(Bloomberg) -- A federal judge expressed doubt about the merits of a $1 billion lawsuit by First Citizens Bank & Trust Co. accusing HSBC Holdings Plc of stealing trade secrets when it recruited dozens of bankers who had just joined First Citizens after it took over failed Silicon Valley Bank.
In an order late Tuesday, US Magistrate Judge Laurel Beeler in San Francisco dismissed most of the allegations, but left in place certain claims of trade secret theft and one for breach of contract.
“Maybe discovery will support claims for a nefarious scheme to poach trade secrets and steal a business model, but right now, the allegations against most defendants show only a failed bank and employees decamping to a better business opportunity,” Beeler wrote in her order.
The pretrial fact-finding phase known as discovery is crucial because North Carolina-based First Citizens will need to show exactly what secrets it claims were stolen.
First Citizens, which had acquired Silicon Valley Bank shortly after its failure, alleged in a $1 billion lawsuit filed in San Francisco in May 2023 that HSBC’s David Sabow, a former SVB executive, spearheaded a scheme called “Project Colony” to hire 42 SVB employees and obtain confidential information. It claimed HSBC and employees who defected violated trade secrets laws and breached company contracts governing confidential information and the solicitation of co-workers to leave the company.
A spokesperson for First Citizens said the bank, for now, didn’t have a comment on the ruling.
London-based HSBC said it welcomed the ruling. “As the court recognized, First Citizens’ core allegations merely show that former employees of a failed bank looked for — and found at HSBC — a better opportunity to further their careers,” the bank said in a statement.
Beeler called First Citizens’ first version of its complaint “confusing” and in need of being “cleaned up.” First Citizens then filed an amended complaint, which claimed HSBC executives including Chief Executive Officer Noel Quinn knew of the hiring plan.
HSBC countered that it “lawfully extended job offers” to former SVB workers whose employment status was up in the air after the First Citizens acquisition. First Citizens had agreed to pay the employees only until it decided whether to officially hire them, HSBC said in court filings, adding that a one-page “New Hire Acknowledgment” form the employees signed didn’t constitute an offer letter.
HSBC had asked the judge to dismiss all the claims other than trade secrets claims against SVB UK and HSBC Bank USA N.A., Sabow and another former SVB executive.
“Discovery will prove these claims are meritless,” the bank said in its request for dismissal.
The case is First Citizens Bank v. HSBC Holdings, 23-cv-02483, US District Court, Northern District of California (San Francisco).
--With assistance from Guillermo Molero.
(Updates with comment from HSBC.)
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