The First Republic Bank class action lawsuit, brought by investors after the bank’s May 2023 collapse, was dismissed on June 9, 2025, by a federal judge in the Northern District of California who ruled the court lacked jurisdiction to hear it. The lead plaintiff appealed to the Ninth Circuit in July 2025, and that appeal is pending. The dismissal did not decide whether the fraud allegations were true; it turned on a procedural bar that applies once the FDIC takes over a failed bank.
Who Sued and Who Was Sued
The consolidated case, Kusen v. Herbert, II (Case No. 3:23-cv-02940-AMO), was filed in the U.S. District Court for the Northern District of California before Judge Araceli Martínez-Olguín. The first investor complaint landed on April 24, 2023, the same day First Republic disclosed that more than $100 billion in deposits had walked out the door during the first quarter.1D&O Diary. First Republic Bank Hit With Banking Crisis-Related Securities Suit
On November 24, 2023, the court appointed Alecta Tjänstepension Ömsesidigt, a Swedish pension fund, as lead plaintiff. Alecta had invested roughly SEK 9.7 billion (about $920 million) in First Republic, and its combined losses on U.S. regional banks in March 2023 came to approximately €1.27 billion.2IPE. Alecta Says It Is Solid Despite Losing €1.3 Billion on US Banks in Days Bernstein Litowitz Berger & Grossmann LLP and Kessler Topaz Meltzer & Check, LLP were appointed co-lead counsel.3Bernstein Litowitz Berger & Grossmann LLP. First Republic Bank
The defendants included First Republic Bank, founder and former CEO James Herbert II, former CEO Michael Roffler, other officers and directors, and the bank’s auditor, KPMG. The amended complaint, filed February 13, 2024, defined a class period running from October 21, 2021, through April 28, 2023, and asserted claims under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934, along with SEC Rule 10b-5.4Kessler Topaz Meltzer & Check, LLP. First Republic Bank
What Investors Alleged
The complaint argued that First Republic’s leaders publicly reassured investors while the bank’s own internal risk models flashed red. According to the pleadings:
- Executives described the deposit base as diversified and stable while relying heavily on uninsured deposits from a narrow group of wealthy clients, leaving the bank exposed to a run.
- Internal risk models allegedly showed severe breaches of the bank’s own limits under higher-rate scenarios, yet leaders told investors the bank was well-positioned for any rate environment.
- The bank allegedly offered abnormally low rates on long-duration fixed-rate mortgages to draw in deposits, in violation of its own risk policies, creating an asset-liability mismatch.
- After Silicon Valley Bank failed, First Republic allegedly experienced up to $65 billion in deposit outflows over two days but gave investors false reassurances about liquidity.
- KPMG allegedly certified the bank’s financial statements as conforming to accounting standards despite the concealed risks.
James Herbert II drew particular scrutiny. Investors pointed to public statements in which he called the bank a “very matched book” with minimal interest rate risk and, as late as April 2022, told investors that net interest income would keep expanding even if rate hikes were “more violent than we have predicted.”5Levi & Korsinsky. FRC Redacted Complaint
The Section 20A claim, which targets insider trading, singled out Herbert’s sale of nearly $7 million in First Republic shares in the months before the collapse, sales that spared him a near-total loss when the stock went to zero.6New York Times. Morgan Stanley First Republic Fined
Why the Case Was Dismissed
After oral argument on April 17, 2025, Judge Martínez-Olguín dismissed the case with prejudice on June 9, 2025.7Stanford Law School Securities Class Action Clearinghouse. First Republic Bank Securities Litigation Filing
The ruling did not touch the substance of the fraud allegations. It rested entirely on subject matter jurisdiction. Because the FDIC had been appointed receiver for First Republic, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) required investors to first exhaust administrative remedies with the FDIC before suing. The original plaintiff never filed a claim with the FDIC at all, and Alecta did not wait for the administrative process to finish before proceeding in court.8Bloomberg Law. First Republic Bank Leaders, Auditor Dodge Investor Class Suit9American Banker. Ex-First Republic Execs Win Dismissal of Shareholder Suit
Because the court found it lacked jurisdiction, it did not rule on the defendants’ separate motions challenging the sufficiency of the fraud allegations. Those arguments remain untested.4Kessler Topaz Meltzer & Check, LLP. First Republic Bank
The Appeal to the Ninth Circuit
On July 9, 2025, the lead plaintiff filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit, challenging the district court’s jurisdictional ruling.7Stanford Law School Securities Class Action Clearinghouse. First Republic Bank Securities Litigation Filing The appeal is pending.
The question the Ninth Circuit will have to answer is a narrow but consequential one: whether FIRREA’s administrative exhaustion requirement blocks federal securities fraud claims brought against the officers and auditors of a failed bank, or whether such claims can proceed in court without first going through the FDIC’s claims process. If the appellate court affirms the dismissal, the fraud allegations against Herbert, Roffler, other former executives, and KPMG will never be tested on their merits in this case. If it reverses, the litigation returns to the district court to address the substance.
How the Suit Fits the 2023 Banking Crisis
First Republic was not the only failed institution to face investor litigation. The March 2023 banking crisis produced securities class actions against Silicon Valley Bank, Signature Bank, and Credit Suisse as well.1D&O Diary. First Republic Bank Hit With Banking Crisis-Related Securities Suit Because the FIRREA exhaustion issue is common to any bank failure resolved by an FDIC receivership, the Ninth Circuit’s answer in the First Republic appeal could shape investor litigation the next time a large bank fails.
For readers checking on the status: as of now, there is no settlement, no class certification decision on the merits, and no active claims process for investors in this lawsuit. The only live proceeding is the appeal.