First Citizens must 'clean up' claims that HSBC poached Silicon Valley Bank workers (updated)

Signature Bank

11/01/2024 22:04

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      Judge says bank must flesh out claims against ex-SVB
employees
    

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      Lawsuit says over 40 SVB workers defected to HSBC
    

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      First Citizens seeking $1 billion in damages
    

  
 (Adds comment from First Citizens in paragraph 7)
    By Daniel Wiessner
       Jan 11 (Reuters) - First Citizens Bank's $1 billion
lawsuit accusing HSBC of illegally poaching employees from
Silicon Valley Bank (SVB) after its collapse "is confusing and
needs to be cleaned up," but the defects do not warrant
dismissing the case, a federal magistrate judge has ruled.
    U.S. Magistrate Judge Laurel Beeler in San Francisco said
First Citizens, which acquired SVB's assets when it folded last
March, has not made clear what role five ex-SVB employees who
are defendants in the case played at the bank and exactly how
they each allegedly broke the law, in a decision late Wednesday.
    First Citizens has made a case against HSBC and David Sabow,
who led SVB's technology and healthcare banking segment and
moved to HSBC shortly after the bank's collapse, Beeler said. 
    But the lawsuit "lumps the other defendants together, thus
does not give fair notice of the claims against them, and
seemingly predicates claims on conduct that predates the
purchase agreement," she said.
    Beeler gave First Citizens 28 days to file an amended
complaint fleshing out its claims.
    HSBC in a statement provided by a spokesperson said: "HSBC
is strongly committed to the innovation banking space and to our
employees, and will continue to vigorously defend against the
lawsuit brought by First Citizens."
    First Citizens in a statement said: “We are confident that
the facts and the law clearly support our position and we will
continue to vigorously protect our company and our
stakeholders.”
    The U.S. Federal Deposit Insurance Corporation took over SVB
on March 10 after depositors rushed to pull out their money in a
bank run that also brought down Signature Bank and wiped out
more than half the market value of several other U.S. regional
lenders.
    First Citizens later in March purchased SVB's assets and
deposits for up to $500 million in stock — a fraction of what
the bank was worth before it failed. HSBC separately acquired
SVB's UK arm.
    First Citizens in its lawsuit claims that Sabow orchestrated
the alleged scheme to steal SVB's business and help HSBC launch
its own U.S. venture banking business. 
    First Citizens says Sabow and five other former SVB
officials convinced about 40 SVB employees to jump to HSBC in
April. 
    HSBC said it had hired dozens of SVB employees to help the
bank establish a dedicated practice focused on serving companies
in technology and healthcare and investors who support them.
    HSBC moved to dismiss the lawsuit, saying First Citizens
lacked standing to bring many of the claims because they
involved conduct that pre-dated its purchase of SVB's assets,
such as Sabow drawing up plans to launch a new venture at HSBC
and allegedly requesting confidential information from another
SVB employee. 
    HSBC also said that First Citizens did not acquire the
ability to enforce employment agreements signed by former SVB
employees. 
    Beeler on Wednesday said First Citizens did have standing
with respect to the claims against HSBC and Sabow, because their
alleged scheme was only consummated when SVB employees defected
to HSBC en masse after the purchase.
    The case is First Citizens Bank & Trust Company v. HSBC
Holdings, U.S. District Court for the Northern District of
California, No. 23-cv-02483.
    For First Citizens: John Hemann of Cooley
    For HSBC and the other defendants: Harris Mufson of Gibson
Dunn & Crutcher
    
    Read more:
    First Citizens sues HSBC for hiring away Silicon Valley Bank
staff
    U.S. backstops Silicon Valley Bank sale to First Citizens
    HSBC rescues British arm of stricken Silicon Valley Bank
    HSBC hires Silicon Valley Bank bankers to focus on tech,
healthcare