SVB Financial Trust v. Federal Deposit Insurance Corporation

Background

SVB Financial Group owned Silicon Valley Bank and kept approximately $2.1 billion there in three deposit accounts. After Silicon Valley Bank closed on March 10, 2023, the Federal Deposit Insurance Corporation (FDIC) took steps to transfer deposits and later invoked the systemic risk exception. According to the amended complaint, public statements said that all depositors would have access to their money, including uninsured deposits.

The amended complaint alleges that SVB Financial Group withdrew approximately $180 million through eight wire transfers on March 15 and 16, 2023. It alleges that Bridge Bank then rejected further transfers, placed holds on the accounts at the direction of senior employees of the FDIC in its corporate capacity, and assigned the accounts to the FDIC acting as receiver. The Trust alleges that this left approximately $1.93 billion inaccessible.

The Trust later demanded payment or access to the uninsured funds. The FDIC in its corporate capacity treated the demand as a claim for insurance coverage and denied it, stating that the Trust had already withdrawn more than $250,000 and that the systemic risk exception did not require the FDIC to take a particular course of action. The Trust then filed this action.

Legal standard

The FDIC moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether the complaint states a legally sufficient claim. At this stage, the court accepted well-pleaded factual allegations as true and viewed reasonable inferences in the Trust’s favor. The court also granted the FDIC’s requests for judicial notice of several public records, including a transfer agreement, a call notice and assignment, and an FDIC organization directory.

Claims that survived dismissal

Declaratory judgment. The court explained that declaratory relief is a remedy rather than an independent cause of action. Because the court found that the Trust adequately pleaded its turnover and promissory-estoppel claims, it denied the FDIC’s motion to dismiss the Trust’s request for declaratory relief.

Turnover under Bankruptcy Code § 542(b). A turnover claim seeks payment of a matured debt owed to a bankruptcy estate. The court held that “control” over a deposit liability does not necessarily require the FDIC’s corporate office to have formally assumed the deposit liability. The Trust alleged that FDIC corporate employees directed or participated in actions blocking access to the accounts and assigning the funds to the FDIC acting as receiver. Although the court described the allegations supporting control as “vanishingly thin,” it found them sufficient at the pleading stage. The court therefore denied dismissal of the turnover claim, while noting that the claim might not survive after the factual record is developed if the FDIC’s contrary assertions prove correct.

Promissory estoppel. Promissory estoppel is a claim based on a promise that reasonably induces reliance and whose enforcement is necessary to avoid injustice. The court held that, for this claim against the FDIC, the Trust also had to plead affirmative misconduct—an affirmative misrepresentation or concealment of a material fact by the government. The court found that the Trust adequately pleaded that requirement by alleging that officials made promises about access to all deposits, that the FDIC corporate office directed actions blocking the funds, and that the public statements were knowingly false. The court denied dismissal of the promissory-estoppel claim.

Claims dismissed

Fifth Amendment due process claim. The court held that the Trust’s request for an injunction was effectively a request for the return of money. Because the Trust sought damages from a federal agency under a due process theory, it had to identify a separate cause of action. The court found that it had not done so and also found that the Administrative Procedure Act did not supply that missing cause of action because the Trust had not adequately pleaded reviewable final agency action. The court granted dismissal of Count IV without leave to amend and did not reach the FDIC’s separate argument that the Trust had not shown a deprivation of property.

Review of final agency action. The court held that 12 U.S.C. § 1821(f)(4) authorizes review of a final FDIC action regarding a claim for insurance coverage. It concluded that the Trust’s claim sought recovery distinct from insured amounts and therefore was not a claim for insurance coverage under that provision. The court found that it lacked authority under § 1821(f) to review the FDIC’s denial and granted dismissal of Count VI without leave to amend.

Disposition

The court granted in part and denied in part the FDIC’s motion to dismiss. It denied dismissal of the declaratory-judgment, turnover, and promissory-estoppel claims. It dismissed Counts IV and VI without leave to amend. The order’s final list appears to label the turnover claim as “Count I,” although the discussion identifies the turnover claim as Count II; this summary refers to the claim by name rather than adopting that apparent numbering inconsistency.