## Facts

- Harry C. Calcutt III served as CEO of Northwestern Bank, a Michigan community bank, from 2000 to 2013.
- The bank’s largest lending relationship involved the “Nielsen Entities,” a group of family-owned businesses; the borrowers defaulted by 2011.
- The FDIC initiated an enforcement action under 12 U.S.C. § 1818(e), alleging Calcutt mismanaged the loan relationship and related bank affairs.
- After an evidentiary hearing, an FDIC administrative law judge found Calcutt violated internal loan policies and committed related misconduct, recommending removal, a prohibition from banking, and a $125,000 civil penalty.
- The FDIC Board adopted the findings and imposed the recommended sanctions.
- On Calcutt’s petition for review, the Sixth Circuit identified two legal errors in the FDIC’s reasoning but affirmed anyway after independently reviewing the record and concluding substantial evidence supported the sanctions under what it viewed as the correct legal standards.

## Issues

1. After identifying legal errors in an agency adjudication, may a court of appeals affirm the agency’s order by applying the correct legal standards to the existing record in the first instance, rather than remanding to the agency?

## Decision

- The Supreme Court reversed the Sixth Circuit’s judgment and required remand.
- The Court held that a reviewing court may not uphold an agency’s discretionary order on a ground different from the one the agency adopted.
- Because the Sixth Circuit affirmed based on a legal rationale the FDIC itself had not applied, the court violated the Chenery rule.
- The case was remanded with instructions that the Sixth Circuit remand to the FDIC so the agency could reconsider the matter under the correct legal framework.

## Legal Principles

- Reviewing courts must assess agency action “solely by the grounds invoked by the agency,” and may not supply post hoc rationales for an agency decision.
- An agency’s discretionary order may be upheld only on the same basis articulated by the agency in its order.
- When an agency has not applied the proper legal standard—particularly where sanctions involve agency discretion—the ordinary remedy is remand for the agency to decide the matter anew under the correct standard.
- A court’s finding that the record could support the same outcome under a different legal rationale does not permit affirmance where the agency did not use that rationale.

## Conclusion

The Court required remand because courts may not cure an agency’s legal errors by independently reanalyzing the record under corrected standards; the agency must apply the proper legal framework and exercise its discretion in the first instance.


Calcutt v. Fed. Deposit Ins. Corp., 598 U.S. 623 (2023)