HSBC Executive Strikes Back in Court Fight Over Poaching Claims

An HSBC Holdings Plc executive who’s spent years fighting allegations by First Citizens Bank & Trust Co. that he raided staff and stole trade secrets is now seeking to turn the tables, saying his accuser broke the law.

HSBC and executive David Sabow have fiercely contested a $1 billion lawsuit alleging he spearheaded an illicit scheme to hire more than 40 people from his past employer, Silicon Valley Bank, after its 2023 collapse and subsequent acquisition by First Citizens’ parent company. In a recently filed counter-attack, Sabow claims First Citizens is trying to enforce a non-compete agreement that violates California law by interfering with the freedom of workers to change jobs.

“Rather than compete fairly for talent and clients, after Mr. Sabow turned down First Citizens’ offer to lead its own innovation banking business, First Citizens sued him for offering a lifeline to his former colleagues,” his lawyers wrote in a court filing.

Late last week, a U.S. magistrate judge said he can pursue his counterclaim, rejecting a request from First Citizens to rule that he filed it too late.

Talent poaching can be particularly bitter for banks because client relationships are among their most valuable assets, directly tied to deposits and loans at the heart of their core business.

The high-stakes dispute playing out in San Francisco federal court offers a window into how messy it can become for everyone involved when companies sue over employee defections.

Read More: Wall Street Job Moves Spur Billion-Dollar Trade Secrets Fights

Three years after First Citizens went to court, the Raleigh, North Carolina-based company has seen most of its claims thrown out and now must engage its lawyers to play defense.

“There’s nothing wrong with coworkers banding together to go somewhere else,” said Orly Lobel, a law professor and founding director of the Center for Employment and Labor Policy at the University of San Diego.

First Citizens and HSBC both declined to comment.

The downfall of SVB in 2023 amid a regional banking crisis opened up a rare chance for its competitors to step into venture banking. At its peak, SVB boasted that it banked nearly half of all venture capital-backed technology and life sciences companies in the U.S.

When it collapsed, bankers scrambled for new jobs, taking with them the relationships that make up the innovation economy. They landed at places including Mitsubishi UFJ Financial Group and Stifel Financial Corp., which each saw an opportunity to win over SVB’s coveted clients by mirroring its business model.

First Citizens initially won big by bringing over thousands of SVB bankers through the 2023 acquisition, which catapulted the family-controlled firm into the ranks of the 15 largest U.S. banks by assets.

But Sabow, who had spent a decade at SVB and headed its tech and healthcare banking in North America, went to HSBC, one of the largest banks in Europe, along with many members of his team.

Based in California, SVB was a relatively easy target for a talent lift. The Golden State has long barred most non-compete agreements.

Sabow’s new counterclaim hinges on those very protections. He argues that the employment agreement he was required to sign in 2012 to join SVB cannot now be enforced against him by First Citizens.

“Through its lawsuit, First Citizens seeks to accomplish what California law expressly forbids: restraining employee mobility through an unlawful post-employment noncompetition agreement,” lawyers representing Sabow and HSBC said in a July filing.

First Citizens shot back in late August, arguing in a filing that Sabow waited too long to file his counterclaim and it should be dismissed as “both unauthorized and untimely.”

But in an Oct. 1 ruling, U.S. Magistrate Judge Laurel Beeler said Sabow’s motion was “properly asserted” — which means he can pursue it against First Citizens.

In its initial complaint in May 2023, First Citizens portrayed the mass defection of 42 employees on the morning of Easter Sunday as an elaborate scheme by HSBC to plunder the “core of SVB’s profitability engine.”

The suit identified Sabow as the “chief architect” of the raid — which was code-named “Project Colony” — and accused him of building his plan around a proprietary SVB memo detailing the bank’s employees and clients, including how much profit it made from each borrower.

HSBC countered that it “lawfully extended job offers” to workers whose employment status was up in the air after SVB’s collapse. Sabow denied that the written memo included any proprietary information, and said he hired the bankers in question to help them rebuild their careers.

In 2024, Beeler threw out many of First Citizens’ claims, saying the allegations “show only a failed bank and employees decamping to a better business opportunity.” In May, Beeler declined to revive the dismissed claims.

But Sabow, who was promoted by London-based HSBC last year to be its head of global innovation banking, isn’t out of jeopardy himself. He still faces breach of contract and trade-secret theft claims.

First Citizens’ hunt for evidence that Sabow failed to honor his contractual obligations to SVB continues. Court filings indicate that after obtaining some 66,000 pages of documents and more than 1,000 mobile communications, his accuser has gained some traction.

In August, Beeler said First Citizens can search the personal devices of one of Sabow’s fellow defectors after it was revealed that he had emailed a spreadsheet of SVB client information from his personal account to his HSBC account.

She also ordered documents to be turned over by two other former SVB employees, one of whom photographed confidential information on his computer screen and emailed the photos to himself — a method that Beeler noted leaves “no forensic trail.” HSBC has argued there was no wrongdoing in the conduct identified by the magistrate.

HSBC has stood by Sabow since his hiring. His promotion last year put him in charge of the global expansion of the company’s venture-banking business, which provides deposit accounts, loans and other services to startups and VC funds.

At the pace the case has progressed, it could still be a year or more before it goes to trial — if it doesn’t settle first, or after all the evidence is submitted, Beeler doesn’t dismiss it entirely. However the fight ends, it won’t be the last time the banking talent wars end up in court.

In early September, Citizens Financial Group, a Providence, Rhode-Island based lender with $234 billion in assets, accused rival SoFi Bank of poaching more than 30 mortgage department employees across six states, and that the loss of Citizen Financial staff in Connecticut “essentially eliminated its market presence.”

Salt Lake City-based SoFi said in a statement: “This is a baseless allegation and a clever attempt to prevent Citizens employees from pursuing career opportunities elsewhere.”

The case is First-Citizens Bank and Trust Company v. HSBC Holdings Plc, 23-cv-02483, U.S. District Court, Northern District of California (San Francisco).