June 08, 2011

On June 2, 2011, the United States Court of Appeals for the Second Circuit affirmed District Court Judge Deborah Batts’ confirmation of the $431 million FINRA arbitral award won by Jenner & Block for client STMicroelectronics, in compensation for losses arising out of fraudulent investments in auction-rate securities made by Credit Suisse Securities (USA) LLC.   The award is the largest arbitration award in the history of FINRA.

In a complete victory for STMicroelectronics, in a unanimous decision written by Judge Gerard Lynch, the Second Circuit affirmed the award and rejected Credit Suisse's claims of arbitral bias and manifest disregard of the law.  The ruling permitted Credit Suisse to not have to pay ST further interest on $75 million of securities after they were redeemed by Deutsche Bank in early 2010; the court rejected Credit Suisse’s attempt to alter further the award’s scheme for distributing to ST all interest earned on the securities portfolio and on the award.

The Firm's team on this matter was led by Partner Andrew Weissmann.  Partner Barry Levenstam argued the appeal before the Second Circuit, and Associates Elizabeth A. Edmondson and Elisabeth Genn and former associate Danielle F. Tarantolo assisting on the brief.  Partners Michael T. Brody, Matthew S. Hellman, C. John Koch, Susan J. Kohlmann and Paul M. Smith assisted as moot court judges in preparation for the oral argument.

The arbitral award was won in February 2009, by a Firm team led by Mr. Weissmann, who also won confirmations of the award, twice, in the District Court for the Southern District of New York.  Other members of the arbitration team included Associates Joseph J. McFadden, Ms. Edmondson, and Ms. Genn; former associates Matthew W. Alsdorf and David A. Newman; and Paralegal Lamia K. Azize and Project Assistant Jonathan D. Hollis.  Partner Marc A. Goldman and Associate David Z. Moskowitz assisted on the brief to confirm the arbitration award.

In another recent victory in a lawsuit stemming from the same transactions, pending in the U.S. District Court for the Eastern District of New York, STMicroelectronics is employing a novel strategy that avoided the arbitration clause that only applied to Credit Suisse Securities.  ST sued the parent corporation, Credit Suisse Group, alleging it violated the Securities Exchange Act, in addition to asserting a claim under state law for conversion.  Judge Raymond Dearie recently rejected Credit Suisse Group's motion to dismiss and twice ruled that STMicroelectronics is permitted to seek punitive damages, in addition to the $431 million FINRA award against its subsidiary.  Mr. Hellman and Law Clerk Randall Adams assisted Mr. Weissmann and Ms. Edmondson in this federal action.