The U.S. Bankruptcy Court for the Southern District of New York issued an opinion on May 17, 2023, in the SVB Financial Group case, which arises from the failure of Silicon Valley Bank.
Specifically, the FDIC brought a motion requesting to escrow tax refunds totaling about $10.7 million. This was opposed by the Debtor, the Official Committee of Unsecured Creditors, and other parties.
The FDIC’s motion was based on a tax sharing agreement with the Debtor. But the Debtor argued that the tax refunds are property of the estate, that the FDIC violated the automatic stay by opening the Debtor’s mail and intercepting refund checks, and that the motion is procedurally improper and should have been brought as an adversary proceeding.
The court determined that the FDIC’s arguments ignore the procedures to be followed under the tax-sharing agreement before receiving a share of the refunds. The court also found that the FDIC interfered with property of the estate without expressly stating that the FDIC violated the automatic stay. Ultimately, the court ordered the FDIC to turn over the tax refund checks.