Federal Deposit Insurance v. Mallen

Background

A bank president who was indicted on federal charges was suspended without a prior hearing by the Federal Deposit Insurance Corporation (FDIC), which barred him from acting as president or director of his insured bank. The suspended official asked for a prompt administrative hearing and oral testimony. The District Court blocked the FDIC’s suspension, concluding the post-suspension process was not sufficiently prompt and did not guarantee live testimony. The FDIC had issued an ex parte suspension order after the indictment, and a hearing was scheduled but interrupted by the litigation.

Reasoning

The Court examined whether the statutory post-suspension process met the requirements of the Due Process Clause. It accepted that a pre-suspension hearing was not required given the public interest in protecting depositors and confidence in banks. The statute guarantees a hearing within 30 days of request and a decision within 60 days after the hearing, creating a possible 90-day period to decision. The Court held that this timetable, coupled with the finding of probable cause from the indictment and Congress’s judgment about banking stability, is not unconstitutional. The Court also rejected the claim that the statute must guarantee oral testimony in every case, noting the statute and regulations give the hearing officer discretion and that the suspended official never offered the hearing officer an opportunity to decide whether to take live testimony.

Real world impact

The ruling allows federal banking agencies to use the written 30/60-day post-suspension process to review suspensions of indicted officers without providing a guaranteed pre-suspension hearing or an absolute right to live testimony. Suspensions may remain in effect until the criminal charge is finally disposed of, including on appeal. The District Court’s injunction was reversed, leaving the FDIC’s suspension procedure available for future cases.