SVB Financial Trust v. Federal Deposit Insurance Corporation

1

2

3 UNITED STATES DISTRICT COURT

4 NORTHERN DISTRICT OF CALIFORNIA

5 SAN JOSE DIVISION

6

7 SVB FINANCIAL TRUST, Case No. 23-cv-06543-BLF

8 Plaintiff,

ORDER GRANTING IN PART AND

9 v. DENYING IN PART DEFENDANT'S

MOTION TO DISMISS THE

10 FEDERAL DEPOSIT INSURANCE AMENDED COMPLAINT

CORPORATION,

11 [Re: ECF No. 99]

Defendant.

12

13 Before the Court is Defendant Federal Deposit Insurance Corporation, in its corporate capacity’s

14 (“FDIC-C”) Motion to Dismiss Plaintiff SVB Financial Trust’s1 (“Trust”) Amended Complaint. ECF 99

15 (“Mot.”). The Trust opposes the motion. ECF 100 (“Opp.”). The FDIC-C filed a Reply. ECF 102

16 (“Reply”). The Court heard oral argument on the motion on January 30, 2024. See ECF 132. For the

17 following reasons, the Court GRANTS IN PART and DENIES IN PART the motion to dismiss.

18 I. BACKGROUND

19 A. Factual Background

20 For purposes of this motion, the Court accepts as true all well-pled facts in the Trust’s

21 Amended Complaint. See ECF 92 (“AC”).

22 Between 2000 and March 2023, SVB Financial Group (“SVBFG”) owned Silicon Valley

23 Bank (“SVB”) and several other affiliated businesses. AC ¶ 32. SVBFG kept substantially all of its

24 funds deposited at SVB. Id. As of March 10, 2023, SVBFG had on deposit approximately $2.1

25

26

1 This action and the related SVB Financial Trust v. Federal Deposit Insurance Corp., as Receiver

for Silicon Valley Bank, et al., No. 5:24-cv-01321-BLF (N.D. Cal.) (“FDIC-R Action”) were

27

initially brought by SVB Group (“SVBFG”). See ECF 1; FDIC-R Action, ECF 1. The parties in

1 billion in three separate deposit accounts at SVB. Id. ¶ 33, 72.

2 On March 10, 2023, SVB closed. Id. ¶ 34. On the same day, the California Department of

3 Financial Protection and Innovation (“DFPI”) took possession of SVB and appointed the Federal

4 Deposit Insurance Corporation as receiver (“FDIC-R1”). Id. On the same day, the FDIC created the

5 Deposit Insurance National Bank of Santa Clara (“DINB”) and transferred all insured deposits of

6 SVB to the DINB. Id. ¶ 36. The FDIC also announced that “[a]ll insured depositors [would] have

7 full access to their insured deposits no later than Monday morning, March 13, 2023.” Id. The FDIC

8 also planned to pay uninsured SVB depositors an advance dividend. Id.

9 Nonetheless, the FDIC’s March 10, 2023, announcement did not calm the market as planned

10 and the FDIC became concerned that uninsured depositors would respond by rapidly withdrawing

11 funds from other banks. Id. ¶ 41. Over the weekend of March 11, 2023, the Department of the

12 Treasury, the FDIC and the Federal Reserve assessed the impact of the closure of SVB and Signature

13 Bank on the American banking system and financial markets. Id. ¶ 42.

14 On March 12, 2023, the boards of both the Federal Reserve and the FDIC unanimously

15 recommended to Treasury Secretary Janet Yellen that she invoke the systemic risk exception. Id. ¶

16 43. After consulting with the President of the United States, Secretary Yellen invoked the Systemic

17 Risk Exception, codified at 12 U.S.C. § 1823(c)(4)(G), to guarantee that all deposits at SVB,

18 regardless of insurance status, would be paid in full and that depositors would immediately have

19 access to their funds. Id.

20 The FDIC, Secretary Yellen and other government officials made public statements

21 confirming that all uninsured deposits at SVB would be covered by the systemic risk exception. Id.

22 ¶¶ 2, 47. For example, on March 12, 2023, Secretary Yellen, Federal Reserve Board Chair Jerome

23 Powell, and FDIC Chairman Martin Gruenberg jointly announced that all depositors “[would] have

24 access to all of their money starting Monday, March 13.” Id. ¶ 2. Additionally, on March 13, 2023,

25 the FDIC issued a press release stating that “[t]he transfer of all the deposits was completed under

26 the systemic risk exception approved [on March 12, 2023],” and that “[d]epositors will have full

27 access to their money beginning this morning.” Id. ¶¶ 48, 69 (citing AC, Ex. 7 (Press Release, FDIC,

1 On Monday, March 13, 2023, all insured and uninsured deposits, including SVBFG’s

2 deposits at SVB, were transferred to the newly formed Silicon Valley Bridge Bank (“Bridge Bank”).

3 Id. ¶ 3, 68. On March 15 and 16, 2023, SVBFG successfully withdrew approximately $180 million

4 via eight wire transfers. Id. ¶ 73. However, on March 16, 2023, Bridge Bank began rejecting wire

5 transfers, at the direction of senior FDIC-C employees, because FDIC-R1 instructed Bridge Bank

6 to place a hold on SVBFG’s accounts. Id. ¶ 74. With the knowledge and approval from the FDIC-

7 C employees, the FDIC-R1 further directed Bridge Bank to assign SVBFG’s deposit accounts to

8 FDIC-R1, and Bridge Bank did so. Id. ¶ 75. As a result, SVBFG lost access to approximately $1.93

9 billion of its deposit (“Account Funds”). Id. ¶ 95.

10 On March 17, 2023, SVBFG filed a petition for relief under Chapter 11 of the Bankruptcy

11 Code and obtained all rights of a debtor in possession. Id. ¶ 96. On March 27, 2023, Bridge Bank

12 closed and the FDIC was appointed to act as the receiver for Bridge Bank (“FDIC-R2”). Id. ¶ 97

13 n.8. Substantially all of Bridge Bank’s assets were transferred to First-Citizens Bank & Trust

14 Company (“First-Citizens”). Id. ¶ 97. On or around April 3, 2023, the FDIC mailed a letter to Bridge

15 Bank depositors and informed them that “[a]ll deposits [at Silicon Valley Bank] were fully insured”

16 by the FDIC-C, and that “the full amount of your deposit was transferred” to First Citizens. Id.

17 SVBFG’s Account Funds were expressly excluded from the transfer to First Citizens. Id.

18 On June 26, 2023, SVBFG sent a letter to the FDIC-C demanding that the FDIC-C pay or

19 give SVBFG full access to all its uninsured funds pursuant to Secretary Yellen’s invocation of the

20 systemic risk exception. Id. ¶ 104. The FDIC-C did not respond to this letter until months later. Id.

21 On July 9, 2023, SVBFG filed an adversary proceeding in the bankruptcy court against the FDIC-

22 C and both FDIC-Rs. Id. ¶ 105. On August 11, 2023, all three FDIC defendants moved to dismiss

23 the adversary complaint. Id. ¶ 108. On the same day, the FDIC-R1 filed a motion to withdraw the

24 reference to the Bankruptcy Court pursuant to 28 U.S.C. § 157(d). Id. ¶ 109. On August 15, 2023,

25 the FDIC-C and FDIC-R2 filed non-substantive joinders to the FDIC-R1’s motion to withdraw the

26 reference. Id. On December 13, 2023, Judge John P. Cronan granted the motion to withdraw

27 reference. Id. ¶ 111; see also In re SVB Fin. Grp., No. 23 CIV. 7218 (JPC), 2023 WL 8622521, at

1 On September 14, 2023, the bankruptcy court directed the FDIC-C to provide SVBFG with

2 a statement, in writing, setting forth the applicable rules and procedures that applied to the FDIC-

3 C’s claims process under 12 U.S.C. § 1821(f). AC ¶ 115. On September 19, 2023, the FDIC-C sent

4 SVBFG a letter, which characterized SVBFG’s June 26 letter as a timely claim for insurance

5 coverage under § 1821(f) and informed SVBFG that the FDIC-C would provide a final

6 determination regarding insurance coverage within 30 days. Id. ¶ 116. On October 20, 2023, the

7 FDIC-C denied SVBFG’s claim for insurance coverage because SVBFG had already withdrawn

8 over $250,000 from its accounts at Bridge Bank and because Secretary Yellen’s invocation of the

9 Systemic Risk Exception did not obligate the FDIC-C to follow any particular course of action. Id.

10 ¶¶ 118–19.

11 B. Procedural History

12 The Trust filed this action against the FDIC-C on December 19, 2023. See ECF 1

13 (“Compl.”). In its Complaint, the Trust brought eight claims for relief: (I) declaratory judgment

14 pursuant to 28 U.S.C. § 2201 et seq., id. ¶¶ 105–10; (II) turnover of account funds pursuant to 11

15 U.S.C. § 542, id. ¶¶ 111–20; (III) violation of the automatic stay under 11 U.S.C. § 362(a), id. ¶¶

16 121–23; (IV) violation of the Trust’s Fifth Amendment due process rights, id. ¶¶ 124–34; (V) review

17 of “the FDIC-C’s policy of exercising discretion to determine not to pay or provide access to

18 uninsured deposits” under the Administrative Procedure Act (“APA”), id. ¶¶ 135–47; (VI) review

19 of the FDIC-C’s § 1821(f) decision under the APA, id. ¶¶ 148–61; (VII) estoppel, id. ¶¶ 162–69;

20 and (VIII) failure to produce records under the Freedom of Information Act (“FOIA”), id. ¶¶ 170–

21 75. On August 8, 2024, the Court granted in part and denied in part the FDIC-C’s motion to dismiss.

22 See ECF 85. Specifically, the Court 1) dismissed Count I without leave to amend to the extent it

23 requested prejudgment interest and denied the motion to dismiss with respect to all other requests

24 for declaratory relief; 2) dismissed Counts II, IV, and V without leave to amend; 3) denied the

25 motion to dismiss Count VII; and 4) dismissed Counts III and VIII without leave to amend. See ECF

26 85.

27 On August 29, 2024, the Trust filed an Amended Complaint. See AC. In its Amended

1 2201 et seq., id. ¶¶ 126–31; (II) turnover of account funds pursuant to 11 U.S.C. § 542, id. ¶¶ 132–

2 41; (IV) violation of the Trust’s Fifth Amendment due process rights, id. ¶¶ 142–54; (VI) review of

3 the FDIC-C’s Final Agency Action Under 5 U.S.C. § 706, id. ¶¶ 155–68; and (VII) estoppel, id. ¶¶

4 169–76.

5 On March 5, 2024, SVBFG filed a lawsuit against the FDIC, in its capacity as receiver for

6 SVB (“FDIC-R1”), and the FDIC, in its capacity as receiver for Bridge Bank (“FDIC-R2”). See SVB

7 Financial Trust v. Federal Deposit Insurance Corp., as Receiver for Silicon Valley Bank, et al., No.

8 5:24-cv-01321-BLF (N.D. Cal.) (“FDIC-R Action”). On March 21, 2024, the Court granted a

9 motion to relate the FDIC-R Action with this action. See ECF 38. On November 29, 2024, the Court

10 granted in part and denied in part the FDIC-R1’s and the FDIC-R2’s motion to dismiss. See FDIC-

11 R Action, ECF 108. On January 10, 2025, the FDIC-R1 and the FDIC-R2 filed an Answer in the

12 FDIC-R Action. See FDIC-R Action, ECF 135.

13 II. LEGAL STANDARD

14 A. Rule 12(b)(6)

15 “A Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim

16 upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation Force v. Salazar,

17 646 F.3d 1240, 1241–42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)).

18 When determining whether a claim has been stated, the Court accepts as true all well-pled factual

19 allegations and construes them in the light most favorable to the plaintiff. Reese v. BP Exploration

20 (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the Court need not “accept as true allegations

21 that contradict matters properly subject to judicial notice” or “allegations that are merely conclusory,

22 unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d

23 1049, 1055 (9th Cir. 2008) (internal quotation marks and citations omitted). While a complaint need not

24 contain detailed factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state

25 a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell

26 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the court

27 to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

1 B. Leave to Amend

2 In deciding whether to grant leave to amend, the Court must consider the factors set forth by

3 the Supreme Court in Foman v. Davis, 371 U.S. 178 (1962), and discussed at length by the Ninth

4 Circuit in Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003). A district court

5 ordinarily must grant leave to amend unless one or more of the Foman factors is present: (1) undue

6 delay, (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by amendment, (4)

7 undue prejudice to the opposing party, or (5) futility of amendment. Eminence Capital, 316 F.3d at

8 1051–52. “[I]t is the consideration of prejudice to the opposing party that carries the greatest

9 weight.” Id. at 1052. However, a strong showing with respect to one of the other factors may warrant

10 denial of leave to amend. Id.

11 III. REQUESTS FOR JUDICIAL NOTICE

12 A court generally cannot consider materials outside the pleadings on a motion to dismiss for

13 failure to state a claim. See Fed. R. Civ. P. 12(b)(6). A court may, however, consider items of which

14 it can take judicial notice without converting the motion to dismiss into one for summary judgment.

15 Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial notice of facts “not

16 subject to reasonable dispute” because they are either “(1) generally known within the territorial

17 jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources

18 whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201. A court may additionally take

19 judicial notice of “‘matters of public record’ without converting a Motion to Dismiss into a motion

20 for summary judgment.” Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (quoting

21 MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986)). Under the incorporation by

22 reference doctrine, courts may consider documents “whose contents are alleged in a complaint and

23 whose authenticity no party questions, but which are not physically attached to the [plaintiff’s]

24 pleading.” In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999) (quoting Branch

25 v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994)) (alteration in original).

26 The FDIC-C requests that the Court take judicial notice of 1) the Transfer Agreement

27 between the FDIC-R1 and Bridge Bank, ECF 99-3 (“Transfer Agreement”); 2) the Call Notice and

1 and 3) an FDIC Organization Directory – Headquarters (“FDIC Organization Directory”), ECF 99-

2 5. See Mot. at 3-4. The FDIC-C argues that judicial notice of these documents is appropriate because

3 they are “publicly available on a government website.” Mot. at 3-4. The Trust does not object to

4 judicial notice of the Transfer Agreement. Opp. at 2. With respect to the Call Notice & Assignment

5 and the FDIC Organization Directory, the Trust argues that these documents “were only recently

6 made public through a filing in SVBFG’s Chapter 11 proceeding,” and thus are not noticeable “to

7 prove the truth of the matters contained therein.” Id. at 2-3. The Court “may take judicial notice of

8 court filings and other matters of public record.” Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442

9 F.3d 741, 746 n.6 (9th Cir. 2006). Here, the Trust has not objected to the authenticity of the Call

10 Notice & Assignment or the FDIC Organization Directory. See Opp. at 2-3. Thus, judicial notice of

11 these documents is appropriate because each document is a matter of public record. See Beulah v.

12 Broomfield, No. 24-cv-00205-BLF, 2024 WL 1607495, at *2 (N.D. Cal. Apr. 11, 2024) (Freeman,

13 J.) (taking judicial notice of court filings); Thompson v. JPMorgan Chase Bank, N.A., No. 16-CV-

14 06134-BLF, 2017 WL 897440, at *2 (N.D. Cal. Mar. 7, 2017) (taking judicial notice of printouts

15 from a government website).

16 Accordingly, the Court GRANTS the FDIC-C’s requests for judicial notice.

17 IV. DISCUSSION

18 A. Declaratory Judgment (Count I)

19 The FDIC-C argues that the Trust’s declaratory judgment claim fails because the claim is

20 “tied to its other claims for relief.” Mot. at 24-25. According to the FDIC-C, because the Trust’s

21 other claims are not plausible and should be dismissed, its “declaratory relief falls with them.” Id.

22 at 25. In response, the Trust argues that the Court should not dismiss its declaratory judgment claim

23 because the other claims are adequately pled. Opp. at 24.

24 It is well-established that declaratory judgment is not an independent cause of action, but an

25 equitable remedy. See Brown v. Transworld Sys., Inc., 73 F.4th 1030, 1038 (9th Cir. 2023) (noting

26 that requests for declaratory and injunctive relief are not stand-alone claims); City of Reno v. Netflix,

27 Inc., 52 F.4th 874, 878 (9th Cir. 2022) (“[T]he Declaratory Judgment Act does not provide an

1 finds the Trust’s turnover claim and promissory estoppel claim are adequately pled, the Trust’s claim

2 for declaratory relief rises with those claims. See Section III.B and III.E infra. Thus, the FDIC-C’s

3 motion to dismiss the Trust’s claim for declaratory judgment is DENIED.

4 B. Turnover Claim Pursuant to Section 542 of the Bankruptcy Code (Count II)

5 Count II of the Complaint seeks turnover of the Trust’s Account Funds under § 542(b) of

6 the Bankruptcy Code. Section 542(b) states:

7

an entity that owes a debt that is property of the estate and that is matured, payable on

8

demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to

9 the extent that such debt may be offset under section 553 of this title against a claim against

the debtor.

10

11 11 U.S.C. § 542(b) (“§ 542(b)”). “To prevail on a claim for turnover, a plaintiff must demonstrate

12 ‘(1) the property is in the possession, custody or control of another entity; (2) the property can be

13 used in accordance with the provisions of section 363; and (3) the property has more than

14 inconsequential value to the debtor’s estate.’” In re Brown, No. 18-10617 (JLG), 2022 WL 4390454,

15 at *20 (Bankr. S.D.N.Y. Sept. 22, 2022) (quoting Gletzer v. Soshkin (In re Brizinova), 588 B.R. 311,

16 327 (Bankr. E.D.N.Y. 2018)). The Trust only argues that FDIC-C has “control” over the deposits.

17 See AC, ¶¶ 8, 91, 94; Opp. at 5-10.

18

1. The FDIC-C need not assume the Trust’s deposit liabilities to have control

19 over the Account Funds under § 542(b).

20 The FDIC-C argues that the Trust has still failed to adequately allege that the FDIC-C “has

21 possession, custody, or control of” the Trust’s deposit liabilities. Mot. at 7 (citing ECF 85 at 22).

22 According to the FDIC-C, the FDIC-R1 “has sole possession of [the Trust’s] deposit liabilities and

23 [the] FDIC-C never assumed those liabilities.” Mot. at 8. In response, the Trust argues that the

24 FDIC-C “does not need to assume” the deposit liabilities to have “control” over the Account Funds

25 under § 542(b). Opp. at 6 (citing cases).

26 Upon reviewing the authorities cited by the parties, the Court agrees with the Trust that

27 having “control” of a deposit liability under § 542(b) does not require assuming the deposit

1 interpreted the term using its dictionary definitions. See In re: JASON SCOTT BROWN, Debtor.

2 KENNETH BROWN, Appellant, v. CHRISTOPHER BARCLAY, Appellee., No. AP 15-90085-MM,

3 2018 WL 2308267, at *5 (B.A.P. 9th Cir. May 21, 2018), aff'd sub nom. In re Brown, 953 F.3d 617

4 (9th Cir. 2020). In Brown, the Bankruptcy Appellate Panel of the Ninth Circuit found that in the

5 Bankruptcy Code, “[t]o ‘control’ means to ‘direct or supervise,’ to ‘limit or regulate something.’”

6 Id. (citing Oxford American Dictionary, (Second Ed. 2008)); see Thompson v. Gen. Motors

7 Acceptance Corp., 566 F.3d 699, 702 (7th Cir. 2009) (using Webster’s Dictionary and interpreting

8 “control” in 11 U.S.C. § 362 as “to exercise restraining or directing influence over” or “to have

9 power over”); In re Arcapita Bank B.S.C.(c), 628 B.R. 414, 480 (Bankr. S.D.N.Y. 2021) (“To

10 ‘exercise control’ means ‘to exercise restraining or directing influence over’ or ‘to have power

11 over.’”). The Court finds that the case cited by the FDIC-C is distinguishable. Reply at 3 (citing

12 Muehlberger, 319 B.R. at 667). In Muehlberger, the Bankruptcy Court found the underlying debt

13 was discharged under Kansas law governing accord and satisfaction, and thus the debtor no longer

14 “owes” a debt subject to turnover pursuant to 11 U.S.C. § 542. Muehlberger, 319 B.R. at 667.

15 Nonetheless, the Bankruptcy Court there did not interpret the meaning of “control” under § 542(b).

16 2. The FDIC-C’s control may not be disregarded as a matter of law.

17 The FDIC-C further argues that, because the FDIC-C and the FDIC-R are entirely separate

18 entities as a matter of law, the FDIC-C cannot be liable for the FDIC-R1’s instruction to Bridge

19 Bank to place holds on the Account Funds. Mot. at 10-11 (citing In re Washington Bancorporation,

20 1996 WL 148533 (D.D.C. Mar. 19, 1996); Patriot Square Assocs. v. FDIC, 1992 WL 12957147

21 (D.D.C. Sept. 25, 1992); Pageland 29 Ltd. v. FDIC, 1992 WL 391377 (D.D.C. Dec. 14, 1992)). The

22 FDIC-C argues that because the FDIC-C and the FDIC-R are “legally separate” entities, the FDIC-

23 C cannot “direct[]” FDIC-R1’s actions. Mot. at 11 (citing Bullion Servs., Inc. v. Valley State Bank,

24 50 F.3d 705, 709 (9th Cir. 1995)). In response, the Trust argues that the authorities cited by the

25 FDIC-C are distinguishable because they only hold that “FDIC-C could not legally enforce”

26 its directives to FDIC-R1, and that they do not address “factual allegations concerning FDIC-C’s

27 direction of FDIC-R1’s actions.” Opp. at 10-11.

1 above, the Trust has sufficiently alleged that the FDIC-C itself is responsible for denying the Trust

2 access to its Account Funds, on which a claim for turnover pursuant to § 542(b) may be brought

3 against the FDIC-C. The FDIC-C’s reliance on Bullion is also off-point. See Mot. at 11. In Bullion,

4 the Ninth Circuit reversed the district court’s decision to remand claims brought against FDIC

5 Corporate to state court because it had independent removal rights from FDIC Receiver for another

6 insolvent bank. Bullion Servs., 50 F.3d at 709. Unlike Bullion, here, the Court finds that the Trust

7 has plausibly alleged that the FDIC-C is currently controlling the Account Funds independent of the

8 FDIC-R1. See AC ¶¶ 94-95.

9 3. The Trust has adequately pled its turnover claim.

10 The FDIC-C argues that the Trust has still failed to adequately plead its turnover claim. Mot.

11 at 8-10, 12-14. Specifically, the FDIC-C contends that the Trust has failed to allege that the FDIC-

12 C currently has control of the Trust’s deposit liabilities. Mot. at 9-10; Reply at 3-4 (citing § 542(b)

13 and In re Al Muehlberger Concrete Constr., Inc., 319 B.R. 663, 667 (Bankr. D. Kan. Jan. 30, 2005)).

14 The FDIC-C further argues that the Court should disregard the Trust’s allegations “that FDIC-C

15 directed FDIC-R1 to block SVBFG’s account access because they are factually contradicted by the

16 emails referenced in the Amended Complaint and by materials subject to judicial notice.” Mot. at

17 13-14 (citing AC ¶ 77, ECF 99-3 (Transfer Agreement), ECF 99-5 (FDIC-C Organizational

18 Directory), and ECF 99-6 (March 13 emails)).

19 In response, the Trust argues that the FDIC-C’s contention “is a factual inquiry inappropriate

20 for resolution at the pleading stage.” Opp. at 8 (citing AC ¶¶ 77-79, 81-94). The Trust further

21 contends that it has adequately alleged that the FDIC-C currently has “control” over the Account

22 Funds for the purpose of § 542(b), and that its pleadings should not be disregarded. See Opp. at 6-

23 10.

24 Considering the facts in the Amended Complaint, the Court finds that the Trust has

25 adequately pled its turnover claim. Although these allegations supporting “control” are vanishingly

26 thin, the Court concludes that the Trust has met the pleading standard. In the Amended Complaint,

27 the Trust alleges that: 1) on March 13, 2023, FDIC-C employees instructed FDIC-R employees via

1 Bridge Bank employees identified deposit accounts from the Trust and placed holds on those

2 accounts, id. ¶ 79; 3) on March 15, 2023, an FDIC-R1 employee updated the FDIC-C on the efforts

3 to block the Trust’s access to its accounts, id.; 4) between March 15 and 17, 2023, employees from

4 the FDIC-C and the FDIC-R1 continued to exchange emails concerning the FDIC-C’s instruction

5 to the FDIC-R1 and the status on the holds placed on the Trust’s accounts, id. ¶¶ 80-88; and 5) as

6 suggested by a March 16, 2023, email, the FDIC-C was directly involved in the decision to assign

7 the Trust’s Account Funds from Bridge Bank back to the FDIC-R1, id. ¶ 90. The Court finds the

8 Trust has pled sufficient facts from which a reasonable inference could be drawn that the FDIC-C

9 has “control” over the Trust’s Account Funds pursuant § 542(b).

10 The Court also disagrees with the FDIC-C’s contention that the Trust has failed to allege

11 that the FDIC-C “currently has sufficient control of [the Trust’s] deposit liabilities.” Reply at 3; see

12 Mot. at 9-10; ECF 139, Hearing Tr. at 38:19-39:1. When accepting as true all well-pled factual

13 allegations and construing them in the light most favorable to the Trust, the Court finds that

14 reasonable inference can be drawn that the FDIC-C has continued to direct the FDIC-R1 to deny the

15 Trust access to the Account Funds after March 2023. See AC ¶¶ 81-82, 83-90.

16 The Court further disagrees with the FDIC-C’s contention that the Trust’s factual allegations

17 should be disregarded as a matter of fact. Mot. at 12-14; Reply at 7-9. The FDIC-C’s argument is

18 based on a series of emails incorporated by reference in paragraphs 76-85 of the Amended

19 Complaint that the FDIC-C asserts were sent by employees acting on behalf of the FDIC-R. To

20 make this point, the FDIC-C asks the Court to consider the FDIC Organization Directory and the

21 Transfer Agreement. Mot. at 14. Upon reviewing the relevant record, the Court finds that the March

22 13 emails do not contain information sufficient to indicate the employment capacities of the persons

23 who participated in the email chain. See ECF 99-5. The FDIC Organization Directory and Transfer

24 Agreement do not, on their face, conclusively establish that employment role either. See ECF 99-3,

25 99-5. Thus, the Court finds that too many inferences need to be drawn in FDIC-C’s favor to support

26 the FDIC-C’s contention that those emails were not sent by the FDIC-C employees and that those

27 emails did not contain directions from the FDIC-C. Those factual inferences are not warranted at

1 (“[T]he court need not . . . make unwarranted deductions or unreasonable inferences” when ruling

2 on a motion to dismiss.). However, the Trust is advised that upon a developed record, this claim

3 may prove untenable if FDIC-C’s assertions are correct.

4 Accordingly, the FDIC-C’s motion to dismiss the Trust’s turnover claim is DENIED.

5 C. Violation of Plaintiff’s Fifth Amendment Due Process Rights (Count IV)

6 “The Due Process Clause of the Fourteenth Amendment imposes procedural constraints on

7 governmental decisions that deprive individuals of liberty or property interests.” Nozzi v. Hous.

8 Auth. of City of Los Angeles, 806 F.3d 1178, 1190 (9th Cir. 2015), as amended on denial of reh’g

9 and reh’g en banc (Jan. 29, 2016). To prevail on a procedural due process claim, the plaintiff “must

10 establish the existence of ‘(1) a liberty or property interest protected by the Constitution; (2) a

11 deprivation of that interest by the government, [and] (3) a lack of process.’” Blumenkron v.

12 Multnomah Cnty., 91 F.4th 1303, 1314 (9th Cir. 2024) (alteration in original) (quoting Shanks v.

13 Dressel, 540 F.3d 1082, 1090 (9th Cir. 2008)).

14 As an initial matter, the FDIC-C argues that the Trust must plausibly allege a separate cause

15 of action to sue the FDIC-C, a federal agency, for a due process violation. Mot. at 15 (citing F.D.I.C.

16 v. Meyer, 510 U.S. 471, 483-86 (1994)). The FDIC-C recognizes that it did not raise this argument

17 in its prior motion to dismiss but argues that the Ninth Circuit is “forgiving” of new arguments made

18 in a second motion to dismiss. Mot. at 15 (citing In re Apple iPhone Antitrust Litig., 846 F.3d 313,

19 319 (9th Cir. 2017), aff’d sub nom. Apple Inc. v. Pepper, 587 U.S. 273 (2019)). The FDIC-C

20 contends that the Trust has failed to allege a cause of action to support the due process claim and

21 that the commonly used claims are unavailable to support a claim against a federal agency. Mot. at

22 16.

23 The Trust argues that the FDIC-C’s argument is untimely under Federal Rule of Civil

24 Procedure 12(g)(2) because the FDIC-C failed to raise the argument in the first motion to dismiss.

25 Opp. at 12-13. The Trust further argues that a separate cause of action is not required for its due

26 process claim because it is seeking injunctive relief as opposed to damages. Opp. at 12-14. The Trust

27 contends that it has adequately pled a claim under the Administrative Procedure Act (“APA”) even

1 The Court finds that the FDIC-C is not barred from raising this argument at this stage. “Rule

2 12(g)(2) provides that a defendant who fails to assert a failure-to-state-a-claim defense in a pre-

3 answer Rule 12 motion cannot assert that defense in a later pre-answer motion under Rule 12 (b)(6).”

4 Apple iPhone Antitrust Litig., 846 F.3d at 318. The Ninth Circuit has explained that a district court

5 may “properly entertain a second [Rule 12(b)(6)] motion if it were convinced it was not interposed

6 for delay and that addressing it would expedite disposition of the case on the merits.” Id. at 319

7 (citation omitted). Here, the Court has no reason to believe that the FDIC-C seeks to delay the

8 litigation by raising the argument for the first time in its second motion to dismiss. Thus, the Court

9 will consider the FDIC-C’s argument on the merits because doing so is “in the interests of judicial

10 economy.” United States v. Sutter Health, 2021 WL 9182525, at *3 (N.D. Cal. Nov. 2, 2021)

11 (adjudicating an issue first brought in a second motion to dismiss).

12 To bring a claim for damages resulting from a due process violation against a federal agency,

13 a plaintiff must allege a separate cause of action. See F.D.I.C. v. Meyer, 510 U.S. 471, 483-86 (1994)

14 (dismissing a Fifth Amendment due process claim against the FDIC seeking damages because there

15 was no implied Bivens cause of action). The Trust does not dispute this requirement. See Opp. at

16 13-14. Rather, it contends that a separate cause of action is not required because it seeks injunctive

17 relief, not damages. See Opp. at 13 (citing Elmco Props., Inc. v. Second Natl’s Fed. Savs. Ass’n, 94

18 F.3d 914, 918, 920-22 (4th Cir. 1996) and Cmty. Fin. Servs. Ass’n of Am., Ltd. v. F.D.I.C., 132 F.

19 Supp. 3d 98, 121-24 (D.D.C. 2015)).

20 The Court need not address whether a separate cause of action is required for a due process

21 claim seeking injunctive relief because the Trust effectively is seeking damages for its due process

22 claim in the guise of injunctive relief. Here, the Trust alleges that it “has a claim of entitlement to

23 the Account Funds because the Treasury Secretary’s invocation and determination unequivocally

24 guaranteed all deposits of all depositors.” AC ¶ 147. The Trust alleges that it wrote a letter to the

25 FDIC-C on June 26, 2023 demanding payment of the Account Funds, that the FDIC-C did not

26 acknowledge the letter until after the Trust filed an adversary complaint and the Bankruptcy Court

27 raised due process issues, and that the FDIC-C treated the Trust’s request as a timely deposit

1 FDIC-C’s § 1821(f) claims process is inadequate for uninsured deposits. AC ¶ 153. For remedy, the

2 Trust seeks “injunctive relief prohibiting the FDIC-C from continuing to deny [the Trust] access to

3 its Account Funds.” AC ¶ 154. Based on these allegations, it appears that the Trust essentially seeks

4 monetary relief from the FDIC in the form of return of its Account Funds, despite labeling its request

5 as “injunctive relief.” Thus, the Court finds that the Trust is required to allege a separate cause of

6 action for its due process claim seeking damages. See Meyer, 510 U.S. at 483-86.

7 The Court finds that the Trust has failed to plead a separate cause of action for its due process

8 claim. See Meyer, 510 U.S. at 483-86. The parties do not dispute that the Trust has failed to allege

9 one of the commonly used causes of action to support its due process claim, such as a cause of action

10 brought under Bivens v. Six Unknown Named Agents, 403 U.S. 388 (1971), 42 U.S.C. § 1983, or Ex

11 parte Young, 208 U.S. 123 (1908), because these claims are unavailable here. See Mot. at 16-17;

12 Opp. at 14. To the extent that the Trust argues that it has adequately pled a claim under the APA as

13 a separate cause of action for its due process claim, for the reasons stated in Part III.D, infra, the

14 Court finds that the Trust has failed to adequately plead a final agency action that warrants judicial

15 review. Thus, the Court finds that the Trust has failed to plead a separate cause of action which is

16 required for its due process claim seeking damages. See Meyer, 510 U.S. at 483-85.

17 On this basis alone, the Court GRANTS the FDIC-C’s motion to dismiss Count IV

18 WITHOUT LEAVE TO AMEND. The Court need not reach the FDIC-C’s remaining argument that

19 the Trust has failed to plausibly allege that the FDIC-C deprived the Trust of property. Mot. at 17-

20 18; Reply at 9.

21 D. Review of Final Agency Action Under 5 U.S.C. § 706 (Count VI)

22 The Trust’s Count VI alleges that the FDIC-C’s denial of the Trust’s administrative claims

23 for the Trust’s uninsured deposits violated 12 U.S.C. § 1821(f) (“§ 1821(f)”). AC ¶¶ 155-68. The

24 Trust alleges that the FDIC-C has failed to establish “any rules or procedures governing the

25 submission or adjudication of uninsured deposit claims for Silicon Valley Bank or Bridge Bank

26 depositors,” and the Court “must” set aside the FDIC-C’s determinations because they are “arbitrary,

27 capricious, an abusive of discretion, or otherwise not in accordance with law.” Id. ¶¶ 157, 160.

1 Trust’s claims are not related to “any insured deposit” or claims for “insurance coverage” within the

2 meaning of § 1821(f). Mot. at 24 (citing ECF 92 at 11-12). Thus, the Trust’s Count VI must fail

3 because § 1821(f) only authorizes judicial review of a “claim for insurance coverage.” Reply at 102

4 (citing § 1821(f)(4)).

5 In response, the Trust argues that Count VI is based on the FDIC-C’s final agency action on

6 October 20, 2023, that denied the Trust’s claim for its uninsured deposits. See Opp. at 23-24; see

7 also AC ¶¶ 12-13. The Trust argues that, because the FDIC-C made its unilateral decision without

8 due process or fair notice, the Court should review and put aside that decision. Opp. at 23.

9 The Court finds that the Trust has failed to allege a final agency action that can be reviewed

10 by the Court. § 1821(f)(4) authorizes the Court to review a final agency action by the FDIC-C

11 “regarding any claim for insurance coverage.” § 1821(f)(4) (emphasis added). As the Court

12 determined in its previous Order dismissing the Complaint, the Trust’s claims are “not for insurance

13 coverage because it seeks recovery that is distinct from the insured amounts to which it is entitled

14 by statute.” ECF 85 at 12. Thus, the Court finds that it lacks authority under § 1821(f) to review the

15 FDIC-C’s final agency action on October 20, 2023. The Court notes that the Trust has failed to

16 identify any final agency action other than the FDIC-C’s denial of the Trust’s § 1821(f) claim. See

17 AC ¶¶ 155-68.

18 Accordingly, the FDIC-C’s motion to dismiss Count VI is GRANTED WITHOUT LEAVE

19 TO AMEND.

20 E. Promissory Estoppel (Count VII)

21 In its prior Order, the Court denied the FDIC-C’s motion to dismiss the Trust’s promissory

22 estoppel claim. See ECF 85 at 31-34. Specifically, the Court found that there is a waiver of sovereign

23 immunity for actions against the FDIC and that promissory estoppel claims are meant to reach the

24 FDIC. Id. at 32. The Court found that the FDIC-C had forfeited its argument that the Trust had failed

25 to allege the elements of promissory estoppel because the FDIC-C did not raise the argument in its

26 opening brief of its first motion to dismiss. See ECF 85 at 33.

27 The FDIC-C argues that the Court did not address the merits of whether the Trust had

1 motion to dismiss the Amended Complaint. Mot. at 18-19. Considering the merits, the FDIC-C

2 argues that affirmative misconduct on the part of the FDIC is required to adequately allege the

3 Trust’s promissory estoppel claim and the Trust has failed to allege affirmative misconduct in the

4 Amended Complaint. Mot. at 19-20 (citing Koroma v. Richmond Redevelopment & Hous. Auth.,

5 2010 WL 1704745, at *12 (E.D. Va. Apr. 27, 2010)).

6 In response, the Trust argues that the FDIC-C’s request is improper because it is seeking

7 reconsideration of the Court’s decision denying the FDIC-C’s first motion to dismiss the promissory

8 estoppel claim. Opp. at 15-16. The Trust argues that the FDIC-C is not entitled to re-argue its

9 promissory estoppel arguments because the FDIC-C did not raise those arguments in the first motion

10 to dismiss. Id. (citing Fed. R. Civ. P. 12(g)(2)). The Trust further contends that it is not required to

11 plead affirmative misconduct for its promissory estoppel claims, and that it has adequately alleged

12 affirmative misconduct even if it is required to do so. Mot. at 17-23.

13

i. The Court will consider the FDIC-C’s challenge to the adequacy of the promissory

14 estoppel claim.

15 As an initial matter, the Court finds that the FDIC-C is not barred from re-raising this

16 argument at this stage. Federal Rule of Civil Procedure 12(g) prohibits parties “from bringing

17 successive motions to dismiss that raise arguments that could have been made in a prior motion.”

18 DeSoto Cab Co., Inc. v. Uber Techs., Inc., No. 16-CV-06385-JSW, 2020 WL 10575294, at *3 (N.D.

19 Cal. Mar. 25, 2020). Nonetheless, “courts have discretion to consider a successive motion under

20 Rule 12(g) if to do so would facilitate judicial economy and efficiency.” Id. (citing In re Apple

21 Iphone Antitrust Litig., 846 F.3d at 319). In its previous Order, the Court did not consider whether

22 the Trust had adequately pled its promissory estoppel claim. See Valerio v. Crawford, 306 F.3d 742,

23 754 n.4 (9th Cir. 2002) (en banc) (distinguishing between a finding of waiver and decision on the

24 merits); ECF 85 at 33. Thus, the FDIC-C’s motion is not for reconsideration. Additionally, the Court

25 finds that Rule 12(g)(2) is inapplicable because the FDIC-C did raise this argument in the first

26 motion to dismiss. See Opp. at 15-16 (recognizing that the Trust raised this argument in its reply

27 brief of the first motion to dismiss); Desoto Cab., 2020 WL 10575294, at * 10. In any event, the

1 doing so “would facilitate judicial economy and efficiency.” DeSoto Cab, 2020 WL 10575294, at

2 *3. Accordingly, the Court will consider the FDIC-C’s arguments on the merits.

3 ii. The Trust’s promissory estoppel claim requires affirmative misconduct.

4 Under federal common law and Ninth Circuit precedent, a promisee who brings a promissory

5 estoppel claim against the promisor must show: “(1) the existence of a promise, (2) which the

6 promisor reasonably should have expected to induce the promisee's reliance, (3) which actually

7 induces such reliance, (4) that such reliance is reasonable, and (5) that injustice can be avoided only

8 by enforcement of the promise.” Aguilar v. Int’l Longshoremen’s Union Loc. No. 10, 966 F.2d 443,

9 445 (9th Cir. 1992). The FDIC-C argues that, in addition to the traditional elements of estoppel,

10 when a claim is made against the federal government, the Trust must also satisfy the element of

11 affirmative misconduct to prevail on its promissory estoppel claim. Mot. at 19 (citing Koroma, 2010

12 WL 170475, at *2). According to the FDIC-C, courts often apply equitable estoppel cases to

13 evaluate the affirmative misconduct element for promissory estoppel cases. Mot. at 19-20 (citing

14 cases). The FDIC-C contends that the affirmative misconduct element of promissory estoppel

15 requires the pleading of “an affirmative misrepresentation or affirmative concealment of a material

16 fact” by the government. Mot. at 20 (citing Baccei v. United States, 632 F.3d 1140, 1147 (9th Cir.

17 2011)). In response, the Trust argues that affirmative misconduct is not a required element for

18 promissory estoppel claims against the government because promissory estoppel does not implicate

19 equitable estoppel’s policy concern that “the Government is unable to enforce the law because the

20 conduct of its agents has given rise to an estoppel.” Opp. at 18 (citing Heckler v. Cmty. Health Servs.

21 Of Crawford Cnty., 467 U.S. 51, 60 (1984)). The Trust argues that the Court should determine the

22 liability of FDIC-C “in the same fashion as that of a private party,” and thus the affirmative

23 misconduct is not required for its promissory estoppel claim. Opp. at 19 (citing Stagen v. FDIC, 152

24 F.3d 929 (9th Cir. 1998)). Neither party has located any Ninth Circuit authority that squarely

25 addresses this affirmative misconduct requirement for promissory estoppel claims against a

26 government agency. See Opp. at 18; Reply at 12; ECF 139, Hearing Tr. at 24:8-16.

27 Considering the authorities cited by the parties, the Court finds persuasive that affirmative

1 Koroma v. Richmond Redevelopment & Hous. Auth., 2010 WL 1704745, at *12 (E.D. Va. Apr. 27,

2 2010); United States v. Vantage Tr. Fed. Credit Union, No. 3:17-CV-0348, 2018 WL 306920, at *6

3 (M.D. Pa. Jan. 5, 2018); Jones Motor Co. v. Teledyne, Inc., 732 F. Supp. 490, 495-96 (D. Del. 1990).

4 In Koroma, the Eastern District of Virginia dismissed plaintiff’s promissory estoppel claim brought

5 under federal common law against Richmond Redevelopment & Housing Authority (“RRHA”), a

6 local agency that administrated Section 8 Housing Choice Voucher Program promulgated by the

7 U.S. Department of Housing and Urban Development, for failing to allege affirmative misconduct

8 by the RRHA. See Koroma, 2010 WL 1704745, at *1, *12-13. In doing so, the Eastern District of

9 Virginia relied on Fourth Circuit precedent addressing equitable estoppel and explained that “[t]o

10 prevail on a claim of promissory estoppel against the federal government, one must show the

11 traditional elements of estoppel as well as affirmative misconduct.” Id. at *12 (citing Dawkins v.

12 Witt, 318 F.3d 606, 611-12 (4th Cir. 2003)); see Vantage Tr. Fed. Credit Union, 2018 WL 306920,

13 at *6 (dismissing promissory estoppel counterclaim against the United States for failing to allege

14 affirmative misconduct on the part of the United States or its agency, the Department of Veterans

15 Affairs); Jones Motor, 732 F. Supp. at 495-96 (dismissing plaintiff’s claim against the United States

16 Government under a theory of promissory estoppel for failure to prove affirmative misconduct).

17 The Court is not aware of any Ninth Circuit case that squarely rejects requiring affirmative

18 misconduct as an element in a promissory estoppel claim brought against the government. For

19 example, in Jablon v. U.S., the Ninth Circuit considered a claim of recovery against the United

20 States based upon promissory estoppel and dismissed the claim because “the United States ha[d]

21 not waived its sovereign immunity with regard to a promissory estoppel cause of action.” 657 F.2d

22 1064, 1065, 1070 (9th Cir. 1981). The Ninth Circuit explained that promissory estoppel “create[s]

23 a cause of action, whereas equitable estoppel [bars] a party from raising a defense.” Id. at 1068. The

24 Ninth Circuit explained that it had dismissed several cases based on “an equitable estoppel theory

25 where the estoppel in question is arguably ‘promissory estoppel’ rather than ‘equitable estoppel,’”

26 including Vickars-Henry because “no affirmative misconduct [was] found.” Id. at 1069 n.7 (citing

27 Vickars-Henry Corp. v. Bd. of Governors of Fed. Rsrv. Sys., 629 F.2d 629 (9th Cir. 1980), among

1 Similarly, in Vickars-Henry, the Ninth Circuit considered an estoppel claim against the

2 Board of Governors of the Federal Reserve System for denying a request for certification under

3 section 1103 of the Internal Revenue Code, 16 U.S.C. § 1103, and section 2 of the Bank Holding

4 Company Act, 12 U.S.C. § 1841. Vickars-Henry, 629 F.2d at 630, 635. The Ninth Circuit explained

5 that “[f]undamental to [estoppel claims against the government] is that, in addition to satisfying the

6 elements of ordinary estoppel, the governmental conduct complained of must amount to ‘affirmative

7 misconduct.’” Vickars-Henry, 629 F.2d at 635 (citing Santiago v. Immigr. & Naturalization Serv.,

8 526 F.2d 488, 491 (9th Cir. 1975)). The Ninth Circuit further explained that, “[i]n the instant case,

9 the affirmative misconduct requirement ‘must be read as requiring an affirmative misrepresentation

10 or affirmative concealment of a material fact by the government.’” Vickars-Henry, 629 F.2d at 635

11 (citing United States v. Ruby Co., 588 F.2d 697, 703-04 (9th Cir. 1978)). The Ninth Circuit affirmed

12 the dismissal of the estoppel claim because there was “no real basis for challenging the agency’s

13 determination.” Vickars-Henry Corp., 629 F.2d at 636. In light of Jablon and Vickars-Henry, the

14 Court finds that, while the Ninth Circuit requires affirmative misconduct as an element in an

15 equitable estoppel claim against the government, the Ninth Circuit has not held that affirmative

16 misconduct is not a required element for a promissory estoppel claim against the government. Thus,

17 based on persuasive authority from courts outside the Ninth Circuit, and at least a tacit approval by

18 the Ninth Circuit, this Court finds that the Trust must plead and prove affirmative misconduct by

19 the FDIC-C.

20 The Court further finds that the Trust’s “policy concerns” do not change the above result.

21 See Opp. at 18. While the Supreme Court in Heckler explained that a private party could not prevail

22 in its estoppel claim against the government “without at least demonstrating that the traditional

23 elements of an estoppel [were] present,” it did not address whether affirmative misconduct should

24 be an element for a promissory estoppel claim against the government. 467 U.S. at 60-61. The

25 Trust’s reliance on Stagen v. FDIC, 152 F.3d 929, 1998 WL 385453 (9th Cir. 1998) is also off-

26 point. In Stagen, plaintiffs brought claims of intentional interference and fraud against Resolution

27 Trust Corporation (“RTC”) in both its corporate capacity and its receiver capacity for failure to

1 the claims against RTC in its corporate capacity because plaintiffs had failed to “point to any conduct

2 on the part of RTC in its corporate capacity in connection with their allegations of wrongdoing.” Id.

3 at *2. Unlike here, Stagen did not involve an estoppel claim, and the Ninth Circuit did not address

4 whether affirmative misconduct was an element for estoppel claims. See id.

5 For the above reasons, the Court finds that affirmative misconduct is a required element in

6 the Trust’s promissory estoppel claim against the FDIC-C.

7 iii. The Trust has adequately pled its promissory estoppel claim.

8 Considering the adequacy of the pleading, the parties do not dispute that the Trust has

9 adequately alleged the traditional elements of promissory estoppel. See Mot. at 20; Opp. at 18.

10 Rather, the FDIC-C argues that, under the heightened pleading standard in Federal Rule of Civil

11 Procedure 9(b), the Trust has failed to adequately plead the affirmative misconduct element. Mot.

12 at 20. Specifically, the FDIC-C contends that the Trust’s alleged March 12-13 press releases and the

13 FDIC-C’s statements in the months following March 2023 are not affirmative misconduct. See Mot.

14 at 20-23. In response, the Trust argues that it has adequately pled the affirmative misconduct element

15 even under the Rule 9(b) standard. See Opp. at 21.

16 Rule 9(b) requires that “a party must state with particularity the circumstances constituting

17 fraud.” Fed. R. Civ. P. 9(b). The applicability of Rule 9(b) hinges not on the elements of the claim

18 but rather on the nature of the allegations themselves: “Rule 9(b) applies to ‘averments of fraud’ in

19 all civil cases in federal district court,” including “particular averments of fraud” even when fraud

20 is not an essential element of the claim. Vess v. Cuva-Geigy Corp. USA, 317 F.3d 1097, 1103-04

21 (9th Cir. 2003). “Averments of fraud must be accompanied by the who, what, when, where, and

22 how of the misconduct charged.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009)

23 (quotation marks and citation omitted). “Allegations of non-fraudulent conduct need satisfy only

24 the ordinary notice pleading standards of Rule 8(a).” Vess, 317 F.3d at 1104.

25 “Affirmative misconduct on the part of the government requires an affirmative

26 misrepresentation or affirmative concealment of a material fact, such as a deliberate lie or a pattern

27 of false promises.” Baccei v. United States, 632 F.3d 1140, 1147 (9th Cir. 2011) (citations omitted).

1 449, 454 (9th Cir. 2000).

2 The Trust has adequately pled the affirmative misconduct element. In the Amended

3 Complaint, the Trust alleges that 1) the FDIC and other government officials confirmed that the

4 systemic risk exception that was invoked on March 12, 2023 “covered all uninsured deposits of all

5 Silicon Valley Bank depositors,” thereafter, 2) “at the direction of senior FDIC-C employees,”

6 Bridge Bank was instructed by the FDIC-R1 “not to release any of the Account Funds and to call

7 back any wire transfers that SVBFG had initiated from its accounts” and “to assign SVBFG’s

8 deposit accounts and all associated assets and liabilities to the FDIC-R1,” and 3) the FDIC-C’s

9 statements on March 12 and 13 concerning the terms of the systemic risk exception that depositors

10 had “complete access the full amount of their deposit accounts . . . were knowingly and egregiously

11 false.” AC ¶¶ 47, 66, 74, 75, 175. In light of these facts, the Court agrees with the Trust that it has

12 adequately pled affirmative misconduct on the part of the FDIC-C even under the heightened Rule

13 9(b) pleading standard. The FDIC-C’s reliance on Lavin is misplaced. See Mot. at 22 (citing Lavin

14 v. Marsh, 644 F.2d 1378, 1380 (9th Cir. 1981). In Lavin, the Ninth Circuit declined to apply the

15 doctrine of equitable estoppel against the government because there was “no pervasive pattern of

16 false promises” that constituted affirmative misconduct. Lavin, 644 F.2d at 1383-84. Unlike Lavin,

17 here, the Amended Complaint plausibly alleges that the FDIC-C made promises that “were

18 knowingly and egregiously false.” AC ¶¶ 171-72, 175. To the extent that the FDIC-C argues that it

19 is not responsible for the actions of the FDIC-R1, for the reasons stated in Part IV.B, supra, the

20 Court finds that the Trust has plausibly alleged that the FDIC-C was responsible for the Trust’s loss

21 of access to its Account Funds.

22 Accordingly, the FDIC-C’s motion to dismiss the Trust’s promissory estoppel claim is

23 DENIED.

24 V. LEAVE TO AMEND

25 The FDIC-C argues that any dismissal of the Trust’s claims should be with prejudice because

26 the Trust had an opportunity to amend its claims, and the Trust’s effort still fall short. Mot. at 25. In

27 response, the Trust argues that any dismissal should be with leave to amend because further

1 to cure the deficiency in Count IV for violation of its Fifth Amendment due process rights and Count

2 VI for review of the FDIC-C’s Final Agency Action under 5 U.S.C. § 706, and the Trust has not

3 shown it could allege additional facts to support those claims. Accordingly, the Court DISMISSES

4 || Counts IV and VI WITHOUT LEAVE TO AMEND.

5 || VI. ORDER

6 For the foregoing reasons, IT IS HEREBY ORDERED that the motion to dismiss (ECF 99)

7 brought by Defendant the Federal Deposit Insurance Corporation, in its corporate capacity, is

8 || GRANTED IN PART and DENIED IN PART.

9 1. The motion to dismiss Count I for declaratory judgment, Count I for turnover claim

10 pursuant to 11 U.S.C. § 542, and Count VII promissory estoppel is DENIED.

11 2. Count IV for violation of the Trust’s Fifth Amendment due process rights and Count VI

12 for review of the FDIC-C’s Final Agency Action under 5 U.S.C. § 706 are DISMISSED

13 WITHOUT LEAVE TO AMEND.

14

15 Dated: February 27, 2025

BETH LABSON FREEMAN

17 United States District Judge

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