SVB Financial Trust v. Federal Deposit Insurance Corporation

Background

SVB Financial Trust and the Federal Deposit Insurance Corporation as receiver asked the court to resolve a dispute about the receiver’s response to Interrogatory No. 1. The interrogatory requested specific calculations and facts supporting the receiver’s contention that SVB Financial Group caused Silicon Valley Bank to incur damages substantially exceeding SVB Financial Group’s $1.93 billion deposit claim.

The receiver’s affirmative defenses alleged that SVB Financial Group exercised control over Silicon Valley Bank’s officers and directors and assisted, encouraged, or participated in breaches of fiduciary duties. The receiver also alleged that those actions caused losses connected to securities purchases, interest-rate hedges, and a bank-to-parent dividend.

The Parties’ Arguments

SVB Financial Trust argued that the receiver had improperly referred back to its pleadings instead of answering the interrogatory directly, had not disclosed the factual bases for its causation and damages contentions, and had not described the important features of the “but-for” situation—what Silicon Valley Bank would have done if it had not engaged in the allegedly improper conduct.

The receiver argued that its answer provided the requested information, including descriptions of the challenged transactions, documents supporting its damages calculations, an anticipated expert methodology, and attachments identifying specific securities and interest-rate swaps. It also argued that the interrogatory did not request a description of the “but-for” situation and that defining that situation belonged to expert discovery.

Ruling

Judge Virginia K. DeMarchi found no basis to conclude that the receiver had merely referred to its pleadings. The answer included additional information, including attachments identifying specific securities and interest-rate hedges.

The court also found that SVB Financial Trust had not shown that the receiver failed to disclose the factual bases for its contention that SVB Financial Group caused more than $1.93 billion in damages. The interrogatory required the receiver to identify the facts and calculations supporting its contention; it did not require the receiver to explain the legal viability of its damages theory or respond to arguments that its theory of unrealized damages did not reflect an actual loss.

The court agreed that the interrogatory did not require the receiver to describe what Silicon Valley Bank should have done instead or to disclose all of its expert opinions. However, the receiver still had to disclose the factual basis for its contention, including facts known to it on which its expert would ultimately rely concerning the nature and amount of damages. If the receiver had already disclosed all facts in its possession, custody, or control on which it would rely, no more was required by Interrogatory No. 1. If it would rely on undisclosed facts, it had to promptly supplement its answer.

The order also terminated Docket No. 199 in an earlier related proceeding, Case No. 23-cv-06543-BLF.