Facts of the Case
Harry C. Calcutt, III, served as CEO of Northwestern Bank from 2000 to 2013. In 2009, under Calcutt’s watch, the bank’s largest lending relationship—with Nielsen Entities, a group of 19 family-owned businesses in real estate and oil industries—deteriorated to the point that, in 2011, the entire group of businesses defaulted on their loans.
In 2012, the Federal Deposit Insurance Corporation (FDIC) opened an investigation into the Nielsen matter, which concluded the following year. The FDIC determined that Calcutt and other officers of the bank had mishandled the Nielsen lending relationship in multiple ways. An administrative law judge conducted an evidentiary hearing into Calcutt’s conduct, and recommended that Calcutt be prohibited from further participation in the banking industry, and be assessed a $125,000 civil penalty. On review, the FDIC board found the ALJ’s findings were well supported and imposed the recommended penalties.
Calcutt appealed to the U.S. Court of Appeals for the Sixth Circuit, which determined that the FDIC had made two legal errors in adjudicating the case. It then conducted its own review of the record and concluded substantial evidence supported the FDIC’s decision.
Question
When an agency commits legal errors may the reviewing court apply the correct legal rules to the record in the first instance?
Conclusion
In a per curiam (unsigned) opinion, the Court held that when an agency commits legal errors, the reviewing court must remand the case to the agency, not conduct its own review of the factual record.Â