ArentFox Schiff Wins Trial Victory for FDIC as Receiver for Silicon Valley Bank Securing a $1.7 Billion Recovery
ArentFox Schiff won a complete trial victory for the Federal Deposit Insurance Corporation in its capacity as Receiver for Silicon Valley Bank in a high-stakes dispute arising from the failure of Silicon Valley Bank, one of the largest bank failures in US history.
After a three-week bench trial in San Jose and post-trial briefing, Judge Beth Labson Freeman of the Northern District of California entered judgment allowing the FDIC as Receiver to retain $1.71 billion in commercial deposits sought by SVB Financial Trust, a liquidating trust formed as part of the bankruptcy proceeding for Silicon Valley Bank’s former holding company. Judge Freeman ruled that holding company officers breached fiduciary duties to the Bank by mismanaging the Bank’s interest-rate and liquidity risk, mismanaging its investment portfolio, improperly terminating hedges, and approving a $294 million dividend shortly before the Bank’s failure. As the successor to the holding company, the liquidating trust was liable for these breaches under principles of agency law, aiding and abetting, and constructive fraudulent transfer. This liability, Judge Freeman held, substantially exceeded and therefore set off the liquidating trust’s $1.71 billion claim against the FDIC as Receiver.
The AFS team representing the FDIC as Receiver for Silicon Valley Bank included Lawrence Heftman, David Giles, Michael Molzberger, Kaitlin Klamann, Max Heckendorn, Bella Seeberg, Mallory McMahon and Zoe Bonsky.
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