Niall Ledwidge, et al. v. Federal Deposit Insurance Corporation, et al.

• Court: District Court, N.D. California
• Decided: December 1, 2025
• Docket: 5:24-cv-08352
• Status: Unknown

Opinion

1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 NIALL LEDWIDGE, et al., Case No. 5:24-cv-08352-BLF

8 Plaintiffs, ORDER GRANTING DEFENDANT'S 9 v. MOTION TO DISMISS FIRST AMENDED COMPLAINT 10 FEDERAL DEPOSIT INSURANCE CORPORATION, et al., [Re: ECF No. 51] 11 Defendants. 12 13 Before the Court is Defendants Federal Deposit Insurance Corporation (“FDIC”)1 and 14 former FDIC Chairman Martin J. Gruenberg’s motion to dismiss Plaintiffs’ First Amended 15 Complaint (“FAC”) for lack of subject matter jurisdiction under Federal Rule of Civil 16 Procedure 12(b)(1) and failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). 17 ECF No. 51 (“Mot.”); see also ECF No. 65 (“Reply”). Plaintiffs oppose the motion. See ECF 18 No. 64 (“Opp.”). The Court heard oral argument on the motion on October 16, 2025. ECF 19 No. 67. 20 After oral argument, the Court set a supplemental briefing schedule addressed to the issue 21 whether Plaintiffs’ agency standing theory is collaterally estopped by the recent decision of United 22 States Bankruptcy Court of the Southern District of New York in Joint Official Liquidators of 23 Silicon Valley Bank (in Official Cayman Islands Liquidation) v. SVB Financial Group, No. 24- 24 AP-04014-MG (Bankr. S.D.N.Y. Sept. 29, 2025) (“Bankr. Order”). Defendants filed supporting 25 briefs, and Plaintiffs filled an opposing brief. See ECF No. 71 (“Estoppel Br.”); ECF No. 72 26 (“Estoppel Opp.”); ECF No. 74 (“Estoppel Reply”). 27 1 For the reasons described below, the Court GRANTS the motion. 2 I. BACKGROUND 3 The collapse of Silicon Valley Bank (“SVB”) was one of the largest bank failures in U.S. 4 history. SVB was an FDIC-insured, state-chartered bank headquartered in Santa Clara, California. 5 See Amended Complaint (“AC”) ¶ 28, ECF No. 39. This case involves SVB’s foreign branch in 6 the Cayman Islands (“SVB Cayman”). Id. ¶ 29. SVB Cayman offered its clients three types of 7 accounts: Eurodollar Money Market Accounts, Eurodollar Operating Accounts, and Eurodollar 8 Sweep Accounts. Id. ¶ 33. Plaintiffs assert claims only on behalf of former SVB Cayman clients 9 with Eurodollar Money Market Accounts and Eurodollar Operating Accounts (the “SVB Cayman 10 Accountholders”). Id. ¶ 86. The SVB Cayman Accountholders were able to take advantage of the 11 Cayman Islands’ favorable tax policies, but the SVB Cayman account agreements expressly stated 12 that the accounts were not deposits as defined by the FDIC. Id. ¶ 39 (“SVB Eurodollar Money 13 Market Account deposits are . . . . NOT domestic deposits, are NOT insured by the FDIC and are 14 NOT guaranteed in any way by the United States government or any government agency 15 thereof.”); see also id. ¶ 42 (Eurodollar Operating Accounts). 16 SVB collapsed on March 10, 2023. Id. ¶ 28. Two days later, on March 12, 2023, Treasury 17 Secretary Janet Y. Yellen, Federal Reserve Board Chair Jerome H. Powell, and Defendant FDIC 18 Chairman Martin J. Gruenberg issued a joint press release (the “Joint Press Release”) in which 19 they announced that all SVB assets and liabilities would be transferred to FDIC-Receiver (“FDIC- 20 R”). Id. ¶ 71. The Joint Press Release further announced that the FDIC would be invoking the 21 system risk exception (“SRE”), which allows depositors at FDIC-insured depository institutions to 22 recover the full value of their deposits above the usual $250,000 cap on deposit insurance and 23 relieves the FDIC of its obligation to adhere to the least cost resolution requirement mandated by 24 the Federal Deposit Insurance Act (“FDI Act”). Id. ¶¶ 71–72; see also 12 U.S.C. § 1823(c)(4). 25 On March 13, 2023, the FDIC issued a press release announcing that the FDIC would be 26 transferring “all deposits—both insured and uninsured—and substantially all assets of” SVB to the 27 newly chartered Silicon Valley Bridge Bank, N.A. (“SVB Bridge”). AC ¶ 76. On March 27, 1 certain liabilities of SVB Bridge were transferred to First-Citizens Bank & Trust Company (“First 2 Citizens”). Id. ¶¶ 82–84. 3 On March 31, 2023, FDIC-R sent notices to the SVB Cayman Accountholders stating that 4 the balances held by customers in accounts originating at SVB Cayman were not deposits within 5 the meaning of the FDI Act and that the SVB Cayman Accountholders were accordingly general 6 unsecured creditors, notifying them of their ability to file claims with FDIC-R by the July 10, 7 2023, claims bar date. Id. ¶¶ 86–87. SVB Cayman clients holding Eurodollar Sweep Accounts 8 did not receive the notices, and their accounts were granted “insured deposit” status and full 9 protection by the SRE. Id. ¶ 88. The FDIC’s stated justification for this decision was that a 10 certain amount of funds associated with the Eurodollar Sweep Accounts had “swept back” into an 11 FDIC-insured deposit account located in the United States prior to the commencement of the SVB 12 receiverships. Id. ¶ 91. 13 Many of the SVB Cayman Accountholders—all but 11 of the 615 depositors with 14 Eurodollar Money Market Accounts and Eurodollar Operating Accounts—filed claims with 15 FDIC-R. FDIC-R issued determinations on each claim brought by the SVB Cayman 16 Accountholders. Id., Ex. 27 at 4. On June 13, 2023, several individuals purporting to represent 17 certain SVB Cayman Accountholders petitioned a court in the Cayman Islands to “wind up” SVB 18 Cayman and to appoint joint official liquidators (“JOLs”) under Cayman Islands law. Id. ¶ 85 & 19 Ex. 22. Because SVB Cayman was not a separate legal entity from SVB, the court ordered the 20 winding up of SVB and appointed Plaintiffs as the JOLs of SVB itself with respect to Cayman 21 Islands-based assets and affairs on June 30, 2023. See id., Ex. 4 at 1–2. 22 On April 17, 2024, Plaintiffs sent a letter to the FDIC pursuant to 12 U.S.C. § 1821(f) 23 demanding that the FDIC classify their accounts as insured deposits and fully insure those 24 accounts. Id., Ex. 27. On September 25, 2025, the FDIC sent Plaintiffs a letter denying their 25 claim for deposit insurance on the grounds that Plaintiffs lacked standing to represent the interest 26 of the SVB Cayman Accountholders and that FDIC was prohibited from paying insurance claims 27 for foreign-payable accounts. Id., Ex. 28. Plaintiffs initiated this action on November 22, 2024, II. LEGAL STANDARD 1 A party may challenge the Court’s subject matter jurisdiction by bringing a motion to 2 dismiss under Federal Rule of Civil Procedure 12(b)(1). “A Rule 12(b)(1) jurisdictional attack 3 may be facial or factual.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). 4 In a facial attack, the movant asserts that the lack of subject matter jurisdiction is apparent from 5 the face of the complaint. Id. In a factual attack, the movant disputes the truth of allegations that 6 otherwise would give rise to federal jurisdiction. Id. “In resolving a factual attack on jurisdiction, 7 the district court may review evidence beyond the complaint without converting the motion to 8 dismiss into a motion for summary judgment.” Id. “The court need not presume the truthfulness 9 of the plaintiff’s allegations.” Id. If the moving party presents evidence demonstrating the lack of 10 subject matter jurisdiction, the party opposing the motion must present affidavits or other evidence 11 sufficient to establish subject matter jurisdiction. Id. 12 Upon granting a motion to dismiss, a court has discretion to allow leave to amend the 13 complaint pursuant to Rule 15(a). “Dismissal with prejudice and without leave to amend is not 14 appropriate unless it is clear . . . that the complaint could not be saved by amendment.” Eminence 15 Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). In deciding whether to grant 16 leave to amend, the Court considers the factors set forth by the Supreme Court in Foman v. Davis, 17 371 U.S. 178 (1962), and discussed at length by the Ninth Circuit in Eminence Capital. The Ninth 18 Circuit in Eminence Capital identified several factors to consider, including (1) undue delay, 19 (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by amendment, (4) undue 20 prejudice to the opposing party, and (5) futility of amendment. See 316 F.3d at 1052. 21 III. DISCUSSION 22 Defendants move to dismiss the Amended Complaint on two grounds. First, Defendants 23 seek dismissal under Rule 12(b)(1) for lack of subject matter jurisdiction because Plaintiffs do not 24 have standing. Second, Defendants seek dismissal under Rule 12(b)(6) for failure to state a claim. 25 “[J]urisdiction generally must precede merits in dispositional order.” Ruhrgas AG v. Marathon 26 Oil Co., 526 U.S. 574, 577 (1999). Only if the Court is satisfied that it has subject matter 27 jurisdiction may it proceed to address Defendants’ merits arguments under Rule 12(b)(6). See id. 1 (“Jurisdiction to resolve cases on the merits requires both authority over the category of claim in 2 suit (subject-matter jurisdiction) and authority over the parties (personal jurisdiction), so that the 3 court's decision will bind them.”). The Court need not address Defendants’ Rule 12(b)(6) motion 4 because it grants Defendants’ Rule 12(b)(1) motion. 5 A. Standing to Sue on Behalf of SVB 6 As a threshold matter, the Court agrees with Defendants that, to the extent Plaintiffs 7 purport to act for SVB by virtue of their appointment as JOLs of SVB Cayman, see, e.g., AC 8 ¶¶ 115–32, 138, 146, 155, they cannot do so. See Mot. at 8–9. When the FDIC was appointed as 9 SVB’s receiver, it “succeed[ed] to . . . all rights, titles, powers, and privileges of” SVB. 12 U.S.C. 10 § 1821(d)(2)(A)(i) (emphasis added). “[N]o court may take any action, except at the request of the 11 [FDIC] Board of Directors by regulation or order, to restrain or affect the exercise of powers or 12 functions of the [FDIC] as a conservator or a receiver.” Id. § 1821(j); see also Sahni v. Am. 13 Diversified Partners, 83 F.3d 1054, 1058 (9th Cir. 1996). Accordingly, Plaintiffs lack standing to 14 assert any claims on behalf of SVB. 15 B. Standing to Sue on Behalf of the SVB Cayman Accountholders 16 Defendants also assert that Plaintiffs lack standing to sue on behalf of the SVB Cayman 17 Accountholders. Mot. at 9–10. Plaintiffs respond with two theories: (1) they possess associational 18 standing to pursue claims on behalf of the foreign bankruptcy estate, and (2) they possess agency 19 standing as the duly appointed agents of the SVB Cayman Accountholders as a matter of Cayman 20 Islands law. Opp. at 22–25. Plaintiffs’ associational standing theory fails as a matter of law, and 21 Plaintiffs’ agency standing theory is collaterally estopped. 22 1. Associational Standing 23 “The doctrine of associational standing permits an organization to ‘sue to redress its 24 members’ injuries, even without a showing of injury to the association itself.’” Or. Advoc. Ctr. 25 v. Mink, 322 F.3d 1101, 1109 (9th Cir. 2003) (quoting United Food & Com. Workers Union 26 Local 751 v. Brown Grp., Inc., 517 U.S. 544, 552 (1996)). An association has standing to sue on 27 behalf of its members when “(a) its members would otherwise have standing to sue in their own 1 the claim asserted nor the relief requested requires the participation of individual members in the 2 lawsuit.” Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 343 (1977); see also Fleck & 3 Assocs., Inc. v. Phoenix, City of, an Arizona Mun. Corp., 471 F.3d 1100, 1106 (9th Cir. 2006). 4 “Associational standing is a narrow and limited exception to the general rule that litigants must 5 assert their own rights.” United Safeguard Distrib. Ass’n v. Safeguard Bus. Sys., Inc., No. 15-cv- 6 03998-RSWL-AJW, 2016 WL 2885848, at *5 (C.D. Cal. May 17, 2016). 7 Plaintiffs’ associational standing theory fails the first prong of the Hunt standard because a 8 foreign bankruptcy estate is not an association. Anticipating Defendants’ argument on this point, 9 Plaintiffs emphasize that “[i]n the Ninth Circuit, courts have held that informal organizations 10 representing the interests of a uniquely vulnerable group, such as the homeless and the disabled, 11 can be associations in this context if the organization’s activities inure specifically to the 12 constituents’ benefit.” Opp. at 24. While that may be the case, where a purported association 13 lacks a “traditional membership structure,” courts still require “indicia of membership,” i.e., that 14 there are members or constituents that (1) elect leadership of the organization, (2) serve as part of 15 that leadership, and (3) finance the organization’s activities. Hunt, 432 U.S. at 344–45. 16 Plaintiffs provide no authority for their novel legal argument that a bankruptcy estate, 17 which lacks any informal or formal membership structure or discernible membership, constitutes 18 an association for the purpose of standing. Nor do Plaintiffs provide any of the required “indicia 19 of membership” that could overcome their purported association’s lack of a traditional 20 membership structure. Hunt, 432 U.S. at 344–45. Here, Plaintiffs were not elected by the SVB 21 Cayman Accountholders they purport to represent, are not themselves SVB Cayman 22 Accountholders, and are not financed by SVB Cayman Accountholders. Because Plaintiffs fail to 23 articulate a theory where “the association is sufficiently identified with and subject to the influence 24 of those it seeks to represent as to have a personal stake in the outcome of the controversy,” their 25 theory of associational standing necessarily fails. Am. Unites for Kids v. Rousseau, 985 F.3d 26 1075, 1096 (9th Cir. 2021) (quoting Mink, 322 F.3d at 1111). 27 Plaintiffs’ associational standing arguments fails for the independent reason that they also 1 While Plaintiffs purport to act as representatives of the SVB Cayman Accountholders, “in order to 2 claim the interests of others, the litigants themselves still must have suffered an injury in fact.” 3 Thole v. U.S. Bank N.A., 590 U.S. 538, 543 (2020); see also Hollingsworth v. Perry, 570 U.S. 693, 4 708 (2013); Powers v. Ohio, 499 U.S. 400, 410 (1991). Indeed, the Supreme Court recently 5 reiterated the brightline requirement that plaintiffs who file suits in a representative capacity must 6 still allege an injury to themselves. Food & Drug Admin. v. All. for Hippocratic Med., 602 U.S. 7 367, 393 (2024) (“The third-party standing doctrine does not allow doctors to shoehorn 8 themselves into Article III standing simply by showing that their patients have suffered injuries or 9 may suffer future injuries.”). 10 2. Agency Standing 11 “The doctrine of collateral estoppel bars the relitigation of issues that were resolved in a 12 prior proceeding, even if the later suit involves a different cause of action.” Fund for Animals, 13 Inc. v. Lujan, 962 F.2d 1391, 1399 (9th Cir. 1992). To foreclose relitigation of an issue under 14 collateral estoppel, the following four conditions must be met: “(1) the issue at stake was identical 15 in both proceedings; (2) the issue was actually litigated and decided in the prior proceedings; 16 (3) there was a full and fair opportunity to litigate the issue; and (4) the issue was necessary to 17 decide the merits.” Howard v. City of Coos Bay, 871 F.3d 1032, 1041 (9th Cir. 2017). The party 18 asserting preclusion has the burden of showing with clarity and certainty what was determined by 19 the prior judgment. Clark v. Bear Stearns & Co. Inc., 966 F.2d 1318, 1321 (9th Cir. 1992). 20 Plaintiffs do not meaningfully dispute that the issue at stake before the Bankruptcy Court 21 was identical, that the issue was actually litigated, and that the issue was necessary to decide the 22 merits. Before the Bankruptcy Court, Plaintiffs asserted standing based on their “contractual 23 designation by [the Cayman accountholders] as their agent—pursuant to the ordinary tenets of 24 agency law in the Cayman Islands,” Bankr. Order at 38 n.11, 46, which is the same argument they 25 make here. See Opp. at 21–22. The Bankruptcy Court heard from both Parties’ experts in 26 Cayman Island law, who agreed that the orders of the Cayman court could not create an agency 27 relationship between the JOLs and SVB Cayman Accountholders. Bankr. Order at 72–73. After 1 at 74–75, the Bankruptcy Court dismissed Plaintiffs’ claims because they failed to “establish[] that 2 they have standing under Cayman law to bring claims on behalf of the Cayman creditors.” Id. 3 at 3, 76. A decision on standing was necessary to the merits of the Bankruptcy Order, since it is a 4 jurisdictional issue that is a prerequisite to bringing any of the claims asserted in those 5 proceedings. See id. at 60 (“Standing is a jurisdictional requirement that must be met in order to 6 have claims litigated in federal court.” (citation omitted)). 7 Plaintiffs nonetheless argue that they did not have a fair and full opportunity to argue the 8 merits of their standing argument because the Bankruptcy Court “did not allow for introduction of 9 facts other than Cayman law expert testimony, while the Bankruptcy Court Decision also faulted 10 Plaintiffs for not providing (factual) evidence supporting the agency formation.” Estoppel Opp. 11 at 2. Plaintiffs do not (and cannot) deny that, following extensive briefing, the Bankruptcy Court 12 held a two-day evidentiary hearing on standing during which they presented evidence from the 13 same expert whose declaration they submitted in this case and relied upon the same evidence they 14 rely on here (e.g., Cayman court orders and the opt-out notice to SVB Cayman Accountholders). 15 See Bankr. Order at 2–3, 53–57. Tellingly, Plaintiffs fail to identify even a single piece of 16 evidence that they were purportedly barred from presenting to the Bankruptcy Court, and it is not 17 incumbent on this Court to sift through the voluminous filings in those proceedings in search of 18 evidence that may have changed the outcome of the Bankruptcy Order. 19 As a last-ditch effort, Plaintiffs quibble that the Court should decline to apply the doctrine 20 of collateral estoppel because Defendants “did not provide any of the Bankruptcy Court record, 21 submissions or transcripts that bear on the collateral estoppel factors,” Estoppel Opp. at 1, and 22 urging that this case “implicates serious matters of public policy, including the power of the FDIC 23 to selectively apply SRE coverage,” id. at 2. The Court is not aware of any requirement that 24 parties seeking to invoke collateral estoppel must provide the full record of the prior proceeding. 25 The case cited by Plaintiffs certainly does not establish any such requirement, explaining only that 26 the party invoking collateral estoppel “must introduce a sufficient record of the prior proceedings 27 to pinpoint the exact issues previously litigated.” Clark v. Bear Stearns & Co., 966 F.2d 1318, 1 sufficient here. The Court also finds that issues of public policy are not sufficiently grave so as to 2 counsel against application of the collateral estoppel doctrine. Cf. Collins v. D.R. Horton, Inc., 3 505 F.3d 874, 882 (9th Cir. 2007). The Court accordingly finds that, all four prongs having been 4 met, the Bankruptcy Order precludes re-litigation of Plaintiff’s agency standing theory. 5 In any case, even if the Bankruptcy Order did not have preclusive effect, the Court agrees 6 with Defendants that Plaintiffs fail to allege that they possess either Article III or prudential 7 standing. See Mot. at 9–11. As explained supra, quite apart from associational or agency 8 standing, Plaintiffs have made no showing that they themselves suffered a concrete or 9 particularized injury that is attributable to Defendants. See, e.g., Pioneers Mem’l Healthcare Dist. 10 v. Imperial Valley Healthcare Dist., 745 F. Supp. 3d 1088, 1102–04 (S.D. Cal. 2024) (explaining 11 that third-party standing is premised on plaintiff having suffered a cognizable injury). Nor have 12 they made the requisite showing of prudential standing that they had a close relation to the SVB 13 Cayman Accountholders or that there is “some hindrance to the [SVB Cayman Accountholder’s] 14 ability to protect [their] own interests.” Powers, 499 U.S. at 411. Indeed, it is undisputed that 15 many of the SVB Cayman Accountholders have already protected their own interests by initiating 16 their own administrative claims with the FDIC. See SurvJustice Inc. v. DeVos, No. 18-cv-00535- 17 JSC, 2019 WL 1434141, at *8 (N.D. Cal. Mar. 29, 2019) (explaining that prudential standing 18 requirements are not met when there is evidence that the third party have brought their own 19 claims). 20 Plaintiffs argue that the Court should allow amendment so that they may “furnish[] a set of 21 written and executed agency agreements containing an assignment of the right to bring this 22 litigation.” Estoppel Opp. at 3. As a threshold matter, whether a plaintiff has standing to sue as an 23 assignee “is determined as of the date of filing the complaint.” In re Ditropan XI Antitrust Litig., 24 No. 06-cv-01761-JSW, 2007 WL 2978329, at *2 (N.D. Cal. Oct. 11, 2007); see also Wilbur 25 v. Locke, 423 F.3d 1101, 1107 (9th Cir. 2005), abrogated on other grounds, Levin v. Com. Energy, 26 Inc., 560 U.S. 413 (2010) (“[S]tanding is determined as of the date of the filing of the 27 complaint . . . . The party invoking the jurisdiction of the court cannot rely on events that 1 (quoting Kitty Hawk Aircargo, Inc. v. Chao, 418 F.3d 453, 460 (Sth Cir. 2005)). 2 In any event, the case upon which Plaintiffs rely stands only for the proposition that an 3 assignee has standing when the assignment agreement grants her “a security interest in the very 4 claims being pursued.” Bank of Am., N.A. v. F.D.I.C., 908 F. Supp. 2d 60, 85-86 (D.D.C. 2012). 5 Plaintiffs do not suggest that the agency agreements they intend to introduce gave them any 6 || ownership interests in the funds in the Cayman accounts at issue in this case. Plaintiffs’ agency 7 theory of standing is estopped, and amendment would be futile. 8 || IV. ORDER 9 For the foregoing reasons, IT IS HEREBY ORDERED that the motion is granted and the 10 || FAC is DISMISSED WITH PREJUDICE. 11 12 || Dated: December 1, 2025

BETH LABSON FREEMAN 14 United States District Judge

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