Calcutt v. FDIC, 598 U.S. 623

FDIC brought an enforcement action under 12 U.S.C. §1818(e) against Harry C. Calcutt III, former CEO of Northwestern Bank, for mishandling a major loan relationship with the Nielson Entities after the 2007–2009 recession.
The Nielson Entities stopped payments multiple times; the Bedrock Transaction briefly cured defaults but the portfolio later defaulted and remained nonperforming.
An ALJ conducted a weeklong evidentiary hearing and recommended removal, a banking prohibition, and a $125,000 civil penalty.
The FDIC Board found Calcutt engaged in unsafe or unsound practices, identified harms (a $30,000 charge-off, $6.4 million in other losses, and investigative/audit/legal expenses), and concluded proximate causation was not required under §1818(e)(1)(B).
The Sixth Circuit held the Board erred as a matter of law (concluding “by reason of” requires proximate cause), and also narrowed which harms could be attributed to Calcutt, but nonetheless affirmed on the ground that substantial evidence supported the Board’s sanctions.
The Supreme Court reversed the Sixth Circuit, holding a reviewing court may not affirm an agency order on a rationale the agency never adopted and remanded the case to the FDIC for reconsideration consistent with administrative-law principles.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether §1818(e)(1)(B)’s phrase “by reason of” requires proximate causation	Calcutt: "By reason of" requires a proximate-cause showing.	FDIC: proximate cause not required; a but-for or looser causal link suffices.	Court did not decide the substantive question on the merits; remanded for agency to address in first instance.
Whether Calcutt proximately caused the $6.4M losses on other Nielson loans	Calcutt: he did not proximately cause those losses; bank would have lost money regardless.	FDIC: his management and concealment materially contributed to the losses.	Not resolved on the merits; left to agency on remand.
Whether investigative, auditing, and legal expenses qualify as harms "by reason of" misconduct	Calcutt: such ordinary business expenses are not cognizable harms under §1818(e).	FDIC: these expenses flowed from managing the misconduct and are harms the bank incurred.	Not resolved on the merits; remanded.
Whether an appellate court can affirm an agency order on a different legal rationale without remanding	Calcutt: court should remand when agency applied wrong legal standard.	FDIC/Sixth Cir.: remand unnecessary because outcome would be the same; affirming on substantial-evidence basis is proper.	Held: reviewing courts must judge agency action solely by the agency’s stated grounds; if the agency erred the proper course is ordinarily remand. Sixth Circuit erred by substituting its own rationale; case remanded.

SEC v. Chenery Corp., 332 U.S. 194 (establishes rule that courts must uphold agency action only on the grounds articulated by the agency)
Burlington Truck Lines, Inc. v. United States, 371 U.S. 156 (agency discretionary orders can only be upheld on the basis the agency articulated)
Florida Power & Light Co. v. Lorion, 470 U.S. 729 (remand ordinarily required when record does not support agency action or agency failed to consider relevant factors)
Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527 (narrow exception where agency was required to take a particular action)
Hemi Group, LLC v. City of New York, 559 U.S. 1 (interpretation that Congress’s phrase "by reason of" can signal a proximate-cause requirement)
Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (uses proximate-cause analysis in statutory interpretation)
FPC v. Idaho Power Co., 344 U.S. 17 (reviewing court’s function ends when an error of law by agency is identified)
NLRB v. Wyman-Gordon Co., 394 U.S. 759 (discusses rare circumstances where remand is unnecessary)
Michael v. FDIC, 687 F.3d 337 (7th Cir.) (definition of "unsafe or unsound practice" cited by the Board)