In Calcutt v. FDIC, decided May 22, 2023, the Supreme Court unanimously reversed a Sixth Circuit ruling that had upheld a lifetime banking ban against a community bank executive. The Court held that when a reviewing court finds legal errors in a federal agency’s enforcement decision, it must send the case back to the agency for reconsideration. It cannot affirm the sanction on legal grounds the agency itself never used.1Supreme Court of the United States. Calcutt v. FDIC
How the Case Reached the Supreme Court
Harry C. Calcutt III was president, CEO, and chairman of Michigan-based Northwestern Bank from 2000 to 2013, and sat on its senior loan committee. The bank’s largest lending relationship was with a group of 19 family-owned real estate and oil businesses known as the Nielsen Entities. That relationship fell apart during the 2007–2009 recession, and by 2011 the entire group had defaulted. The bank took a $30,000 charge-off on one loan tied to a transaction Calcutt helped negotiate, plus $6.4 million in losses on other Nielsen-related loans.2Legal Information Institute. Calcutt v. FDIC
The FDIC investigated and concluded that Calcutt had mishandled the relationship, violated internal lending policies, misled the board, and failed to respond accurately to regulator inquiries. The agency sought to permanently bar him from banking under Section 8(e) of the Federal Deposit Insurance Act, one of the most severe sanctions a banking regulator can impose.3Federal Deposit Insurance Corporation. Formal and Informal Enforcement Actions Manual – Chapter 6 – Removal, Prohibition, and Suspension Actions After a seven-day hearing, an FDIC administrative law judge recommended the ban plus a $125,000 civil penalty. The FDIC Board adopted the recommendation.2Legal Information Institute. Calcutt v. FDIC
What the Sixth Circuit Got Wrong
Calcutt appealed to the Sixth Circuit. He argued that the FDIC had misapplied the statute’s “by reason of” requirement, which ties an individual’s misconduct to the harm suffered by the bank, by refusing to apply a proximate-cause standard. He also argued that the specific harms the FDIC identified did not qualify under the statute or were not proximately caused by his conduct.4Justia U.S. Supreme Court Center. Calcutt v. Federal Deposit Insurance Corporation
The Sixth Circuit agreed the FDIC had made legal errors on both points. Ordinarily that finding requires a remand to the agency. Instead, the appeals court reviewed the administrative record itself, decided that substantial evidence supported the sanctions, and affirmed the ban on a legal theory the FDIC had never actually adopted.1Supreme Court of the United States. Calcutt v. FDIC
The Chenery Rule and the Court’s Reasoning
The Supreme Court reversed in a per curiam opinion, an unsigned unanimous decision that signals the error was clear. The ruling turned on the Chenery doctrine, drawn from SEC v. Chenery Corp. (1947). Under Chenery, a reviewing court can uphold an agency’s action only on the grounds the agency itself invoked. If those grounds are legally flawed, the court cannot rescue the decision by supplying its own reasoning. Quoting Chenery, the Court said that if the grounds the agency relied upon are “inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis.”2Legal Information Institute. Calcutt v. FDIC
The Court added that reviewing courts generally cannot conduct their own independent factual inquiry into the matter before the agency. When an agency commits legal error, the proper remedy is remand, letting the agency reconsider under the correct legal standards. By skipping that step, the Sixth Circuit acted as both reviewer and decision-maker, which Chenery forbids.1Supreme Court of the United States. Calcutt v. FDIC
What the Ruling Means for Calcutt
The Court ordered the Sixth Circuit to remand the case to the FDIC so the agency could reconsider Calcutt’s case under the correct legal framework. The Court was explicit that the FDIC was not required to reach the same result on remand. Whether to sanction Calcutt, and how severely, remained a discretionary judgment tied to fact-specific questions about his culpability.4Justia U.S. Supreme Court Center. Calcutt v. Federal Deposit Insurance Corporation
As of early 2026, no publicly available FDIC Board decision resolving the case on remand has been identified. The case may still be under agency review, or the parties may have reached a settlement not reflected in the public record.
Why the Decision Matters
The ruling draws a hard line around what courts can do when reviewing agency enforcement actions. Federal regulators wield significant power, and a Section 8(e) prohibition order effectively ends a career in the banking industry. When that power is exercised using flawed legal reasoning, the fix has to come from the agency, not from a reviewing court filling in the gaps.
The Supreme Court did not say Calcutt was innocent or that the FDIC was wrong to investigate him. It said the process broke down when the Sixth Circuit tried to salvage a legally defective agency decision instead of making the agency get it right. That distinction has practical consequences for how regulators build enforcement cases: agencies must correctly apply each element of the statutory test and clearly articulate why each element is met, because courts are expected to catch sloppy reasoning rather than paper over it. For individuals facing career-ending sanctions, the decision confirms they are entitled to meaningful judicial review of the legal framework the agency actually applied, not a rationale invented after the fact by the court reviewing it.