Justices rule on challenge to FDIC order
on May 22, 2023 at 11:05 am
The Supreme Court on Monday issued a summary reversal – that is, a decision on the merits, but without additional briefing or oral argument – in a challenge to an order that would bar the former CEO of a Michigan community bank from ever working in the banking industry again. The justices’ ruling in Calcutt v. FDIC was the highlight of a list of orders from their private conference on Thursday, May 18. The court did not add any new cases to its merits docket for the 2023-24 term.
The seven-page unsigned opinion came in a challenge by Harry Calcutt, the former head of Northwestern Bank, to an order by the Federal Deposit Insurance Corporation that would bar him from working in the banking industry for life. After a divided panel of the U.S. Court of Appeals for the 6th Circuit upheld the order, Calcutt came to the Supreme Court, asking the justices to weigh in. Although the court of appeals agreed that the FDIC had made legal mistakes in concluding that the order was warranted, he noted, it affirmed the order anyway, reasoning that there was still enough evidence to support the FDIC’s findings. But under the Supreme Court’s decision in Securities and Exchange Commission v. Chenery, Calcutt contended, the court of appeals should have instead sent his case back to the FDIC for it to apply the correct legal standard to the facts.
Representing the FDIC, U.S. Solicitor General agreed with Calcutt that the 6th Circuit should have remanded the case to the FDIC, and on Monday the justices reversed that court’s decision. “It is ‘a simple but fundamental rule of administrative law,’” the court explained, that courts can only uphold a federal agency’s order on the ground on which the agency itself relied. Once the court of appeals concluded that the FDIC was wrong, the court continued, “the proper course … was to remand the matter back to the FDIC for further consideration of” Calcutt’s case.
The court acknowledged that there may be some “narrow” cases in which it is not necessary to send a case back to the agency – for example, when an agency is required to take an action, so that the rationale is less important. But in this case, the court reasoned, the FDIC’s decision about “whether to sanction [Calcutt]—as well as the severity and type of any sanction that could be imposed—is a discretionary judgment” that is “highly fact specific and contextual.” “To conclude, then, that any outcome in this case is foreordained is to deny the agency the flexibility in addressing issues in the banking sector as Congress has allowed.”
The court did not address a second question raised in Calcutt’s petition, involving his challenge to the structure of the FDIC, whose members can only be removed by the president for cause. But now Calcutt’s case will return to the FDIC, for it to take another look under the correct legal standard.
The justices’ next conference is scheduled for Thursday, May 25. The court is expected to release orders from that conference on Tuesday, May 30, at 9:30 a.m.
This article was originally published at Howe on the Court.