A federal appeals court has revived an investor lawsuit over Signature Bank’s 2023 collapse, giving purchasers in the proposed class another chance to pursue claims against the bank’s former auditor and leaders.
The decision matters now because a lower court had dismissed the entire case before examining whether the investors adequately alleged securities fraud.
Key Facts
- The Second Circuit vacated the dismissal and returned the case to federal district court.
- The ruling allows the lawsuit to continue but does not establish fraud, liability, damages or a class.
- The defendants may renew arguments that the allegations do not meet the legal requirements for securities fraud.
Why the lawsuit was dismissed
Sjunde AP-Fonden, known as AP7, is the lead plaintiff for investors seeking to proceed as a class.
AP7 alleges that KPMG and seven former Signature Bank officers or directors made false or misleading statements about the bank’s liquidity, risk controls and financial condition.
Those accusations remain allegations and have not been proven in court.
New York regulators closed Signature Bank on March 12, 2023, and appointed the Federal Deposit Insurance Corporation as receiver.
A receiver takes control of a failed bank and manages its assets and obligations.
The FDIC argued that a federal banking law transferred the investors’ claims to the agency when it became receiver.
The district court accepted that position in March 2025 and dismissed the lawsuit.
KPMG and the former bank officials had filed separate motions challenging the substance of the complaint, but the district court did not decide them.
What the appeals court decided
The Second Circuit rejected the FDIC’s position as applied to AP7’s claims under Section 10(b) of the Securities Exchange Act and Rule 10b-5.
The court drew a distinction between rights held because someone owns stock and rights held because someone bought or sold securities.
AP7’s claims arise from alleged harm to purchasers, the court concluded, so the FDIC did not inherit them under the banking law’s succession clause.
The panel also held that AP7 did not need to use the FDIC’s administrative claims process before suing.
That process applies to claims against a failed bank or its receiver, while AP7’s remaining claims target KPMG and former officers and directors.
The court therefore vacated the judgment and sent the case back to the Eastern District of New York for further proceedings.
In practical terms, the investors recovered an opportunity to litigate their claims, not a judgment awarding them money.
What remains unresolved
The decision does not determine whether any statement was false or misleading.
It also does not establish that any defendant acted knowingly or recklessly, caused investor losses or owes damages.
The proposed investor class has not been certified.
On remand, the district court must address the case’s next procedural steps and may consider unresolved defenses to the complaint.
KPMG and the former officials can continue contesting the allegations and whether AP7 has stated legally sufficient claims.
The dispute illustrates why the difference between a dismissal and a merits decision matters in federal appellate review.
An appeals court can restore a case because the wrong threshold rule was applied without deciding who should ultimately prevail.
