Farella Braun + Martel LLP v. Federal Deposit Insurance Corporation as Receiver for Silicon Valley Bank

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 FARELLA BRAUN + MARTEL LLP, Case No. 24-cv-01306-SI 8 Plaintiff, ORDER GRANTING SUMMARY 9 v. JUDGMENT 10 FEDERAL DEPOSIT INSURANCE Re: Dkt. No. 95 CORPORATION, 11 Defendant. 12 13 Defendant has requested summary judgment in its favor. Dkt. No. 95. For the reasons stated 14 below, the Court GRANTS defendant’s motion. 15 16 BACKGROUND 17 I. Relevant Factual Background 18 This litigation arises out of legal work performed by plaintiff Farella Braun + Martel for the 19 Silicon Valley Bank before it failed on March 10, 2023. Defendant Federal Deposit Insurance 20 Corporation (FDIC) was appointed to be the receiver for the failed bank. Dkt. No. 95-11 ¶ 3. The 21 FDIC then published a notice that any claims against Silicon Valley Bank must be filed by July 10, 22 2023. Id. The FDIC ultimately processed almost 6,000 claims against the bank. Id. ¶ 4. 23 On July 6, 2023, plaintiff submitted a proof of claim for $211,025.72 encompassing 24 seventeen separate bills for work performed in 2022 and early 2023. Dkt. No. 95-4. On October 25 26, 2023, the FDIC asked plaintiff to supply more detail to support its claim, including invoices, 26 detail about who performed the work and for how long, and documentation showing a flat rate if 27 plaintiff and Silicon Valley Bank had agreed to a flat rate. Dkt. No. 95-9 at 5. The FDIC requested 1 its claim would be disallowed if the requested material was not provided within the statutory 180- 2 day determination period. Id. The next day, plaintiff provided the FDIC with invoices and plaintiff 3 attorney Gary Kaplan wrote, “Let me know if you seek any further information to review our claim 4 in the Silicon Valley Bank receivership.” Id. at 4. Only eight of the seventeen invoices contained 5 the requested detail. Dkt. No. 95-11 ¶ 8. 6 Plaintiff did not hear anything further from the FDIC so Mr. Kaplan followed up on January 7 9, 2024, several days after the end of the 180-day determination period. Dkt. No. 95-9 at 4. Mr. 8 Kaplan then learned that the FDIC had mailed a notice of partial allowance on January 5. Id. at 3. 9 That notice informed plaintiff that it would receive payment for $162,193.97 but not for the 10 remaining $48,831.75. Dkt. No. 95-5 at 1. The latter portion was disallowed because it was “[n]ot 11 proven to the satisfaction of the Receiver.” Id. When plaintiff sought clarification, the FDIC 12 informed plaintiff that “[l]egal invoices without billing rates, billed hours, and itemized lists of work 13 done (with dates and description of work done) are disallowed.” Dkt. No. 95-9 at 2. Plaintiff sought 14 administrative review, but the FDIC denied that request on January 16. Id. at 1-2. The FDIC 15 informed plaintiff that it could pursue its claim via a lawsuit filed within 60 days of its January 5, 16 2024 denial notice. Id. at 2. 17 On January 30, plaintiff then provided the FDIC with additional invoices. Id. at 1. Mr. 18 Kaplan wrote, “I understand that this information was not included with the invoices actually 19 presented to Silicon Valley Bank (and included in our claim in the Receivership) in light of the 20 parties’ agreement for FBM to perform the particular services at a reduced fee.” Id. Plaintiff then 21 asked the FDIC whether it would reconsider its partial disallowance. Id. In a phone call, the FDIC 22 informed plaintiff that it would not change its position. Dkt. No. 100-5 (Kaplan Dep.) at 37. 23 On March 4, 2024, plaintiff filed this judicial review action under 12 U.S.C. § 1821(d)(6). 24 Dkt. No. 1. 25 26 LEGAL STANDARD 27 Summary judgment is proper if the pleadings, the discovery and disclosure materials on file, 1 is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). The moving party bears the 2 initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. 3 Catrett, 477 U.S. 317, 323 (1986). The moving party, however, has no burden to disprove matters 4 on which the non-moving party will have the burden of proof at trial. The moving party need only 5 demonstrate to the Court that there is an absence of evidence to support the non-moving party’s 6 case. Id. at 325. 7 Once the moving party has met its burden, the burden shifts to the non-moving party to 8 “designate ‘specific facts showing that there is a genuine issue for trial.’” Id. at 324 (quoting then 9 Fed. R. Civ. P. 56(e)). To carry this burden, the non-moving party must “do more than simply show 10 that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. 11 Zenith Radio Corp., 475 U.S. 574, 586 (1986). “The mere existence of a scintilla of evidence . . . 12 will be insufficient; there must be evidence on which the jury could reasonably find for the 13 [nonmoving party].” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). 14 In deciding a summary judgment motion, the Court must view the evidence in the light most 15 favorable to the non-moving party and draw all justifiable inferences in its favor. Id. at 255. 16 “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences 17 from the facts are jury functions, not those of a judge . . . ruling on a motion for summary 18 judgment . . . .” Id. However, conclusory, speculative testimony in affidavits and moving papers is 19 insufficient to raise genuine issues of fact and defeat summary judgment. Thornhill Publ’g Co., Inc. 20 v. Gen. Tel. & Elec. Corp., 594 F.2d 730, 738 (9th Cir. 1979). The evidence the parties present must 21 be admissible. Fed. R. Civ. P. 56(c). 22 23 DISCUSSION 24 Defendant first argues that the Court lacks jurisdiction to hear plaintiff’s claim. To consider 25 this argument, the Court reviews the relevant provisions of the Financial Institutions Reform, 26 Recovery and Enforcement Act of 1989 (“FIRREA”), 12 U.S.C. § 1821. 27 The FDIC’s 180-day claim determination period starts on the day a claim is filed. 12 U.S.C. 1 to [its] satisfaction.” Subparagraph (E) of paragraph (5) states, “No court may review the 2 Corporation’s determination pursuant to subparagraph (D) to disallow a claim.” Id. § 1821(d)(5)(E). 3 A separate paragraph in the statute allows for agency administrative review or judicial review if 4 requested or filed within 60 days of the earlier of the end of the 180-day claim determination period 5 or the date of the notice of disallowance.1 Id. § 1821(d)(6)(A). These provisions appear at odds, 6 and the law “is not a model of statutory clarity.” Bueford v. Resol. Tr. Corp., 991 F.2d 481, 486 7 (8th Cir. 1993). This Court agrees with other courts that the best way to reconcile these provisions 8 is with an understanding that a court may review a claim de novo, but may not review the FDIC’s 9 determination of the claim. See id. (“We are particularly persuaded by the interpretation advanced 10 by other circuits that section 1821(d)(5)(E) directs the district courts to analyze claims against failed 11 banking institutions de novo.”); see also Brady Dev. Co. v. Resol. Tr. Corp., 14 F.3d 998, 1003 (4th 12 Cir. 1994) (“If judicial relief is chosen, review is by a de novo determination of the claim, not a 13 review of the administrative disallowance of the claim.”). 14 By citing the judicial review provisions in 12 U.S.C. § 1821(d)(6), plaintiff’s complaint 15 sufficiently established the Court’s jurisdiction. Defendant argues that, according to the complaint, 16 plaintiff “seeks judicial review of the partial disallowance by the defendant FDIC,” which is barred 17 by 12 U.S.C. § 1821(d)(5)(E). Dkt. No. 101 at 2 (citing Dkt. No. 1 ¶ 1). The Court does not read 18 the complaint so narrowly. The Court understands the complaint to ask for the Court’s de novo 19 review of the validity of the claim itself, not the propriety of defendant’s initial rejection. The Court 20 retains jurisdiction for this review. 21 Defendant next contends that if the Court considers plaintiff’s claim, the Court’s review 22 must be limited to the material presented to FDIC during the 180-day claim window. In defendant’s 23 view, to consider material not presented to the FDIC would frustrate the purpose of FIRREA. The 24 25 1 If a claimant does not request administrative review or file suit before the end of the 60- day period, the claim must be disallowed. 12 U.S.C. § 1821(d)(6)(B). The Court notes that plaintiff 26 filed this lawsuit within 60 days of the notice of disallowance but not within 60 days of the end of the 180-day claim period. However, since the notice was sent after the end of the claim period, the 27 Court finds it reasonable to start the 60-day clock on the later of these days, even though the statute suggests otherwise. See id. § 1821(d)(6)(A). Moreover, defendant does not challenge the timeliness 1 Ninth Circuit summarized that purpose as follows: 2 Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 12 U.S.C. § 1821, to enable the federal 3 government to respond swiftly and effectively to the declining financial condition of the nation’s banks and savings institutions. The 4 statute grants the FDIC, as receiver, broad powers to determine claims asserted against failed banks. 12 U.S.C. § 1821(d)(3)(A). 5 To effectuate this power, Congress created a claims process for the filing, consideration and determination of claims against insolvent 6 banks. 12 U.S.C. § 1821(d)(3)-(10). The receivership claims process “allow[s] the FDIC to quickly resolve many of the claims against 7 failed financial institutions without unduly burdening the District Courts.” H.R.Rep. No. 101–54(I), 101st Cong., 1st Sess., reprinted in 8 1989 U.S.C.C.A.N. 87, 215. 9 Henderson v. Bank of New England, 986 F.2d 319, 320 (9th Cir. 1993). 10 Defendant cites several cases to bolster its claim. In Brown Leasing Co. v. F.D.I.C., the 11 plaintiff amended a complaint to add new claims in federal court for conversion and breach of 12 contract against the FDIC without having brought those claims through the administrative claims 13 process. 833 F. Supp. 672, 673 (N.D. Ill. 1993), aff’d sub nom. Brown Leasing Co. v. Cosmopolitan 14 Bancorp, Inc., 42 F.3d 1112 (7th Cir. 1994). The federal court found that “that the FDIC is entitled 15 to fair notice of the facts and legal theories on which a claimant seeks relief from the failed 16 institution.” Id. at 675. Similarly, in Ravenswood, LLC v. F.D.I.C., the plaintiff sought relief under 17 a damages theory it had not presented to the FDIC during the administrative claims process. No. 18 10-CV-1064, 2011 WL 1079495, at *1 (N.D. Ill. Mar. 21, 2011). The court dismissed the new claim 19 based on the plaintiff’s failure to bring that theory through the administrative process. Id. at *5. 20 The court asked rhetorically, “How was the FDIC–R supposed to respond to a theory it did not know 21 Ravenswood was presenting?” Id.; see also 15th & Spruce Bldg. LLC v. Colorado Cap. Bank, No. 22 12-CV-00851-REB-MEH, 2012 WL 6814127, at *5 (D. Colo. Nov. 30, 2012), report and 23 recommendation approved sub nom. 15th & Spruce Bldg. LLC v. F.D.I.C., No. 12-CV-00851-REB- 24 MEH, 2013 WL 104890 (D. Colo. Jan. 9, 2013) (“Though the FDIC could have theoretically 25 conducted further investigation, the Court finds that requiring the FDIC to ensure that the asserted 26 Proof of Claim presents the appropriate theory of recovery conflicts with FIRREA’s intent to enable 27 receivers to ‘deal expeditiously with failed financial institutions’ and is otherwise unreasonable.”). 1 theories of damages, the Court extends the reasoning of these cases to the current circumstances. If 2 a plaintiff could withhold evidence from the FDIC and then seek a remedial ruling in Court with 3 newly presented evidence, it would frustrate the purpose of FIRREA to encourage speedy resolution 4 of claims. To be sure, plaintiff here did not intentionally hide any evidence. On the contrary, 5 plaintiff expected to receive notice from the FDIC if its documentary submissions were insufficient 6 to support their claim. From a customer service perspective, plaintiff’s expectation was not 7 unreasonable. But the FDIC had to deal with nearly 6,000 claims resulting from the failure of the 8 Silicon Valley Bank. See Dkt. No. 95-11 ¶ 4. It was not legally obligated to repeatedly follow up 9 with claimants whose documentation was lacking, and plaintiff unfortunately did not proactively 10 seek reassurance until after the close of the claim window. 11 Thus the Court only considers the evidence submitted to the FDIC within the claim 12 determination window. The FDIC refused payment for nine of the seventeen invoices that plaintiff 13 sent after the FDIC requested further documentation. These invoices listed the legal fees and costs 14 and a short description of the nature of the work provided—for example, “Fees plus out of pocket 15 costs for Streamlined Growth Capital Term Loan documentation for Castiron, Inc.” See Dkt. No. 16 95-7.2 The invoices do not contain any detail about the number of hours worked, billing rates, or 17 the individuals who performed the work. See id. Only sometimes is a particular bank client 18 mentioned. See id. Plaintiff did not provide any evidence of a flat fee agreement to the FDIC before 19 the claim determination window expired.3 Dkt. No. 95-11 ¶ 6. 20 Reviewing the disallowed invoices, the Court finds the detail contained therein insufficient 21 to merit payment for the claims. The Court does not question plaintiff’s veracity or intent behind 22 submitting these claims. However, requiring billing details—including rates and hours worked or 23 a flat fee agreement if one existed—is necessary and fair to protect the interests of the FDIC and the 24 25 2 This exhibit is missing invoice number 389082 for $900, but absent any argument to the contrary the Court will assume that the level of information provided in that invoice is equivalent 26 to the other eight invoices in the exhibit. See Dkt. No. 95-7. 27 3 Defendant argues that any agreement must have been in writing pursuant to 12 U.S.C. § 1821(e). Since no evidence of an agreement was submitted during the 180-day window, the Court 1 other creditors of the failed bank. Since plaintiff did not provide these details in a timely fashion, 2 || the Court GRANTS defendant’s motion for summary judgment. 3 4 CONCLUSION 5 For the foregoing reasons and for good cause shown, the Court hereby GRANTS defendant’s 6 || motion for summary judgment. 7 8 IT IS SO ORDERED. 9 Dated: September 5, 2025 Site WU tee 10 SUSAN ILLSTON I United States District Judge 12 15 16 = 17 Z 18 19 20 21 22 23 24 25 26 27 28