Magellsen v. Federal Deposit Insurance Corporation

William Magellsen (plaintiff) created two banks and applied for insurance with the Federal Deposit Insurance Corporation (FDIC) (defendant). FDIC regulations provided that, upon application for deposit insurance, the FDIC was to cause an investigation and examination of the bank. The regional director of the FDIC was then to make a recommendation to the board of directors. Finally, the board of directors was to exercise discretion as to whether to grant an application for insurance to the bank based on several factors. The FDIC approved Magellsen’s applications 10 months after Magellsen applied. However, the FDIC subsequently suspended Magellsen from conducting banking operations. Magellsen sued the FDIC and its regional director, Roger West (defendant). Magellsen made five primary allegations against the FDIC. First, the delay in acting on Magellsen’s applications by FDIC and West was arbitrary and unreasonable. Second, the refusal to act on the applications by the FDIC and West was negligent. Third, West deliberately aroused suspicion about Magellsen and discriminated against him. Fourth, the FDIC and West did not administer FDIC regulations fairly. Fifth, the FDIC and West deprived Magellsen of a fair hearing through unfair treatment. West argued that he was immune from suit because each of the actions complained of were within the discretionary duties of the regional director (i.e., West himself) or the FDIC’s board of directors pursuant to federal law and FDIC rules and regulations.