Luby's vs Credit Suisse

Filing 13

MEMORANDUM AND ORDER.(Signed by Judge Ewing Werlein, Jr) (Attachments: # 1 Exhibit) Parties notified.(kcarr, )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
LUBY’S RESTAURANTS LIMITED
PARTNERSHIP,
Petitioner,
v.
CREDIT SUISSE SECURITIES (USA)
LLC,
Respondent.

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CIVIL ACTION NO. H-10-3212

MEMORANDUM AND ORDER
Pending is Petitioner Luby’s Restaurants Limited Partnership’s
Petition to Confirm Arbitration Award, Entry of Final Judgment and
Petition to Enforce, Modify or Correct Award (Document No. 1).1
After carefully considering the petition, answer, exhibits, and the
applicable law, the Court concludes as follows.
I.

Background

Petitioner Luby’s Restaurants Limited Partnership (“Luby’s”)
seeks confirmation of its arbitration award and a determination
that

Respondent

1

Credit

Suisse

Securities

(USA)

LLC

(“Credit

Although Luby’s styled its petition “Petition to Confirm
Arbitration Award, Entry of Final Judgment, and Petition to
Enforce, Modify, or Correct Award,” Luby’s states in its Response
that it is not asking the Court to modify or correct the Award, but
to confirm it and interpret the Award to include an award of
$186,000 for the loss that Luby’s sustained when it sold a portion
of its securities under par.

Suisse”) still owes it $186,000 based on an arbitration award
entered

in

Regulatory
petition

to

its

favor

Authority
federal

by

a

panel

(“FINRA”).
court

of

the

Credit

pursuant

to

jurisdiction, 28 U.S.C. § 1332(a)(2).

Financial

Suisse
the

Industry

removed

Court’s

this

diversity

See Stiftung v. Plains

Mktg., L.P., 603 F.3d 295, 297 (5th Cir. 2010).
Luby’s purchased over $30 million in auction rate securities
from Credit Suisse based on representations made by Credit Suisse
that the securities were (1) equivalent to money market funds,
(2) highly liquid, safe investments for short term investing, and
(3) suitable for Luby’s.

When the arbitration proceedings were

filed in October 2008, Luby’s had redeemed all but $8.9 million
worth of securities, which Luby’s could not sell at face value.

In

September 2009, after initiating the arbitration proceedings but
before

the

arbitration

hearing,

Luby’s

redeemed

one

of

its

securities for less than par, sustaining a loss of $186,000.
The hearing was held in April 2010, and the Panel ruled as
follows:
(1) Respondent, Credit Suisse Securities (USA) LLC,
is liable to Claimant, Luby’s Restaurant Limited
Partnership, and shall purchase Claimant’s auction
rate securities at par;
(2) Respondent, Credit Suisse Securities (USA) LLC,
is liable for and shall pay Claimant, Luby’s
Restaurant Limited Partnership, interest on the at
par purchase price of the auction rate securities at
the rate of 6% per annum from and including May 29,

2

2010 through and including the date Award is paid in
full;
(3) Other than Forum Fees which are specified below,
the parties shall each bear their own costs and
expenses incurred in this matter; and
(4)
Any
relief
not
specifically
enumerated,
including punitive damages and attorney’s fees, is
hereby denied with prejudice.
Document No. 8, ex. A at 004.
Both parties seek confirmation of the Award, but dispute
whether it includes the $186,000.

Credit Suisse claims it has

complied fully with the arbitration Award because it bought all of
Luby’s remaining securities at par and paid the required interest
thereon.

Luby’s contends that Credit Suisse also owes it the

$186,000 it lost when it sold the portion of its securities under
par after it filed to arbitrate the dispute.
II.

Discussion

Because no modification of the award is sought by either
party, the issue is interpretation of the award.2

“[A] court is

required to enforce an arbitration award only as written by the
arbitrator.”

Brown v. Witco Corp., 340 F.3d 209, 216 (5th Cir.

2003) (citing Oil, Chem. & Atomic Workers Int’l Union Local 4-367
v. Rohm & Haas, Tex., Inc., 677 F.2d 492, 495 (5th Cir. 1982)

2

See Document No. 9 at 1: “Luby’s Restaurants Limited
Partnership is not seeking a modification or correction of this
award.”
3

(emphasis in original)). If the arbitration award is ambiguous, it
is unenforceable. Id.

“A court may not interpret the award to

resolve the ambiguity and implement the award; instead, the court
must remand the award to the arbitrator with instructions to
clarify the award’s particular ambiguities.”

Id.

Remand is

appropriate where: an award is patently ambiguous, the issues
submitted were not fully resolved, or the language of the award has
generated a collateral dispute.3
F.2d at 495.

Oil, Chem. & Atomic Workers, 677

“However, once the court is presented with an

unambiguous, enforceable award, the arbitrator’s award must be
upheld so long as the arbitrator’s decision . . . does not exceed
the scope of the arbitrator’s authority.”

Brown,

340 F.3d at 216.

The Award in this case is not patently ambiguous, although
each party urges a different interpretation of the Award. Both the
plain language of the Award and the arguments before the panel
demonstrate its effect.
. . .

First, the Award provides: “Credit Suisse

shall purchase Claimant’s auction rate securities at par,”

and “shall pay . . . interest on the at par purchase price of
the auction rate securities . . . from and including May 29,
2010 . . . .”4

The Award was signed May 21, 2010.

states:

relief

“[a]ny

not

specifically

3

enumerated,

It further
including

Neither party argues that FINRA did not fully resolve their
dispute, nor do they assert that the language of the Award has
created a collateral dispute.
4

Document No. 8, ex. A at 004.
4

punitive

damages

prejudice.”5

The

and

attorney’s

plain

fees,

language

of

is
the

hereby
Award

denied

with

prospectively

requires Credit Suisse to buy back Luby’s securities at par, and
imposes interest on the “par purchase price” beginning eight days
after the Award was signed.

The Award makes no mention of

additional damages sustained by Luby’s when it sold some of its
securities below par during pendency of the arbitration but before
the hearing was held.
par”

the

Credit Suisse could not “purchase . . . at

already-sold

securities,

“Claimant’s auction rate securities.”

as

they

were

no

longer

The Award denied any relief

other than that which was expressly granted.6
Moreover, Luby’s submitted to the arbitration panel the same
argument to recover $186,000 that it now urges.

Luby’s counsel

stated to the arbitration panel the following:
The damages in this case that my client has
suffered are obviously the $7.1 million in auction
rate securities that are currently illiquid.
They’ve also suffered a 2.28 million dollar writedown in the value of its securities on its public
filings.
There’s $180,000 that it suffered as a
result of the loss of the SSM Health Care that was
sold at a discount.
Attorney’s fees of $94,000,
and an expert witness fees [sic] of $64,000.
Now, with respect to the damages in the case,
we’re respectfully asking that the panel order and
in compliance with the Texas State Securities
Commission order, that Credit Suisse buy back these

5

Id.

6

Id.
5

securities at par.
That would be $7.1 million,
that we be awarded our damages $180,000 for the
sale of one of these auction rate securities at the
12 percent loss and also our attorney’s fees and
expert witness fees.
Document No. 8, ex. B at 18:20-19:13 (emphasis added).7
In short, the matter of the loss of $180,000 (now alleged to
be

$186,000)

on

the

already-sold

securities

was

specifically

presented to the arbitral panel, and it was presented as a claim
distinct from the request to buy back at par the securities still
held by Luby’s.

The arbitrators, however, required Credit Suisse

only to “purchase Claimant’s auction rate securities at par,” plus
interest to begin accruing eight days after the Award was signed.
“Any relief not specifically enumerated . . . is hereby denied with
prejudice,” which effectively denied Luby’s $186,000 claim urged
here.
Because the Award is unambiguous, the Award must be confirmed
and enforced as written.

See Wartsila Finland OY v. Duke Capital

LLC, 518 F.3d 287, 292 & n.4 (5th Cir. 2008).
III.

Order

For the foregoing reasons, it is
ORDERED that the Final Award in Financial Industry Regulatory
Authority Case No. 08-04007, Luby’s Restaurants Limited Partnership

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In the hearing, Luby’s refers to its loss from the below par
sale as $180,000, but in this case it values the loss at $186,000.
6

v. Credit Suisse Securities (USA), LLC, a copy of which is attached
hereto, is in all things CONFIRMED and ADOPTED as the Judgment of
this Court, and Luby’s Restaurants Limited Partnership’s petition
and prayer to order Credit Suisse additionally to pay to Luby’s
$186,000, plus interest on that amount and attorney’s fees, is
DENIED as not having been ordered in the Final Award of the
arbitration panel.
The Clerk will enter this Order, providing a correct copy to
all parties of record.
SIGNED at Houston, Texas, on this 5th day of May, 2011.

____________________________________
EWING WERLEIN, JR.
UNITED STATES DISTRICT JUDGE

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