Silicon Valley Bank
Silicon Valley Bank v. Federal Deposit Insurance Corporation, in its corporate capacity (FDIC-C)
Date: Feb. 27, 2025
Issue: Whether the Federal Deposit Insurance Corporation, in its corporate capacity (FDIC-C) unlawfully withheld $1.93 billion from Silicon Valley Bank Financial Group (SVBFG) following the collapse and mass withdrawals of its subsidiary, Silicon Valley Bank.
Case Summary: A California district court again trimmed SVBFG’s lawsuit against the FDIC-C, alleging it unlawfully withheld $1.93 billion following Silicon Valley Bank’s collapse.
SVBFG maintained accounts in Silicon Valley Bank and Silicon Valley Bridge Bank. When Silicon Valley Bank collapsed, the California Department of Financial Protection and Innovation appointed FDIC as receiver (FDIC-R) for the banks. Initially, SVBFG still had access to its funds, but on March 16, 2023, the FDIC-C cut off access without notice. The FDIC-C claimed it satisfied its obligation by paying SVBFG the maximum $250,000 deposit insurance amount, and it had no legal duty to pay for its uninsured deposits.
SVBFG sued the FDIC-C alleging it wrongfully blocked access to its $1.93 billion—either by doing so directly or by allowing FDIC-R to block access to the funds. On Aug. 8, 2024, Judge Beth Freeman dismissed SVBFG’s claims for violating the Freedom of Information Act and a bankruptcy court’s automatic stay. However, she allowed SVBFG to amend its lawsuit to pursue other claims. SVBFG later filed an amended complaint with five counts, and on Sept. 19, 2024, the FDIC-C responded with another motion to dismiss.
Judge Freeman partially granted and partially denied SVBFG’s motion to dismiss. The court refused to dismiss SVBFG’s claim for declaratory judgment, explaining that declaratory judgment is not an independent cause of action but an equitable remedy. Because the court found that some of SVBFG’s claims were adequately pleaded, it concluded the request for declaratory relief remained valid alongside them. The court also refused to dismiss SVBFG’s turnover claim under Section 542 of the Bankruptcy Code. Although the FDIC-C argued that SVBFG failed to show it had “possession, custody or control” over the deposit liabilities, the court disagreed. It held that control under Section 542 does not require assuming the liabilities and found that SVBFG’s amended complaint, while thin, met the pleading standard.
The court also declined to toss its promissory estoppel claim, concluding SVBFG sufficiently alleged government misconduct to survive dismissal. While the parties agreed SVBFG had met the basic elements of promissory estoppel under federal common law and Ninth Circuit precedent — including a promise, reasonable and actual reliance, and the need to enforce the promise to avoid injustice — the FDIC-C argued SVBFG failed to plead the required affirmative misconduct. But the court disagreed, pointing to SVBFG’s allegations that government officials, acting at the direction of senior FDIC-C employees, confirmed the systemic risk exception announced on March 12, 2023, would apply to all uninsured depositors at Silicon Valley Bank.
However, the court dismissed SVBFG’s due process and Administrative Procedure Act (APA) claims. As an initial matter the FDIC-C argued that SVBFG must plausibly allege a separate cause of action to sue the FDIC-C, a federal agency, for a due process violation. SVBFG countered by arguing that FDIC-C’s was untimely because it failed to raise this argument in its first motion to dismiss. But the court disagreed, citing Ninth Circuit precedent allowing second motions to dismiss if they aid resolution and do not delay proceedings. The court also held that SVBFG needed a separate cause of action and, because it failed to provide one, dismissed the claim. Dismissing the APA claim, the court ruled that SVBFG failed to allege a final agency action the court could review.
Bottom Line: Trial is set for July 13, 2026.
Documents: Order
