Opinion ID: 6348737
Heading Depth: 4
Heading Rank: 1

Heading: issues

Text: 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. 6 This 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 –19 (FDIC Sept. 17, 2019); Matter of Landry, No. FDIC-95-65e, 1999 WL 440608, at –29 (FDIC May 25, 1999); Matter of Leuthe, Nos. FDIC-9515Ee, FDIC-95-16k,1998 WL 438323, –11 (FDIC June 26, 1998). Those decisions, however, did not concern a separation-of-powers challenge to the FDIC Board. 7 While 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