Opinion ID: 2453821
Heading Depth: 2
Heading Rank: 3

Heading: Implementation of the Award

Text: Having rejected Credit Suisse's attacks on the arbitration award, we now turn to some more technical points about how the district court's judgment implemented that award. The first issue involves accounting for cash ST received from the post-award sale of securities to Deutsche Bank. The judgment below requires Credit Suisse to pay ST the full amount of the award, at which point ST is to render to Credit Suisse in return both the securities remaining after the sale and the roughly $75 million in cash that it received from the sale. Rather than crediting the money ST received from the sale against Credit Suisse's remaining obligations, the judgment thus requires Credit Suisse to pay ST $75 million that ST will then hand right back. More importantly, the judgment requires Credit Suisse to continue paying interest on the full original value of the portfolio, including on the $75 million that ST already received from the sale. Credit Suisse argues that the district court should have treated the $75 million as a payment in partial satisfaction of the award, thus reducing both Credit Suisse's principal obligation to ST and the interest it owes on that obligation. We review for abuse of discretion, see In re Assicurazioni Generali, S.p.A., 592 F.3d 113, 120 (2d Cir.), cert. denied, ___ U.S. ___, 131 S.Ct. 287, 178 L.Ed.2d 250 (2010), and we vacate the judgment on this point. It makes little sense to have Credit Suisse pay ST money that ST will immediately return to Credit Suisse. Allowing Credit Suisse to pay just its net obligation avoids the absurdity of making A pay B when B owes A. Studley v. Boylston Nat'l Bank of Boston, 229 U.S. 523, 528, 33 S.Ct. 806, 57 L.Ed. 1313 (1913); see also Citizens Bank of Md. v. Strumpf, 516 U.S. 16, 18, 116 S.Ct. 286, 133 L.Ed.2d 258 (1995). Both New York and federal common law have recognized a right to setoff in circumstances similar to these. See Westinghouse Credit Corp. v. D'Urso, 278 F.3d 138, 149 (2d Cir.2002) (discussing setoff under New York law); Singer v. Olympia Brewing Co., 878 F.2d 596, 599-600 (2d Cir.1989) (establishing rule of setoff in federal securities fraud cases). Such an arrangement also avoids the possibility however remote it might bethat ST might not immediately return the $75 million it would owe Credit Suisse, forcing Credit Suisse to pursue enforcement efforts against ST in Switzerland. We therefore hold that Credit Suisse should pay ST its full obligation minus the money ST received from the sale. It similarly makes little sense to require Credit Suisse to continue to pay interest on all of a debt that has been partially satisfied. Cf. Indu Craft, Inc. v. Bank of Baroda, 87 F.3d 614, 617 (2d Cir.1996) (affirming district court's award of interest on net balance of verdict after setoff). ST cites no precedents approving of such a result but rather contests Credit Suisse's characterization of the Deutsche Bank's payment as partially satisfying the debt. The district court agreed with ST and disregarded the money that ST received as only an intervening payment... from a third-party, rejecting Credit Suisse's request to receive credit for that payment. But the source of the money is irrelevant: the result is the same whether the payment comes from directly Credit Suisse or, as here, from a third party that pays ST in exchange for property that is to become Credit Suisse's under the award. Either way, ST has already received some of the money owed by Credit Suisse, and Credit Suisse's interest obligations should be adjusted accordingly. The language of the arbitral award provides ST its only plausible argument for not counting the Deutsche Bank payments, but this argument also ultimately fails. The award makes Credit Suisse liable for interest at the rate of 4.64% on the par value of the portfolio from December 31, 2008 until the Award is paid in full. Emphasizing the paid in full provision, ST contends that Credit Suisse's interest obligations will remain the same no matter how large a partial payment Credit Suisse makeseven if it pays off all but a dollar. But the award's language could equally be read more favorably to Credit Suisse: because the award requires payment of interest on the par value of the portfolio, it could be read to give Credit Suisse credit for $153,500,000 (the face value of the securities sold) instead of just $74,582,000 (the amount of cash received from Deutsche Bank). Crediting Credit Suisse for a payment that ST has not received, however, is just as absurd as requiring Credit Suisse to pay interest on an obligation it has already repaid. The unlikelihood of either reading suggests that the award simply did not contemplate a scenario like the Deutsche Bank sale, which arose long after the award was issued. We therefore conclude that the district court's judgment should account for the approximately $75 million Deutsche Bank payment when calculating both Credit Suisse's principal and interest liability. Credit Suisse argues less successfully for another modification to the judgment. Credit Suisse argues that ST receives a double recovery of interest, first from the portfolio of securities, which ST owns until the award is paid, and second from Credit Suisse, which owes ST interest on the award and now on the judgment. To avoid this alleged double recovery, Credit Suisse argues that it should receive the interest from the portfolio instead of ST. The award provides a specific interest schedule, however, that precludes this argument. The award credited Credit Suisse with the interest on the securities from the portfolio until December 31, 2008, offsetting Credit Suisse's other obligations by over $25 million. After December 31, 2008, however, the award provides only interest at the rate of 4.64% and gives Credit Suisse no setoff. The district court properly calculated interest in accordance with this plan: from the time of the underlying events to December 31, 2008, Credit Suisse owes interest as calculated by the award and set off by the amount paid on the portfolio; from December 31, 2008, to March 31, 2010, the time of the first judgment, Credit Suisse owes interest calculated at 4.64%, without setoff; and from March 31, 2010, until the time of payment, Credit Suisse owes interest at the federal post-judgment rate, see 28 U.S.C. § 1961(a), also without setoff. Credit Suisse asserts, in line with the argument we adopted regarding the Deutsche Bank proceeds, that the award is silent as to post-award interest received on the securities and that we may therefore give Credit Suisse that interest. But unlike the proceeds from the Deutsche Bank salea situation the award seems not to have contemplatedthe award does give pre -award interest from the securities to Credit Suisse, so that its silence on the subject of post -award interest strongly suggests by negative implication that the arbitrators contemplated and rejected a similar treatment of the interest received after the award was rendered. And, although such a different treatment of interest before and after December 2008 may be odd, it is no more odd than the difference in interest on ST's damages before and after March 31, 2010, the time of the judgment, when the lower federal post-judgment rate replaces the much higher award rate of 4.64%. The arbitrators may have applied an effectively higher rate after the award to motivate Credit Suisse to pay more quickly, or to compensate ST for the low interest rates in effect at the time, or as a compromise between such lower rates and the higher 9% New York statutory rate that ST requested, see C.P.L.R. 5004, or based on some combination of these or other factors. Whatever the arbitrators' reasoning, Credit Suisse gives us no persuasive ground to reject it and we therefore affirm the district court on this point.