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

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

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 did not immediately respond to a request for comment on Thursday.

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:

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