A federal judge in California has dismissed a lawsuit by nearly 170 former employees of the defunct First Republic Bank.
The ex-staffers accused the Federal Deposit Insurance Corp (FDIC) of improperly blocking access to at least $150 million in retirement funds.
US District Judge Haywood Gilliam ruled that federal law, enacted after the 1980s savings and loan crisis, grants the FDIC broad authority to act as a receiver for failed banks, preventing judicial interference.
The former employees’ legal team did not immediately respond to requests for comment, and an FDIC spokesperson declined to comment.
First Republic Bank, based in San Francisco and serving wealthy clients, failed on May 1, 2023.
The collapse was after Federal Reserve interest rate hikes resulted in massive investment portfolio losses and depositor withdrawals.
With $229 billion in assets, its collapse marked the largest US bank failure since the 2008 financial crisis.
JPMorgan Chase subsequently acquired First Republic’s deposits and most of its assets.
The former employees filed their complaint last December.
They alleged the FDIC wrongfully halted payments under their deferred compensation plan on May 18, 2023.Â
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They claimed this action left them as unsecured creditors, likely to recover “little, if anything,” while depositors remained protected.
The plaintiffs sought to recover the owed funds.
Judge Gilliam ruled that honoring their request would interfere with the FDIC’s statutory powers, dismissing the lawsuit with prejudice, meaning it cannot be refiled.Â
First Republic’s collapse was the largest US bank failure since the 2008 financial crisis
The judge said the law “forecloses actions – like this one – which seek to ‘restrain or affect’ the FDIC in fulfilling its receivership duties.”
JPMorgan Chase was not involved in the lawsuit.
First Republic’s failure occurred less than two months after the collapse of Silicon Valley Bank and Signature Bank.
