STMicroelectronics, N v. v. Credit Suisse Securities (USA) LLC
2011 U.S. App. LEXIS 11116
| 2d Cir. | 2011Background
- STMicroelectronics invested ST's cash in ARS that Credit Suisse promised would be government-backed, ultimately switching to riskier ARS including CDOs and CLNs.
- Credit Suisse sent false email confirmations masking the true nature of ARS investments to ST, despite ST's repeated instructions to limit to government-backed paper.
- Two Credit Suisse brokers were later convicted of securities fraud related to the account; arbitration resulted in ST prevailing with a damages award.
- FINRA arbitration panel awarded ST $400 million in compensatory damages plus fees and interest; Credit Suisse sought vacatur for disclosure issues and manifest disregard of the law.
- ST later sold $153.5 million in securities to Deutsche Bank for $74.582 million; this post-award event prompted Credit Suisse to seek offset/credit against the award.
- District court confirmed the award and attempted to implement it, including handling of the post-award Deutsche Bank proceeds and interest, which this appeal partially reverse/remand addresses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Arbitrator disclosure sufficiency and vacatur standard | Credit Suisse argues Duval's disclosures were incomplete/misleading. | ST contends disclosures were adequate and nonprejudicial. | No vacatur; no clear improper disclosure. |
| Manifest disregard of the law | Credit Suisse asserts panel ignored well-defined fraud/contract law standards. | ST argues panel's reading was colorable and not a manifest disregard. | No manifest disregard; upheld award. |
| Implementation of the award – Deutsche Bank proceeds | Credit Suisse seeks to offset the award by the Deutsche Bank cash payment to ST. | ST argues offset is improper or would create double recovery. | Vacate portion; remand to credit approximately $75 million from Deutsche Bank against principal and reduce interest accordingly. |
| Post-award interest calculation | Credit Suisse seeks different treatment of post-award interest in light of Deutsche Bank payment. | ST argues award terms and subsequent readings require maintaining the established interest scheme. | Affirmed as to overall interest scheme but remanded to recalculate with the Deutsche Bank offset. |
Key Cases Cited
- D.H. Blair & Co. v. Gottdiener, 462 F.3d 95 (2d Cir. 2006) (high burden to vacate arbitration award)
- Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (S. Ct. 2008) (FAA grounds for vacatur and limits of review)
- Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383 (2d Cir. 2003) (manifest disregard review and deference to arbitral decisions)
- Modern Settings, Inc. v. Prudential-Bache Securities, Inc., 936 F.2d 640 (2d Cir. 1991) (notice-of-objection clause distinctions in arbitral awards)
- Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930 (2d Cir. 1986) (standard for reasonably reliance in fraud; well-defined, explicit law)