GMAG, LLC, et al. v. Ralph S. Janvey, as Receiver for the Stanford International Bank Limited, et al.

Petitioners (“Magness”) invested tens of millions of dollars in a bank that turned out to be one of the largest and best-concealed Ponzi schemes in American history. Respondent, the receiver appointed after the bank’s collapse, sued Magness to recover loans that Magness had received from the bank in amounts substantially less than his lost investments. The jury returned a verdict for Magness on its good-faith defense, finding any investigation into the bank would have been futile. On appeal, the Fifth Circuit not only overturned the jury’s verdict but entered judgment against Magness based on a factual question that was never put to the jury. The Fifth Circuit first asked the Texas Supreme Court to decide whether a transferee can assert good faith on the ground that a diligent investigation would have been futile. Resolving that question of first impression, the Texas Supreme Court held that a transferee must conduct a diligent investigation to assert good faith. Based on that intervening legal ruling, Magness’ good-faith defense turned on a factual question that the jury never decided and was expressly told was not dispositive. But instead of remanding for the jury to resolve that disputed factual issue, the Fifth Circuit resolved the factual dispute itself. Based on its own skewed reading of a trial record aimed at different issues, the court reversed the jury’s verdict and rendered judgment against Magness. The question presented is: Whether the Seventh Amendment and due process permit a court of appeals to reverse a jury verdict based on the court’s own independent examination of a trial record to answer disputed factual questions that were never presented to or resolved by the jury.