HSBC Faces Trimmed-Down Trade Secrets Lawsuit Over SVB Hires

By Rachel Graf | July 10, 2024

HSBC Holdings Plc won the dismissal of most claims brought by First Citizens Bank & Trust Co. over the hiring of dozens of Silicon Valley Bank employees following the lender’s collapse last year.

In an order Tuesday, US Magistrate Judge Laurel Beeler granted the bulk of HSBC’s requests to dismiss the allegations but left in place certain claims of trade secret theft, though she expressed some skepticism about them.

“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,” the judge wrote in her order.

The pretrial fact-finding phase known as discovery is crucial because 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.

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).

Top photo: A former HSBC Canada bank branch with temporary signage in Vancouver, British Columbia, Canada, on Thursday, March 28, 2024. Royal Bank of Canada said it expects to complete its C$13.5 billion ($10 billion) purchase of HSBC’s Canadian assets – the largest transaction in Royal Banks history – just before midnight and will work through the Easter holiday weekend to convert those operations, including information-technology systems. Photographer: Paige Taylor White/Bloomberg.

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