offense, his guilty plea conditioned on receiving a prison sentence of 60 months and a supervised release term of 60 months. After serving the prison sentence and one year of the supervised release, he violated the supervised release terms and received a revocation sentence of 37 months’ imprisonment and 23 months’ supervised release. After serving that 37-month prison term, defendant then violated the supervised-release terms again, and received the 37-month prison term at issue in this appeal. He argued that he understood that his original plea agreement meant that, if he violated his supervised release, he would never be on the hook for more than 60 months’ additional prison time, the length of the supervised release term, and that the two 37-month prison terms her received for the two supervised-release revocations were 14 months longer and therefore a violation of his plea agreement.
  • Court held that the imposition of the first 37-month revocation term was the only revocation term that would have been subjected to the plea agreement, because the plain language of the plea agreement only governed the initial sentence, and the second revocation was not governed by the initial plea agreement. Court also held that the second 37-month revocation sentence was not substantively or procedurally unreasonable, even though it was added as a consecutive sentence to a 240-month drug trafficking sentence defendant received on the same day, because defendant failed to rebut the presumption that the 37-month sentence–which was within the Guidelines range–was reasonable.
  • Court also held that the timing of his revocation sentencing did not constitute plain error. First, the Court noted that the time for a “reasonable time” to run starts from the time a defendant is taken into federal custody on the revocation charge, not from the time that the violation of the supervised release occurred. Here, the violation of supervised release terms occurred when defendant committed a state crime, for which he was first convicted and served a state prison sentence, was released from that state prison sentence and committed a new federal crime, and then was taken into custody for both that new crime and for the revocation offense.

• U.S. v. Smith, 19-30711, appeal from W.D. La., designated for publication
  • Oldham, J. (Smith, Clement, Oldham), criminal, sentencing
  • Affirming conviction and 600-month sentence on sex-trafficking charge.
  • Court held there was no abuse of discretion in district court’s denial of a hearing at his re-trial on his motion to suppress evidence from his cell phone, which he had argued in his first trial had been accessed by agents prior to their receiving a warrant. Court held there was no new evidence presented by defendant for rehearing of the motion in his second trial, and that there was no abuse of discretion where his motion to suppress was based only on conclusory speculation.
  • As to his sentence, the Court noted, “Smith raises a hodgepodge of procedural and substantive objections,” and then observed, “The one thing they have in common is meritlessness.” First, the Court held that defendant’s rule of lenity argument did not apply to require a lower Guidelines sentence because that rule only applies to interpretation of mandatory sentences and the Guidelines are now merely advisory rather than mandatory. The Court then held that, even if the rule of lenity could apply, it wouldn’t here because there was no ambiguity in the sentencing range, 15 years to life. The Court then held that there was no error in the district court’s refusal to apply a downward adjustment for acceptance of responsibility. The Court also held that there was nothing substantively or procedurally unreasonable about the 600-month prison term, as it was within the Guidelines range of 360 months to life.

• U.S. v. Carreto-Sanchez, 18-31296, appeal from E.D. La., unpublished
  • per curiam (Smith, Clement, Oldham), criminal, sentencing
  • Affirming sentence. Court held that there was no plain error in district court’s imposition of four years’ supervised release, where that term was both the statutory minimum and fit within the Guidelines range when factoring in application of the safety valve provision. Court also held there was no plain error in the district court not asking defendant at second sentencing hearing whether he had reviewed the PSR with counsel, since district court had confirmed that at the first sentencing hearing and nothing substantive had changed in the PSR in the interim.

• Molina v. Marques, 19-11120, appeal from N.D. Tex., unpublished
  • per curiam (Davis, Stewart, Dennis), habeas corpus
  • Affirming dismissal of § 2241 petition on finding that claims challenging legality rather than conditions of federal sentencing must go forward under § 2255 rather than § 2241, in the court that sentenced the petitioner rather than in the court where he is incarcerated; and that petitioner “may not invoke § 2255(e)’s savings clause to proceed under § 2241 because he cannot demonstrate that, in light of a retroactively applicable Supreme Court decision, he was convicted for conduct that did not constitute a crime.”

• Roberson v. Texas, 19-20262, appeal from S.D. Tex., unpublished
  • per curiam (Dennis, Southwick, Engelhardt), § 1983
  • Dismissing appeal of order denying appointment of counsel as non-appealable order; denying remaining motions as moot because prisoner plaintiff moved for voluntary dismissal of his complaint at the district court.

• U.S. v. Thomas, 19-20520, appeal from S.D. Tex., unpublished
  • per curiam (Owen, Davis, Southwick), criminal, sentencing, supervised release
  • Affirming term of supervised release on finding that any discrepancy between the oral pronouncement and the terms of the supervised release was a “reconcilable ambiguity,” rather than a conflict.

• Adams v. Chen, 19-20530, appeal from S.D. Tex., unpublished
  • per curiam (Stewart, Dennis, Haynes), landlord-tenant
  • Vacating district court’s ruling in favor of tenants on landlords’ counterclaim of breach of lease, and remanding to district court.
  • Tenants had been evicted from townhome and brought suit against landlords for retaliation under Texas law and for housing discrimination under Fair Housing Act (“FHA”). Landlords counter-claimed on breach of lease. Tenants voluntarily dismissed their claims, and district court ruled in favor of tenants on counter-claim after two-day bench trial.
  • Court held that the landlords conclusively proved that tenants breached the lease by bringing a second pet, an emotional support animal, into the townhome without a prior written agreement allowing them to do so. Court held that tenants did not have a valid excusability defense because it was not convinced that tenants made a good faith attempt to exercise rights under the FHA. Court then remanded for the district court to consider the landlords’ mitigation of damages and claim for attorneys’ fees.

• U.S. v. Duarte, 19-20635, appeal from S.D. Tex., unpublished
  • per curiam (Graves, Costa, Engelhardt), criminal, sentencing
  • Affirming sentence of two consecutive 12-month prison terms for violation of supervised release terms for two separate underlying convictions. The Court found no plain error in the imposition of the sentences consecutively, given the district court’s detailed explanation of its rationale for the consecutive sentences.

• U.S. v. Smith, 19-51018, appeal from W.D. Tex., unpublished
  • per curiam (Wiener, Southwick, Duncan), First Step Act, sentencing
  • Holding that the district court did not abuse its discretion in denying prisoner’s motion for reduction of sentence under the First Step Act.

• Hasan v. Barr, 19-60576, petition for review of BIA order, unpublished
  • per curiam (Owen, Dennis, Ho), immigration, Convention Against Torture
  • Denying petition for review. Holding that substantial evidence supported finding that petitioner had failed to show that Bangladeshi government would fail to protect him from persecution for his failure to join the Awami League upon his return. Court noted that State Department reports submitted by petitioner “do not necessarily bolster his claim of governmental inaction because they showed a decrease in politically motivated killings and explained that the Bangladeshi government had at least enacted steps to remedy police corruption, even if it did not consistently enforce the measures.”
  • Also holding that petitioner had failed to make substantial showing for protection under the Convention Against Torture because he “offers only a generalized assertion that he will more likely than not be tortured if he returns to Bangladesh. Such speculation is insufficient to reverse the BIA’s determination that Hasan is ineligible for protection under the CAT.”

• U.S. v. Harrison, 20-10243, appeal from N.D. Tex., unpublished
  • per curiam (Dennis, Costa, Engelhardt), criminal
  • Granting counsel’s motion to withdraw and dismissing appeal.

• U.S. v. Serna, 20-40106, appeal from S.D. Tex., unpublished
  • per curiam (Higginbotham, Jones, Costa), criminal, sentencing
  • Affirming sentence for cash smuggling, finding no clear error in district court’s determination that the amount of cash smuggled by defendant’s co-conspirator should also be attributed to defendant for purposes of determining applicable Guidelines range.

• U.S. v. Humber, 20-50069, appeal from W.D. Tex., unpublished
  • per curiam (Barksdale, Graves, Oldham), criminal, sentencing
  • Affirming sentence and finding no clear error in district court’s attribution of the full amount of controlled substances involved in the conspiracy to defendant for purposes of sentencing.