RECOMMENDED FOR PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 22a0122p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

HARRY C. CALCUTT III, 

Petitioner,

v.

FEDERAL DEPOSIT INSURANCE CORPORATION,

Respondent.

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No. 20-4303

On Petition for Review of an Order of the Federal Deposit Insurance Corporation;

Nos. FDIC-12-568e; FDIC-13-115k.

Argued: October 20, 2021

Decided and Filed: June 10, 2022

Before: BOGGS, GRIFFIN, and MURPHY, Circuit Judges.

_________________

COUNSEL

ARGUED: Sarah M. Harris, WILLIAMS & CONNOLLY LLP, Washington, D.C., for 

Petitioner. Michelle Ognibene, FEDERAL DEPOSIT INSURANCE CORPORATION, 

Arlington, Virginia, for Respondent. ON BRIEF: Sarah M. Harris, Ryan T. Scarborough, 

William B. Snyderwine, Helen E. White, WILLIAMS & CONNOLLY LLP, Washington, D.C., 

Barry D. Hovis, MUSICK, PEELER & GARRETT LLP, San Francisco, California, for 

Petitioner. Michelle Ognibene, John Guarisco, FEDERAL DEPOSIT INSURANCE 

CORPORATION, Arlington, Virginia, for Respondent. John M. Masslon II, WASHINGTON 

LEGAL FOUNDATION, Washington, D.C., Ilya Shapiro, CATO INSTITUTE, Washington, 

D.C., Michael Pepson, AMERICANS FOR PROSPERITY FOUNDATION, Arlington, Virginia, 

Andrew J. Pincus, MAYER BROWN LLP, Washington, D.C., Robert D. Nachman, BARACK 

FERRAZZANO KIRSCHBAUM & NAGELBERG LLP, Chicago, Illinois, for Amici Curiae.

BOGGS, J., delivered the opinion of the court in which GRIFFIN, J., joined. MURPHY, 

J. (pp. 54–91), delivered a separate dissenting opinion.

>
No. 20-4303 Calcutt v. FDIC Page 2

_________________

OPINION

_________________

BOGGS, Circuit Judge. Harry C. Calcutt III, a bank executive and director, petitions for 

review of an order issued by the Federal Deposit Insurance Corporation (“FDIC”) that removes 

him from his position, prohibits him from participating in the conduct of the affairs of any 

insured depository institution, and imposes civil money penalties. In addition to attacking the 

conduct and findings in his individual proceedings, he also brings several constitutional 

challenges to the appointments and removal restrictions of FDIC officials.

His first hearing in these proceedings occurred before an FDIC administrative law judge 

(“ALJ”) in 2015. Before the ALJ released his recommended decision, the Supreme Court 

decided Lucia v. SEC, 138 S. Ct. 2044 (2018), which invalidated the appointments of similar 

ALJs in the Securities and Exchange Commission (“SEC”). The FDIC Board of Directors then 

appointed its ALJs anew, and in 2019 a different FDIC ALJ held another hearing in Calcutt’s 

matter and ultimately recommended penalties.

Broadly, Calcutt’s claims fall into two categories. First, he brings structural 

constitutional challenges, contending that: The FDIC Board of Directors is unconstitutionally 

shielded from removal by the President; the FDIC ALJs who oversee enforcement proceedings 

are also unconstitutionally insulated from removal; and the second hearing before a different ALJ 

failed to afford him a “new hearing,” as mandated by Lucia. In his second group of challenges, 

Calcutt attacks the procedure used and results reached in his post-Lucia adjudication. He begins 

by contending that the ALJ abused his discretion by curtailing cross-examination about bias of 

the witnesses. He then argues that the FDIC Board failed to find that he had committed 

misconduct that caused “effects” for Northwestern Bank, as the governing statute, 12 U.S.C. 

§ 1818(e)(1), requires. See Dodge v. Comptroller of Currency, 744 F.3d 148, 152 (D.C. Cir. 

2014). 

We deny his petition. Calcutt’s challenges to the removal restrictions at the FDIC are 

unavailing, because even if he were to establish a constitutional violation, he has not shown that 
No. 20-4303 Calcutt v. FDIC Page 3

he is entitled to relief. See Collins v. Yellen, 141 S. Ct. 1761, 1789 (2021). We also conclude that 

his 2019 hearing satisfied Lucia’s mandate. As for the limits on cross-examination at that 

hearing, any error committed by the ALJ was harmless. Finally, there is substantial evidence in 

the record to support the FDIC Board’s findings regarding the elements of § 1818(e)(1).

I. BACKGROUND

A. Overview of FDIC Enforcement Proceedings

Among other functions, the FDIC conducts examinations and investigations to ensure 

banks’ safety, soundness, and compliance with statutes and regulations. See 12 U.S.C. § 1811. 

It has the authority to impose a range of enforcement remedies. Id. § 1818. These include 

removal and prohibition orders, in which the FDIC orders “an institution-affiliated party” to be 

removed from office or “prohibit[s] any further participation by such party, in any manner, in the 

conduct of the affairs of any insured depository institution.” Id. § 1818(e)(1). An institutionaffiliated party includes “any director, officer, employee, or controlling stockholder (other than a 

bank holding company or savings and loan holding company) of, or agent for, an insured 

depository institution.” Id. § 1813(u)(1). 

Section 8(e) of the Federal Deposit Insurance Act (“FDI Act”), 12 U.S.C. § 1818(e), as 

amended by the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”), 

P.L. No. 101-73, § 903, 103 Stat. 183, 453–54 (1989), provides that FDIC may remove an 

institution-affiliated party from office or prohibit the party from participating in conducting the 

affairs of any insured institution upon establishing three elements: “(1) the banker committed an 

improper act; (2) the act had an impermissible effect, either an adverse effect on the bank or a 

benefit to the actor; and (3) the act was accompanied by a culpable state of mind.” De la Fuente 

v. FDIC, 332 F.3d 1208, 1222 (9th Cir. 2003). First, the Board of Directors of the FDIC (“FDIC 

Board” or “Board”) must find that the party has committed misconduct, including engaging in 

“any unsafe or unsound practice in connection with any insured depository institution” or 

committing “any act, omission, or practice which constitutes a breach of such party’s fiduciary 

duty.” 12 U.S.C. § 1818(e)(1)(A)(ii)–(iii). Second, the Board must find that at least one 

requisite effect has occurred, i.e., that “by reason of” the party’s action, the insured depository 
No. 20-4303 Calcutt v. FDIC Page 4

institution “has suffered or will probably suffer financial loss or other damage,” its depositors 

have been or could be prejudiced, or the party has received financial gain or other benefit. Id. 

§ 1818(e)(1)(B). Finally, the party must have had a culpable state of mind: The violation must 

be one that “involves personal dishonesty” or “demonstrates willful or continuing 

disregard by such party for the safety or soundness of such insured depository institution.” Id. 

§ 1818(e)(1)(C). 

The FDIC may also issue civil money penalties (“CMPs”) under a similar test. See 

12 U.S.C. § 1818(i)(2). As relevant here, the agency may impose a “second tier” penalty of 

$25,000 per day of violation when a party “recklessly engages in an unsafe or unsound practice 

in conducting the affairs of [an] insured depository institution” or “breaches any fiduciary duty,” 

and that action “is part of a pattern of misconduct,” causes more than minimal loss to the 

institution, or benefits the institution-affiliated party. Id. § 1818(i)(2)(B). 

To commence these enforcement proceedings, the FDIC first serves the party with a 

notice of intention to remove the party from office and/or prohibit that party from participating in 

other insured depository institutions. See id. § 1818(e)(1); see also id. § 1818(i)(2)(E)(i)

(requiring notice for civil money penalty). The notice must contain a statement of facts 

establishing grounds for the removal and indicate a time and place for a hearing. Id.

§ 1818(e)(4). The institution-affiliated party may then appear at the hearing to contest the notice; 

failure to appear constitutes consent to the order. Ibid.

An ALJ conducts the adversarial hearing in accordance with the Administrative 

Procedure Act (“APA”), 5 U.S.C. §§ 551–559. See 12 U.S.C. § 1818(h)(1) (requiring hearings 

to be “conducted in accordance with the provisions of chapter 5 of Title 5”). Under the 

applicable regulations, an ALJ presiding over a removal proceeding has “all powers necessary to 

conduct a proceeding in a fair and impartial manner and to avoid unnecessary delay,” 12 C.F.R. 

§ 308.5(a), including the power to “receive relevant evidence and to rule upon the admission of 

evidence and offers of proof,” id. § 308.5(b)(3); “[t]o consider and rule upon all procedural and 

other motions appropriate in an adjudicatory proceeding . . . ,” id. § 308.5(b)(7); and “[t]o 

prepare and present to the Board of Directors a recommended decision,” id. § 308.5(b)(8). 
No. 20-4303 Calcutt v. FDIC Page 5

The regulations also provide that evidence that would be admissible under the Federal 

Rules of Evidence is admissible in adjudicatory proceedings, id. § 308.36(a)(2), and that except 

as otherwise provided, “relevant, material, and reliable evidence that is not unduly repetitive is 

admissible to the fullest extent authorized by the Administrative Procedure Act and other 

applicable law,” id. § 308.36(a)(1). If evidence meets this latter standard but would be 

inadmissible under the Federal Rules of Evidence, the ALJ may not deem the evidence 

inadmissible. Id. § 308.36(a)(3).

After the hearing, the ALJ must file and certify a record of the proceeding, including a 

recommended decision, recommended findings of fact, recommended conclusions of law, and a 

proposed order. Id. § 308.38(a). A party then has thirty days to file written exceptions for the 

FDIC Board’s review objecting to particular matters or omissions in the ALJ’s 

recommendations, but a failure to file an exception on a particular matter is treated as a waiver of 

that objection, and the Board need not consider any such objections that were not initially raised 

before the ALJ. Id. § 303.39.

The Board then reviews the ALJ’s recommendations and issues a final decision. Id. 

§ 308.40. Its review is “based upon review of the entire record of the proceedings,” although it 

may limit its review to those arguments and exceptions that were raised by the parties. Id. 

§ 308.40(c)(1). After the Board’s final decision, a party may petition for review in the United 

States Court of Appeals for the District of Columbia Circuit or the circuit in which the 

institution’s home office is located. 12 U.S.C. § 1818(h)(2).

B. FDIC Composition and Structure

The FDIC Board consists of five members: the Comptroller of the Currency, the Director 

of the Consumer Financial Protection Bureau (“CFPB”), and three additional directors who are 

appointed by the President with the advice and consent of the Senate. 12 U.S.C. § 1812(a)(1). 

The Comptroller of the Currency and the CFPB Director are also appointed by the President with 

Senate advice and consent. Id. § 2 (Comptroller of the Currency); id. § 5491(b)(2) (CFPB 

Director). The Board also incorporates a measure of partisan balancing, with a maximum of 

three directors permitted to be members of the same political party. Id. § 1812(a)(2). 
No. 20-4303 Calcutt v. FDIC Page 6

The three members of the Board not appointed by virtue of another office serve fixed 

terms, and the parties agree that they are not removable at will. During the proceedings before 

the ALJs in this case, the CFPB Director also enjoyed for-cause protection from removal under 

12 U.S.C. § 5491(c)(3); however, before the Board issued its final order, the Supreme Court held 

this removal restriction to be unconstitutional. Seila Law LLC v. Consumer Fin. Prot. Bureau, 

140 S. Ct. 2183 (2020). The Comptroller of the Currency’s term lasts for five years “unless 

sooner removed by the President, upon reasons to be communicated by him to the Senate,” and 

Calcutt concedes that this provision provides for at-will removal. 12 U.S.C. § 2. In practice,

however, the FDIC Board has had several vacancies during the proceedings in Calcutt’s case; 

additionally, at least one board member continued to serve after his term expired until a 

successor was appointed. See 12 U.S.C. § 1812(c)(3) (providing for continuation of service of 

appointed members after expiration of term before a successor is appointed). 

The ALJs who hear FDIC removal and prohibition proceedings are part of a pool housed 

in the Office of Financial Institution Adjudication (“OFIA”), an interagency body established by 

FIRREA that presides over enforcement proceedings brought by the FDIC, the Office of the 

Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System 

(“FRB”), and the National Credit Union Administration (“NCUA”). See FIRREA § 916, 103 

Stat. 183, 486–87 (codified at 12 U.S.C. §1818 note); 12 C.F.R. § 308.3 (defining OFIA as “the 

executive body charged with overseeing the administration of administrative enforcement 

proceedings” of OCC, FRB, FDIC, and NCUA).1 These agencies signed an agreement that 

provides for cost-sharing and specifies that the FDIC is the “Host Agency,” responsible for the 

employment of an office staff consisting of ALJs and administrative employees. See Ex. L to 

Emergency Motion for Stay Pending Review, at 1–6. The agreement also states: “Any change to 

the Office Staff personnel shall be subject to the prior written approval of all Agencies.” Id. at 3.

Two ALJs currently make up the pool in OFIA. See Our Judges, Office of Financial Institution 

Adjudication, https://www.ofia.gov/who-we-are/our-judges.html (last visited May 24, 2022). 

1

Initially, the Office of Thrift Supervision served as “host agency” for OFIA, but that agency’s 

responsibilities were transferred to FRB, OCC, and FDIC in Title III of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Pub. L. No 111-203, 124 Stat. 1376 (2010). 
No. 20-4303 Calcutt v. FDIC Page 7

Until Lucia, these ALJs were not appointed by the FDIC. After the Supreme Court held 

in Lucia that SEC ALJs were officers who must be appointed by the President, a court of law, or 

a head of department, see 138 S. Ct. at 2051–54, the FDIC Board then newly appointed the same 

ALJs without conceding that their previous appointments had been unconstitutional. The FDIC 

ALJs may only be removed “for good cause” determined by the Merit Systems Protection Board 

(“MSPB”) on the record after an opportunity for a hearing. 5 U.S.C. § 7521(a). Members of the 

MSPB, in turn, may be removed by the President “only for inefficiency, neglect of duty, or 

malfeasance in office.” 5 U.S.C. § 1202(d).

C. Calcutt’s Actions at Northwestern Bank

With this background, we turn to the facts of the present case. Calcutt was the President, 

CEO, and Chairman of the Board of Directors of Northwestern Bank (the “Bank”), which had its 

principal place of business in Traverse City, Michigan. He also served as a member of the 

Bank’s senior loan committee and as CEO of the Bank’s holding company, Northwestern

Bancorp. The Bank was an insured state nonmember bank subject to the FDI Act, as well as 

associated regulations and Michigan state laws. Calcutt retired from his positions at the Bank in 

2013 and now serves as the Chairman of State Savings Bank in Michigan and its holding 

company. Northwestern Bank was purchased by a competitor in 2014. 

Under the Bank’s management structure, twenty employees reported directly to Calcutt, 

including Richard Jackson, an Executive Vice President and board member. A commercial-loan 

officer named William Green also worked for the Bank. 

By 2009, the Bank’s largest loan relationship was with a group of nineteen limited 

liability companies controlled by the Nielson family (the “Nielson Entities”). These businesses’ 

activities involved development of real estate, holding vacant and developed real estate, and 

holding oil and gas interests. At that time, the Bank’s loans to the Nielson Entities (the “Nielson 

Loans”) amounted to approximately $38 million. The value of the Nielson Entities’ holdings 

during this time was approximately $112 million, with $7–9 million in cash or cash equivalents, 

and $80 million available in real estate or oil and gas assets that could be used for collateral or 

loan-payment purposes. 
No. 20-4303 Calcutt v. FDIC Page 8

As early as 2008, FDIC examiners identified several of the Nielson Entities as a single 

borrower and identified the Bank’s loans to these businesses as a “concentration of credit”—

defined as a lending relationship that exceeds twenty-five percent of a bank’s Tier 1 capital. 

Although in practice the Nielsons could use cash derived from one entity to pay the loans of 

another entity, the loans were not cross-collateralized, meaning that the collateral in one Nielson 

Entity did not secure loans to other Nielson Entities, despite the common control. Neither were 

the loans supported by personal guarantees: If a Nielson Entity failed, the Bank could not 

compel the Nielsons to personally satisfy the obligation. Loans lacking personal guarantees were 

considered to be an exception to the Bank’s commercial-loan policy.

In April 2008, Calcutt and Green met Cori Nielson, one of the managers of the limitedliability company that managed the Nielson Entities, and Autumn Berden, the chief financial 

officer of that company. Calcutt and Green requested that the Nielsons stop reporting transfers 

between Nielson Entities as intercompany loans on their balance sheets; instead, the bankers 

recommended that when an entity needed funds, another entity should distribute funds to its 

members, who could then loan or give the funds to the cash-strapped entity. Such a payment 

mechanism would not be reported to regulators as an intercompany transfer and would conceal 

the Nielson Entities’ “common use of funds.” According to the FDIC, over the following 

months this strategy also masked the interrelationship of the Nielson Entities and hid loans to 

Entities that had no positive cash flow by routing funds through other actors in the Nielson 

group. 

The relationship between the Bank and the Nielsons began to deteriorate during the Great 

Recession. Although in May 2009 several of the Nielson Entities wrote to Calcutt stating that 

they had sufficient cash flow for debt service, by August multiple loans were past due. More 

were scheduled to mature on September 1. On August 10, Berden told the Bank that the Nielson 

Entities would need to restructure their loans, and on August 21, Cori Nielson made a similar 

communication. The Bank did not oblige, and the Nielson Entities stopped paying their loans on 

September 1. 

Over the following months, the Nielsons and the Bank continued to negotiate, but their 

efforts were fruitless. The Nielsons sought measures such as debt forbearance, reduction of loan 
No. 20-4303 Calcutt v. FDIC Page 9

payments, or deeds in lieu of foreclosure,2 because ongoing problems in the real-estate market 

had diminished their ability to repay existing debts. Calcutt, on the other hand, later testified that 

he thought that the Nielsons were “posturing” and possessed sufficient funds to pay their loans. 

The Bank attempted to convince the Nielsons to refinance and provide greater payments on their 

loans. Cori Nielson later testified that in response to her communications, Calcutt expressed 

concerns about raising “red flags” to regulators about the Bank’s relationship with the Nielson 

Entities. By November 30, 2009, several of the loans to the Nielson entities were automatically 

placed on nonaccrual status by the Bank, meaning that they were ninety days past due. 

Also on November 30, the Bank and the Nielson Entities finally reached an agreement 

that would bring all the loans current. First, the Bank extended a loan of $760,000 to Bedrock 

Holdings LLC, one of the Nielson Entities (the “Bedrock Loan”), which would be used for the 

companies’ future required loan payments until April 2010. After receipt of the loan, Bedrock 

Holdings transferred the funds into accounts at the Bank for other Nielson Entities. Second, the 

Bank agreed to release $600,000 worth of collateral in investment-trading funds that had been 

granted to it by another Nielson Entity, Pillay Trading LLC (the “Pillay Collateral”).3 This 

collateral release allowed the Nielson Entities to bring their past-due loans current. Finally, the 

Bank renewed the Nielson Entities’ matured loans, including a loan of $4,500,000 to Bedrock 

Holdings. The parties refer to this agreement, which took effect in December 2009, as the 

“Bedrock Transaction.” Consequently, the Nielson Entities’ loans were removed from the 

Bank’s nonaccrual list on December 1. 

The FDIC Board would later find that the actions surrounding the Bedrock Transaction 

violated the Bank’s commercial-loan policy. That policy required that “all commercial loans are 

to be supported by a written analysis of the net income available to service the debt and by 

written evidence from the third parties supporting the collateral value of the security,” yet the 

Bank did not conduct these analyses or collateral appraisals prior to providing the Bedrock Loan 

2Through a deed in lieu of foreclosure, “a mortgagee . . . take[s] a conveyance from the mortgagor in full or 

partial satisfaction and as a substitute for foreclosure.” Restatement (Third) of Property (Mortgages) § 8.5 cmt. b 

(Am. Law Inst. 1997).

3As discussed below, a year later Northwestern Bank also released $690,000 in collateral from Pillay 

Trading LLC. We refer to the $600,000 and $690,000 disbursements together as the “Pillay Collateral.”
No. 20-4303 Calcutt v. FDIC Page 10

and releasing the Pillay Collateral. At the 2019 hearing, however, Calcutt testified that he 

thought that the Bedrock Transaction was in the Bank’s best interest, because it provided time 

for the Nielson Entities to pay off their debt and because he believed they had the resources to do 

so. 

Moreover, the commercial-loan policy required approval by two-thirds of the board of 

directors for loans “where the total aggregate exposure is between 15 and 25 percent of the 

Bank’s Regulatory Capital.” Ibid. The loans to the Nielson Entities were approximately half of 

the Bank’s Tier 1 capital, thereby qualifying for the voting requirement. According to the FDIC, 

however, the board did not approve the Bedrock Transaction until March 2010—approximately 

four months after the disbursements. The loan write-up for the Bedrock Transaction that was 

presented to the board in March 2010 also contained inaccurate information, including misstating 

the purpose of the Bedrock Loan as “working capital requirements” and omitting that the 

Bedrock Transaction had already occurred.

That loan write-up was prepared by a credit analyst based on information provided by 

Green, and Calcutt and Jackson both initialed the document. Before the FDIC, Calcutt argued 

that: (a) the write-up’s errors and mischaracterization could not be attributed to him; (b) the 

board of directors was aware of the difficulties with the Nielson Entities in November 2009 

because of materials it had received; and (c) the board of directors verbally approved the 

Bedrock Transaction in November and December 2009. The ALJ and FDIC Board, however, 

found against him on these points.

Calcutt’s actions surrounding the FDIC’s June 2010 examination of the Bank also 

attracted scrutiny. In May 2010, Calcutt signed an Officer’s Questionnaire required by the 

agency. The first question required him to list the loans that the Bank had renewed or extended 

since the previous year’s examination by accepting separate notes for the payment of interest or 

without fully collecting interest, as well as any loans made for the direct benefit of anyone other 

than the named recipients of the loans. On the questionnaire, Calcutt answered that he was not 

aware of any such loans. He later testified that these answers were incorrect in light of the 

Bank’s activities with the Nielson Entities, but argued that the misstatements were “inadvertent 

and unintentional.” (Brackets omitted.)
No. 20-4303 Calcutt v. FDIC Page 11

Additionally, Calcutt participated in a decision to sell several Nielson Entity loans to two 

of Northwestern Bank’s affiliates in May 2010, shortly before the FDIC examiners were due to 

arrive. Green told Berden that he and Calcutt would continue to serve as the points of contact on 

those loans. In late September 2010, the Bank repurchased the loans, at which point the loans 

were delinquent and past maturity. 

Despite these actions, by September 2010 the Nielson Entities’ position remained 

precarious. Beginning on September 1, they again stopped making payments on their loans. 

Several additional months of negotiations ensued, and in December 2010 the parties agreed to an 

additional release of $690,000 of collateral from Pillay Trading LLC to fund the Nielson 

Entities’ debt service from September 2010 to January 2011. The Bank’s board of directors 

agreed to this arrangement. At the end of that period, however, the Nielson Entities yet again 

stopped making payments, and they have been in default since then. 

D. The 2011 Examination

Shortly before the FDIC’s 2011 regular examination of the Bank was set to begin on 

August 1, 2011, Cori Nielson sent the agency a binder with approximately 267 pages of 

correspondence between herself, Berden, Green, and Calcutt. The binder’s contents went

beyond the correspondence that FDIC examiners had found in the Bank’s loan file. According to 

Calcutt, Nielson’s move also began a series of actions in which she and Berden improperly 

influenced the FDIC’s Case Manager, Anne Miessner, and Miessner became biased against 

Calcutt while participating in the examination. 

During his September 14, 2011 meeting with examiners from the FDIC and the Michigan 

Office of Financial and Insurance Regulation,4 Calcutt made several false statements about the 

Bedrock Transaction. First, in response to a question about his understanding as to the purpose 

of the Bedrock Loan, Calcutt said that the funds were meant to provide “working capital” in 

connection with an acquisition of another business, although their true purpose was to help pay 

off the loans to Nielson Entities. Second, when examiners asked him about the release of the 

Pillay Collateral, he responded, “I thought we still had them,” although he had authorized 

4This agency has been renamed the Michigan Department of Insurance and Financial Services.
No. 20-4303 Calcutt v. FDIC Page 12

releases of the collateral in 2009 and 2010. Third, when queried about how the Nielson Entities 

managed to bring their loans current in December 2010, he answered that they used their “vast 

resources between oil, gas, and rentals,” although the December 2010 release of Pillay Collateral 

was in fact used to satisfy these obligations.

In its 2011 examination, the FDIC also noted that the Nielson relationship “should have 

been reported as nonaccrual on quarterly Call Reports beginning no later than December 2009,” 

and that its omission “has resulted in a material overstatement in earnings both in the form of 

falsely inflated interest income and of grossly understated provision expense.” Calcutt signed 

the Call Reports, yet he later testified that he was not involved in their preparation. 

Ultimately, the FDIC’s 2011 examination report identified the Bank’s failures in securing 

and analyzing the Bedrock Transaction, its reporting inaccuracies, and its misstatements during 

the examination. It ordered the Bank to charge off $6.443 million on the loans to Nielson 

Entities, which represented the amount that the Bank would be unlikely to collect.5 On July 31, 

2012, the Bank charged off an additional $30,000 specifically on the Bedrock Loan. 

E. Administrative Proceedings

1. The 2015 Hearing

On April 13, 2012, the FDIC formally opened an investigation into the Bank’s officers. 

Its investigation ended on August 20, 2013, and the agency issued a Notice of Intention to 

Remove from Office and Prohibit from Further Participation against Calcutt, Jackson, and 

Green, as well as a notice of assessment of civil money penalties (the “Notice”). In 2015, both 

Jackson and Green stipulated to orders prohibiting them from banking activity, and Jackson 

agreed to a $75,000 CMP. Calcutt proceeded to discovery and further administrative

proceedings. 

In September 2015, ALJ C. Richard Miserendino held an eight-day hearing on Calcutt’s 

charges. Among the several witnesses who testified were Calcutt, Jackson, Nielson, Berden, 

Miessner, and Dennis O’Neill (one of the FDIC examiners). ALJ Miserendino released a 

5The parties disagree about whether a charge-off necessarily qualifies as a loss. See infra at 45.
No. 20-4303 Calcutt v. FDIC Page 13

recommended decision on June 6, 2017. However, before the Board issued its final decision, it 

stayed the case pending the Supreme Court’s decision in Lucia, because ALJ Miserendino had 

not been appointed by an agency head. 

2. The 2019 Hearing

Following Lucia, the FDIC Board formally appointed Miserendino and its other ALJ, 

Christopher B. McNeil, then remanded and reassigned each ALJ’s pending cases to the other 

ALJ “for a new hearing and a fresh reconsideration of all prior actions, including summary 

dispositions, taken before the hearing.” See FDIC Resolution Seal No. 085172, Order in Pending

Cases (July 19, 2018). The Board permitted each new ALJ to conduct a paper hearing on 

remand, but if a party objected to the paper hearing, the Board ordered that the ALJ “must 

conduct a new oral hearing in accordance with 12 C.F.R. § 308.35, except that the ALJ may 

accept the written transcript of prior testimony of any witnesses for which the parties agreed to 

accept such testimony.”

Calcutt’s case was reassigned to ALJ McNeil, who stated that he would conduct an oral 

hearing and requested that the parties submit objections to ALJ Miserendino’s prehearing 

rulings. In response, Calcutt asserted that the prior proceedings were entirely void under Lucia

because the prior ALJ had not been appointed by an agency head. ALJ McNeil rejected this 

argument, and proceeded to request that the parties submit specific examples where the prior 

proceeding’s outcome turned on evidence that should have been included or excluded, or 

“elements, such as witness demeanor, that are not readily determined from a review of the 

written record.”

Calcutt then reasserted his argument that “the original proceeding was void ab initio” and 

objected to the inclusion of the record from the 2015 proceedings because the case “turn[ed] 

entirely on credibility assessments.” In an order dated March 19, 2019, ALJ McNeil rejected 

these arguments, concluding that the second hearing would not be de novo, and that “[t]he prior 

proceedings have not been deemed void ab initio, but instead serve as the primary source of the 

evidentiary record, subject to review and reconsideration by the new ALJ.” ALJ McNeil went 

on to observe that although credibility assessments were material to the decision of the case, 
No. 20-4303 Calcutt v. FDIC Page 14

Calcutt had not established that a review of the 2015 hearing transcript would be hindered by an 

inability to view witnesses’ demeanor. Finally, he rejected Calcutt’s objections to the admission 

of several exhibits from the 2015 proceedings. 

On March 20, 2019, ALJ McNeil released an additional prehearing order, which among 

other things specified that the parties should identify witnesses by May 15, 2019 and indicate 

each witness’s expected testimony. The order specified that “during the evidentiary hearing, 

witness testimony will be limited to the descriptions provided in this summary.” Calcutt sought 

an interlocutory appeal before the FDIC Board on ALJ McNeil’s limitations on the oral hearing. 

The Board granted his request for a new oral hearing on all issues considered at the prior hearing, 

including live witness testimony, but it denied his request for an entirely new proceeding as 

untimely. 

In the next prehearing order, ALJ McNeil granted enforcement counsel’s motions to 

strike Calcutt’s affirmative defenses of laches, entrapment, and examiners’ violation of the 

agency’s own procedural rules. Then, in response to the parties’ motions in limine, he permitted 

introduction of Green and Jackson’s testimony and the parties’ stipulations at the 2015 hearing, 

among other evidentiary rulings. 

The hearing lasted from October 29 to November 6, 2019. Calcutt was among twelve 

witnesses who testified. During the proceedings, Calcutt’s counsel unsuccessfully attempted to 

cross-examine witnesses, including Berden, Miessner, and Nielson, about the theory that 

Miessner and the FDIC were biased against Calcutt due to their relationship with the Nielsons. 

In sustaining enforcement counsel’s objections to this testimony, ALJ McNeil reasoned that 

these questions were outside the scope of direct examination, and that in accordance with his 

March 20, 2019 order, Calcutt could have identified these witnesses in a prehearing submission 

as subject to questioning about bias but failed to do so. 

On April 3, 2020, ALJ McNeil issued the Findings of Fact, Conclusions of Law, and 

Recommended Decision on Remand (the “Recommended Decision”), finding that Calcutt’s 

actions surrounding the Bedrock Transaction amounted to unsafe or unsound practices and 

breached his fiduciary duties of care and candor; that these actions caused the Bank to suffer 
No. 20-4303 Calcutt v. FDIC Page 15

damages and financially benefitted Calcutt; and that the actions involved personal dishonesty and 

willful and continuing disregard for the Bank’s safety and soundness. See 12 U.S.C. 

§ 1818(e)(1). Finding that Calcutt’s actions satisfied the requirements for a removal and 

prohibition order and civil money penalties, ALJ McNeil recommended that Calcutt be 

prohibited from banking and assessed a $125,000 CMP. 

Calcutt filed exceptions to the FDIC Board, challenging many of these findings and 

conclusions. He also argued that the proceedings were invalid because the restrictions on ALJ 

McNeil’s removal were unconstitutional, and because the new hearing granted after Lucia did 

not remedy the Appointments Clause violation in the previous proceedings before ALJ 

Miserendino. He did not argue that the Board was also improperly shielded from removal.

Upon review, the FDIC Board accepted ALJ McNeil’s findings and conclusions, and on 

December 15, 2020, it issued a final Decision and Order to Remove and Prohibit from Further 

Participation and Assessment of Civil Money Penalties (the “Removal and Prohibition Order”). 

The Board concluded that Calcutt’s involvement with the Bank’s loans to the Nielson Entities, as 

well as his misrepresentations to regulators and the board of directors, were both unsafe and 

unsound practices and breaches of his fiduciary duties. See 12 U.S.C. § 1818(e)(1)(A). It also 

found that sufficient effects had occurred by reason of Calcutt’s malfeasance: loan charge-offs; 

the Bank’s increased investigative, legal, and auditing expenses; and Calcutt’s receipt of 

dividends from the Bank’s holding company that reflected the Nielson portfolio’s inflated value.

See 12 U.S.C. § 1818(e)(1)(B). And it concluded that Calcutt acted with the requisite 

culpability. See 12 U.S.C. § 1818(e)(1)(C). The Board similarly upheld ALJ McNeil’s 

conclusions regarding the appropriateness of the civil money penalty. See 12 U.S.C. § 1818(i). 

Finally, it rejected Calcutt’s exceptions regarding the ALJ’s insulation from removal, the 

adequacy of the new hearing after Lucia, the ALJ’s evidentiary rulings, the statute of limitations, 

and the ALJ’s bias. 

Calcutt petitioned this court for review the following day. On December 21, 2020, he 

moved for an emergency stay. A panel of this court granted the stay on January 5, 2021. We 

have jurisdiction over Calcutt’s petition for review of the FDIC’s order under 12 U.S.C. 

§ 1818(h)(2).
No. 20-4303 Calcutt v. FDIC Page 16

II. STANDARD OF REVIEW

The judicial-review provisions of the APA apply to FDIC removal and prohibition orders 

and orders assessing CMPs. 12 U.S.C. § 1818(h)(2). Accordingly, we must hold unlawful and 

set aside agency actions, findings, or conclusions that are “arbitrary, capricious, an abuse of 

discretion, or otherwise not in accordance with law”; “contrary to constitutional right, power, 

privilege, or immunity”; “in excess of statutory jurisdiction, authority, or limitations”; 

“without observance of procedure required by law”; or “unsupported by substantial evidence.” 

5 U.S.C. § 706(2). Furthermore, “due account shall be taken of the rule of prejudicial error.” 

Ibid.; see Nat’l Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S. 664, 659–60 (2007) 

(explaining that this statutory language refers to a harmless-error rule). Though a court does not 

“substitute its judgment for that of the agency” over decisions within the agency’s delegated 

authority in applying the APA’s arbitrary-and-capricious standard, the agency’s conclusions must 

still be based on “reasoned decision making.” Wollschlager v. FDIC, 992 F.3d 574, 581–82 (6th 

Cir. 2021).

We review other agency determinations differently. Questions of law are reviewed 

de novo, but we defer to an agency’s interpretation of a provision in a statute that it is entrusted 

with administering, if (1) Congress has not “directly spoken to the precise question at issue,” and 

(2) “the agency’s answer is based on a permissible construction of the statute.” N. Fork Coal 

Corp. v. Fed. Mine Safety & Health Rev. Comm’n, 691 F.3d 735, 739 (6th Cir. 2012) (quoting 

Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984)). And an 

agency’s factual findings are reviewed for substantial evidence, which is “more than a scintilla of 

evidence but less than a preponderance; it is such relevant evidence as a reasonable mind might 

accept as adequate to support a conclusion.” Gen. Med., P.C. v. Azar, 963 F.3d 516, 520 (6th Cir. 

2020) (quoting Cutlip v. Sec’y of Health & Hum. Servs., 25 F.3d 284, 286 (6th Cir. 1994)). 

“The substantiality of evidence must take into account whatever in the record fairly detracts from 

its weight.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951).
No. 20-4303 Calcutt v. FDIC Page 17

III. REMOVAL PROTECTIONS

Calcutt maintains that two features of the structure of the FDIC violate Article II and the 

separation of powers and thus compel invalidation of the agency’s proceedings against him. 

First, relying principally on Seila Law, he argues that the members of the FDIC Board are 

unconstitutionally insulated from removal by the President. Second, he contends that the FDIC’s 

ALJs are insulated by multiple levels of for-cause protection in contravention of the Supreme 

Court’s holding in Free Enterprise Fund v. Public Company Accounting Oversight Board, 

561 U.S. 477 (2010). 

Neither alleged infirmity, however, compels invalidation of the FDIC proceedings against 

Calcutt. As the Court recently explained in Collins v. Yellen, even if an agency’s structure 

unconstitutionally shields officers from removal, a party challenging the agency’s action is not 

entitled to relief unless that unconstitutional provision “inflict[s] compensable harm.” 141 S. Ct. 

at 1789. Calcutt has not demonstrated that the removal protections of the FDIC Board or the 

FDIC ALJs caused such harm to him. 

A. FDIC Board Structure

We first address Calcutt’s challenge to the FDIC Board’s structure. To start, we conclude 

that Calcutt has not forfeited this claim. However, Calcutt has not demonstrated that the 

purported constitutional infirmity inflicted harm. See Collins, 141 S. Ct. at 1789. Thus, he is not 

entitled to invalidation of the proceedings on this basis.

1. Issue Exhaustion

At the outset, we disagree with the argument by the FDIC that Calcutt has forfeited his 

challenge to the Board’s removal protections by not raising it in his exceptions to the 

recommended decision of ALJ McNeil. This is a question of “issue exhaustion,” a rule in many 

administrative contexts that requires a party to present an issue to an agency before pursuing 

judicial review on that issue. Carr v. Saul, 141 S. Ct. 1352, 1358 (2021). 
No. 20-4303 Calcutt v. FDIC Page 18

We have recognized three types of issue-exhaustion requirements. First, many 

“requirements of administrative issue exhaustion are largely creatures of statute.” Sims v. Apfel, 

530 U.S. 103, 107 (2000). Second, an agency’s regulations may require exhaustion, id. at 108, 

so long as the regulations “comport with the statute” and are not applied arbitrarily, Island Creek 

Coal Co. v. Bryan, 937 F.3d 738, 747 (6th Cir. 2019). Third, a court may impose an issueexhaustion requirement without either a statute or regulation. Sims, 530 U.S. at 108; see Bryan, 

937 F.3d at 747–48 (describing “prudential exhaustion” and its unclear doctrinal source). In this 

last context, “[t]he desirability of a court imposing a requirement of issue exhaustion depends on 

the degree to which the analogy to normal adversarial litigation applies in a particular 

administrative proceeding.” Carr, 141 S. Ct. at 1358 (quoting Sims, 530 U.S. at 109). This 

resemblance to an adversarial litigation in turn depends on “whether claimants bear the 

responsibility to develop issues for adjudicators’ consideration.” Ibid.

The FDIC argues that its regulations (namely 12 C.F.R. § 308.39(b)) compelled Calcutt 

to raise any Appointments Clause challenge to the Board’s structure in his exceptions to the 

Recommended Decision before raising them before this court. Moreover, the agency adds, 

Carr’s limitation on imposing issue-exhaustion requirements in non-adversarial proceedings do 

not apply here, because Calcutt’s adjudication was adversarial. 

Calcutt responds that § 308.39(b) requires exhaustion only of issues over which the 

agency has jurisdiction, and that because agencies lack “authority to entertain a facial 

constitutional challenge to the validity of a law,” he did not need to exhaust the removal issue 

before the ALJ or the Board. Reply Br. 2 (quoting Jones Bros., 898 F.3d at 673); see 12 C.F.R. 

§ 308.39(c)(1) (stating that exceptions “must be confined to the particular matters in, or 

omissions from, the administrative law judge’s recommendations”). Relatedly, he argues that an 

agency proceeding is an inappropriate forum to consider a structural constitutional claim such as 

the Board’s removability, because the Board has no special expertise in Appointments Clause 

jurisprudence and has previously disclaimed authority to entertain constitutional challenges to 

statutes, meaning that raising this issue before the Board would have been futile. 

We think Calcutt has the better of the argument, and that in the “particular administrative 

scheme at issue” in this case, no statute, regulation, or prudential principle required him to raise 
No. 20-4303 Calcutt v. FDIC Page 19

his challenge to the FDIC Board during the administrative proceedings. Joseph Forrester 

Trucking v. Dir., Off. of Workers’ Comp. Programs, 987 F.3d 581, 590 (6th Cir. 2021) (quoting 

Weinberger v. Salfi, 422 U.S. 749, 765 (1975)). To begin with, the judicial review provision of 

the FDI Act, 12 U.S.C. § 1818(h), says nothing bearing on exhaustion. We have explained that a 

statute must contain language “directing parties to raise issues” before the agency in order to 

create a statutory issue-exhaustion requirement. See Bryan, 937 F.3d at 749; Jones Bros., Inc. v. 

Sec’y of Lab., 898 F.3d 669, 673–74 (6th Cir. 2018).

The applicable FDIC regulations hit closer to the mark. They provide that the “[f]ailure 

of a party to file exceptions . . . is deemed a waiver of objection thereto.” 12 C.F.R. 

§ 308.39(b)(1). This text might be read to create an issue-exhaustion requirement in light of our 

decision in Bryan, where we detected an issue-exhaustion requirement in a regulation requiring 

that a petition for review list “specific issues to be considered” for appeals from Black Lung 

Benefits Act adjudications to the Benefits Review Board. 937 F.3d at 749 (quoting 20 C.F.R. 

§ 802.211(a)). However, there is an important difference between Bryan and this case. Calcutt 

raises a facial constitutional challenge to the FDI Act, and the FDIC has no power to invalidate 

its own organic statute; thus, it could never entertain Calcutt’s separation-of-powers challenge to 

the FDIC Board in the first place. See Jones Bros., 898 F.3d at 673–74 (reading statute not to 

impose issue-exhaustion requirement on facial constitutional challenges where agency could not 

“invalidate the statute from which it derives its existence and that it is charged with 

implementing”). True, we have explained that an agency may entertain certain facial 

constitutional challenges and therefore impose issue-exhaustion requirements where it has long 

asserted that authority. See Joseph Forrester Trucking, 987 F.3d at 588–89; Bryan, 937 F.3d at 

753. But the FDIC Board has previously disclaimed the authority to determine the 

constitutionality of statutes. See Matter of the Bank of Hartford, No. FDIC-92-212kk, at A-2525 

(FDIC Apr. 11, 1995), https://www.fdic.gov/bank/individual/enforcement/5223.html (last visited 

June 8, 2022)). Though the FDIC now offers a list of examples in which it has considered 

constitutional claims in adjudications, almost none of those decisions considered a constitutional 

challenge to the authority or structure of the FDIC, and the decision that did so—Matter of ***, 
No. 20-4303 Calcutt v. FDIC Page 20

No. FDIC-85-363e, 1986 WL 379631 (FDIC Apr. 21, 1986)—predates Bank of Hartford.

6 And 

even if we recognize that the FDIC has asserted authority to decide some constitutional issues, 

we cannot say that this constitutes an established practice for the type of separation-of-powers 

claim at issue here.

A further consideration counsels against imposing an issue-exhaustion requirement here: 

Calcutt’s challenge to the removal protections of the FDIC Board is a structural constitutional 

challenge over which the FDIC Board has no special expertise. See Carr, 141 S. Ct. at 1360.

And had Calcutt raised this challenge before the Board, his efforts would have been futile. 

See id. at 1361 (“[T]his Court has consistently recognized a futility exception to exhaustion 

requirements.”).7 To illustrate, consider what remedy the Board could have offered if Calcutt 

had raised the issue and the Board had agreed that it was unconstitutionally shielded from 

removal. The remedies granted by Article III courts, such as severing and striking the Board’s 

for-cause protections from the FDIC’s organic statute, would have been unavailable, because the 

Board, an agency of the Executive Branch, cannot edit its own organic statute. Cf. Seila Law, 

140 S. Ct. at 2207–09. Similarly, the Board could hardly have told the President to treat it as if it 

had no protections from removal, since an agency cannot compel the President to act (let alone 

violate a statute). Another possibility would be for it to vacate Calcutt’s penalty, but that would 

not resolve the constitutional issue, because the removal restrictions would persist. Requiring 

issue exhaustion in this situation would have been a pointless exercise.

In sum, Calcutt has not forfeited his claim that the FDIC Board is unconstitutionally 

insulated from removal. 

6This is not to say that the FDIC has disavowed authority to address any constitutional claim. As the FDIC 

notes, it has previously addressed Appointments Clause and separation-of-powers challenges to ALJs. See Matter of 

Sapp, Nos. FDIC-13-477(e), FDIC-13-478(k), 2019 WL 5823871, at *18–19 (FDIC Sept. 17, 2019); Matter of 

Landry, No. FDIC-95-65e, 1999 WL 440608, at *27–29 (FDIC May 25, 1999); Matter of Leuthe, Nos. FDIC-95-

15Ee, FDIC-95-16k,1998 WL 438323, *10–11 (FDIC June 26, 1998). Those decisions, however, did not concern a 

separation-of-powers challenge to the FDIC Board. 

7While the Supreme Court has cautioned that courts should hesitate to apply exceptions to mandatory 

exhaustion requirements in a statute, see Ross v. Blake, 136 S. Ct. 1850, 1857–58 (2016), that concern does not 

apply here because, as we have explained, the FDI Act does not clearly mandate an issue-exhaustion requirement.
No. 20-4303 Calcutt v. FDIC Page 21

2. FDIC Board Structure

Calcutt would have us hold that the FDIC Board is unconstitutionally shielded from 

removal and therefore asks us to invalidate his entire proceeding. Under the framework set out 

by the Supreme Court’s recent separation-of-powers decisions, however, he is not entitled to 

invalidation of his proceedings. See Collins, 141 S. Ct. at 1783–89; Seila Law, 140 S. Ct. at 

2198–2204. In particular, Collins indicates that Calcutt is not entitled to the relief he seeks, 

because he has not specified the harm that occurred as a result of the allegedly unconstitutional 

removal restrictions. See 141 S. Ct. at 1788–89. 

Article II of the Constitution states that “[t]he executive Power shall be vested in a 

President,” U.S. Const. art. II, § 1, cl. 1, and requires the President to “take Care that the Laws be 

faithfully executed,” id. art. II, § 3. This language establishes a core principle of constitutional 

separation of powers: “[T]he President’s removal power is the rule, not the exception.” Seila 

Law, 140 S. Ct. at 2206; see also Myers v. United States, 272 U.S. 52, 163–64 (1926). 

In Seila Law, the Court provided the framework for analyzing the constitutionality of a 

restriction on the President’s removal authority. 140 S. Ct. at 2198. At the first step, we ask 

whether an officer’s tenure protection falls within an established exception to the general 

removal authority. Id. at 2198. As relevant here, one such exception, identified in Humphrey’s 

Executor v. United States, 295 U.S. 602 (1935), permits for-cause removal protections for 

“multimember expert agencies that do not wield substantial executive power.” Seila Law, 

140 S. Ct. at 2199–2200.8 To determine whether an agency falls within this category, we 

consider whether (a) the agency is a “body of experts,” id. at 2200 (quoting Humphrey’s Ex’r, 

295 U.S. at 624); (b) the agency is nonpartisan or balanced along partisan lines, ibid.; and (c) the 

agency is closer to “a mere legislative or judicial aid” that “was said not to exercise any 

enforcement power,” id. at 2199–2200, or rather an enforcement body that may “promulgate 

binding rules,” “unilaterally issue final decisions awarding legal and equitable relief in 

8The Seila Law Court also recognized an exception for “inferior officers with limited duties and no 

policymaking or administrative authority” under Morrison v. Olson, 487 U.S. 654 (1988). See Seila Law, 140 S. Ct. 

at 2199–2200. However, this exception does not apply to the FDIC Board, which qualifies as the head of a 

department. See Free Enter. Fund, 561 U.S. at 512–13 (explaining that multimember commissions can qualify as 

head of a department).
No. 20-4303 Calcutt v. FDIC Page 22

administrative adjudications,” and “seek daunting monetary penalties against private parties on 

behalf of the United States in federal court,” id. at 2200.

At the second step, if an agency structure does not fall within an established exception, 

we must determine “whether to extend those precedents to the ‘new situation.’” Seila Law, 

140 S. Ct. at 2201 (quoting Free Enter. Fund, 561 U.S. at 483). In concluding that the CFPB 

Director was unconstitutionally shielded from removal, the Seila Law Court emphasized two key 

features: the historical novelty of an agency headed by a single director removable only for 

cause, and the inconsistency of this design with constitutional structure. Id. at 2201–04. 

As for the historical inquiry, the Court canvassed American history and found only 

“modern and contested” examples of agencies headed by a single director who enjoyed goodcause tenure, such as the Federal Housing Finance Agency (“FHFA”) Director, and a “one-year 

blip” during the Civil War in which the Comptroller of the Currency received for-cause 

protections. Id. at 2202; see also Collins, 141 S. Ct. at 1783 (holding that removal restriction for 

FHFA Director was unconstitutional, and that Seila Law was “all but dispositive” on the 

question).

As for the structural inquiry, the Court underscored that the constitutional scheme’s 

combination of the separation of powers and democratic accountability foreclosed 

executive officers from exercising significant authority without direct presidential supervision. 

The Constitution emphasizes the division of power, but it also recognized the need for an 

“energetic executive” to respond quickly and flexibly to challenges. Seila Law, 140 S. Ct. at 

2203 (discussing The Federalist No. 51 (James Madison) and The Federalist No. 70 (Alexander 

Hamilton)). To resolve these dueling priorities, the Constitution makes the President directly 

accountable to the American people through elections, allowing him to delegate authority to 

subordinate officials to complete the tasks of governance so long as that delegated authority 

“remains subject to the ongoing supervision and control of the elected President.” Ibid. The 

CFPB Director’s for-cause protections violated this structure because, by eliminating the 

President’s ability to remove the CFPB Director at will, the CFPB concentrated power in a 

single officer while insulating him from presidential control. Id. at 2204. This infirmity was 

exacerbated by the CFPB Director’s five-year term, which meant that “some Presidents may not 
No. 20-4303 Calcutt v. FDIC Page 23

have any opportunity to shape its leadership,” and the agency’s independence from the normal 

appropriations process. Ibid.

We need not delve deeply into the Seila Law inquiry in this case, however, because 

Collins instructs that relief from agency proceedings is predicated on a showing of harm, a 

requirement that forecloses Calcutt from receiving the relief he seeks. See 141 S. Ct. at 1788–89. 

Collins concerned the Director of the Federal Housing Finance Agency, an agency with authority 

to regulate and act as the conservator or receiver of the Federal National Mortgage Association 

(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Collins, 

141 S. Ct. at 1770. Acting as the companies’ conservator, the FHFA amended stock purchasing 

agreements with the Treasury Department, which altered the dividends that Fannie Mae and 

Freddie Mac were required to pay to Treasury in exchange for capital. See id. at 1772–75. 

Shareholders of the companies brought suit against the FHFA and the FHFA Director as a result. 

See id. at 1775. As relevant here, the shareholders argued that the statutory for-cause removal 

protection of the FHFA Director violated the separation of powers, see id. at 1778, and that 

therefore the amendment to the FHFA-Treasury agreement “must be completely undone,” id. at 

1787.

The Supreme Court agreed that the for-cause removal provision was unconstitutional, as 

its decision in Seila Law was “all but dispositive.” Id. at 1783. Just as the CFPB in that decision 

presented a “novel context of an independent agency led by a single Director” whose for-cause 

removal protections “lack[ed] a foundation in historical practice and clashe[d] with constitutional 

structure by concentrating power in a unilateral actor insulated from Presidential control,” so too 

did the single-director structure and removal protections in the FHFA unconstitutionally limit the 

President’s removal power. Id. at 1783–84 (quoting Seila Law, 140 S. Ct. at 2192). 

Yet although the removal restriction was unconstitutional, the Court held that the 

shareholders were not entitled to relief absent further findings by the lower courts. The 

shareholders were not entitled to a prospective remedy, because a subsequent agreement between 

the FHFA and Treasury had deleted the dividend formula that caused the alleged injury. Id. at 

1779–80. As to retrospective relief for the claimed injury during the years that the dividend 

formula was in effect, the Court observed that “[a]lthough the statute unconstitutionally limited 
No. 20-4303 Calcutt v. FDIC Page 24

the President’s authority to remove the confirmed Directors, there was no constitutional defect in 

the statutorily prescribed method of appointment to that office.” Id. at 1787. Thus, the Director 

“lawfully possess[ed]” the power to implement the provision. Id. at 1788. 

The Court explained that the shareholders would be entitled to relief if the 

unconstitutional removal restriction “inflict[ed] compensable harm,” and it remanded the case to 

the Court of Appeals to conduct this inquiry. Id. at 1789. To establish such harm, the 

shareholders would need to show that the removal restriction specifically impacted the agency 

actions of which they complained:

Suppose, for example, that the President had attempted to remove a Director but 

was prevented from doing so by a lower court decision holding that he did not 

have “cause” for removal. Or suppose that the President had made a public 

statement expressing displeasure with actions taken by a Director and had 

asserted that he would remove the Director if the statute did not stand in the way. 

In those situations, the statutory provision would clearly cause harm.

Ibid. Several concurring Justices confirmed that a petitioner would have to establish that an 

unconstitutional removal protection specifically caused an agency action in order to be entitled to 

judicial invalidation of that action. See id. at 1789 (Thomas, J., concurring) (agreeing with 

majority’s remedial analysis “that, to the extent a Government action violates the Constitution, 

the remedy should fit the injury”); id. at 1801 (Kagan, J., concurring in part and concurring in the 

judgment) (“I also agree that plaintiffs alleging a removal violation are entitled to injunctive 

relief—a rewinding of agency action—only when the President’s inability to fire an agency head 

affected the complained-of decision.”); id. at 1803 n.1 (Sotomayor, J., concurring in part and 

dissenting in part) (agreeing with majority’s remedial discussion).

Calcutt attempts to distinguish Collins by observing that the decision concerned only 

retrospective relief, because the FHFA had already ended the challenged action, whereas 

Calcutt’s Removal and Prohibition Order remains in effect and operates prospectively. That 

distinction does not matter here. The Collins inquiry focuses on whether a “harm” occurred that 

would create an entitlement to a remedy, rather than the nature of the remedy, and our 

determination as to whether an unconstitutional removal protection “inflicted harm” remains the 

same whether the petitioner seeks retrospective or prospective relief (particularly when we 
No. 20-4303 Calcutt v. FDIC Page 25

review an adjudication that has already ended). Collins, 141 S. Ct. at 1789. In other words, 

Collins instructs that we must ask whether the FDIC Board’s for-cause protections “inflicted 

harm,” such as by preventing superior officers from removing Board members when they 

attempted to do so, or possibly by altering the Board’s behavior. Ibid. The Removal and 

Prohibition Order’s prospective effect does not change a court’s ability to conduct that inquiry.

Collins thus provides a clear instruction: To invalidate an agency action due to a removal 

violation, that constitutional infirmity must “cause harm” to the challenging party. Ibid. Our 

sister circuits that have considered the question agree that this is the key inquiry. See Kaufmann 

v. Kijakazi, 32 F.4th 843, 849 (9th Cir. 2022) (explaining that “[a] party challenging an agency’s 

past actions must . . . show how the unconstitutional removal provision actually harmed the 

party”); Bhatti v. Fed. Housing Fin. Agency, 15 F.4th 848, 854 (8th Cir. 2021) (identifying issue 

under Collins as whether unconstitutional removal restriction “caused compensable harm”);9

Decker Coal Co. v. Pehringer, 8 F.4th 1123, 1137 (9th Cir. 2021) (stating that, under the 

“controlling” authority of Collins, “[a]bsent a showing of harm, we refuse to unwind the 

[agency] decisions below”).

Calcutt has not demonstrated that the structure of the FDIC Board caused him harm. 

He first states that the FDIC Board’s Removal and Prohibition Order “inflicts ongoing harm” by 

preventing him from participating in banking activities. Reply Br. 10. However, Collins does 

not say that any administrative penalty imposed by an unconstitutionally-structured agency must 

be vacated. Instead, the constitutional violation must have caused the harm. See Collins, 

141 S. Ct. 1789 (identifying inquiry as whether “an unconstitutional provision . . . inflict[ed] 

compensable harm”). 

Calcutt also argues that the possibility that the FDIC would have taken different actions in 

his case, if the Board not been unconstitutionally shielded from removal, means that we should 

9

In Bhatti, the Eighth Circuit also remanded to the district court “to determine if the shareholders suffered 

‘compensable harm’ and are entitled to ‘retrospective relief.’” Bhatti, 15 F.4th at 854 (quoting Collins, 141 S. Ct. at 

1789). This language does not conflict with our conclusion that Collins does not rest on whether relief is 

prospective or retrospective, because Bhatti concerned the same agency actions as Collins did. See id. at 852. 

Because the Collins Court recognized that only retrospective relief was available to Fannie Mae and Freddie Mac 

shareholders, the Bhatti court followed that precedent. See ibid.
No. 20-4303 Calcutt v. FDIC Page 26

vacate and remand. Taken in isolation, some language in Collins might be read to support this 

view. See, e.g., ibid. (“[T]he possibility that the unconstitutional restriction on the President’s 

power to remove a Director of the FHFA could have such an effect [of inflicting compensable 

harm] cannot be ruled out.”). But such a broad reading would effectively eliminate any need to 

show that unconstitutional removal protections caused harm, because a petitioner could always 

assert a possibility that an agency with different personnel might have acted differently. The 

Collins Court was not deterred from its holding by the very possibility that harm might occur; 

rather, it indicated that a more concrete showing was needed.

Calcutt also posits that if the FDIC Board had not been unconstitutionally insulated from 

removal, after Lucia it might have “altered [its] behavior,” ibid., and provided new proceedings 

as recommended by the Solicitor General, see Mem. from the Solicitor General to Agency 

General Counsels, Guidance on Administrative Law Judges after Lucia v. SEC (S. Ct.) 8–9, 

https://static.reuters.com/resources/media/editorial/20180723/ALJ--SGMEMO.pdf (last visited 

May 24, 2022). While failure to follow executive-branch policy could certainly help indicate 

that a removal restriction inflicted harm, that is not what happened here. As we explain further 

below, the FDIC provided a new hearing to Calcutt consistent with Lucia. See infra at 30–35. 

We also fail to see how the FDIC disregarded the Solicitor General’s guidance. The Solicitor 

General told agencies that while “a full soup-to-nuts redo of the administrative proceeding” was 

“the safest course” after Lucia, it was not the only course available:

While litigants may be expected to argue otherwise, however, we do not believe a 

complete do-over is constitutionally required. We believe that a ‘new hearing’ 

will be constitutionally adequate as long as the new ALJ is careful to avoid any 

taint from the prior ALJ’s decision. Thus, we do not think it is necessarily fatal if 

the new ALJ starts with the existing record in the proceeding (including hearing 

transcripts), much of which there would be little purpose in generating anew.

Mem. from the Solicitor General to Agency General Counsels 8–9. Thus, we disagree with 

Calcutt’s suggestion that the FDIC Board failed to follow executive-branch policy—let alone that 

it did so because of its removal protections.

Finally, Calcutt asks this court to remand to the FDIC to determine whether the removal 

restriction “inflicted harm” in his case, as the Collins court also remanded for further findings. 
No. 20-4303 Calcutt v. FDIC Page 27

We do not think this step is necessary. The record is sufficiently clear that the removal 

protections did not cause harm, and Calcutt provides only vague, generalized allegations in 

response. See Decker Coal Co., 8 F.4th at 1137 (declining to remand where “the record is 

clear”). We also note that, unlike the Collins Court or the Eighth Circuit in Bhatti, we would be 

remanding to an agency rather than another court. See Collins, 141 S. Ct. at 1789 (remanding to 

court of appeals); Bhatti, 15 F.4th at 854 (remanding to district court to determine whether 

Fannie Mae and Freddie Mac shareholders suffered compensable harm entitling them to relief 

under Collins). We do not see how yet another proceeding before the FDIC would aid in 

developing the record on this point.

B. FDIC ALJ Structure

Calcutt’s separation-of-powers challenge to the removal protections of FDIC ALJs is 

unsuccessful for similar reasons as his challenge to the structure of the FDIC Board. First and 

foremost, even if we were to accept that the removal protections for the FDIC ALJs posed a 

constitutional problem, Calcutt is not entitled to relief unless he establishes that those protections 

“inflict[ed] compensable harm,” and he has not made this showing. Collins, 141 S. Ct. at 1789. 

Second, even if he established that the removal protections caused him harm, Free Enterprise 

Fund explicitly excludes ALJs from its prohibition on multiple levels of for-cause removal 

protection, and thus, like Seila Law, it only provides weak support for his position. See Free 

Enter. Fund, 561 U.S. at 507 n.10. 

To recall, FDIC ALJs can only be removed if the MSPB finds that there is “good cause” 

for removal on the record after an opportunity for a hearing. 5 U.S.C. § 7521(a). The President 

may remove MSPB members “only for inefficiency, neglect of duty, or malfeasance in office.” 

5 U.S.C. § 1202(d). Additionally, the FDIC ALJs are housed in an interagency body—the Office 

of Financial Institution Adjudication, or OFIA—composed of the FDIC, OCC, FRB, and NCUA. 

The memorandum of understanding for OFIA states: “Any change to the Office Staff personnel 

shall be subject to the prior written approval of all Agencies.” See Ex. L to Emergency Motion 

for Stay Pending Review, at 3. According to Calcutt, OFIA’s structure “magnifies the 

constitutional problem” by requiring all four member agencies to consent before “initiat[ing] 

ALJ removal proceedings.” Br. of Petitioner 30.
No. 20-4303 Calcutt v. FDIC Page 28

We begin with the Collins issue. As previously discussed, that decision requires a 

showing that an unconstitutional removal restriction “cause[d] harm” to invalidate an agency 

action. 141 S. Ct. at 1789.10 Here, again, Calcutt offers vague assertions that it “cannot be ruled 

out” that the multiple levels of for-cause removal protections insulating ALJ McNeil caused him 

harm, but a generalized allegation is insufficient for affording relief. Reply Br. 18 (quoting 

Collins, 141 S. Ct. at 1789). He also argues that had these removal restrictions not been in place,

ALJ McNeil would have been more responsive to executive-branch policy, would have properly 

offered a new hearing after Lucia, and would not have issued a recommended decision 

that conflicted with the FDI Act. But those arguments are premised on the success of Calcutt’s 

other claims of constitutional and statutory violations, and as we explain below, none of those 

claims succeed. See infra at 30–35, 37–53. Thus, he cannot rely on those allegations of harm, 

either.

An additional feature in this case further suggests that no harm was caused by the 

removal restrictions. Before Lucia, FDIC adjudications were performed by two ALJs who were 

not appointed by the FDIC Board: ALJ Miserendino and ALJ McNeil. After Lucia held that 

similar ALJs in the SEC were inferior officers who must be appointed by the President, a court of 

law, or a head of department, see 138 S. Ct. at 2051 (citing U.S. Const. art. II, § 2, cl. 2), the 

FDIC could have appointed new ALJs. However, it simply appointed the officials who had 

previously been acting as ALJs—including ALJ McNeil. In the specific circumstances of this 

case, where the FDIC newly appointed an ALJ when it had the option not to do so, it is unlikely 

that the restriction on the removal of the ALJ prevented the agency from pursuing a different 

path respecting Calcutt.

Even if relief were available, we doubt Calcutt could establish a constitutional violation 

from the ALJ removal restrictions. Though Free Enterprise Fund concluded that the two layers 

of for-cause protections enjoyed by the members of the Public Company Accounting Oversight 

Board were “incompatible with the Constitution’s separation of powers,” Free Enter. Fund, 

10Even if the restrictions on the removal of FDIC ALJs were invalid, both parties agree that ALJ McNeil 

was validly appointed. Therefore, we need not address whether Calcutt would be entitled to relief on grounds 

specifically relating to McNeil’s appointment. See Collins, 141 S. Ct. at 1787–88.
No. 20-4303 Calcutt v. FDIC Page 29

561 U.S. at 498, the Court took care to omit ALJs from the scope of its holding, id. at 507 n.10 

(“[O]ur holding also does not address that subset of independent agency employees who serve as 

administrative law judges.”). The Court explained that its decision did not apply to ALJs for 

several reasons: “Whether administrative law judges are necessarily ‘Officers of the United 

States’ is disputed,” and many ALJs “perform adjudicative rather than enforcement or 

policymaking functions, . . . or possess purely recommendatory powers.” Ibid. (citing Landry v. 

FDIC, 204 F.3d 1125 (D.C. Cir. 2000) (statutory citations omitted)). Similarly, as then-Judge 

Kavanaugh explained in dissent in the District of Columbia Circuit proceedings, the for-cause 

protections of ALJs are distinguishable because agencies can choose not to use ALJs in 

adjudications; ALJs may not be officers (as the law stood at that time); and many ALJs perform 

adjudicatory functions that are subject to review by higher agency officials, which “arguably 

would not be considered ‘central to the functioning of the executive Branch’ for purposes of the 

Article II removal precedents.” Free Enter. Fund v. Pub. Co. Acct. Oversight Bd., 537 F.3d 667, 

699 n.8 (D.C. Cir. 2008) (Kavanaugh, J., dissenting) (quoting Morrison v. Olson, 487 U.S. 654, 

691–92 (1988)). 

Other than the argument that ALJs are not officers, which Lucia forecloses, see 138 S. Ct. 

at 2053–54, these rationales still apply to the FDIC ALJs. First, the FDIC ALJs perform 

adjudicatory functions, and they file a recommended decision that is subject to review by the 

FDIC Board. See Free Enter. Fund, 561 U.S. at 496 n.10; Free Enter. Fund, 537 F.3d at 699 n.8 

(Kavanaugh, J., dissenting); 12 C.F.R. § 308.38(a). Second, “Congress has not tied the 

President’s hands and hindered his control over his subordinates here.” Decker Coal Co., 8 F.4th 

at 1133. Rather, the FDIC must conduct hearings “in accordance with the provisions of [the 

APA],” 12 U.S.C. § 1818(h)(1), and the APA permits an agency to choose whether to preside 

over an adjudication itself, allow one or more members to be presiding officers, or use an ALJ, 

5 U.S.C. § 556(b). In short, though Calcutt is correct that Free Enterprise Fund left open 

whether it applied to ALJs, that decision’s reasoning for exempting ALJs still extends to this 

case.

Calcutt and amicus Chamber of Commerce of the United States of America also argue 

that the structure of OFIA provides particularly egregious removal protections for FDIC ALJs 
No. 20-4303 Calcutt v. FDIC Page 30

that violate the separation of powers. Under OFIA’s governing memorandum of understanding, 

all the constituent agencies of OFIA—the FDIC, OCC, FRB, and NCUA—must approve 

“[a]ny change to the Office Staff personnel.” Ex. L to Emergency Motion for Stay Pending 

Review, at 3. According to Calcutt, this provision means that each agency has veto power over 

any other agency’s attempt to remove an ALJ. Exacerbating this problem, he adds, several of the 

agencies who must agree to removal also enjoy for-cause protection. See 12 U.S.C. § 242 

(FRB); 12 U.S.C. § 1752a(c) (NCUA Board members serve fixed terms); supra at 6 (FDIC forcause protections). 

Although OFIA may present a “novel structure,” Free Enter. Fund, 561 U.S. at 495, the 

Free Enterprise Fund exception for ALJs centers on their status as adjudicatory officials that 

issue non-final recommendations to an agency, and not on how many levels of removal 

protections they enjoy, see id. at 496 n.10. Consequently, OFIA does not present a reason for us 

to hold that the removal restrictions for FDIC ALJs violates constitutional separation of powers. 

More importantly, even if we were to find such a violation, Collins decisively precludes relief for 

Calcutt.

C. Appointments Clause

The Appointments Clause requires that “Officers of the United States” be appointed by 

the President with the advice and consent of the Senate, but Congress may allow “inferior 

Officers” to be appointed by the President alone, by courts, or by heads of departments. 

U.S. Const. art. II, § 2, cl. 2. “[T]he ‘appropriate’ remedy for an adjudication tainted with an 

appointments violation is a new ‘hearing before a properly appointed official.’” Lucia, 

138 S. Ct. at 2055 (quoting Ryder v. United States, 515 U.S. 177, 188 (1995)). Calcutt argues 

that he did not receive this “new hearing,” but he is wrong.

Calcutt states that the FDIC ALJs are “inferior Officers,” and the FDIC does not contest 

this point. We agree that FDIC ALJs are inferior officers and that they were improperly 

appointed before Lucia. Cf. Burgess v. FDIC, 871 F.3d 297, 302–03 (5th Cir. 2017) 

(reasoning that FDIC ALJs are officers). Because they are inferior officers, the FDIC ALJs must 

be appointed by the President, a court, or the FDIC Board. U.S. Const. art. II, § 2, cl. 2. Prior to 
No. 20-4303 Calcutt v. FDIC Page 31

2018, the FDIC Board did not appoint the ALJs, so their appointments were invalid. See Jones 

Bros., 898 F.3d at 679.

Calcutt and the FDIC also agree up to a point that the remedy for the prior Appointments 

Clause violation is “a new ‘hearing before a properly appointed’ official” distinct from the 

previous ALJ. Lucia, 138 S. Ct. at 2055 (quoting Ryder, 515 U.S. at 188). However, Calcutt 

argues that a new hearing must consist of an entirely new proceeding, where the new adjudicator 

starts from scratch and ignores the record from the prior proceeding. He specifically objects to 

ALJ McNeil’s admission of stipulations and transcripts from the 2015 proceedings, and he 

contends that ALJ Miserendino’s procedural rulings in 2015 narrowed the scope of discovery in a 

manner that impacted the 2019 proceedings. The FDIC, in contrast, contends that the “new 

hearing” requires only a new, independent evaluation of the merits of a case without limiting 

consideration of the prior record, and that therefore ALJ McNeil’s use of the 2015 record was 

proper. 

Lucia does not specify what features a “new hearing” must contain, other than a new 

adjudicator. 138 S. Ct. at 2055. Other decisions addressing the remedies for Appointments 

Clause violations are similarly vague. See Ryder, 515 U.S. at 188 (holding that petitioner “is 

entitled to a hearing before a properly appointed panel” of military court); Jones Bros., 898 F.3d 

at 679 (holding that petitioner “is entitled to a new hearing before a constitutionally appointed 

administrative law judge” and remanding for “fresh proceedings”). 

Other decisions indicate that courts afford agencies more leeway on remand after 

Appointments Clause violations than Calcutt’s all-or-nothing position suggests. In Lucia, for 

example, the Supreme Court recognized that in situations where “there is no substitute 

decisionmaker” after an Appointments Clause violation, a new hearing before the original 

decisionmaker could be proper. Lucia, 138 S. Ct. at 2055 n.5 (citing FTC v. Cement Inst., 

333 U.S. 683, 700–03 (1948)). The Federal Circuit, after finding that administrative patent 

judges were invalidly appointed, also explained that it required a “new hearing” before a “new 

panel” of judges, but that it saw “no error in the new panel proceeding on the existing record” 

and left to the agency’s “sound discretion” whether to “allow additional briefing or reopen the 

record in any individual case.” Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320, 1340 
No. 20-4303 Calcutt v. FDIC Page 32

(Fed. Cir. 2019), vacated on alternate grounds and remanded sub nom. United States v. Arthrex, 

Inc., 141 S. Ct. 1970 (2021).11 For its part, the Court of Appeals for the District of Columbia 

Circuit rejected a petitioner’s claim that a new proceeding by a properly appointed official must 

involve entirely new proceedings that ignore the prior record. Intercollegiate Broad. Sys., Inc. v. 

Copyright Royalty Bd., 796 F.3d. 111, 117–19 (D.C. Cir. 2015). Instead, that court concluded 

that a subsequent proceeding is valid when “a properly appointed official has the power to 

conduct an independent evaluation of the merits and does so,” id. at 117, and that as a 

constitutional matter this “independent evaluation” could include a review of prior records and 

transcripts, see id. at 122. 

This reluctance to adopt a bright-light rule makes sense. To hold that all adjudications 

must start from zero after a judicial decision invalidating ALJ appointments would result in 

cumbersome, repetitive processes throughout the executive branch simply to produce findings 

and orders that would often be identical the second time around. Moreover, as the District of 

Columbia Circuit observed, an “independent evaluation of the merits” does not require an ALJ to 

ignore all past proceedings: Independence is not a synonym for ignorance. See id. at 121–23.12

Thus, our inquiry focuses on whether ALJ McNeil’s consideration of the 2015 

stipulations and testimony showed “sufficient continuing taint arising from the first 

[proceeding]” to demonstrate that the second proceeding was not “an independent, de novo 

11We note that although the Supreme Court stated that a new hearing was unnecessary in Arthrex, it 

explained that Arthrex was not entitled to a new hearing before a new panel “[b]ecause the source of the 

constitutional violation is the restraint on the review authority of the Director [of the Patent and Trademark Office], 

rather than the appointment of [administrative patent judges] by the Secretary [of Commerce].” Arthrex, 141 S. Ct. 

at 1988 (emphases added). This decision thus did not reject the Federal Circuit’s conclusion that, if the 

administrative patent judges’ appointments had been invalid, a new hearing would be appropriate, including some 

consideration of the original record.

12Our dissenting colleague characterizes our approach as a cost-benefit balancing exercise. See Dissent at 

74. But determining whether a new ALJ can conduct an “independent evaluation of the merits,” see Intercollegiate 

Broad. Sys., 796 F.3d at 117, involves analyzing the impact of those past proceedings on a current adjudication—an 

inquiry that bears little resemblance to a weighing of the relative costs and benefits of a new administrative 

proceeding. Though we mention prudential considerations that favor our approach, we do not rely on them. 

Instead, our conclusion rests on the principle illustrated in Intercollegiate Broadcasting System and other decisions 

that, following an Appointments Clause violation, a new proceeding affords adequate remedy when a new 

decisionmaker can independently consider the merits. See id. at 117–20; Arthrex, 941 F.3d at 1340.
No. 20-4303 Calcutt v. FDIC Page 33

decision.” Id. at 124 (citing Fed. Election Comm’n v. Legi-Tech, Inc., 75 F.3d 704, 708 n.5 (D.C. 

Cir. 1996)). No such ongoing impact occurred here.

First, ALJ Miserendino’s general ability to shape the record at the 2015 hearing does not 

demonstrate that ALJ McNeil lacked independence. Calcutt implies that any decision at a prior 

proceeding that shapes the record of a later proceeding invalidates the latter’s outcome. That 

goes too far. See Intercollegiate Broad. Sys., 796 F.3d at 124 (explaining that “not every possible 

kind of taint is fatal because, if it were, there would be no way to remedy an Appointments 

Clause violation”); Legi-Tech, 75 F.3d at 708–09 (accepting that past Appointments Clause 

violation will have some impact on later proceedings, but refusing to restart administrative 

process). And where a party receives an opportunity to submit additional evidence and to specify 

alleged defects in the first proceeding, as the FDIC’s order after Lucia provided here, the 

subsequent proceeding is even more likely to be independent. 

Second, ALJ McNeil’s reliance on stipulations that the FDIC, Calcutt, Green, and 

Jackson made during the 2015 proceedings before Green and Jackson settled did not taint the 

proceedings. Calcutt and amicus Washington Legal Foundation argue that the settlement altered 

the facts that Calcutt would have conceded. At most, however, the cases cited by the parties 

show that courts sometimes accept stipulations made in prior proceedings and sometimes do not, 

and that these decisions are reviewed for abuse of discretion. See United States v. Kanu, 

695 F.3d 74, 78 (D.C. Cir. 2012); Waldorf v. Shuta, 142 F.3d 601, 616 (3d Cir. 1998); Hunt v. 

Marchetti, 824 F.2d 916, 918 (11th Cir. 1987). To the extent that these decisions about judicial 

proceedings apply to administrative adjudications, ALJ McNeil did not abuse his discretion. In 

Waldorf, the court specified that “a stipulation does not continue to bind the parties if they 

expressly limited it to the first proceeding or if the parties intended the stipulation to apply only 

at the first trial,” 142 F.3d at 616, and in this case the parties had agreed to stipulations at the 

2015 proceedings without expressly limiting the stipulations to those proceedings. Moreover, 

while stipulations from prior proceedings may be excluded if their admission would create a 

“manifest injustice,” Kanu, 695 F.3d at 78, Calcutt did not deny that the stipulations were 

accurate, but rather argued that they were irrelevant or inappropriate to the new proceeding now 

that that his co-respondents had settled. The ALJ did not abuse his discretion by admitting the 
No. 20-4303 Calcutt v. FDIC Page 34

stipulations when Calcutt had failed to show that their admission would produce manifest 

injustice and had failed to expressly limit their use to the prior proceedings.

Finally, Calcutt contends that ALJ McNeil and the FDIC Board’s use of the record of the 

2015 hearing hampered their ability to make an independent judgment. At the 2019 hearing, 

Calcutt objected to using that record for all but two witnesses,13 except for impeachment 

purposes. ALJ McNeil indicated that he was willing to use the entire 2015 record for substantive 

as well as impeachment purposes, and he ultimately used that record at several points throughout 

the hearing and his recommended decision. The FDIC Board then referred to the 2015 record in 

its final decision at several points, including instances when the 2015 record was the only cited 

evidence. It also concluded that it could consider Calcutt’s testimony during 2015 as either 

impeachment or substantive evidence. 

This inclusion of the 2015 record also did not prevent ALJ McNeil and the Board from 

conducting an “independent evaluation of the merits.” Intercollegiate Broad. Sys., 796 F.3d at 

122. To begin with, Calcutt’s prior testimony likely qualifies as an opposing party’s statement, 

despite his objection. See 12 C.F.R. § 308.36(a)(2) (permitting admission of evidence that would 

be admissible under Federal Rules of Evidence); United States v. Cunningham, 679 F.3d 355, 

383 (6th Cir. 2012) (explaining that Federal Rule of Evidence 801(d)(2)(A) allows “a party’s 

own statement to be offered as evidence against that party even where the statement would 

otherwise be inadmissible as hearsay”). Additional testimony from 2015 was corroborated by 

other evidence. The remaining isolated instances in which either ALJ McNeil or the Board relied 

on the 2015 record for substantive conclusions do not convince us that the agency was unable to 

independently consider the merits of Calcutt’s case. And, if there was error at these points in its 

analysis, it was likely harmless due to the abundance of evidence in the record supporting the 

agency’s decision. See 5 U.S.C. § 706(2); see also infra at 37–53.

In sum, Lucia required that Calcutt receive a new hearing, and that is what he got. A new 

hearing need not be from scratch; rather, the impact of the prior proceeding must be sufficiently 

muted that the new adjudicator can independently consider the merits. ALJ McNeil and the 

13The parties agreed by stipulation to introduce the 2015 testimony of Dennis O’Neill and Charles Bird, 

two FDIC examiners.
No. 20-4303 Calcutt v. FDIC Page 35

FDIC Board did not abuse their discretion by admitting the 2015 materials when they remained 

capable of drawing their own conclusions about Calcutt’s case.

IV. HEARING CHALLENGES

We now turn from Calcutt’s structural constitutional challenges to his claims regarding 

the specifics of his 2019 hearing. These fall into three categories: a challenge relating to the 

decision of the ALJ to limit cross-examination on bias at the hearing, a challenge to the 

substance of the FDIC Board’s findings and conclusions, and an abuse-of-discretion challenge to 

the FDIC Board’s choice of sanction. 

A. Cross-Examination

Under the FDI Act and the APA, parties are entitled “to conduct such cross-examination 

as may be required for a full and true disclosure of the facts.” 5 U.S.C. § 556(d); see 12 U.S.C. 

§ 1818(h)(1) (requiring FDIC hearings to be conducted in accordance with APA adjudication 

procedures). The FDIC’s regulations provide that evidence which would be admissible under the 

Federal Rules of Evidence is also admissible in an enforcement hearing, 12 C.F.R.

§ 308.36(a)(2), and that evidence that would be inadmissible under the Federal Rules of 

Evidence is admissible in the hearing if it is “relevant, material, reliable, and not unduly 

repetitive,” id. § 308.36(a)(3); see id. § 308.36(a)(1). Calcutt argues that ALJ McNeil erred 

under these provisions by limiting cross-examination of Autumn Berden, Cori Nielson, and Anne 

Miessner regarding their purported bias against Calcutt, and that the Board erred by accepting 

these limitations. The parties agree that neither Berden, Nielson, nor Miessner testified about 

bias at the hearing. 

We review an ALJ’s exclusion of evidence under an abuse-of-discretion standard. NLRB 

v. Jackson Hosp. Corp., 557 F.3d 301, 305–06 (6th Cir. 2009). An abuse of discretion occurs 

when the ALJ “applies the wrong legal standard, misapplies the correct legal standard, or relies 

on clearly erroneous findings of fact.” B & G Mining, Inc. v. Dir., Off. of Workers’ Comp. 

Programs, 522 F.3d 657, 661 (6th Cir. 2008) (quotation marks omitted). 
No. 20-4303 Calcutt v. FDIC Page 36

Yet, “due account must be taken of the rule of prejudicial error.” 5 U.S.C. § 706(2); see 

12 U.S.C. § 1818(h)(2) (providing that the APA governs review of FDIC enforcement 

proceedings). This language applies the federal harmless-error standard from civil cases. See 

Shinseki v. Sanders, 556 U.S. 396, 406–07 (2009). We employ a “case-specific application of 

judgment, based upon examination of the record,” id. at 407, to determine whether the error 

“affect[ed] the substantial rights of the parties,” 28 U.S.C. § 2111. An error is not harmless 

when, for example, an agency violates its own procedural rules and the petitioner shows that he 

“has been prejudiced on the merits or deprived of substantial rights because of the agency’s 

procedural lapses.” Wilson v. Comm’r of Soc. Sec., 378 F.3d 541, 547 (6th Cir. 2004) (quotation 

marks and emphasis omitted).

We need not reach whether ALJ McNeil abused his discretion in limiting crossexamination on the bias of Berden, Nielson, and Miessner, because even if he did, that error was 

harmless. As we have explained in the civil context, an adjudicator’s erroneous exclusion of 

evidence is not prejudicial, and therefore is harmless, “if other substantially equivalent evidence 

of the same facts [was] admitted into evidence.” In re Air Crash Disaster, 86 F.3d 498, 526 (6th 

Cir. 1996) (quoting Leonard v. Uniroyal, Inc., 765 F.3d 560, 567 (6th Cir. 1985) (alteration in 

original)). Thus, we recently observed that where a court excluded evidence of police interview 

transcripts but the record contained depositions of “most of the same witnesses” quoted in the 

transcripts, any error was harmless. M.J. v. Akron City Sch. Dist. Bd. of Educ., 1 F.4th 436, 447 

(6th Cir. 2021); see also Smith v. Woolace Elec. Corp., 822 F. App’x 409, 417 (6th Cir. 2020) 

(potential error over excluding witness’s testimony was harmless where plaintiff “introduced 

substantially equivalent evidence” through another witness’s testimony).

ALJ McNeil and the FDIC Board had access to the 2015 record, which contained 

substantially equivalent evidence regarding Berden, Nielson, and Miessner’s bias. See supra at 

31–35. During those earlier proceedings, Calcutt’s counsel examined Berden, Nielson, and 

Miessner about their bias and alleged collaboration. Other documents in the record were also 

relevant to bias, including an email where Nielson told Miessner about difficulties with 

Northwestern Bank, requested that the FDIC contact Michigan regulators, and stated, “I just wish 

there was a fresh face to talk to at the bank—all this collateral damage is meaningless”; an email 
No. 20-4303 Calcutt v. FDIC Page 37

in which Miessner communicated with Michigan regulators regarding Nielson’s request;

Berden’s handwritten notes from meetings with FDIC officials; and an email correspondence 

between Miessner, Nielson, and Berden about FDIC charges against Calcutt, titled “A little news 

to brighten your weekend.” Although further cross-examination would have allowed Calcutt to 

further develop his bias argument, the availability of these other materials indicates that the 

agency’s factfinders possessed sufficient information regarding the possible bias of Berden, 

Nielson, and Miessner to render any error harmless. Thus, the limits on cross-examination do 

not necessitate a new proceeding.

B. Substantive Challenges

As previously discussed, Section 8(e) of the FDI Act permits the FDIC to enter a removal 

and prohibition order against an institution-affiliated party after finding that three elements have 

been met: misconduct, effects, and culpability. See Dodge, 744 F.3d at 152. Misconduct occurs 

when a party has “directly or indirectly” violated a law or regulation, “engaged or participated in 

any unsafe or unsound practice” connected with an insured institution, or breached a fiduciary 

duty. 12 U.S.C. § 1818(e)(1)(A). The requisite effects take place when, “by reason of” the 

misconduct, the insured institution “has suffered or will probably suffer financial loss or other 

damage,” its depositors’ interests are prejudiced, or the party “has received financial gain or 

other benefit by reason of” the misconduct. Id. § 1818(e)(1)(B). And the culpability element is 

met when the party’s action “involves personal dishonesty” or “demonstrates willful or 

continuing disregard . . . for the safety or soundness” of the insured institution. Id. 

§ 1818(e)(1)(C). We review the FDIC Board’s factual findings for substantial evidence and set 

aside the agency’s legal conclusions if they are “arbitrary, capricious, an abuse of discretion, or 

otherwise not in accordance with law.” Pharaon v. Bd. of Governors of Fed. Rsrv. Sys., 135 F.3d 

148, 152 (D.C. Cir. 1998) (quoting 5 U.S.C. § 706(2)(A)).14

Calcutt argues that the FDIC exceeded its statutory authority by finding misconduct when 

none of his actions qualified under the statutory definitions, failing to demonstrate that any 

14Though the FDIC Board’s interpretation of Section 8(e) of the FDI Act may receive persuasive weight, at 

least one of our sister circuits has explained that the FDIC receives no Chevron deference to its interpretation of the 

Act, because several agencies administer that statute. Dodge, 744 F.3d at 155.
No. 20-4303 Calcutt v. FDIC Page 38

effects resulted “by reason of” of the misconduct, and failing to identify qualifying effects. 

He therefore does not challenge the Board’s finding as to his culpability, so we do not address 

that part of the Removal and Prohibition Order. He also challenges his civil money penalty only 

to the extent that the Board’s reasoning for the penalty overlaps with its analysis supporting the 

Removal and Prohibition Order. 

1. Misconduct

As to misconduct, Calcutt maintains that the FDIC Board erred by determining that his 

actions constituted an “unsafe or unsound practice” or a breach of fiduciary duties under the 

statute.15 We disagree.

a. Unsafe or Unsound Practice

The FDI Act does not define an “unsafe or unsound practice,” and the term is interpreted 

flexibly. See Seidman v. Off. of Thrift Supervision (Matter of Seidman), 37 F.3d 911, 926–27 

(3d Cir. 1994). However, courts have generally treated the phrase as referring to two 

components: “(1) an imprudent act (2) that places an abnormal risk of financial loss or damage 

on a banking institution.” Id. at 932; see also Michael v. FDIC, 687 F.3d 337, 352 (7th Cir. 

2012) (same); Landry, 204 F.3d at 1138 (identifying imprudent-act and abnormal-financial-risk 

components).

Calcutt emphasizes the financial-risk component and argues that the Bedrock Transaction 

did not pose an abnormal financial risk to Northwestern Bank. Along with amicus American 

Association of Bank Directors, he characterizes the Bedrock Transaction as a good-faith attempt 

to shore up one of the Bank’s largest lending relationships during the tumult of the Great 

Recession by releasing collateral and extending a loan that amounted to only a fraction of the 

Nielson Entities’ total debt. And even if the $760,000 loan and $600,000 in collateral were 

ultimately not collected, he says, that loss would have been insignificant, considering that the 

Bank’s Tier 1 capital totaled more than $70 million. 

15The FDIC does not argue that Calcutt’s actions violated any explicit statute, regulation, cease-and-desist 

order, or other similar requirement. Cf. 12 U.S.C. § 1818(e)(1)(A)(i).
No. 20-4303 Calcutt v. FDIC Page 39

The FDIC responds that the statute does not require a finding of a threat to bank stability 

in order to find “unsafe or unsound” practice, and that “[c]ourts have affirmed prohibition orders 

based on unsafe and unsound practices with a much more limited effect.” Br. of Respondent 46. 

That reading contradicts the analyses of our sister circuits in Seidman, Michael, and Landry, and 

the decisions that the agency cites in support of its interpretation are not convincing. Ulrich v. 

U.S. Department of Treasury is a Ninth Circuit memorandum in which the court concluded that a 

loan “fraught” with financial risk, not just a limited effect, was an unsafe or unsound practice. 

129 F. App’x 386, 390 (9th Cir. 2005). Other decisions that the FDIC cites—Gully v. National 

Credit Union Administration Board, 341 F.3d 155 (2d Cir. 2003), First State Bank of Wayne 

County v. FDIC, 770 F.2d 81 (6th Cir. 1985), and Jameson v. FDIC, 931 F.2d 290 (5th Cir. 

1991)—did not engage with the question of whether financial risk to the institution was 

necessary to demonstrate an unsafe or unsound practice. Still other cited decisions linked a 

finding of unsafe or unsound practices to abnormal financial risks, again controverting the FDIC. 

See Gulf Fed. Sav. & Loan Ass’n of Jefferson Parish v. Fed. Home Loan Bank Bd., 651 F.2d 259, 

264 (5th Cir. 1981); Matter of ***, FDIC-83-252b&c, FDIC-84-49b, FDIC-84-50e 

(Consolidated Action), 1985 WL 303871, at *9 (FDIC Aug. 19, 1985).

Whether or not we interpret the statute to require a finding of abnormal financial risk, 

however, the FDIC’s finding that Calcutt committed an “unsafe or unsound practice” is 

supported by substantial evidence. First, Calcutt does not address the Board’s finding that he 

“repeatedly concealed material information about the Nielson Loans” from regulators, and that 

such misrepresentations “constitute unsafe or unsound practices.” See De la Fuente, 332 F.3d at 

1224 (“Failure to disclose relevant information to a government investigator can constitute an 

unsound banking practice.”); Seidman, 37 F.3d at 937 (stating that “hindering [a financial 

regulatory agency] investigation is an unsafe or unsound practice”). 

Second, the record supports the FDIC Board’s conclusion that Calcutt committed 

additional imprudent acts that posed an abnormal financial risk. In particular, the Board 

underscored that when the Nielson Entities indicated to the Bank that they would not be able to 

pay off their loans in 2009, Calcutt declined to seek additional financial information and instead 

approved the Bedrock Transaction, which extended further credit to the Entities and renewed the 
No. 20-4303 Calcutt v. FDIC Page 40

outstanding $4.5 million in loans to Bedrock Holdings. The Board also found that Calcutt’s 

actions violated the Bank’s commercial-loan policy because he approved the Bedrock 

Transaction without either determining that the Nielson Entities had sufficient income to service 

their debt, obtaining personal guarantees on the loans, or receiving approval by a two-thirds 

majority of the board of directors. 

Calcutt responds that such actions do not constitute “unsafe or unsound” practices absent 

abnormal financial risk to the Bank, and that his actions did not present such a risk. His first 

proposition may be correct. See Seidman, 37 F.3d at 932. However, Calcutt’s actions concerned 

the Bank’s largest lending relationship—the Nielson Entities—which represented approximately 

$38 million in loans and half of the Bank’s Tier 1 capital. The FDIC Board had substantial 

evidence to find that his actions presented a risk in this context, even if it did not explicitly draw 

that connection. See Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 377 (1998) 

(explaining that substantial-evidence test “gives the agency the benefit of the doubt, since it 

requires not the degree of evidence which satisfies the court that the requisite fact exists, but 

merely the degree which could satisfy a reasonable factfinder” (emphasis omitted)). We 

therefore hold that the FDIC Board did not err in determining that Calcutt engaged in unsafe or 

unsound practices.

b. Breach of Fiduciary Duties

The FDIC Board also concluded that the misconduct element was satisfied because 

Calcutt breached his fiduciary duties of care and candor. See 12 U.S.C. § 1818(e)(1)(A)(iii). 

These duties are determined by state law rather than federal common law. See Atherton v. FDIC, 

519 U.S. 213, 226 (1997) (holding that state law rather than federal common law defines 

standard of care for corporate governance); Mickowski v. Visi-Trak Worldwide, LLC, 415 F.3d 

501, 511–12 (6th Cir. 2005). Under Michigan law, bank directors and officers have a fiduciary 

duty to act with the degree of care “that an ordinarily prudent person would exercise under 

similar circumstances in a like position.” Mich. Comp. Laws Ann. § 487.13504(1) (2021). 

And in other contexts, Michigan courts have recognized that “[a] fiduciary has an affirmative 

duty to disclose” material facts relating to the fiduciary relationship to a principal. Silberstein v. 

Pro-Golf of Am., Inc., 750 N.W.2d 615, 624 (Mich. Ct. App. 2008); see also Lumber Vill., Inc. v. 
No. 20-4303 Calcutt v. FDIC Page 41

Siegler, 355 N.W.2d 654, 694–95 (Mich. Ct. App. 1984) (recognizing that courts may toll the 

statute of limitations for fraudulent concealment actions when a fiduciary fails to inform a 

principal of material facts relating to the claim, because “there is an affirmative duty to disclose 

where the parties are in a fiduciary relationship”).

On appeal, Calcutt presents three arguments, none availing. First, he contends that he 

cannot have violated his duty of care, because his actions did not create an “undue risk” to the 

Bank. Br. of Petitioner 51 (quoting Kaplan v. Off. of Thrift Supervision, 104 F.3d 417, 421 (D.C. 

Cir. 1997)). This argument echoes his position that he did not commit an “unsafe or unsound” 

practice with regard to the Bedrock Transaction.16 See Landry, 204 F.3d at 1138 (noting overlap 

in analyses of breach of fiduciary duties and unsafe or unsound practices). And it fails for the 

same reason as his unsafe-or-unsound claim: The record presents substantial evidence to support 

a finding of financial risk. 

Second, Calcutt argues that the Board’s finding that he failed to supervise his 

subordinates (namely Green, Jackson, and other Bank employees) does not indicate that he 

breached his duty of care. It is true that an officer does not necessarily violate a duty of care 

merely because subordinates failed to follow orders. See Doolittle v. Nat’l Credit Union Admin., 

992 F.2d 1531, 1537 (11th Cir. 1993); see also Kaplan, 104 F.3d at 422 (explaining that 

director’s approval of plan that ultimately led other officers and directors to “dishonestly short 

circuit the required procedures” was not “remotely foreseeable” and did not “contribut[e] to any 

increased risk” to institution). 

But even if Green, Jackson, and other employees committed many of the actions related 

to the Nielson Entities, Calcutt remains responsible if he knew about their actions and permitted 

them to occur. Failure to supervise subordinates breaches an officer’s duty of care when the 

officer knows about subordinates’ activities or buries his head in the sand. See Hoye v. Meek, 

795 F.2d 893, 896 (10th Cir. 1986) (holding that bank director and president inadequately 

supervised subordinate, because “[w]here suspicions are aroused, or should be aroused, it is the 

16We note that the Board also concluded that the December 2010 release of Pillay Collateral violated the 

duty of care, but it did not conclude that the collateral release constituted an unsafe or unsound practice. This 

difference between the two types of misconduct findings does not affect our analysis.
No. 20-4303 Calcutt v. FDIC Page 42

directors’ duty to make necessary inquiries”). In Doolittle, for instance, the Eleventh Circuit 

clarified that an officer was not responsible for his subordinates’ actions when he gave proper 

orders to them, they failed to follow those orders, and he attempted to take remedial measures, 

but that those circumstances did not present “a case where a fiduciary engaged in imprudent 

lending activities or stood idle and allowed damage to increase.” 992 F.2d at 1537.17

The record provides substantial evidence that Calcutt knew about his subordinates’ 

activities and permitted them to continue. For instance, in 2008, he was involved in discussions 

with Green and the Nielsons involving the suggestion that they change their methods of 

intercompany loans. Calcutt was aware of the Nielson Entities’ difficulty in paying their loans, 

although he testified that he thought that they were “posturing.” He received correspondence 

directly from the Nielsons. Berden testified that though Calcutt would not attend all meetings, 

Green often sought his approval before proceeding in negotiations. Calcutt had received a memo 

from Green in November 2009 describing the loan to Bedrock Holdings. He was aware of (and 

possibly participated in approving) the sale of Nielson Entity loans to affiliated banks. And 

Green reported directly to Calcutt. There was ample evidence for the FDIC Board to find that he 

had breached his duty of care by failing to supervise subordinates.

Finally, Calcutt resists the Board’s conclusion that he breached his duty of candor to the 

Bank’s board of directors by failing to timely disclose the information about the status of the 

Nielson Loans and the Bedrock Transaction. He asserts that the duty of candor requires 

corporate fiduciaries to “disclose only ‘material information relevant to corporate decisions from 

which [the fiduciary] may derive a personal benefit,’” and that he did not have a personal interest 

in the Bedrock Transaction. Br. of Petitioner 53 (quoting De la Fuente, 332 F.3d at 1222 

(alteration in original)). Even if we accept this framing of the duty, however, the FDIC 

concluded that Calcutt derived a personal benefit from misrepresenting the status of the Nielson 

17Calcutt and amicus American Association of Bank Directors refer to the business-judgment rule and urge 

us not to fault Calcutt for taking what they characterize as reasonable, good-faith, but ultimately mistaken decisions 

in managing the Bank. Michigan courts have recognized that “[i]nterference with the business judgment of 

corporate directors is not justified by allegations that a different policy could have been followed.” Matter of Est. of 

Butterfield, 341 N.W.2d 453, 462 (Mich. 1983). However, they also recognize that a breach of fiduciary duty merits 

judicial intervention. Ibid. The business-judgment rule thus does not prevent us from considering whether Calcutt 

breached fiduciary duties.
No. 20-4303 Calcutt v. FDIC Page 43

Loans to regulators, because he received dividends through the Bank’s holding company that 

reflected the Bank’s artificially inflated income. To the extent that substantial evidence supports 

the personal-benefit determination, the finding that Calcutt breached his duty of candor would 

also be sufficiently supported. In addition, even if Calcutt did not receive a personal benefit, the 

support for the Board’s finding that he committed unsafe and unsound practices and violated the 

duty of care means that this error would be harmless. See Sanders, 556 U.S. at 407.

In sum, we decline to set aside the Board’s conclusions that Calcutt met the misconduct 

element of the statute.

2. Effects

Under the FDI Act, the FDIC must find that “by reason of” Calcutt’s misconduct, one or 

more of the following effects resulted: The Bank “has suffered or will probably suffer financial 

loss or other damage,” its “depositors have been or could be prejudiced,” or Calcutt “has 

received financial gain or other benefit.” 12 U.S.C. § 1818(e)(1)(B). The FDIC Board found 

that three types of harms qualified under this provision: (1) a $30,000 charge-off to the $760,000 

Bedrock Loan that the Bank recorded; (2) $6.443 million in other charge-offs that the Bank 

recorded on other Nielson Loans; and (3) investigative, legal, and auditing expenses that the 

Bank incurred. It also found that Calcutt received a financial benefit, because he received 

dividends from the Bank’s holding company that would have been smaller had he reported the 

condition of the Nielson Loans and not approved the Bedrock Transaction or 2010 release of 

Pillay Collateral. 

Calcutt commences by arguing that the Board erred by failing to read the statute’s “by 

reason of” language to require proximate causation. In its final decision, the FDIC was 

unwilling to apply a proximate-causation standard, instead stating that “an individual respondent 

need not be the proximate cause of the harm to be held liable under section 8(e).”

Because Section 8(e) requires that a bank’s loss or potential loss, or a party’s benefit, 

occur “by reason of” the misconduct, it mandates proximate causation. 12 U.S.C. 

§ 1818(e)(1)(B). Recently, we observed that “[t]he Supreme Court has repeatedly and explicitly 

held that when Congress uses the phrase ‘by reason of’ in a statute, it intends to require a 
No. 20-4303 Calcutt v. FDIC Page 44

showing of proximate cause.” Crosby v. Twitter, Inc., 921 F.3d 617, 623 (6th Cir. 2019) 

(quoting Kemper v. Deutsche Bank AG, 911 F.3d 383, 391 (7th Cir. 2018)). This interpretation 

has occurred in the context of other statutory schemes. See Hemi Grp., LLC v. City of New York, 

559 U.S. 1, 9 (2010) (civil RICO statute, 18 U.S.C. § 1964(c)); Holmes v. Sec. Inv. Prot. Corp., 

503 U.S. 258, 268 (1992) (same); Crosby, 921 F.3d at 623 (Anti-Terrorism Act, 18 U.S.C. 

§ 2333). The FDIC has not offered a reason why the phrase should not have the same meaning 

in Section 8(e), and “[i]n the absence of any statutory definition to the contrary, courts assume 

that Congress adopts the customary meaning of the terms it uses.” United States v. Detroit Med. 

Ctr., 833 F.3d 671, 674 (6th Cir. 2016) (citing Morissette v. United States, 342 U.S. 246, 263 

(1952)). 

The FDIC alternatively argues that its formulation—that “by reason of” requires only “a 

causal ‘nexus’ between the misconduct and harm, or that harm was reasonably foreseeable”—is 

consistent with proximate causation. Br. of Respondent 50. This has some appeal; after all, it is 

notoriously difficult for judges to define proximate cause. See Associated Gen. Contractors of 

Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 535–36, 535 n.32 (1983); Crosby, 

921 F.3d at 623–24. We also recognize that in prior adjudications, the FDIC has concluded 

that a reasonably foreseeable loss “satisfies the ‘effects’ requirement.” Matter of Conover, 

Nos. FDIC-13-214e, FDIC-13-217k, 2016 WL 10822038, at *22 (FDIC Dec. 14, 2016); see also 

Matter of ***, 1985 WL 303871, at *114 (declining to characterize the causation standard as 

proximate cause). However, while reasonable foreseeability may be a necessary component of 

proximate causation, it is not sufficient: “substantiality, directness, and foreseeability are all 

relevant in a proximate cause determination,” though these concepts may overlap. Crosby, 

921 F.3d at 624. 

The decisions cited by the FDIC as support for its view are consistent with a proximatecausation definition of “by reason of” that incorporates substantiality, directness, and 

foreseeability. In De la Fuente, for example, the Ninth Circuit held that a risk of loss must be 

“reasonably foreseeable,” but did not conclude that reasonable foreseeability alone was enough 

for liability. 332 F.3d at 1223; see also United States v. Gamble, 709 F.3d 541, 549 (6th Cir. 

2013) (holding that harms must be reasonably foreseeable to be proximately caused, but not 
No. 20-4303 Calcutt v. FDIC Page 45

stating that reasonable foreseeability is sufficient). Haynes v. FDIC, a memorandum, seemingly 

treated “reasonably foreseeable” as interchangeable with “by reason of,” but did so in a summary 

fashion that we do not consider persuasive. See 664 F. App’x 635, 637 (9th Cir. 2016). 

Although in Landry, the Court of Appeals for the District of Columbia Circuit recognized that an 

individual could be liable for the effects of misconduct even if he acted “only indirectly,” the 

court was construing the misconduct element of Section 8(e). 204 F.3d at 1139; see 12 U.S.C. 

§ 1818(e)(1)(A) (identifying relevant finding as whether a party has “directly or indirectly” 

committed misconduct). We do not read that decision to say that when it comes to the effects 

inquiry, reasonable foreseeability alone suffices to show causation. 

With the causation standard established, we consider the statutory effects identified by 

the FDIC Board. We conclude that substantial evidence supports the conclusion that some—but 

not all—of the impacts to the Bank are “effects” under Section 8(e) and were proximately caused 

by Calcutt’s misconduct.

a. The $30,000 Charge-Off on the $760,000 Bedrock Loan 

The charge-off on the loan to Bedrock Holdings, which was part of the Bedrock 

Transaction, is an effect under the statute. Calcutt argues that a charge-off does not reflect actual 

losses but rather estimates possible future loss, but the FDI Act is clear that a loss that a bank 

will “probably suffer” qualifies as an effect, 12 U.S.C. § 1818(e)(1)(B)(i). Similarly, an 

estimated loss is sufficient. See Dodge, 744 F.3d at 158 (explaining that effects requirement “is 

satisfied by evidence of either potential or actual loss to the financial institution, and the exact 

amount of harm need not be proven”); Pharaon, 135 F.3d at 157 (holding that FDIC Board need 

not “demonstrate the exact amount of harm”). Though Calcutt argues that some charge-offs are 

too small to constitute effects, we need not address this issue, because the FDIC supplemented its 

finding with respect to the $30,000 effect with several other findings of effects. And the record 

indicates that, because Calcutt participated extensively in negotiating and approving the Bedrock 

Transaction, his actions proximately caused the Bedrock Loan charge-off. 
No. 20-4303 Calcutt v. FDIC Page 46

b. Investigative, Auditing, and Legal Expenses 

The FDIC Board also agreed with ALJ McNeil that Calcutt’s misconduct caused the 

Bank to incur expenses by retaining a CPA firm and a legal firm to conduct work relating to the 

regulatory problems with the Nielson Entities relationship. We conclude, however, that such 

professional fees are not “effects” under Section 8(e). Banks regularly engage accounting and 

legal firms as part of their normal business, and we do not see how employing such businesses 

for additional services related to imprudent loans is meaningfully different from their run-of-themill engagements. 

The FDIC Board reasoned that though legal fees “presumptively are a normal cost of 

doing business,” they can constitute an effect when they “are coupled with other ‘non-neutral 

indicia of loss,’” and that the Bank’s payments to a CPA firm and loan charge-offs constituted 

such other non-neutral indicia. See Matter of Proffitt, FDIC-96-105e, 1998 WL 850087, at *9 

n.11 (FDIC Oct. 6, 1998) (considering “a [court] judgment of improper and illegal behavior” in a 

related lawsuit to be a non-neutral indicium). We are unpersuaded by this rationale: If 

professional fees are not a loss unless they are coupled with other “non-neutral indicia of loss,” 

then it may be that the fees do not have any independent significance. The two FDIC decisions 

cited by the Board exemplify this problem, since in both instances banks suffered losses in 

addition to their payment of professional fees. In Matter of Proffitt, the Board explained that “a 

judgment of improper and illegal behavior”—in that context, a court judgment awarding a bank 

to pay damages—plus legal fees could establish a qualifying loss. Id. at *3, *9 & n.11. And in 

Matter of Shollenburg, the bank suffered additional losses besides professional fees in order to 

satisfy tax laws that the respondents had violated. See FDIC-00-88e, 2003 WL 1986896, at *12–

13 (FDIC Mar. 11, 2003).

c. $6.443 Million in Other Losses

Next, the Board found that Calcutt’s actions cost the Bank $6.443 million in losses from 

other loans to the Nielson Entities, and that his approval of the release of approximately 

$1.2 million in Pillay Collateral prevented the Bank from using those funds to recoup part of 

those losses. Apart from asserting that the Board failed to apply a proximate-causation standard, 
No. 20-4303 Calcutt v. FDIC Page 47

Calcutt argues that under that standard, the $6.443 million loss does not count as an effect, 

because it represents a probable future loss from the entire Nielson Entity loan portfolio that 

would have occurred regardless of his actions, and because the $1.2 million in released collateral 

was used to pay off the Nielson Entities’ debts, thereby benefitting the Bank.18

Only part of the $6.443 million in charge-offs can be described as an effect proximately 

caused by Calcutt’s misconduct. Recall that the Nielson Entities indicated that they were unable 

to pay off debts as early as 2009. The Bank probably would have incurred some loss no matter 

what Calcutt did: Although multiple parties’ actions can proximately cause the same outcome, 

the state of the Bank’s relationship with the Nielson Entities suggests that Calcutt’s actions did 

not substantially or directly contribute to all of its ultimate losses. 

Additionally, the FDIC’s explanation for considering the $1.2 million of released 

collateral in its loss calculation is unconvincing. In its decision, the FDIC Board reasoned that 

had Calcutt not participated in the release of the Pillay Collateral in 2009 and 2010, those funds 

would have been available to pay off debts owed by certain Nielson Entities that were secured by 

that collateral. But that view ignores that the release of Pillay Collateral was used to satisfy 

other Nielson Entity debts, and that the FDIC, in calculating the $6.443 million in losses, 

considered all of the Bank’s loans to the companies together. We fail to see how the agency 

could reasonably consider the interrelatedness of the Nielson Entities in one part of its loss 

calculation and ignore those connections in another. Thus, the mere release of the $1.2 million 

in collateral does not qualify as an effect.

Nevertheless, there is substantial evidence that part of the $6.443 million in losses was an 

effect of Calcutt’s actions. The record indicates that Calcutt, knowing that the Nielson Entities 

were near default and that they were a large lending relationship, extended credit and renewed 

loans to them while concealing these transactions and the scale of the problem from the Bank’s 

board and from regulators. ALJ McNeil also found that, in 2009, the Nielson Entities had 

proposed loan renewals, forbearance, deeds in lieu of foreclosure, and other mechanisms to 

relieve their obligations. Though Calcutt may have thought that these options would have 

18Calcutt also suggests that because the $6.443 million was recorded in charge-offs, it does not qualify as a 

loss. For the reasons previously discussed, this view fails. See supra at 45. 
No. 20-4303 Calcutt v. FDIC Page 48

resulted in “sure losses” to the Bank, the FDIC could have concluded from the record that his 

decision to extend additional loans ultimately exacerbated the problem. 

Additionally, there is substantial evidence that Calcutt’s actions resulted in probable 

future losses to the Bank. Cf. 12 U.S.C. § 1818(e)(1)(B)(i) (permitting effects finding where 

bank “will probably suffer financial loss or other damage”); Proffitt v. FDIC, 200 F.3d 855, 863 

(D.C. Cir. 2000) (noting that “the effect prong can be met by either potential or actual ‘financial 

loss or other damage’”). Even if there were insufficient evidence that Calcutt’s actions 

surrounding the Bedrock Transaction and 2010 release of Pillay Collateral caused an actual loss, 

his negotiation with the Nielson Entities and approval of loans despite indications that they 

would not be able to repay their debts was a direct, substantial, and foreseeable cause of a 

situation in which the Bank could suffer a potential loss. The record also shows that Calcutt’s 

actions prevented the board and regulators from discovering and mitigating the probable losses 

from these activities. Cf. Seidman, 37 F.3d at 937 (noting, in the context of identifying an unsafe 

or unsound practice, that a chairman of a board of director’s “attempt to obstruct the 

investigation, if continued, would pose an abnormal risk of damage” to the agency). Relying on

board members’ testimony and contemporaneous board minutes,19 ALJ McNeil found that the 

board did not approve the loan to Bedrock Holdings until several months after the loan had 

already been made. And Miessner testified (despite Calcutt’s theory that she was biased) that, in 

her opinion, misrepresenting the condition of the Bank’s loans with the Nielson Entities exposed 

the Bank to additional risk. In these circumstances, we conclude from the record as a whole that 

Calcutt’s actions proximately caused an actual and potential loss to the Bank—even if the loss 

did not amount to the total of $6.443 million.

d. Holding Company Dividends

Finally, the Board concluded that the dividends Calcutt received from the Bank’s holding 

company qualified as a financial benefit that satisfied the “effects” element. See 12 U.S.C. 

§ 1818(e)(1)(B)(iii) (providing that an effect is present when a party “has received financial gain 

or other benefit by reason of such violation, practice, or breach”). The holding company, 

19ALJ McNeil also found that Calcutt’s testimony regarding the timing of the board’s approval of the 

Bedrock Transaction was not credible. 
No. 20-4303 Calcutt v. FDIC Page 49

Northwestern Bancorp, wholly owned the Bank, and Calcutt held approximately ten percent of 

the shares in the holding company. In 2010 and 2011, the Bank paid dividends to Northwestern 

Bancorp. The holding company, in turn, paid a dividend to its shareholders. Calcutt argues that 

his alleged misconduct cannot have proximately caused a financial benefit, because 

Northwestern Bancorp operated independently from the Bank and had alternative sources of 

income; thus, even if the Bank’s income appeared inflated due to the improper reporting of the 

Nielson Loans, it did not substantially affect the holding company’s payout to shareholders.

As in the circumstance of the FDIC’s categorization of the $6.443 million in losses, the 

record compels an answer somewhere in between the two parties’ positions. On one hand, the 

FDIC did not point to specific evidence in the record showing that Northwestern Bancorp’s 

dividends with certainty reflected the inflated earnings from the Nielson Entities. It simply 

assumed (and reasonably so) that the dividends paid by the holding company reflected the value 

of the dividends paid by the Bank. On the other hand, Calcutt does not really challenge the 

findings that the Bank paid a dividend to the holding company, nor that the Bank’s dividend 

reflected its inflated representation of the Nielson Loans’ performance. Rather, his position is 

that the holding company still might have paid out dividends from its other sources of income. 

He does not provide evidence (other than his own testimony, which is stated in general terms)20

that the holding company had ever paid dividends over and above a reflection of the Bank’s 

perceived performance. Absent such evidence, we are skeptical that the Bank’s earnings did not 

impact its holding company’s dividend payments. On balance, the evidence and common sense 

support the agency’s position as to this effects finding.

e. Cumulative Effects

In sum, the support for the effects findings made by the FDIC Board are mixed. Taken 

together, the $30,000 charge-off on the Bedrock Loan, some of the $6.443 million in other losses 

related to the Nielson Entities, and some of the dividend payments that Calcutt received from 

20“Q. Did the holding company have sufficient capacity to make payments to shareholders regardless of 

whether there were dividends being paid by the Bank to the holding company?

A. [Calcutt:] Yes, for some years the holding company not only had its own assets that generated some 

income but it had a line of credit so it had capacity to make dividend payments to shareholders. Again, we were, we 

were laughed at a bit in the industry because we had one of the lowest dividend payout ratios that was recorded.”
No. 20-4303 Calcutt v. FDIC Page 50

Northwestern Bancorp occurred “by reason of” his misconduct surrounding loan activities and 

misrepresentations to the Bank’s board of directors and regulators. But the Bank’s auditing and 

legal fees do not qualify as an effect, and Calcutt’s actions may not have proximately caused 

some of the losses and dividend payments.

These conclusions lead to a further question: If some, but not all, of the FDIC’s effects 

findings are supported, should the Removal and Prohibition Order be remanded? One might 

argue that had the FDIC only considered those effects for which the record presented substantial 

evidence, it would not have thought it appropriate to remove Calcutt from his banking positions 

and prohibit him from participation in the industry. Or, perhaps one might say that the whittleddown effects findings are sufficiently minimal to compel us to send the matter back to the agency 

for further findings and proceedings. 

A remand is not necessary, for several reasons. To start, the text of the statute indicates 

that if substantial evidence supports the FDIC’s finding as to one effect out of multiple 

possibilities, the fact that it fails to adequately support its other effects findings does not limit its 

power to issue a removal and prohibition order. Section 8(e)(1)(B) separates the categories of 

permissible effects by the disjunctive term “or”: The agency must find that “by reason of” the 

misconduct, 

(i) such insured depository institution . . . has suffered or will probably suffer 

financial loss or other damage; 

(ii) the interests of the insured depository institution’s depositors have been or 

could be prejudiced; or

(iii) such party has received financial gain or other benefit . . . .

12 U.S.C. § 1818(e)(1)(B) (emphases added). Generally, “terms connected by a disjunctive [are] 

given separate meanings, unless the context dictates otherwise.” Reiter v. Sonotone Corp., 

442 U.S. 330, 339 (1979). For example, when a statute lists two activities connected by “or,” the 

natural reading is usually that it applies to either activity. See Encino Motorcars, LLC v. 

Navarro, 138 S. Ct. 1134, 1141 (2018). Thus, the text of the FDI Act permits the FDIC to 

remove and prohibit a party (assuming that the misconduct and culpability elements are met) as 

long as the evidence supports a finding of one out of any of the options provided by Section 
No. 20-4303 Calcutt v. FDIC Page 51

8(e)(1)(B). Because we conclude here that substantial evidence supports several of the FDIC’s 

effects findings, the statutory text indicates that the Removal and Prohibition Order should stand.

Additionally, other circuits have also suggested that when such a finding can be 

supported by one of several alternative bases, courts should deny petitions challenging the 

agency’s order. In Dodge, for example, the District of Columbia Circuit upheld an effects 

finding when substantial evidence supported the Comptroller of the Currency’s conclusions that 

a bank’s depositors could be prejudiced under Section 8(e)(1)(B)(ii) and that the petitioner 

received a financial benefit under Section 8(e)(1)(B)(iii)—even when the court declined to rely 

on the Comptroller’s finding of potential harm to the bank under Section 8(e)(1)(B)(i). 744 F.3d 

at 158. And in De la Fuente, the Ninth Circuit held that the FDIC Board “correctly concluded 

that De La Fuente’s [sic] actions had an impermissible effect because he received financial 

benefit from the transaction and/or because the interests of [the bank’s] depositors were 

prejudiced thereby.” 332 F.3d at 1223 (emphasis added). That is, the court suggested that even 

if the Board had incorrectly concluded that the petitioner received financial benefit, its separate 

finding of prejudice to depositors was sufficient to satisfy the effects element.

Finally, a remand would be in tension with the substantial-evidence standard of review 

for factual findings. In conducting this review, we consider the whole record, 5 U.S.C. § 706(2), 

but we must uphold an agency’s decision even if we “would decide the matter differently . . . and 

even if substantial evidence also supports the opposite conclusion.” Gen. Med., P.C., 963 F.3d at 

520 (quoting Cutlip, 25 F.3d at 286). As we have explained, the record in this case provides 

substantial evidence to conclude that Calcutt’s actions produced sufficient effects to merit the 

FDIC’s sanction, even if some findings as to other effects were incorrect. We cannot nitpick the 

agency’s factfinding more than that. 

Our dissenting colleague would nonetheless remand the petition to the FDIC, reasoning 

that only that remedy is consistent with the principle that courts may not uphold an agency’s 

order “unless the grounds upon which the agency acted in exercising its powers were those upon 

which its action can be sustained.” SEC v. Chenery Corp., 318 U.S. 80, 95 (1943). While we do 

not question Chenery, that decision does not mean that a court must remand where the agency 

makes any legal error, especially where substantial evidence amply supports an agency’s 
No. 20-4303 Calcutt v. FDIC Page 52

findings. Remand is unnecessary where an agency’s “incorrect reasoning was confined to that 

discrete question of law and played no part in its discretionary determination,” and it reaches a 

conclusion that it was bound to reach. United Video, Inc. v. FCC, 890 F.2d 1173, 1190 (D.C. Cir. 

1989); see also Morgan Stanley Cap. Grp. Inc. v. Pub. Util. Dist. No. 1., 554 U.S. 527, 545 

(2008) (“That [the agency] provided a different rationale for the necessary result is no cause for 

upsetting its ruling.”). Reading Chenery so broadly as to compel remand in such circumstances 

would result in yet another agency proceeding that amounts to “an idle and useless formality.” 

NLRB v. Wyman-Gordon Co., 394 U.S. 759, 766 n.6 (1969) (plurality op.). And it would risk 

contradicting the harmless-error rule in courts’ review of agency action. See Sanders, 556 U.S. 

at 406–07.

Thus, we do not uphold the FDIC’s order in this case simply by substituting our 

reasoning for the agency’s discretionary determinations. Rather, our inquiry focuses on whether 

substantial evidence supports the FDIC’s factual findings that the charge-offs, dividends, and 

other expenses were “effects” under the statute. Notwithstanding the agency’s error in 

identifying the appropriate causation standard, and our conclusion that legal expenses do not 

qualify as “effects,” the agency’s findings clear this hurdle. We decline to remand the petition to 

the FDIC.

3. Sanction

Finally, Calcutt claims that the FDIC’s order removing him from his position and 

prohibiting him from future banking activities is an abuse of discretion. Courts review a removal 

sanction for abuse of discretion. Grubb v. FDIC, 34 F.3d 956, 963 (10th Cir. 1994). A sanction 

constitutes an abuse of discretion when it “is unwarranted in law or without justification in fact.” 

Ibid. (quoting Butz v. Glover Livestock Comm’n Co., 411 U.S. 182, 185–86 (1973)) (quotation 

marks omitted). According to Calcutt, his penalty is “plainly excessive” in light of his 

subsequent, misconduct-free work for State Savings Bank, his age, and the harshness of the 

penalty. Br. of Petitioner 63. True, removal and prohibition are “extraordinary sanction[s].” 

De la Fuente, 332 F.3d at 1227. And, as Calcutt notes, the FDIC could have opted to proceed 

with only a cease-and-desist order or civil monetary penalty. But for the reasons we have 

explained, Section 8(e) clearly permits removal and prohibition for the actions that the FDIC 
No. 20-4303 Calcutt v. FDIC Page 53

alleges in this case, and the FDIC’s conclusions are well supported. The agency’s sanction 

choice is not an abuse of discretion under these circumstances.

V. CONCLUSION

For the reasons above, we deny Calcutt’s petition for review and vacate our stay of the 

FDIC’s Removal and Prohibition Order.
No. 20-4303 Calcutt v. FDIC Page 54

_________________

DISSENT

_________________

MURPHY, Circuit Judge, dissenting. After adjudging Harry Calcutt guilty of 

misconduct in the management of a bank, the Federal Deposit Insurance Corporation (FDIC) 

issued an order that would bar him from working in his profession and fine him $125,000. 

Calcutt challenges this order on constitutional and statutory grounds. My colleagues reject all of 

his claims. I agree with them on his constitutional claims but must part ways on his statutory 

ones.

Calcutt’s three constitutional claims do not entitle him to relief. He first alleges that 

Congress has unconstitutionally restricted the President’s right to terminate (and so to control) 

the FDIC’s Board of Directors. But his argument rests on a misreading of the Board’s enabling 

statute. It gives the President complete authority to fire most of the Board’s members. Calcutt 

next argues that Congress at least gave one Board member and the FDIC’s administrative law 

judges unconstitutional protections from removal. Even assuming that this claim has merit, 

however, he fails to show why these unconstitutional statutes would entitle him to the relief that 

he seeks—vacatur of the FDIC’s actions in his case as “void.” The Constitution itself requires 

no remedy. And I would read recent Supreme Court precedent to bar his preferred remedy 

because that reading best comports with the historical practices that we should follow until 

Congress says otherwise. Calcutt lastly notes that the first administrative law judge who heard 

his case had not been appointed in a manner that comported with the Constitution’s 

Appointments Clause. The Board agreed and gave him a new hearing before a new judge. 

Calcutt now claims that the Appointments Clause barred this new judge from relying on any 

evidence developed at the initial hearing. But again, nothing in the Constitution required any 

remedy, let alone Calcutt’s expansive one.

Calcutt’s statutory claims are another matter. The FDIC misread the statute on which it 

relied to sanction him. Of most note, the FDIC cannot bar Calcutt from banking unless it proves 

that his bank will suffer a loss (or that he will receive a benefit) “by reason of” his misconduct. 

12 U.S.C. § 1818(e)(1)(B). As the Supreme Court has long made clear, the phrase “by reason 
No. 20-4303 Calcutt v. FDIC Page 55

of” incorporates common-law principles of but-for and proximate cause. Yet the FDIC’s order 

ignored but-for cause and disavowed proximate cause. In fact, the agency held Calcutt liable for 

his bank’s entire loss from underwater loans even though the Great Recession likely would have 

caused the bank to suffer much (if not all) of this loss no matter what he did. Congress has given 

the FDIC “extraordinary power” to regulate private parties with only limited judicial oversight. 

In re Seidman, 37 F.3d 911, 929 (3d Cir. 1994). After Stern v. Marshall, 564 U.S. 462 (2011), 

one might wonder whether the agency exercises judicial power by adjudicating cases that 

deprive individuals of private rights. At the least, its significant authority should make us 

diligent to ensure that the agency has “turn[ed] square corners when” dealing with the regulated 

community. Niz-Chavez v. Garland, 141 S. Ct. 1474, 1486 (2021). Because the FDIC did not 

do so in this case, I would remand for it to apply the proper law. I thus respectfully dissent.

I. Background

Calcutt served for years as the President and Chairman of Northwestern Bank in Traverse 

City, Michigan. During his tenure, entities controlled by the Nielson family (the “Nielson 

Entities”) became the Bank’s largest borrowers with $38 million in loans. The Nielson Entities 

ran real-estate businesses that struggled during the Great Recession. They defaulted in 

September 2009. Two months later, the Bank entered into the “Bedrock Transaction” with the 

entities. It issued them another $760,000 loan and released to them $600,000 of funds held as a 

security interest. Yet things did not improve. The Nielson Entities again defaulted in September 

2010. After the Bank released to them another $690,000 in secured funds, the entities defaulted 

a final time in January 2011. The Bank incurred $6.443 million in “charge-offs” (amounts 

unlikely to be collected) from the loans and $30,000 in charge-offs from the Bedrock 

Transaction.

These events led the FDIC to seek to “remove” Calcutt “from office” and to impose a 

“civil penalty” on him. 12 U.S.C. § 1818(e)(1), (i)(2)(B). The first administrative law judge 

who heard his case had been unlawfully appointed, so the FDIC assigned him a new judge. This 

judge found that Calcutt had committed many statutory violations and that the FDIC should bar 

him from banking and fine him $125,000. The FDIC agreed. It held that Calcutt had engaged in 

“unsafe or unsound practice[s]” and committed “breach[es]” of his “fiduciary dut[ies]” mainly in 
No. 20-4303 Calcutt v. FDIC Page 56

connection with the Bedrock Transaction. Id. § 1818(e)(1)(A)(ii)–(iii). Among other 

misconduct, it found that he had violated the Bank’s lending standards by agreeing to that 

transaction, had hid the transaction’s true nature from the Bank’s board of directors, and, perhaps 

most seriously, had lied to regulators about it. The FDIC also found that the Bank would likely 

suffer “financial loss” and that Calcutt had “received financial gain” “by reason of” this 

misconduct. Id. § 1818(e)(1)(B).

II. Constitutional Claims

I agree with my colleagues that Calcutt’s constitutional arguments all fall short. But my 

reasoning rests largely on different grounds.

A. Restrictions on the President’s Ability to Control the FDIC

Calcutt first argues that the FDIC’s statutory scheme gives the President constitutionally 

insufficient control over the agency’s exercise of executive power. Why? He assumes that the 

statute creating the FDIC’s five-member Board of Directors bars the President from removing 

most of its members except “for cause.” See 12 U.S.C. § 1812. This limit, Calcutt reasons, 

impairs the President’s ability to command the “executive Power” and to “take Care that the 

Laws be faithfully executed.” U.S. Const. art. II, § 1, cl. 1; id. § 3. He has a point. The 

Supreme Court recently found unconstitutional similar “for cause” limits on the President’s 

ability to remove the Director of the Consumer Financial Protection Bureau (CFPB). Seila Law 

LLC v. CFPB, 140 S. Ct. 2183, 2197–2207 (2020). In response, the FDIC “does not dispute 

Calcutt’s assumption” that § 1812 gives the Board these removal protections. Resp. Br. 17 n.7. 

But it argues that they pass muster under Humphrey’s Executor v. United States, 295 U.S. 602 

(1935), which upheld similar protections for the Federal Trade Commission (FTC). Id. at 626–

30.

As an intermediate judge, I find this constitutional question difficult. On the one hand, 

Humphrey’s Executor relied on the FTC’s nonpartisan, multimember structure to uphold the 

provision limiting the President’s ability to fire its commissioners. Id. at 624–25. The FDIC 

shares the same structure. Compare 12 U.S.C. § 1812(a)(1)–(2), with 15 U.S.C. § 41. And while 

Seila Law may well call Humphrey’s Executor into doubt, lower courts must follow a case that is 
No. 20-4303 Calcutt v. FDIC Page 57

directly on point even if another decision has undercut it. See Agostini v. Felton, 521 U.S. 203, 

237 (1997).

On the other hand, Humphrey’s Executor may not be directly on point. It also upheld the 

FTC’s removal protections because, as the Court understood the FTC’s duties in 1935, the 

agency undertook “no part of the executive power[.]” 295 U.S. at 628. The FDIC, by contrast, 

performs core executive functions. Here, it has essentially brought a civil-enforcement suit 

against Calcutt to ban him from banking and impose a hefty fine on him. It thus is executing 

(i.e., carrying into effect) the law barring “unsafe or unsound” banking practices. 12 U.S.C. 

§ 1818(e)(1)(A)(ii); see Saikrishna Prakash, The Chief Prosecutor, 73 Geo. Wash. L. Rev. 521, 

537–40 (2005). For executive officers of this kind, “the President’s removal power [has been] 

the rule, not the exception.” Seila Law, 140 S. Ct. at 2206; see Myers v. United States, 272 U.S. 

52, 111–75 (1926); Michael W. McConnell, The President Who Would Not Be King 161–69, 

335–41 (2020).

But I see no reason to resolve the parties’ constitutional debate because I do not read the 

FDIC’s statutory scheme to implicate it. Rather, I read the statute that creates the FDIC’s Board 

(12 U.S.C. § 1812) as giving the President full power to remove all but one of the Board’s five 

members. Since the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Board 

has consisted of the Comptroller of the Currency, the CFPB’s Director, and three other 

presidentially appointed members. Pub. L. No. 111-203, § 336(a), 124 Stat. 1376, 1540 (2010); 

12 U.S.C. 1812(a)(1). All agree that the President may fire the Comptroller for any reason. 

12 U.S.C. § 2.

So the President’s ability to control the Board turns on whether he has free rein to fire its 

three appointed members. The statute creating their offices provides: “Each appointed member 

shall be appointed for a term of six years.” Id. § 1812(c)(1). This statute says nothing that 

expressly grants for-cause removal protections to these members. Maybe the mere creation of a 

fixed-year term implies that the President may not remove them before their terms end? That 

view raises a host of problems. If read this way, wouldn’t the text create an “absolute” ban on 

removal even if the President has an excellent reason (like fraud)? Parsons v. United States, 

167 U.S. 324, 343 (1897). How can we read the text to include an implied gloss authorizing 
No. 20-4303 Calcutt v. FDIC Page 58

some removals (for cause) on top of an implied restriction generally barring them? That is an 

awful lot of implications. And if we were to create this gloss, how do we decide what counts as 

adequate “cause”? Judicial intuition? Simply put, we would be legislating rather than 

interpreting if we read § 1812 to bar all but for-cause removals. See Morgan v. Tenn. Valley 

Auth., 115 F.2d 990, 992–93 (6th Cir. 1940).

Historical context confirms that § 1812 does not interfere with the President’s ability to 

remove the Board’s appointed members. The provision establishing their six-year term dates to 

the creation of the FDIC in 1933. Banking Act of 1933, Pub. L. No. 73-66, § 8, 48 Stat. 162, 

168. At that time, a “well-approved” “rule of” “statutory construction” directed courts to 

interpret laws that gave the President the power to appoint an executive officer as including the 

power to remove the officer. Myers, 272 U.S. at 119. So if a law was silent on removal, the 

President could terminate the officer for any reason. See Shurtleff v. United States, 189 U.S. 311, 

316 (1903); Parsons, 167 U.S. at 338–39. The Congress that created the FDIC operated against 

this interpretive rule. See Collins v. Yellen, 141 S. Ct. 1761, 1782 (2021). And while the Court 

has since departed from the rule once, it relied on the “philosophy of Humphrey’s Executor” to 

do so. Wiener v. United States, 357 U.S. 349, 356 (1958). That philosophy did not exist in 

1933.

A constitutional concern points the same way. Before Humphrey’s Executor, the 

Supreme Court had broadly held that Congress could not constitutionally limit the President’s 

power to fire officers who are appointed with the advice and consent of the Senate. See Myers, 

272 U.S. at 109–76. The FDIC was created between Myers and Humphrey’s Executor—when 

the Court treated these removal protections as presumptively invalid. Myers “aroused wide 

interest,” Morgan, 115 F.2d at 992, so Congress would have known that such protections raised 

“grave” constitutional “doubts,” United States v. Jin Fuey Moy, 241 U.S. 394, 401 (1916). These 

concerns make it all the more implausible to read a law passed at this time as silently including 

them. See Free Enter. Fund v. Pub. Co. Acct. Oversight Bd., 561 U.S. 477, 545–46 (2010) 

(Breyer, J., dissenting). In short, the President has unfettered power to fire (and control) most of 

the FDIC’s Board.
No. 20-4303 Calcutt v. FDIC Page 59

To be sure, both parties seem content to assume that the statute grants the Board 

protections from removal. Cf. United States v. Sineneng-Smith, 140 S. Ct. 1575, 1579 (2020). In 

a related case, the Supreme Court also assumed that another agency had these protections. Free 

Enter. Fund, 561 U.S. at 487. Yet parties cannot force courts to accept their stipulations of law. 

See Young v. United States, 315 U.S. 257, 258–59 (1942). Under basic avoidance principles, 

moreover, our power to address an unraised issue reaches its apex when parties ask us to resolve 

a weighty constitutional question that a statute might not present. Cf. Nw. Austin Mun. Util. Dist. 

No. One v. Holder, 557 U.S. 193, 205 (2009). That is especially true here. Calcutt’s 

constitutional claim, if accepted, would take us right back to a statutory “severability” question: 

Which parts of the statute must we set aside as unconstitutional? See Free Enter. Fund, 561 U.S. 

at 508–10; John Harrison, Severability, Remedies, and Constitutional Adjudication, 83 Geo. 

Wash. L. Rev. 56, 88–89 (2014). If the removal protections are imaginary, this question has an 

easy answer. We should disregard those protections. Since we may have to consider this 

statutory issue even if we reach Calcutt’s constitutional claim, we might as well reach it 

immediately. See William Baude, Severability First Principles, 109 Va. L. Rev. ____ 

(forthcoming 2023) (manuscript at 44–45).

*

Even so, Calcutt responds, the President and Board believed that § 1812 contained 

removal protections. This belief, Calcutt argues, “shows that the Board enjoyed de facto tenure 

protections while pursuing this enforcement action, causing” him harm. Reply Br. 7 n.1. I agree 

that the executive branch likely read the statute this way. But why would “de facto” protections 

violate the law? Consider a hypothetical: Disagreeing with my reading, the President issues an 

order stating that he will adhere to for-cause removal rules for the Board due to his views of 

§ 1812 and the Constitution. If we conclude that this order misreads § 1812 and that the statute 

would be unconstitutional if it imposed such protections, would the order violate the Constitution 

or statute?

I fail to see why it would violate the Constitution. Like the Supreme Court when 

resolving cases, the President must interpret the Constitution when performing his constitutional 

duties. See Island Creek Coal Co. v. Bryan, 937 F.3d 738, 753 (6th Cir. 2019) (citing Frank H. 
No. 20-4303 Calcutt v. FDIC Page 60

Easterbrook, Presidential Review, 40 Case W. Res. L. Rev. 905 (1990)). Presidents have 

routinely done so. When exercising his pardon power, President Jefferson pardoned those 

convicted under the Sedition Act of 1798 because he believed that the convictions violated the 

First Amendment. See New York Times Co. v. Sullivan, 376 U.S. 254, 273–76 (1964). When 

exercising his veto power, President Jackson vetoed a bill reauthorizing the national bank 

because he believed that Congress lacked the power to create it. See Easterbrook, supra, at 909–

10. Like these powers, the removal power belongs to the President. See Seila Law, 140 S. Ct. at 

2197–98. So what constitutional provision would the President offend by self-limiting this 

power? If anything, a court’s intrusion on his authority would raise the concerns. If an injured 

bank customer had sued President Jackson over his national-bank veto, nobody (I hope) would 

claim that a court could enjoin the President’s veto with a citation to McCulloch v. Maryland, 

17 U.S. 316 (1819). See Collins, 141 S. Ct. at 1794 (Thomas, J., concurring). We would raise 

identical separation-of-powers problems if we intruded on the President’s lawful exercise of the 

removal power with a citation to Seila Law.

Nor would this hypothetical executive order violate § 1812. The statute gives the 

President the power to remove any of the Board’s appointed members for any reason. The 

President thus may retain any member for any reason—whether based on his reading of the 

statute or on the benefits of a civil-service system. In this respect, the statute is not much 

different than a provision that sets the minimum process that an agency must provide. That floor 

does not foreclose the agency from offering additional process. Cf. Vt. Yankee Nuclear Power 

Corp. v. Nat. Res. Def. Council, Inc., 435 U.S. 519, 543–49 (1978); Al-Saka v. Sessions, 

904 F.3d 427, 432 (6th Cir. 2018); Easterbrook, supra, at 908. So while § 1812 does not impose 

for-cause removal protections on the President, it also does not bar him from imposing those 

protections on himself.

Now adjust my hypothetical slightly: Before the FDIC acted in Calcutt’s case, “suppose 

that the President had made a public statement expressing displeasure with actions taken by [its 

Board] and had asserted that he would remove [its members] if [§ 1812] did not stand in the 

way.” Collins, 141 S. Ct. at 1789. If the President’s (mis)reading of § 1812 does not violate the 

law once he knows that the courts will interpret it differently than he does, why would this 
No. 20-4303 Calcutt v. FDIC Page 61

reading violate the law before he knows how they will interpret it? I am not sure. Yet I would 

leave open whether courts may vacate agency action as “arbitrary and capricious” under the 

Administrative Procedure Act (APA) if the President’s reading tangibly affected the disputed 

action. 5 U.S.C. § 706(2)(A); Collins, 141 S. Ct. at 1794 n.7 (Thomas, J., concurring). We need 

not decide this question because the APA tells us to take “due account” “of the rule of prejudicial 

error.” 5 U.S.C. § 706. Calcutt thus would have needed to show that any mistaken belief about 

the Board’s removal protections harmed him (by, for example, affecting the Board’s makeup). 

See Jicarilla Apache Nation v. U.S. Dep’t of Interior, 613 F.3d 1112, 1121 (D.C. Cir. 2010). 

He presented no such evidence.

Calcutt responds that we should remand to the FDIC to allow him to seek discovery over 

whether any de facto protections harmed him. That leads to my final point. An FDIC regulation 

contains an issue-exhaustion rule that requires parties to raise all exceptions to an administrative 

law judge’s decision with the Board. 12 C.F.R. § 308.39(b). Calcutt concedes that he did not 

raise this facial constitutional challenge with the agency but says that exhaustion mandates 

categorically do not apply to those challenges. I am not so confident. Courts must tread lightly 

before creating implied exceptions to regulatory exhaustion rules (as opposed to judge-made 

ones). Bryan, 937 F.3d at 751–52. Yet I find the FDIC’s specific regulation unclear as to 

whether its text even covers these types of challenges. Cf. id. at 752. I thus would leave this 

question for another day because exhaustion is a nonjurisdictional affirmative defense. See 

Jones v. Bock, 549 U.S. 199, 211–12 (2007). A rejection of Calcutt’s claim on statutory grounds 

makes the issue unnecessary to decide. Cf. Woodford v. Ngo, 548 U.S. 81, 101 (2006). Apart 

from exhaustion, however, I see no reason why we should give Calcutt a redo to obtain discovery 

that he did not seek the first time around.

B. Restrictions on Removal of the CFPB Director and Administrative Law Judge

Calcutt next challenges two unambiguous removal protections. First, the law that created 

the FDIC’s final Board member—the CFPB Director—gives the Director these protections. 

12 U.S.C. § 5491(c)(3). As noted, Seila Law found this provision unconstitutional. 140 S. Ct. at 

2201–07. And while the President could control all of the other Board members, Calcutt claims 

that Congress may not create a multimember agency with even one tenure-protected member. 
No. 20-4303 Calcutt v. FDIC Page 62

Second, “dual for-cause limitations” on removal insulated the administrative law judge who 

heard Calcutt’s case from presidential oversight. Free Enter. Fund, 561 U.S. at 492. The judge 

could be fired only if the Merit System Protection Board found “good cause,” 5 U.S.C. 

§ 7521(a), and the President could remove that entity’s members only for cause too, id.

§ 1202(d). Calcutt claims that the Constitution bars the judge’s “double insulation” from the 

President. Compare Decker Coal Co. v. Pehringer, 8 F.4th 1123, 1129–36 (9th Cir. 2021), with 

Fleming v. U.S. Dep’t of Agric., 987 F.3d 1093, 1113–18 (D.C. Cir. 2021) (Rao, J., concurring in 

part and dissenting in part).

I see no need to opine on the merits of these claims. We must distinguish the 

constitutional questions that Calcutt raises (do the removal statutes violate the Constitution?) 

from a separate remedies question (if so, do these defects entitle him to his requested relief?). 

As his proposed remedy, Calcutt asks us to vacate the FDIC’s order as “void.” But he fails to 

identify the source of law that requires (or permits) courts to treat the FDIC’s past actions as 

void because potentially unconstitutional statutes attempted to insulate two of the FDIC’s 

officers from the President’s removal power. And my review of the relevant legal authorities 

leads me to conclude that Calcutt could not obtain this relief even if he successfully established 

the statutes’ unconstitutionality.

1

Because Calcutt seeks relief for a constitutional violation, the Constitution provides the 

place to start on this remedies question. But it says almost nothing about remedies. 

Cf. Hernandez v. Mesa, 140 S. Ct. 735, 741–43 (2020); Armstrong v. Exceptional Child Ctr., 

Inc., 575 U.S. 320, 324–27 (2015). Except for a few provisions like the requirement to pay “just 

compensation” for a taking, see Knick v. Township of Scott, 139 S. Ct. 2162, 2171 (2019), the 

Constitution sets only limits on government conduct without prescribing specific relief for 

violations, see Alfred Hill, Constitutional Remedies, 69 Colum. L. Rev 1109, 1118 (1969). One 

thus will search Article II in vain for an explicit constitutional remedy that applies to an invalid 

removal provision.
No. 20-4303 Calcutt v. FDIC Page 63

Where else should we look? The founders enacted the Constitution against the backdrop 

of a preexisting legal system with preexisting causes of action and remedies. See id. at 1131–32. 

Before the founding, for example, this system often allowed equity courts to issue injunctions to 

stop “illegal executive action[.]” Armstrong, 575 U.S. at 327; Ex parte Young, 209 U.S. 123, 

150–51 (1908). The Supreme Court has held that we may use these preexisting “judge-made” 

remedies to redress constitutional wrongs unless Congress displaces them. Armstrong, 575 U.S. 

at 327–28.

But courts should not take this allowance too far. The Constitution does not give us 

freewheeling power to adopt federal common-law remedies based on our views of wise policy. 

See Hernandez, 140 S. Ct. at 741–42 (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). 

And the Court “disfavor[s]” remedies that are rooted in legislative-like choices about the best 

way to deter illegal acts. Ziglar v. Abbasi, 137 S. Ct. 1843, 1857 (2017) (citation omitted).

This dichotomy points the way here. We lack an inherent power to treat the FDIC’s 

actions as “void” because we think it would be a good idea. See Hernandez, 140 S. Ct. at 741–

42. We instead must look to the causes of action and remedies that traditionally applied to 

claims like Calcutt’s—that a statutory provision related to an office was illegal and that this 

defect rendered the officer’s actions void. When courts traditionally chose remedies for this sort 

of claim, they distinguished between two types of officers: a “de facto officer” in a lawful

office (whose actions were enforceable) and a “mere usurper” in an unlawful one (whose 

actions were void). Albert Constantineau, A Treatise on the De Facto Officer Doctrine §§ 5, 34, 

at 8–10, 52–53 (1910).

De Facto Officer in Lawful Office. For centuries, parties have alleged that an officer was 

unlawfully holding (and performing the duties of) an office. To give an example at the time of 

the founding, a party claimed that a sheriff could not hold that office because the sheriff had 

not lived in the county as long as the law required. State v. Anderson, 1 N.J.L. 318, 324–28 

(N.J. 1795).

English courts channeled these claims into a specific writ (“quo warranto”) with a 

specific remedy (prospectively ousting the officer). See 3 William Blackstone, Commentaries
No. 20-4303 Calcutt v. FDIC Page 64

*262–64; 2 Edward Coke, Institutes of the Laws of England 282, 494–99 (1642). American 

courts followed suit. Constantineau, supra, § 451, at 635 n.1; State v. Parkhurst, 9 N.J.L. 427, 

437–38 (N.J. 1802). Three aspects of the quo warranto action deserve mention. For one, invalid 

officers caused public harms, so the government itself typically needed to sue them. See Wallace 

v. Anderson, 18 U.S. 291, 292 (1820). Yet private parties could sue on the government’s behalf 

if they showed a unique interest. See Newman v. United States ex rel. Frizzell, 238 U.S. 537, 

549–51 (1915). For a second, the remedy was exclusive. Constantineau, supra, § 451, at 635. 

A party disputing an officer’s authority could not sue for an injunction “to restrain the exercise of 

official functions[.]” Floyd R. Mecham, A Treatise on the Law of Public Offices and Officers

§ 478, at 307 (1890). For a third, the remedy exists today. See D.C. Code § 16-3503. Parties 

may ask the Attorney General to seek this relief or request leave of court to seek it themselves—

a process that may look “cumbersome” to modern eyes. Andrade v. Lauer, 729 F.2d 1475, 

1497–98 (D.C. Cir. 1984) (Wright, J.).

Yet the process has always looked cumbersome. Rather than file a direct quo warranto 

suit to oust invalid officers, parties harmed by the officers’ actions have tried to collaterally 

attack their qualifications in suits involving the actions. Id. at 1496. Since 1431, English courts 

have rebuffed these attacks under the “de facto officer doctrine.” Constantineau, supra, § 5, at 

8–10 (citing The Abbé de Fontaine, 1431 Y.B. 9 Hen. VI, fol. 32, pl. 3 (Eng.)); Clifford L. 

Pannam, Unconstitutional Statutes and De Facto Officers, 2 Fed. L. Rev. 37, 39–42 (1966). 

That doctrine treats the past actions of an officer with a colorable claim to office as valid whether 

or not the officer met all conditions to hold the office. Constantineau, supra, § 1, at 3–4. 

English courts introduced it “into the law as a matter of policy and necessity, to protect the 

interests of the public and individuals, where those interests were involved in the official acts of 

persons exercising the duties of an office, without being lawful officers.” State v. Carroll, 38 

Conn. 449, 467 (1871).

American courts likewise adhered to the de facto officer doctrine as a corollary to the 

exclusive quo warranto remedy. See Cocke v. Halsey, 41 U.S. 71, 81–88 (1842); Taylor v. 

Skrine, 5 S.C.L. 516, 516–17 (S.C. 1815); Fowler v. Bebee, 9 Mass. 231, 234–35 (1812); People 

ex rel. Bush v. Collins, 7 Johns. 549, 554 (N.Y. 1811) (per curiam). Notably, these courts upheld 
No. 20-4303 Calcutt v. FDIC Page 65

the actions of invalid officers who did not meet constitutional conditions on their offices. 

An officer might not have taken an oath. Cf. Bucknam v. Ruggles, 15 Mass. 180, 182–83 (1818) 

(per curiam). Or the officer might have been appointed in an illegal way. Cf. Ex parte Ward, 

173 U.S. 452, 454 (1899). Or the officer might have flunked an eligibility requirement. Perhaps 

the officer was too young. Cf. Blackburn v. State, 40 Tenn. 690, 690–91 (1859). Or maybe the 

officer had been in the Congress that increased the office’s salary before taking office. Cf. U.S. 

Const. art. I, § 6, cl. 2; William Baude, The Unconstitutionality of Justice Black, 98 Tex. L. Rev. 

327 (2019); In re Griffin, 11 F. Cas. 7, 27 (C.C.D. Va. 1869) (No. 5,815). The same rules 

applied even if the officer held the office by reason of an unconstitutional statute. See

Constantineau, supra, §§ 192–96, at 264–70. An early decision thus upheld the acts of an officer 

who had been appointed by the governor under a statute authorizing this appointment, even 

though the state constitution had required the legislature to elect the officer. See Taylor, 5 S.C.L. 

at 516–17; Carroll, 38 Conn. at 474; see also State v. McMartin, 43 N.W. 572, 572 (Minn. 

1889); Ex Parte Strang, 21 Ohio St. 610, 615–18 (1871); cf. Buckley v. Valeo, 424 U.S. 1, 142 

(1976) (per curiam). 

Usurper in Unlawful Office. Other times, parties have alleged that a generic office could 

not exist because it had been assigned “sovereign functions” that it could not possess. Mecham, 

supra, § 4, at 5. In one case, for example, a party alleged that a legislatively created “court” 

could not perform judicial duties because those duties had been vested in a wrongly abolished 

life-tenured court. Hildreth’s Heirs v. McIntire’s Devisee, 24 Ky. 206, 207–08 (1829); Jeffrey S. 

Sutton, Who Decides? States as Laboratories of Constitutional Experimentation 76–80 (2022).

Courts granted much broader relief for this type of claim. Parties affected by an illegal 

office did not need to sue in quo warranto to dispute the officeholder’s power to perform the 

challenged function. Parties instead could dispute the officer’s conduct “in any kind” of suit. 

Walcott v. Wells, 24 P. 367, 370 (Nev. 1890); Mecham, supra, §§ 324–26, at 216–18. And the 

opposing party could not defend the officer’s past acts using the de facto officer doctrine. 

Constantineau, supra §§ 34–36, at 51–55. The officer instead was “merely a usurper, to whose 

acts no validity can be attached[.]” Norton v. Shelby County, 118 U.S. 425, 449 (1886).
No. 20-4303 Calcutt v. FDIC Page 66

This rule extended to constitutional defects. The Supreme Court may have followed it as 

early as United States v. Yale Todd (U.S. 1794). United States v. Ferreira, 54 U.S. 40, 52–53 

(1851) (note by Taney, C.J.). This unreported case addressed a law allowing pensions for 

disabled Revolutionary War veterans. The law ordered circuit courts to determine whether 

applicants were disabled and to send their findings to the Secretary of War. Circuit judges 

(including Supreme Court Justices) found that the law unconstitutionally gave courts executive 

power by making them the Secretary’s administrators. Hayburn’s Case, 2 U.S. 408, 410 n.* 

(1792). Given the law’s benevolent goals, though, some judges awarded pensions by claiming to 

act as “commissioners.” See Wilfred J. Ritz, United States v. Yale Todd (U.S. 1794), 15 Wash. 

& Lee L. Rev. 220, 228–29 (1958). Congress ordered the Attorney General to seek Supreme 

Court review of pensions granted by judges “styling themselves commissioners.” Act of Feb. 

28, 1793, 1 Stat. 324, 325. In Yale Todd’s case, the Court required him to return the funds. Ritz, 

supra, at 228–30. As others have noted, the Court may well have found the judges’ actions void 

because they unconstitutionally undertook executive functions. Ferreira, 54 U.S. at 53 (note by 

Taney, C.J.); Keith E. Whittington, Judicial Review of Congress before the Civil War, 97 Geo. 

L.J. 1257, 1270–74 (2009).

Many decisions followed this remedial approach for claims that a legislative body had 

granted functions to an office that it could not lawfully possess. See Town of Decorah v. Bullis, 

25 Iowa 12, 18–19 (1868); Hildreth’s Heirs, 24 Ky. at 207–08; G. L. Monteiro, Annotation, De 

Jure Office as Condition of De Facto Officer, 99 A.L.R. 294 § III(a) (1935), Westlaw (database 

updated 2022). When, for example, a legislature assigned local-government functions to a board 

of commissioners that the state constitution vested in justices of the peace, the Supreme Court 

treated the board’s actions as void. Norton, 118 U.S. at 441–49. It refused to apply the de facto 

officer doctrine because that doctrine required a valid (“de jure”) office. Id. at 444–45.

The Supreme Court’s modern cases also treat an officer’s actions as void if the generic 

office could “not lawfully possess” the power to take them. Collins, 141 S. Ct. at 1788. The 

Court thus found invalid a bankruptcy judge’s decision in a suit that an Article III court needed 

to resolve. See Stern v. Marshall, 564 U.S. 462, 503 (2011). And a plurality rejected the de 

facto officer doctrine when a party claimed that Congress assigned to Article I judges a duty 
No. 20-4303 Calcutt v. FDIC Page 67

(sitting on circuit courts) that Article III judges must perform. See Glidden Co. v. Zdanok, 370 

U.S. 530, 535–37 (1962) (plurality opinion); cf. Bowsher v. Synar, 478 U.S. 714, 732 (1986); 

Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 815 (1987) (Scalia, J., 

concurring in the judgment).

2

This “long history of judicial review” has relevance for Calcutt’s request that we vacate 

the FDIC’s order in his case because invalid removal protections shielded two of its officers. 

Armstrong, 575 U.S. at 327. To begin with, the history refutes the theory that the Constitution of 

its own force compels courts to treat as “void” any action taken by officers whose exercise of an 

office does not comport with a constitutional command. That view would treat the de facto 

officer doctrine itself as unconstitutional. Yet it formed part of the legal backdrop against which 

the founders enacted the Constitution. Near the founding, judges described the doctrine as “a 

well settled principle of law,” Bush, 7 Johns. at 554, or “too well established to admit of a 

doubt,” Taylor, 5 S.C.L. at 517. Nothing in the Constitution can be read to do away with it.

This history also highlights the key inquiry for deciding whether courts may vacate an 

officer’s actions as a “judge-made remedy” when a statute unconstitutionally limits the 

President’s removal authority. Armstrong, 575 U.S. at 327. Does the unconstitutional removal 

provision show that Congress vested “sovereign functions” in an invalid office that cannot 

possess them? Mecham, supra, § 4, at 5; Norton, 118 U.S. at 449. If so, courts should treat the 

officer’s actions as void wherever they arise. Or is the removal provision “distinct from the 

provisions creating the . . . office” such that the office itself is valid “even assuming that the 

[removal provision] is” not? McMartin, 43 N.W. at 572; Carroll, 38 Conn. at 449. If so, courts 

should enforce the officer’s acts in suits involving third parties (in contrast to suits between the 

government and the officer).

Unfortunately for Calcutt, his claim falls on the wrong side of this divide. He does not 

even argue that the two executive officers (the CFPB Director and administrative law judge) sat 

in offices that constitutionally “could not exist” (because, for example, the Constitution vested 

their duties in another branch). Ashley v. Bd. of Supervisors of Presque Isle Cnty., 60 F. 55, 65 
No. 20-4303 Calcutt v. FDIC Page 68

(6th Cir. 1893). Indeed, his argument’s very premise—that Congress has illegally insulated the 

officers from the President—assumes that they perform executive functions. Cf. Seila Law, 

140 S. Ct. at 2209. So I would treat the constitutional “condition” in this case (that an officer be 

accountable to the President) like other constitutional conditions the violation of which does not 

void an officer’s acts. The condition is not much different than, say, a condition that an officer 

be of a certain age, see Blackburn, 40 Tenn. at 690–91, or be elected rather than appointed, see 

Constantineau, supra, § 192, at 264–65. If statutes departing from these mandates did not render 

an officer’s actions void, I fail to see why an unconstitutional removal provision would. Under 

traditional remedial principles, then, Calcutt could not obtain the relief that he seeks in this case.

The “lack of historical precedent” to attack removal provisions in a suit like Calcutt’s 

reinforces the conclusion that the provisions did not traditionally render an officer’s actions void. 

Seila Law, 140 S. Ct. at 2201 (citation omitted). If any private party could collaterally attack 

removal provisions in any suit implicating an officer’s acts, one would expect to see many of 

these suits. After all, Congress began to enact constitutionally dubious removal provisions 

shortly after the Civil War during President Johnson’s administration. See Myers, 272 U.S. at 

166–73. Yet Calcutt cites no historical example in which courts evaluated removal provisions in 

this type of litigation. So constitutional questions about the provisions lingered for decades. Id.

at 173.

Challenges to the validity of removal provisions instead arose in employment disputes. 

See Humphrey’s Executor, 295 U.S. at 618–19; Myers, 272 U.S. at 106; cf. Shurtleff, 189 U.S. at 

311–12; Reagan v. United States, 182 U.S. 419, 424 (1901); Ex parte Hennen, 38 U.S. 230, 256–

57 (1839). A discharged officer would sue to recover a salary (or seek reinstatement) on the 

ground that the termination violated a tenure-protection statute. Myers, 272 U.S. at 106. The 

government would respond that the statute could not restrict the President’s power. Id. This 

different kind of suit required courts to resolve the constitutional question. Courts “almost 

universally recognized” that the de facto officer doctrine did not apply because the suit was 

between the government and the officer (not a third party) and because only valid officers could 

receive salaries. Constantineau, supra, § 236, at 331; 2 James Kent, Commentaries on American 

Law 355 n.2 (11th ed. 1867).
No. 20-4303 Calcutt v. FDIC Page 69

Modern precedent confirms my conclusion. The Supreme Court’s recent cases have all 

held that unconstitutional removal provisions do not render the office to which they attach 

invalid or require courts to find actions taken by the officers void. See Collins, 141 S. Ct. at 

1787–89; Seila Law, 140 S. Ct. at 2207–11; Free Enter. Fund, 561 U.S. at 508–10. Take Free 

Enterprise Fund. There, accountants under investigation by the Public Company Accounting 

Oversight Board filed an Ex Parte Young suit seeking to enjoin all of the Board’s actions as void 

because of its removal protections. See 561 U.S. at 487, 491 n.2, 508. The Court agreed that 

various removal provisions unconstitutionally intruded on the President’s authority. Id. at 492–

98. But it refused to treat the Board’s actions as void. Id. at 508–10. It held that the Board 

could perform the executive functions assigned to it despite the invalid removal provisions 

because they were “severable from the remainder of the statute.” Id. at 508. The Court analyzed 

this issue in terms of “severability.” See id. at 509. But it could just as well have reasoned that 

the unconstitutional statutes did not render the Board’s actions void in third-party suits and so 

did not entitle the accountants to their requested remedy. Cf. McMartin, 43 N.W. at 572; 

Harrison, supra, at 73–75.

Seila Law fits a similar mold. The CFPB in that case issued a civil investigative demand 

seeking documents from a law firm. 140 S. Ct. at 2194. The firm refused to comply, so the 

CFPB filed a petition to enforce its demand. Id. The district court rejected the firm’s request to 

deny the CFPB’s petition on the ground that its Director’s removal protections rendered all 

CFPB actions void. Id. After agreeing that the protections were unconstitutional, the controlling 

Supreme Court opinion again held that the invalid provisions were severable and did not render 

all CFPB actions void. Id. at 2208–11 (opinion of Roberts, C.J.). Admittedly, the opinion did 

not simply reject the law firm’s remedy and affirm the enforcement of the CFPB’s demand. 

Rather, it remanded for the lower courts to decide whether the demand had been “validly 

ratified” by a Director accountable to the President. Id. at 2211. This resolution might have 

implied that all CFPB actions (including the investigative demand) had been void prior to the

Court’s severance “remedy.” Id. at 2208. But the Court has since clarified that Seila Law did 

not hold that the CFPB’s prior actions were invalid and instead had left all remedy-related issues 

for the lower courts. See Collins, 141 S. Ct. at 1788.
No. 20-4303 Calcutt v. FDIC Page 70

Most recently in Collins, the Court expressly held that unconstitutional removal 

provisions do not render an officer’s past actions void in suits by third parties. Headed by a 

director with removal protections, the agency in Collins served as the conservator to two large 

mortgage-financing companies. 141 S. Ct. at 1771–72. This agency entered into agreements 

with the Department of Treasury requiring the companies to pay large dividends to the Treasury. 

Id. at 1772–74. The companies’ shareholders sued to compel the Treasury to return the 

dividends on the ground that the director’s removal protections were unconstitutional and that 

they voided the agency’s past acts (including the challenged agreements). Id. at 1775. Although 

the Court agreed that the removal protections were unconstitutional, id. at 1783–87, it rejected 

the broad remedy, id. at 1787–89. The Court found “no reason to regard any of the actions taken 

by the” agency “as void” simply because its head had been protected by invalid removal 

provisions. Id. at 1787.

All told, under traditional remedial rules, unconstitutional removal provisions do not 

render the offices to which they attach invalid and so do not allow courts to vacate the actions of 

officers as void in suits by third parties. This tradition compels me to reject Calcutt’s proposed 

remedy.

3

I end with two disclaimers about things I need not decide. Disclaimer One: Congress 

may generally displace judge-made remedial principles. Armstrong, 575 U.S. at 327–29. 

Congress, for example, has sometimes restricted a court’s power to grant Ex Parte Young’s 

injunctive relief for violations of federal law. See id. And Bowsher teaches that Congress may 

adjust the relief for structural constitutional claims too. There, the Court followed the statutory 

remedy once it found that Congress had illegally entrusted a legislative officer with executive 

duties. 478 U.S. at 734–35. Congress thus may permit courts to vacate actions taken by officers 

subject to unconstitutional removal protections even if traditional judge-made remedial limits 

would foreclose relief.

Has Congress done so here? The FDIC’s statute incorporates the APA. 12 U.S.C. 

§ 1818(h)(2). It orders a court to “hold unlawful and set aside agency action” that is “contrary to 
No. 20-4303 Calcutt v. FDIC Page 71

constitutional right, power, privilege, or immunity[.]” 5 U.S.C. § 706(2)(B). Perhaps this text 

could be read to allow courts to depart from traditional limits and vacate agency “actions” if a 

law has structured the agency in a way that is “contrary to constitutional right” or “power.” Id.; 

cf. Collins, 141 S. Ct. at 1795 (Gorsuch, J., concurring in part). That the Constitution’s structural 

principles exist to protect individual liberty could reinforce this reading that a structural problem 

is “contrary to constitutional right” within the meaning of the APA. See Bond v. United States, 

564 U.S. 211, 220–24 (2011).

In most structural constitutional cases, however, a private party claims that the challenged 

action itself is “contrary to constitutional right.” 5 U.S.C. § 706(2)(B). So parties routinely 

allege that a prosecution violates the Constitution because the relevant law reaches conduct that 

Congress may not proscribe. See, e.g., Bond, 564 U.S. at 224. Yet, as I have explained, an 

unconstitutional removal statute for an office would not necessarily render the officer’s “actions” 

void and so would not necessarily render those actions “contrary to constitutional right.” 

5 U.S.C. § 706(2)(B). Perhaps the APA’s text is thus best read to incorporate—not depart 

from—traditional remedial limits. Cf. id. § 702; Tom C. Clark, Att’y Gen.’s Manual on the 

Admin. Proc. Act 108 (1947).

And even if the APA expanded the available relief, recall that it requires courts to take 

“due account” “of the rule of prejudicial error.” 5 U.S.C. § 706. The Court has read this text to 

adopt the harmless-error principles that “ordinarily apply in civil cases.” Shinseki v. Sanders, 

556 U.S. 396, 406 (2009). Under those principles, constitutional errors can be harmless. See 

O’Neal v. McAninch, 513 U.S. 432, 440 (1995). Although Collins did not cite the APA, this 

harmless-error provision might be one way to understand its suggestion that third parties could 

seek relief for unconstitutional removal provisions if they showed that the provisions harmed 

them (that is, if they showed that the error was not harmless). 141 S. Ct. at 1788–89. At day’s 

end, I would leave these statutory questions open. The parties did not address the APA’s scope 

and focused only on whether the removal provisions rendered the FDIC’s order 

unconstitutionally void. They did not.

Disclaimer Two: The parties assume that the FDIC performs only executive functions. 

Our resolution should not be taken to have impliedly adopted that premise. The FDIC did not 
No. 20-4303 Calcutt v. FDIC Page 72

just prosecute this action. It also adjudicated the action—finding Calcutt guilty and imposing a 

punishment on him in the form of an end to his career and a $125,000 penalty. Once an Article 

III court finally enters the picture, moreover, it may review the FDIC’s factual findings only 

under a deferential substantial-evidence test—a test that has been called more deferential than 

the one governing our review of a district court’s factual findings. See Dickinson v. Zurko, 

527 U.S. 150, 153 (1999).

Yet both Article III and the Due Process Clause generally require the government to 

follow common-law procedure (including, fundamentally, the use of a “court”) when seeking to 

deprive people of their private rights to property or liberty. See Stern, 564 U.S. at 482–84; Caleb 

Nelson, Adjudication in the Political Branches, 107 Colum. L. Rev. 559, 569–70 (2007). At first 

blush, one might think that the FDIC has sought to deprive Calcutt of his “core private rights” to 

both. B&B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S. 138, 171 (2015) (Thomas, J., 

dissenting). According to Blackstone, Calcutt had a “property” interest in the thousands of 

dollars that the government seeks to take. See 1 Blackstone, supra, at *134–35. According to 

Coke, he had a “liberty” interest in continuing in his profession. See 2 Coke, supra, at 47. So 

perhaps the FDIC has undertaken judicial functions here—functions that the Constitution vests in 

courts. See Stern, 564 U.S. at 482–84. If the FDIC needed to file suit, moreover, the filing 

would have triggered the Seventh Amendment’s right to a jury, which Justice Brennan made 

clear applies to suits seeking civil penalties. See Tull v. United States, 481 U.S. 412, 422–25 

(1987).

The government traditionally has responded to this call for more “process” with the 

defense that its action seeks to vindicate “public rights,” rights that need not be litigated in a 

court with a jury. See Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 138 S. Ct. 

1365, 1373 (2018); Atlas Roofing Co. v. Occupational Safety & Health Rev. Comm’n, 430 U.S. 

442, 450–51 (1977). And maybe Calcutt did not raise this argument here because a healthy 

amount of caselaw has accepted that defense in the banking context. See Cavallari v. Off. of 

Comptroller of Currency, 57 F.3d 137, 145 (2d Cir. 1995); Simpson v. Off. of Thrift Supervision, 

29 F.3d 1418, 1422–24 (9th Cir. 1994). Yet this precedent predates the Court’s recent 

instructions in cases like Stern, which held that the adjudication of a state tort claim required an 
No. 20-4303 Calcutt v. FDIC Page 73

Article III court. See 564 U.S. at 487–501. And while Stern did not involve an agency, the 

Court “recognize[d]” that its cases may not provide “concrete guidance” on the scope of the 

public-rights doctrine in the administrative context. Id. at 494. Several Justices have also 

expressed concern with extending the doctrine too far. See Oil States, 138 S. Ct. at 1381–85 

(Gorsuch, J., joined by Roberts, C.J., dissenting); B & B Hardware, 575 U.S. at 170–74 

(Thomas, J., joined by Scalia, J., dissenting).

There must be some limit to the government’s ability to dissolve the Constitution’s usual 

separation-of-powers and due-process protections by waving a nebulous “public rights” flag at a 

court. When the government indicts a person for a crime, it also vindicates “public rights” that 

belong to the community. Spokeo v. Robins, 578 U.S. 330, 345 (2016) (Thomas, J., concurring) 

(citing Ann Woolhandler & Caleb Nelson, Does History Defeat Standing Doctrine?, 102 Mich. 

L. Rev. 689, 695–700 (2004)). But the government cannot send people to prison using a hearing 

room rather than a court room or an administrative officer rather than a jury of peers. N. Pipeline 

Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 70 n.24 (1982) (plurality opinion). Why 

should this case be different simply because Calcutt must pay a civil penalty rather than a 

criminal fine? Cf. Jarkesy v. SEC, __ F.4th __, 2022 WL 1563613, at *2–7 (5th Cir. May 18, 

2022). The FDIC one day must provide answers to these questions in a case that does not 

assume them.

C. Remedy for Appointments Clause Violation

Calcutt lastly challenges the FDIC’s remedy for an undisputed constitutional wrong. The 

Appointments Clause sets the ground rules for the appointment of officers. U.S. Const. art. II, 

§ 2, cl. 2. It allows Congress to vest the power to appoint inferior officers in “the President,” 

“Courts of Law,” or “Heads of Departments.” Id. In Lucia v. SEC, 138 S. Ct. 2044 (2018), the 

Court held that the SEC’s administrative law judges are inferior officers who must be appointed 

by the President or the Commission. Id. at 2051–55. The parties agree that the FDIC’s 

administrative law judges are likewise inferior officers, but Calcutt litigated his first hearing 

before a judge who had not been appointed by the President or FDIC. The FDIC thus granted 

Calcutt a “new” hearing before a different, lawfully appointed judge—the remedy that Lucia

ordered. See id. at 2055. Calcutt argues that this remedy still fell short because the FDIC 
No. 20-4303 Calcutt v. FDIC Page 74

allowed the second judge to use records, stipulations, and orders from the invalid judge’s first 

hearing. According to him, the Appointments Clause required the second judge to ignore

everything that occurred before.

To decide what Lucia meant by its “new hearing” remedy, my colleagues engage in a 

cost-benefit balance that resembles the Supreme Court’s test for whether a court should suppress 

evidence in a criminal trial under the Fourth Amendment’s “exclusionary rule.” Davis v. United 

States, 564 U.S. 229, 236–38 (2011). They point out that Calcutt’s remedy would impose heavy 

administrative costs (because it would require inefficient, duplicative processes). They add that 

it would offer few private benefits (because it is unnecessary to insulate the valid judge’s 

decision from the first hearing’s “taint”). Based on this prudential balancing, they reject 

Calcutt’s claim that the second judge had to ignore items from the first hearing. Their balance 

seems reasonable enough. But I would reject Calcutt’s view of Lucia based on structural 

grounds rooted in the best reading of the Appointments Clause and the Court’s current approach 

to judge-made remedies.

At the outset, I do not mean to critique my colleagues for engaging in a cost-benefit

inquiry. The Supreme Court’s instructions in Appointments Clause cases may well be read to 

contemplate it. See Lucia, 138 S. Ct. at 2055 & nn.5–6; Ryder v. United States, 515 U.S. 177, 

182–83 (1995). In Ryder, a court-martialed member of the Coast Guard had his conviction 

upheld by a panel that included judges whose appointments violated the Appointments Clause. 

515 U.S. at 179–80. The Court of Military Appeals affirmed the panel’s conviction under the de 

facto officer doctrine. Id. at 180. The Supreme Court reversed and refused to apply this 

doctrine. It held that “one who makes a timely challenge to the constitutional validity of the 

appointment of an officer who adjudicates his case is entitled to a decision on the merits of the 

question and whatever relief may be appropriate if a violation indeed occurred.” Id. at 182–83. 

Did Ryder look to the “original meaning” of the Appointments Clause to adopt this remedy and 

reject the de facto officer doctrine? Fin. Oversight & Mgmt. Bd. for P.R. v. Aurelius Inv., LLC, 

140 S. Ct. 1649, 1659 (2020). No, the Court rested on a sentence of pure policy: “Any other rule 

would create a disincentive to raise Appointments Clause challenges[.]” Ryder, 515 U.S. at 183. 
No. 20-4303 Calcutt v. FDIC Page 75

The Court summarily found the “proper” remedy to be a second appeal before a lawfully 

constituted panel. See id. at 188.

Lucia followed the same reasoning. It noted that Ryder called for a new hearing before a 

properly appointed administrative law judge. 138 S. Ct. at 2055. It then added a new 

requirement: an agency may not assign the case to the judge who initially heard it even if that 

judge had been properly appointed in the interim. Id. When responding to the claim that this 

“new judge” remedy was not needed to further the Appointments Clause’s purposes, the Court 

reasoned that its remedies in this area have been “designed not only to advance those purposes 

directly, but also to create ‘[]incentive[s] to raise Appointments Clause challenges.’” Id. at 2055 

n.5 (quoting Ryder, 515 U.S. at 183). In both cases, therefore, the Court chose a remedy to 

“incentivize” these claims.

This reasoning should look familiar. The Court once expansively created judge-made 

remedies that would best promote the purposes of constitutional rights. Although, for example, 

Congress has allowed damages claims only against state officers who violate the Constitution, 

42 U.S.C. § 1983, the Court felt free to create a remedy allowing parties to seek damages from 

federal officers who violate the Fourth Amendment. See Bivens v. Six Unknown Fed. Narcotics 

Agents, 403 U.S. 388, 395–96 (1971). And although the Fourth Amendment says nothing about 

the rules of evidence in criminal trials, the Court created the exclusionary rule to “remov[e] the 

incentive to disregard” its ban on unreasonable searches. Mapp v. Ohio, 367 U.S. 643, 656 

(1961) (citation omitted). Ryder bears the hallmarks of Bivens and Mapp. It even discussed the 

exclusionary rule. The Court noted that its cases have rejected that rule when the rule’s costs 

(allowing criminals to go free) exceeded its benefits (incentivizing officers to obey the law). See 

Ryder, 515 U.S. at 185–86 (citing United States v. Leon, 468 U.S. 897 (1984)). Analogizing to 

this approach, Ryder foresaw no ill effects from granting an Appointments Clause remedy on 

direct appeal and suggested that this appellate relief would create “incentives to make such 

challenges.” Id. at 186.

Although Ryder might mesh well with Mapp, the Court in recent years has treated these 

types of judge-made innovations with a healthy dose of skepticism. See Hernandez, 140 S. Ct. at 

747. The creation of remedies amounts to “lawmaking” that must balance the benefits of any 
No. 20-4303 Calcutt v. FDIC Page 76

remedy against its costs. Id. at 741–42. Yet the Constitution reserves this task to Congress, not 

the courts. See id. As a result, the Court has all but held that Bivens was wrong and has refused 

to extend it to any other constitutional right for some 40 years. See id. at 742–43 (citing cases); 

Abbasi, 137 S. Ct. at 1856–58. It has also continued to narrow the scope of the exclusionary 

rule, acknowledging that it is a “judicially created remedy” that must be applied cautiously only 

in cases of clear police misconduct. Davis, 564 U.S. at 238 (citation omitted); see, e.g., Utah v. 

Strieff, 579 U.S. 232, 237–38, 241 (2016); Herring v. United States, 555 U.S. 135, 140–44 

(2009).

What do these principles mean for the issue that confronts us? I agree that Ryder and 

Lucia leave open whether a lawful judge at a “new ‘hearing’” may rely on evidence developed at 

the invalid hearing or on orders entered by the invalid judge. Lucia, 138 S. Ct. at 2055 (quoting 

Ryder, 515 U.S. at 182–83). To resolve the ambiguity, I would read the cases in a way that best 

comports with the Constitution’s “original meaning,” Aurelius, 140 S. Ct. at 1659, and with the 

Court’s recent guidance to act cautiously before expanding judge-made remedies, Hernandez, 

140 S. Ct. at 747. When analyzed in that fashion, the FDIC’s remedy more than sufficed.

The Appointments Clause does not compel Calcutt’s conclusion that a valid judge must 

ignore all prior proceedings before an invalid one. If anything, the clause itself requires no

remedy. The de facto officer doctrine broadly applied to claims like Calcutt’s that an officer had 

been appointed by the wrong person. See Constantineau, supra, §§ 182–86, at 248–55. An 

English judge who sat on the first case to enforce the doctrine in 1431 “apparently recognized” 

its application in this setting. Id. § 182, at 248. American courts routinely relied on it when an 

officer was unconstitutionally appointed by, say, the governor rather than the legislature, see 

Carroll, 38 Conn. at 474 (discussing Taylor, 5 S.C.L. at 516–17), or the mayor rather than the 

governor, see Strang, 21 Ohio St. at 615–19. And if the Constitution requires some way in 

which to dispute an officer’s right to an office, Congress left open the traditional (if narrow) quo 

warranto remedy. D.C. Code § 16-3503; cf. Henry M. Hart, Jr., The Power of Congress to Limit 

the Jurisdiction of Federal Courts: An Exercise in Dialectic, 66 Harv. L. Rev. 1362, 1366–67 

(1953).
No. 20-4303 Calcutt v. FDIC Page 77

Ryder and Lucia thus must rest on a power to create judge-made remedies for 

constitutional violations. But we must act with caution when asked to expand these remedies 

because the weighing of the costs and benefits amounts to a legislative task, not a judicial one. 

See Abbasi, 137 S. Ct. at 1856–57. On the benefits side, Calcutt’s remedy would certainly 

promote the purposes of the Appointments Clause. See United States v. Arthrex, Inc., 141 S. Ct. 

1970, 1979 (2021). But no provision—not even a constitutional one—“pursues its purposes at 

all costs.” Hernandez, 140 S. Ct. at 741–42 (citation omitted). And Calcutt’s remedy comes 

with its burdens too. It would add to the “administrative costs” already associated with the new 

hearings. Abbasi, 137 S. Ct. at 1856. More fundamentally, courts long recognized that 

permitting parties to challenge an officer’s validity at all in appeals of the officer’s actions could 

create “endless confusion[.]” Norton, 118 U.S. at 441–42; see Constantineau, supra, § 4, at 7. 

That is why they channeled these challenges into special suits that would oust officers only 

prospectively, not into appeals that would reverse their actions retrospectively. See 

Constantineau, supra, § 451, at 635–36. I see no judicial mode of analysis that can resolve this 

legislative weighing of interests. 

All told, the Court’s cautious approach to judge-made remedies comports with traditional 

remedial practice governing challenges to the validity of an officer’s appointment. See 

Hernandez, 140 S. Ct. at 742. I thus would not read Ryder and Lucia broadly to compel 

administrative judges to disregard all that occurred at a prior hearing. I would instead read them 

literally to compel a new hearing before a properly appointed judge. Calcutt got just that.

III. Statutory Claims

In my view, Calcutt’s statutory claims fare better. The statute allowing the FDIC to bar 

bankers from the industry requires it to prove three things: that a banker has engaged in a listed 

kind of misconduct, that the misconduct will harm the bank (or benefit the banker), and that the 

banker acted with a culpable state of mind. 12 U.S.C. § 1818(e)(1)(A)–(C). The statute 

allowing the FDIC to impose penalties largely covers the same terrain. Id. § 1818(i)(2)(B). 

Here, Calcutt argues that the FDIC failed to prove the “misconduct” and “effect” elements. 

I agree that the FDIC misread these provisions and would remand for it to reconsider the case 

under the proper law.
No. 20-4303 Calcutt v. FDIC Page 78

A. Misconduct

To remove Calcutt from the Bank, the FDIC first must prove that he engaged in one of 

three types of misconduct. Id. § 1818(e)(1)(A). Specifically, the statute allows the FDIC to 

remove an “institution-affiliated party” if that the party “has, directly or indirectly”:

(i) violated—

(I) any law or regulation;

(II) any cease-and-desist order which has become final;

(III) any condition imposed in writing by a Federal banking agency in 

connection with any action on any application, notice, or request by 

such depository institution or institution-affiliated party; or

(IV) any written agreement between such depository institution and such 

agency;

(ii) engaged or participated in any unsafe or unsound practice in connection with 

any insured depository institution or business institution; or

(iii) committed or engaged in any act, omission, or practice which constitutes a 

breach of such party’s fiduciary duty[.]

Id. The FDIC found that Calcutt violated the second and third clauses by engaging in “unsafe 

or unsound practice[s]” and committing “breach[es]” of his “fiduciary duty.” App. 18–26. 

(It imposed the $125,000 penalty for the same reasons. See App. 35.)

1. Unsafe or Unsound Practice. The statute gives the FDIC the power to ban a banker 

from the profession if the banker has “engaged or participated in any unsafe or unsound practice 

in connection with any insured depository institution or business institution[.]” 12 U.S.C. 

§ 1818(e)(1)(A)(ii). Regulators have long defined the key phrase—“unsafe or unsound 

practice”—using a two-part test that courts have generally accepted. See First Nat’l Bank of 

Eden v. Dep’t of Treasury, 568 F.2d 610, 611 n.2 (8th Cir. 1978). Under this test, an act 

qualifies as an unsafe or unsound practice if it conflicts with “generally accepted standards of 

prudent operation” and creates an “abnormal risk of loss or harm” to the bank. App. 18 (quoting 

Michael v. FDIC, 687 F.3d 337, 352 (7th Cir. 2012)).

This test was not intuitive to me from a review of the text, so I looked into its origins. 

One court transparently identified its source: “Because the statute itself does not define an unsafe 
No. 20-4303 Calcutt v. FDIC Page 79

or unsound practice, courts have sought help in the legislative history.” In re Seidman, 37 F.3d 

911, 926 (3d Cir. 1994). The Fifth Circuit started down this path. See Gulf Fed. Sav. & Loan 

Ass’n v. Fed. Home Loan Bank Bd., 651 F.2d 259, 263–65 (5th Cir. 1981). Rather than seek out 

the ordinary meaning of “unsafe or unsound practice,” it jumped to a “lively” debate in the 

congressional record. Id. at 263. During this debate, the court noted, a few legislators had 

treated as “authoritative” a definition proposed by an agency chairman. Id. at 264. Under the 

chairman’s view, the phrase covered “any action” that “is contrary to generally accepted 

standards of prudent operation, the possible consequences of which, if continued, would be 

abnormal risk or loss or damage to an institution, its shareholders, or the agencies administering 

the insurance funds.” Id. (citation omitted). The court accepted his view as law. Id. at 264–65.

This straight-from-the-legislative-history test has spread widely since. The few courts 

with reasoned analysis regurgitate the same bit of legislative history. Seidman, 37 F.3d at 926. 

Most others, though, simply cite other precedent for this test without considering its origins. See

Frontier State Bank v. FDIC, 702 F.3d 588, 604 (10th Cir. 2012); Michael, 687 F.3d at 352; 

Landry v. FDIC, 204 F.3d 1125, 1138 (D.C. Cir. 2000); Simpson, 29 F.3d at 1425; Doolittle v. 

Nat’l Credit Union Ass’n, 992 F.2d 1531, 1538 (11th Cir. 1993); Nw. Nat’l Bank v. Dep’t of 

Treasury, 917 F.2d 1111, 1115 (8th Cir. 1990).

I am troubled by this approach. The test springs from a mode of interpretation that no 

Justice on the Supreme Court would endorse today. In recent decades, the Court has given us 

clear marching orders: the answer to an interpretive question begins by identifying the ordinary 

meaning of Congress’s words when read against their context and structure. See Food Mktg. 

Inst. v. Argus Leader Media, 139 S. Ct. 2356, 2364 (2019); Ross v. Blake, 578 U.S. 632, 638 

(2016). This “first canon” is also the “last” if the text has a clear meaning. Conn. Nat’l Bank v. 

Germain, 503 U.S. 249, 254 (1992). Here, however, courts have viewed the legislative history 

as both the beginning and the end of the analysis. Gulf Federal even claimed that the agency 

chairman’s proposed test had been “adopted in both Houses”—by which the court meant that it 

had been read into the legislative record. 651 F.2d at 264 (citation omitted). “But legislative 

history is not the law.” Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1631 (2018). And the Court 
No. 20-4303 Calcutt v. FDIC Page 80

has not been kind to other tests that developed in this manner. See, e.g., Food Mktg., 139 S. Ct. 

at 2364.

I am also troubled by this approach because courts have chosen it to create a “flexible” 

statute allowing regulators to address “changing business problems[.]” Seidman, 37 F.3d at 927. 

What does this even mean? If an agency condones a banker’s “new business model,” the agency 

can constrict the statute to give the banker a pass? Henson v. Santander Consumer USA Inc., 

137 S. Ct. 1718, 1725–26 (2017). But if the agency disapproves of a competitor’s practice, it can 

expand the statute to punish the competitor? This accordion-like view of the rule of law has no 

place in our constitutional order—one in which the President lacks any “dispensing” prerogative. 

Cf. Clark v. Martinez, 543 U.S. 371, 382 (2005); McConnell, supra, at 115–19. If anything, this 

view has things backwards. This statute can deprive citizens of their property and livelihoods. 

So it would better align with our interpretive traditions if we construed the phrase “strictly” 

rather than flexibly. 1 Blackstone, supra, *88; United States v. Wiltberger, 18 U.S. 76, 95 

(1820). After all, the rule of lenity (the rule that we resolve ambiguities against the government) 

historically applied not just to criminal laws, but also to all laws considered “penal”—“that is, 

laws inflicting any form of punishment” like a civil penalty. Wooden v. United States, 142 S. Ct. 

1063, 1086 n.5 (2022) (Gorsuch, J., concurring in the judgment). This statute fits that bill. See 

Proffitt v. FDIC, 200 F.3d 855, 860–62 (D.C. Cir. 2000). At the least, courts should give a 

phrase that affects core private rights its ordinary meaning—not a malleable one.

How might an ordinary banker interpret the phrase? The legislative history reaches any 

“imprudent act.” Seidman, 37 F.3d at 932; see Gulf Federal, 651 F.2d at 264. Yet this definition 

does not adequately account for two parts of the actual text. For starters, the statute uses the 

word “practice,” not “act.” 12 U.S.C. § 1818(e)(1)(A)(ii). Those words mean different things. 

If an otherwise conscientious banker makes a single imprudent loan to a couple down on their 

luck, the banker might have engaged in an unsound “act.” But nobody would say that the banker 

has made it a “practice” of issuing bad loans after just the one. This word includes a connotation 

of repetition (of habitual acts). The banker must have a habit of making bad loans (or, at the 

least, the bank must have that habit and the banker must “participate[] in” it). Id.; cf. Nw. Nat’l 

Bank, 917 F.2d at 1115. That is because a “practice” is a “habitual or customary performance,” 
No. 20-4303 Calcutt v. FDIC Page 81

American College Dictionary 951 (1970), or a “habitual or customary action or way of doing 

something,” American Heritage Dictionary of the English Language 1028 (1973).

The statute itself contemplates this distinction. One clause bars bankers from engaging in 

“any unsafe or unsound practice[.]” 12 U.S.C. § 1818(e)(1)(A)(ii). The next bars them from 

engaging in “any act, omission, or practice” that breaches their fiduciary duties. Id. 

§ 1818(e)(1)(A)(iii) (emphases added). We presume that Congress meant different things when 

it used different words in clauses that sit right next to each other. See Nat’l Ass’n of Mfrs. v. 

Dep’t of Def., 138 S. Ct. 617, 631 (2018). So even a single act or omission “that breaches [a] 

fiduciary duty” suffices for punishment, but only a habit of “unsafe or unsound” actions does.

Next, the statute does not cover every unsafe or unsound practice in the abstract. Rather, 

the practice must be “in connection with” a bank. 12 U.S.C. § 1818(e)(1)(A)(ii). The Supreme 

Court has recognized that this phrase has an “indeterminat[e]” scope. Maracich v. Spears, 

570 U.S. 48, 59–60 (2013); see Mont v. United States, 139 S. Ct. 1826, 1832 (2019). If we read 

it broadly here, it could cover practices with the remotest of relations to banking—such as a 

banker’s decision to speed to work every morning. See Maracich, 570 U.S. at 59. One regulator 

even thought that the phrase covered a decision to seek judicial review of the regulator’s own 

regulatory decision. Johnson v. Off. of Thrift Supervision, 81 F.3d 195, 202 (D.C. Cir. 1996). 

Could Calcutt’s decision to file a petition in this court also be an “unsound practice” because we 

reject his appeal? I would not read the statute this broadly. Courts instead must interpret the 

clause to adopt the “limiting principle” that best comports with the statute’s context and 

structure. See Maracich, 570 U.S. at 59–60; Chadbourne & Parke LLP v. Troice, 571 U.S. 377, 

387–91 (2014).

For the reasons that a D.C. Circuit decision has explained, I would read this clause to 

cover only “unsafe or unsound banking practices.” Grant Thornton, LLP v. Off. of the 

Comptroller of the Currency, 514 F.3d 1328, 1332–33 (D.C. Cir. 2008). This definition 

“harmonizes” this subsection with the rest of § 1818. Id. at 1332. The section includes several 

other provisions that regulate unsafe or unsound practices “in conducting the business” of a 

bank, including one permitting the FDIC to issue cease-and-desist orders. 12 U.S.C. 

§ 1818(b)(1). It would be odd to permit a limited remedy (a cease-and-desist order) only for 
No. 20-4303 Calcutt v. FDIC Page 82

unsound banking practices but a severe remedy (removal from a bank) for any unsound practice 

with any connection to the bank. And a definition that covered only “banking” practices would 

exclude, for example, an outside auditor’s deficient audit, see Grant Thornton, 514 F.3d at 1332–

33, or a decision to seek judicial review.

All of this said, courts that apply a broad legislative-history test have recognized that 

their reading could lead to “open-ended supervision.” Gulf Fed., 651 F.2d at 265. So they 

compensate by adding a limiting principle that I do not necessarily see in the text either. They 

have read the phrase “unsafe or unsound practice” to require that an action pose a risk of extreme 

harm—one that threatens the bank’s “financial stability,” Seidman, 37 F.3d at 928, or “integrity,” 

Johnson, 81 F.3d at 204 (quoting Gulf Fed., 651 F.2d at 267). An “unsafe” practice (one that 

exposes the bank to “danger or risk”) may well require a risk of some harm. 2 Oxford Universal 

Dictionary 2312 (3d ed. 1968). But the statute also covers an “unsound” practice in the 

disjunctive (a practice that is “not based on proven practice, established procedure, or practical 

knowledge”). Webster’s New International Dictionary 2511 (3d ed. 1966). Perhaps the entire 

phrase “unsafe or unsound” may be one of those “doublets” that Congress uses to convey a 

single idea (like “aid and abet” or “cease and desist”). Doe v. Boland, 698 F.3d 877, 881 (6th 

Cir. 2012) (citing Freeman v. Quicken Loans, Inc., 566 U.S. 624, 635–36 (2012)). Even still, I 

would not think that this text requires the risk of financial collapse. A loan officer at a massive 

bank who has followed a consistent pattern of making bad loans may have engaged in an “unsafe 

or unsound practice” even if the banker’s portfolio cannot threaten the bank’s existence.

Be that as it may, I would save the required financial-risk level for another appeal. When 

sanctioning Calcutt here, the FDIC did not apply my reading that the statute requires unsafe or 

unsound banking practices. I would remand for it to do so in the first instance. Most notably, 

the FDIC nowhere indicated that it must identify a banking “practice” as I read the phrase—i.e., 

a “habitual or customary action[.]” American Heritage, supra, at 1028. To the contrary, as 

Calcutt notes, the vast majority of its findings relied on a single loan—the Bedrock Transaction. 

It concluded, among other things, that Calcutt violated the Bank’s lending policies and engaged 

in imprudent lending by approving that transaction. App. 19–21. It is not clear that Calcutt’s 

actions with respect to this loan can rise to the level of an unsafe or unsound “practice.” 
No. 20-4303 Calcutt v. FDIC Page 83

This fact contrasts Calcutt’s case with those that the FDIC cited—which involved a pattern of 

bad loans. See, e.g., First State Bank of Wayne Cnty. v. FDIC, 770 F.2d 81, 82–83 (6th Cir. 

1985).

2. Breach of Fiduciary Duty. The statute also gives the FDIC the authority to ban a 

banker from the profession if the banker has “committed or engaged in any act, omission, 

or practice which constitutes a breach of such party’s fiduciary duty[.]” 12 U.S.C. 

§ 1818(e)(1)(A)(iii). The parties’ briefing on this portion of the statute raises more questions in 

my mind than it answers.

Start with a choice-of-law question. Citing Atherton v. FDIC, 519 U.S. 213 (1997), my 

colleagues and Calcutt suggest that the relevant state’s corporate-governance law supplies the 

rule of decision for determining whether a banker has breached a “fiduciary duty” within the 

meaning of § 1818(e)(1)(A)(iii). (The FDIC does not enlighten us with its position on this 

choice-of-law subject.) I am skeptical that their reading is correct. The relevant portion of 

Atherton that they cite was not interpreting federal statutory language like the “fiduciary duty” 

text in § 1818(e). It was rejecting the claim that purely federal common law should supply the 

“corporate governance standards” for federally chartered entities. See 519 U.S. at 217–26. Here, 

by contrast, we must determine the proper “interpretation of a federal statute,” not whether we 

may create federal common law. Id. at 218. And when a federal statute uses a common-law 

term of art, the Supreme Court generally interprets its language to adopt a uniform standard of 

conduct for all 50 states based on generic common-law concepts. See, e.g., Burlington Indus., 

Inc. v. Ellerth, 524 U.S. 742, 754–55 (1998); Cmty. for Creative Non-Violence v. Reid, 490 U.S. 

730, 739–41 (1989). I might take that approach here. It would likely mean that we should 

interpret this phrase to codify the well-known duties of care and loyalty as they existed in this 

corporate-governance context at the time that Congress adopted this language in 1966. See, e.g., 

Harry G. Henn, Handbook of the Law of Corporations and Other Business Enterprises 362–70 

(1961); William J. Grange & Thomas C. Woodbury, Corporation Law: Operating Procedures 

for Officers and Directors § 268, at 286–87, § 311, at 325–26 (2d ed. 1964); Dow Votaw, 

Modern Corporations 63–64 (1965); Harold Koontz, The Board of Directors and Effective 

Management 84–86 (1967).
No. 20-4303 Calcutt v. FDIC Page 84

Turn to the substantive standards. The Board held that Calcutt had breached his duty of 

care to the Bank by acting incompetently in his approval of the Bedrock Transaction and in his 

failure to manage the Nielson Loans. App. 23–24. But from my review of the FDIC’s order, 

I cannot even determine the substantive standards of conduct that it applied. Its order did not use 

the words “negligence” or “gross negligence.” And for decades, courts have debated which of 

these standards the statute incorporates. Julie Andersen Hill & Douglas K. Moll, The Duty of 

Care of Bank Directors and Officers, 68 Ala. L. Rev. 965, 986–92 (2017). The Board also 

neglected to mention the traditional “business-judgment rule,” the application of which is also

contested. Patricia A. McCoy, A Political Economy of the Business Judgment Rule in Banking: 

Implications for Corporate Law, 47 Case W. Res. L. Rev. 1, 22–60 (1996). Yet another layer in 

this morass is that in the 1980s, Congress also adopted a “gross negligence” floor to govern the 

conduct of officers and directors in a related context. 12 U.S.C. § 1821(k); see Atherton, 

519 U.S. at 226–28. That separate section’s implications for § 1818(e) are unclear.

Yet I would not authoritatively answer these choice-of-law or substantive questions now. 

As I explain below, I would remand to allow the FDIC to reconsider whether Calcutt’s 

misconduct was the cause of any of the claimed harms. On remand, I would give the FDIC a 

chance to clarify its views on these legal questions about the meaning of this fiduciary-duty 

statute.

B. Causation

The statute next requires the FDIC to prove either that Calcutt’s misconduct had the 

potential to harm the Bank or that Calcutt received a benefit from that misconduct. See 

12 U.S.C. § 1818(e)(1)(B). This “effect” subparagraph provides in full:

(B) by reason of the violation, practice, or breach described in any clause of 

subparagraph (A)—

(i) such insured depository institution or business institution has suffered 

or will probably suffer financial loss or other damage;

(ii) the interests of the insured depository institution’s depositors have 

been or could be prejudiced; or

(iii) such party has received financial gain or other benefit by reason of 

such violation, practice, or breach[.]
No. 20-4303 Calcutt v. FDIC Page 85

Id. The specific civil-penalty provisions on which the FDIC relied required similar “effects.” 

See id. § 1818(i)(2)(B)(ii)(II)–(III); App. 34–35.

The FDIC misinterpreted the causation element in this subparagraph. To show why, 

I start with the causation basics. The common law has long recognized two types of causation: 

factual (or “but for”) causation and legal (or “proximate”) causation. See William L. Prosser, 

Handbook of the Law of Torts §§ 45–46, at 311, 321–22 (1941). But-for causation creates a 

simple rule. As its name suggests, it requires a plaintiff to show that an injury would not have 

occurred “but for” the defendant’s wrongful conduct. See Burrage v. United States, 571 U.S. 

204, 211–12 (2014); Univ. of Tex. Sw. Med. Ctr. v. Nassar, 570 U.S. 338, 347 (2013). Suppose, 

for example, that after a neighbor’s dam breaks and floods a plaintiff’s property, the plaintiff 

sues the neighbor for building the dam negligently. See Restatement (Second) of Torts § 432 

illus. 2 (Am. L. Inst. 1965). But-for causation requires a court to ask whether the plaintiff would 

have suffered this injury (the flooding) in a counterfactual world in which the neighbor did not 

commit the wrongful act (the negligent construction). See id. § 432(1) & cmt. a. And if a oncein-a-century storm would have caused the flooding even if the neighbor had built the dam to 

perfection, the negligent construction did not cause the harm. See id. § 432 illus. 2; Burrage, 

571 U.S. at 211–12.

Proximate causation arose from the premise that a factual-cause test alone would lead to 

excessive liability. Prosser, supra, § 45, at 312. Courts recognized that, “[i]n a philosophical 

sense, the consequences of an act go forward to eternity, and the causes of an event go back to 

the discovery of America and beyond.” Id. They thus adopted “proximate cause” rules to cut off 

liability even if a defendant was a but-for cause of harm. Holmes v. Secs. Inv. Prot. Corp., 

503 U.S. 258, 268 (1992). As one example, a defendant’s conduct (say, its failure to keep a ship 

docked) may set in motion a chain of events that leads another party to negligently cause an 

injury (say, the captain incompetently runs the ship aground). See Exxon Co., U.S.A. v. Sofec, 

Inc., 517 U.S. 830, 832–34 (1996). Under a superseding-cause test, courts will not hold the 

defendant liable if the other party’s negligence was unforeseeable. Id. at 837. As another 

example, a defendant’s misconduct (say, stock manipulation) may directly harm one person 

(a stockbroker who goes bankrupt) and indirectly harm third parties (the stockbroker’s creditors). 
No. 20-4303 Calcutt v. FDIC Page 86

See Holmes, 503 U.S. at 262–63. Under a directness test, courts will not allow the third parties 

to recover. Id. at 271–72.

These common-law rules have significance in this case. The Supreme Court presumes 

that Congress enacts statutory text with common-law concepts in mind. See Lexmark Int’l, Inc. 

v. Static Control Components, Inc., 572 U.S. 118, 132 (2014). It thus has long read common-law 

causation rules into statutes that use causal language like “because of” or “results from.” See

Burrage, 571 U.S. at 213–14; Nassar, 570 U.S. at 350–52. Congress used one such phrase (“by 

reason of”) here. The FDIC must prove that the Bank suffered (or will likely suffer) a loss or 

that Calcutt received a benefit “by reason of” his misconduct. 12 U.S.C. § 1818(e)(1)(B). So 

I would interpret this statute to require both but-for and proximate causation. See Comcast Corp. 

v. Nat’l Ass’n of African American-Owned Media, 140 S. Ct. 1009, 1015 (2020); Holmes, 

503 U.S. at 265–67.

But the FDIC has not adopted these causation rules. Its enforcement orders have all but 

ignored but-for cause. In fact, I have found only one such order that even used this phrase. See 

In re Adams, 1997 WL 805273, at *5 (F.D.I.C. Nov. 12, 1997). And it suggested that a “‘but 

for’ relationship” was not required. Id. (quoting ABKCO Music, Inc. v. Harrisongs Music Ltd., 

772 F.2d 988, 995–96 (2d Cir. 1983)). The FDIC also failed to mention but-for cause in this 

case. It simply indicated: “An actual loss is not required; a potential loss is sufficient so long as 

the risk of loss to the Bank was ‘reasonably foreseeable’ to someone in [Calcutt’s] position.” 

App. 26 (citations omitted). The FDIC is correct that, unlike most statutes imposing liability for 

harm, this statute does not require a past loss. It also applies if a bank “will probably suffer” a 

loss in the future “by reason of” the banker’s misconduct. 12 U.S.C. § 1818(e)(1)(B)(i). But it 

incorporates but-for cause all the same. For a past loss, the FDIC must show that it “would not 

have occurred without” the misconduct. Nassar, 570 U.S. at 347 (citation omitted). For a future 

loss, the FDIC must show that the probability of loss would not have occurred without that 

misconduct. See id. The FDIC’s jurisprudence leaves no hint that it adheres to these first-year 

torts-class concepts.

The FDIC’s legal error is all the more pronounced for proximate causation. For years, it 

has rejected outright any need to prove this causation. See Adams, 1997 WL 802573, at *5; In re 
No. 20-4303 Calcutt v. FDIC Page 87

***, 1985 WL 303871, at *114 (F.D.I.C. Aug. 19, 1985). It did so in this case too, noting that 

“an individual respondent need not be the proximate cause of the harm to be held liable[.]” App. 

26–27. Confusingly, however, the FDIC suggested that the loss needs to be “foreseeable.” App. 

26, 31. Foreseeability is one component of the proximate-causation requirement that the FDIC 

said it was rejecting. See Hemi Grp., LLC v. City of New York, 559 U.S. 1, 12 (2010). If the 

FDIC meant to imply that the statute incorporates only proximate cause’s foreseeability element, 

it still erred. Proximate causation contains a group of concepts other than foreseeability. See id. 

So the Supreme Court has already rejected this type of argument that a federal statute contains 

only a foreseeability test. See Bank of Am. Corp. v. City of Miami, 137 S. Ct. 1296, 1305–06 

(2017).

*

Maybe we could overlook the FDIC’s failure to identify the governing causation law if it 

correctly applied that law to Calcutt. But it did no such thing. The FDIC held Calcutt 

responsible for three injuries to the Bank and one benefit to him. The Bank incurred $6.443 

million in charge-offs from the Nielson Loans. App. 27–29. It incurred a $30,000 charge-off 

from the $760,000 Bedrock Transaction. App. 27. And it paid its lawyers and accountants for 

work related to these loans. App. 29–31. Calcutt lastly received dividends from the Bank’s 

holding company despite the loans’ poor condition. App. 31–32. None of these “effects” 

sufficed.

As an initial matter, I agree with my colleagues that the FDIC failed to explain why the 

statute should even cover fees paid to lawyers or accountants. The statute reaches “financial loss 

or other damage” from Calcutt’s misconduct. 12 U.S.C. § 1818(e)(1)(B)(i). It would be unusual 

to describe the money paid for these services as “financial loss” or “other damage.” One does 

not normally use such terms to describe a payment of money for something of 

commensurate value. Cf. Summit Valley Indus. Inc. v. Loc. 112, United Brotherhood of 

Carpenters & Joiners of Am., 456 U.S. 717, 722–23 (1982). The payment is more naturally 

described as an “expense” or “cost.” Our country’s litigation traditions reinforce this view. We 

have long followed the “American Rule” in which a plaintiff’s legal costs are not recoverable 

“damages” even if the defendant’s conduct is their but-for cause. See Alyeska Pipeline Serv. Co. 
No. 20-4303 Calcutt v. FDIC Page 88

v. Wilderness Soc’y, 421 U.S. 240, 249–50 (1975) (citing Arcambel v. Wiseman, 3 U.S. 306 

(1796)). When a statute allows a plaintiff to recover “damages,” then, courts do not read that 

phrase to cover attorney’s fees—or other expert fees for that matter. See Summit Valley, 

456 U.S. at 722–23; cf. W. Va. Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 88–92 (1991). And the 

Court has stuck with this rule even if a law uses a phrase (“expenses”) that is “capacious enough 

to include” these fees. Peter v. Nantkwest, Inc., 140 S. Ct. 365, 372 (2019). So I would not read 

the text “loss” or “damage” to cover them here.

That leaves the other three “effects.” The FDIC did not apply basic causation rules to 

any of them. Most tellingly, the FDIC held Calcutt responsible for all $6.443 million in chargeoffs on the $38 million in Nielson Loans—that is, for the entire loss. App. 27–28; see id. at 6–7. 

But these loans were underwater in the aftermath of the Great Recession before Calcutt 

committed most of the identified misconduct. App. 625–26. As with my hypothetical about the 

negligently made dam, then, the FDIC needed to ask a “counterfactual” question: How much in 

charge-offs would the Bank have incurred if Calcutt had not engaged in that misconduct? 

Comcast, 140 S. Ct. at 1015. Suppose that the (hopefully) once-in-a-century recession would 

have caused $7 million in charge-offs if the Bank started collection efforts immediately because 

of the collapsed real-estate market. If so, a decision to enter into the Bedrock Transaction would 

have helped (not harmed) the Bank. And Calcutt’s misconduct (for example, the failure to 

undertake the usual underwriting efforts, see App. 19) could not be described as a but-for cause 

of loss. I see nothing in the record on appeal that would help answer this critical but-for 

question, confirming that the FDIC did not even ask it.

The same error underlies the FDIC’s decision to hold Calcutt liable for the $30,000 

charge-off for the Bedrock Transaction. App. 27. The FDIC did not consider the 

“counterfactual” of what would have occurred if Calcutt had not engaged in misconduct. 

Comcast, 140 S. Ct. at 1015. As a generic matter, the Bank suffered a total of $6.473 million in 

charge-offs on all Nielson Loans (including the Bedrock Transaction) and the FDIC needed to 

consider the amount of likely charge-offs without this transaction. Would it have lost more? 

Less? The FDIC did not ask these questions. More granularly, Calcutt told the FDIC that the 

administrative law judge had erred “by failing to tether the $30,000 charge-off (and other actual 
No. 20-4303 Calcutt v. FDIC Page 89

and potential losses) to specific acts of misconduct[.]” App. 27. The judge found, for instance, 

that Calcutt breached his fiduciary duty of candor to the Bank’s directors by failing to seek their 

preapproval for the Bedrock Transaction. App. 25–26. Suppose the directors would have 

approved the transaction even if he had done so. How could this specific misconduct have 

caused this harm? The FDIC responded that it was “unpersuaded” by this causation argument 

because the Bedrock Transaction was a “main focus” of the hearing and the judge catalogued 

Calcutt’s many misdeeds in approving it. App. 27. This (non)response said nothing about 

causation—an element distinct from misconduct.

Both but-for and proximate-cause problems undergird the FDIC’s decision that Calcutt 

benefited from his misconduct. He was the largest shareholder of the Bank’s holding company, 

and the FDIC held that his misconduct allowed him to obtain a dividend from this company. 

App. 31–32. Its conclusion rested on the administrative law judge’s finding that the Bank paid 

its own shareholder (the holding company) a $462,950 dividend in mid-2011 and that the FDIC 

would not have approved this payment (to the holding company) if it had known that the Nielson 

Loans were not performing. App. 287, 751. As a matter of but-for causation, the FDIC did not 

ask whether the holding company would have paid its shareholders the same dividend even if the 

FDIC had known of the Nielson Loans’ true condition. See Comcast, 140 S. Ct. at 1015. It cites 

no testimony from the company’s directors about what they would have done. And Calcutt 

testified that the holding company had sufficient assets to pay the dividend even if the Bank had 

paid it nothing. A580.

As a matter of proximate causation, the FDIC failed to consider a “directness” issue. 

If “by reason of” incorporates usual proximate-cause rules, it would require that Calcutt directly

benefit from his misconduct. Under the FDIC’s theory, though, the holding company was the 

direct beneficiary that received the dividend; Calcutt was an indirect beneficiary as a shareholder 

of that separate company. Is this a sufficiently “direct” benefit (analogous to a larger salary)? 

“The general tendency” in the law has been “not to go beyond the first step.” Bank of Am., 

137 S. Ct. at 1306 (citation omitted). And this theory potentially rests on the “independent” 

decision of the holding company. Hemi, 559 U.S. at 15. But I would leave this question for the 

FDIC.
No. 20-4303 Calcutt v. FDIC Page 90

All told, I would remand for the FDIC—the fact finder—to apply the correct causation 

rules to the two charge-offs and the dividend payment in the first instance. My colleagues 

recognize many of the FDIC’s legal errors but say there is no need to remand. I disagree. They 

first invoke the deferential substantial-evidence test. But that test governs our review of the 

agency’s factual findings. See Dickinson, 527 U.S. at 162. I do not quibble with those. I take 

issue with the FDIC’s failure to follow the proper causation law. The substantial-evidence test 

has nothing to say on that subject. And even the FDIC does not claim that we should defer to its 

legal views. See Grant Thornton, 514 F.3d at 1331; cf. Epic, 138 S. Ct. at 1629–30.

If anything, my colleagues’ analysis runs afoul of basic administrative-law principles. 

When an agency’s decision rests on a collapsed legal foundation, we cannot affirm the decision 

on the ground that the agency might have reached the right outcome under a correct legal view. 

We must let the agency apply the proper law in the first instance. See Gonzales v. Thomas, 

547 U.S. 183, 186 (2006) (per curiam); SEC v. Chenery Corp., 318 U.S. 80, 88 (1943); Henry J. 

Friendly, Chenery Revisited: Reflections on Reversal and Remand of Administrative Orders, 

1969 Duke L.J. 199, 209–10. But my colleagues all but find facts by applying their view of the 

law to the record. Recall, for example, that the FDIC held Calcutt liable for all $6.443 million in 

charge-offs on the Nielson Loans—a finding that leaves no doubt that the agency erred. My 

colleagues do not defend this finding. They nevertheless say that the FDIC “could have” found 

that Calcutt’s misconduct caused some unquantified percentage of the losses. Maj. Op. 48. But 

this “judicial judgment cannot be made to do service for an administrative judgment.” Chenery, 

318 U.S. at 88.

Even if we could now find Calcutt liable for an (unknown) loss amount on a goodenough-for-government-work approach, I would still remand. The statute says that the FDIC 

“may” seek to remove a banker—not that it must do so—when the other requirements are met. 

12 U.S.C. § 1818(e)(1). It thus leaves the FDIC with discretion over whether to bar Calcutt 

“from working in his chosen profession for the remainder of his career.” Doolittle, 992 F.2d at 

1538. The amount of harm properly chargeable to Calcutt should influence its discretionary 

decision. The FDIC found removal proper after holding Calcutt responsible for well over 

$8 million (including professional fees and charge-offs). If, on remand, the FDIC were to find 
No. 20-4303 Calcutt v. FDIC Page 91

that Calcutt’s conduct caused a tiny fraction of this harm, it might reconsider its “draconian” 

sanction. Id. In fact, this logic led the Eleventh Circuit to remand a similar removal order so that 

a related agency could reconsider the order after the court jettisoned part of its reasoning. Id. 

Even a case that my colleagues cite issued this type of remand when it upheld only part of the 

FDIC’s order—given the “extraordinary” nature of the sanction. De la Fuente v. FDIC, 

332 F.3d 1208, 1227 (9th Cir. 2003). Because the FDIC’s order is riddled with legal error, I find 

it inexplicable that we are not doing so here.

* * *

For these reasons, I respectfully dissent.