## Facts

- Michael D. Landry served as Senior Vice President, Chief Financial Officer, and Cashier of First Guaranty Bank, a federally insured bank in financial distress.
- The FDIC required the bank to obtain a $4.7 million capital infusion by January 1, 1991, and later indicated it would seek termination of deposit insurance after continued weakness.
- Landry helped arrange a transaction involving Pangaea Corporation intended to improve the bank’s regulatory capital position.
- The FDIC viewed the Pangaea transaction as a misleading capital enhancement that misrepresented the bank’s condition and increased risk.
- The FDIC brought an enforcement action under 12 U.S.C. § 1818(e)(1) seeking to remove Landry and prohibit him from participating in the affairs of any federally insured depository institution.
- An FDIC administrative law judge conducted a formal APA hearing, recommended the sanction, and the FDIC Board adopted the recommendation and issued a removal and prohibition order.
- Landry petitioned for review, arguing the ALJ’s appointment violated the Appointments Clause, the findings lacked substantial evidence under § 1818(e), and discovery/privilege rulings denied a fair proceeding.

## Issues

1. Whether FDIC administrative law judges are “inferior officers” subject to the Appointments Clause when they issue only recommended decisions subject to FDIC Board review.
2. Whether substantial evidence supported the FDIC’s findings that Landry’s conduct satisfied the statutory predicates for removal and prohibition under 12 U.S.C. § 1818(e).
3. Whether asserted discovery and privilege errors required vacatur of the FDIC’s order.

## Decision

- The court denied the petition for review and affirmed the FDIC’s removal and prohibition order.
- The court held FDIC ALJs are not “inferior officers” because they lack authority to issue final agency decisions; their rulings are recommendations subject to de novo Board review.
- The court held substantial evidence supported the FDIC’s findings that Landry’s conduct met § 1818(e)’s requirements.
- The court rejected Landry’s procedural and discovery challenges, finding no deprivation of a fair hearing and, at most, harmless error.

## Legal Principles

- An adjudicator is not an Appointments Clause “officer” where the adjudicator lacks final decisionmaking authority and the agency retains de novo power to make the final decision.
- Judicial review of FDIC removal/prohibition orders under § 1818(e) applies the substantial evidence standard to agency factfinding.
- Under 12 U.S.C. § 1818(e), removal/prohibition requires findings of (1) misconduct (e.g., unsafe or unsound practice, violation, or fiduciary breach), (2) personal dishonesty or willful/continuing disregard for safety and soundness, and (3) actual or likely more-than-minimal loss or prejudice to depositors’ interests.
- Procedural errors in an administrative enforcement proceeding warrant relief only upon a showing of prejudice; harmless error does not justify vacating the agency’s order.

## Conclusion

The D.C. Circuit sustained the FDIC’s authority to impose removal and industry prohibition on a bank officer based on substantial evidence of qualifying misconduct under § 1818(e), and it rejected an Appointments Clause challenge because FDIC ALJs issue nonfinal recommendations reviewed de novo by the FDIC Board.


Landry v. Fed. Deposit Ins. Corp., 204 F.3d 1125 (D.C. Cir. 2000)