Supreme Court’s Remand of FDIC Enforcement Action: Any Larger Impact on Agency Deference? 

June, 2023 - Stephanie Shea

June 5, 2023

By: Joshua Robbins and Stephanie Shea

While we wait for the U.S. Supreme Court to decide the fate of the Chevron doctrine governing courts’ deference to agencies’ interpretations of law, its recent decision in another case has flown under the radar. In Calcutt, III v. FDIC, 598 U.S. ____ (2023), decided on May 22, 2023, the Court broke little new ground, but sent a reminder that even the elimination of Chevron deference would not spell the end of agency discretion in enforcement actions within the financial industry and elsewhere.

In Calcutt, the FDIC brought an enforcement action against a former CEO of a community bank, alleging that he mismanaged a series of loans to one entity that went bad during the Great Recession, by failing to comply with the Bank’s internal loan policy or to accurately respond to the FDIC’s inquiries about the transaction. The FDIC Administrative Law Judge (ALJ) recommended that the former CEO be barred from the banking industry and assessed a $125,000 civil penalty. The former CEO appealed the decision to the FDIC’s Board, which agreed with the ALJ’s penalties. The former CEO then appealed the decision to the Sixth Circuit.

A key issue before the Sixth Circuit was whether imposition of the penalties against the former CEO required showing that his actions were the proximate cause of the bank’s or its depositors’ harm. While the FDIC Board had concluded that a showing of proximate cause was not needed, the Sixth Circuit disagreed, holding that a showing of proximate cause was required. Nonetheless, the Sixth Circuit concluded that the record included enough evidence of probable cause to support the Board’s decision, and affirmed on that basis.

The Supreme Court reversed. As it explained, a “fundamental rule of administrative law” provides that a court can only uphold a federal agency’s order on the same ground on which the agency itself relied. If the agency’s legal analysis was wrong, the matter should be remanded to the agency—here, the FDIC Board—to reconsider the matter under the correct rule. The Court further observed that because decisions regarding sanctions are discretionary, as well as “highly fact-specific and contextual,” reviewing courts should allow them the “flexibility” to make their own decisions based on the facts and the correct legal standard. The Court thus ordered the Sixth Circuit to remand the case to the FDIC Board for further proceedings.

Ultimately, the decision is a mixed bag for executive agency authority, whether in the financial regulatory sphere or elsewhere. On the one hand, it has made it more difficult for courts to affirm agency decisions that contain legal errors but that the courts may still deem defensible. On the other, it has reaffirmed agencies’ authority in adjudicating regulatory disputes based on their view of the facts, which is often more important than abstract legal principles in determining the outcome of agency enforcement actions. Thus, even if and when Chevron falls, agency enforcement discretion will remain considerable, and disputes about the limits of that discretion will live on.

Buchalter is a leading nationally recognized financial services law firm, having served large, medium and small financial institutions for over 90 years. Buchalter’s Financial Services Regulatory Industry Group provides counseling and analysis across the wide range of regulatory and compliance issues facing such institutions, and the Group’s seasoned attorneys are experienced in the corporate, compliance and risk management issues such as those raised by this holding.  Buchalter’s White Collar & Investigations practice represents financial services industry clients and others in criminal and civil investigations, prosecution, and litigation brought by the U.S. Department of Justice, Securities & Exchange Commission, Consumer Financial Protection Bureau, FinCEN, and other enforcement agencies, as well as internal corporate investigations. Its members include a number of former federal prosecutors and agency enforcement attorneys, with experience defending both individuals and institutions across a range of enforcement matters.

Joshua Robbins

Stephanie Shea

John Hosack

Michael Flynn


This communication is not intended to create or constitute, nor does it create or constitute, an attorney-client or any other legal relationship. No statement in this communication constitutes legal advice nor should any communication herein be construed, relied upon, or interpreted as legal advice. This communication is for general information purposes only regarding recent legal developments of interest, and is not a substitute for legal counsel on any subject matter. No reader should act or refrain from acting on the basis of any information included herein without seeking appropriate legal advice on the particular facts and circumstances affecting that reader. For more information, visit


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