Amicus Curiae Brief — Harry C. Calcutt, III, Petitioner v. Federal Deposit Insurance Corporation

No. 22-714

IN THE

Supreme Court of the United States

_________________________________________________

HARRY C. CALCUTT, III,

Petitioner,

v.

FEDERAL DEPOSIT INSURANCE CORPORATION,

Respondent.

____________________________________________________________________________________________________

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

____________________________________________________________________________________________________

BRIEF OF AMICUS CURIAE

AMERICANS FOR PROSPERITY FOUNDATION

IN SUPPORT OF PETITIONER

————

Michael Pepson

Counsel of Record

Cynthia Fleming Crawford

AMERICANS FOR PROSPERITY FOUNDATION

1310 N. Courthouse Road, Ste. 700

Arlington, VA 22201

(571) 329-4529

mpepson@afphq.org

Counsel for Amicus Curiae

February 24, 2023

i

TABLE OF CONTENTS

Table of Authorities ...................................................... ii

Brief of Amicus Curiae in Support of Petitioner ........ 1

Interest of Amicus Curiae ............................................ 1

Summary of Argument ................................................. 2

Argument ....................................................................... 4

I.

The Panel’s Application of Chenery Warrants

This Court’s Review ............................................. 4

II.

The Panel’s Application of Collins Warrants This

Court’s Review ...................................................... 9

A.

The Panel Overread Collins ...................... 10

B.

Collins Does Not Bar Meaningful Review of

Article II Removal Claims ......................... 13

III. The

FDIC’s

Administrative

Process

is

Unconstitutional ................................................. 16

IV. Granting Meaningful Relief for Article II

Violations Affecting Private Rights Will Not

Cause the Floodgates to Open........................... 20

Conclusion ................................................................... 22

ii

TABLE OF AUTHORITIES

Page(s)

Cases

AMG Capital Mgmt., LLC v. FTC,

141 S. Ct. 1341 (2021) ............................................. 7

Austin v. Shalala,

994 F.2d 1170 (5th Cir. 1993) .............................. 21

Barr v. Am. Ass’n of Political

Consultants,

140 S. Ct. 2335 (2020) ........................................... 13

B&B Hardware, Inc. v. Hargis Indus.,

575 U.S. 138 (2015) ......................................... 18, 19

Bhatti v. Fed. Hous. Fin. Agency,

15 F.4th 848 (8th Cir. 2021) ................................. 12

Bhatti v. Fed. Hous. Fin. Agency,

17-CV-2185, 2022 U.S. Dist. LEXIS

226527 (D. Minn. Dec. 16, 2022) .......................... 11

Buffington v. McDonough,

143 S. Ct. 14 (2022) ................................................. 7

Burgess v. FDIC,

No. 22-cv-00100,

2022 U.S. Dist. LEXIS 213050

(N.D. Tex. Nov. 6, 2022) ................................... 3, 19

iii

Burgess v. FDIC,

No. 22-cv-00100,

2022 U.S. Dist. LEXIS 223387

(N.D. Tex. Dec. 1, 2022) ........................................ 20

Burlington Truck Lines v. United

States,

371 U.S. 156 (1962) ................................................. 5

City of Arlington v. FCC,

569 U.S. 290 (2013) ............................................ 16, 18

Cmty. Fin. Servs. Ass’n of Am. v.

Consumer Fin. Prot. Bureau,

51 F.4th 616 (5th Cir. 2022) ................................. 10

Cohens v. Virginia,

19 U.S. (6 Wheat.) 264 (1821) .............................. 15

Collins v. Yellen,

141 S. Ct. 1761 (2021) ........................... 3, 10, 14, 15

Collins v. Yellen,

27 F.4th 1068 (5th Cir. 2022) ............................... 12

Cochran v. SEC,

20 F.4th 194 (5th Cir. 2021) ........................... 10, 11

Consumer Fin. Prot. Bureau v.

Nationwide Biweekly Admin., Inc.,

Nos. 18-15431, 18-15887,

2023 U.S. App. LEXIS 2190

(9th Cir. Jan. 27, 2023) ......................................... 12

iv

Consumers’ Research v. Consumer Prod.

Safety Comm’n,

592 F. Supp. 3d 568 (E.D. Tex. 2022) .................. 10

De La Fuente v. FDIC,

332 F.3d 1208 (9th Cir. 2003) ................................ 8

Dep’t of Homeland Sec. v. Regents of the

Univ. of Cal.,

140 S. Ct. 1891 (2020) ................................. 4, 5, 7, 8

DISH Network Corp. v. NLRB,

953 F.3d 370 (5th Cir. 2020) .................................. 9

Encino Motorcars, LLC v. Navarro,

579 U.S. 211 (2016) ................................................. 4

Fla. Dep’t of Labor & Emp’t Sec. v.

United States Dep’t of Labor,

893 F.2d 1319 (11th Cir. 1990) .............................. 6

FEC v. Akins,

524 U.S. 11 (1998) ................................................... 6

Fleming v. USDA,

987 F.3d 1093 (D.C. Cir. 2021)................... 3, 15, 17

Free Enterprise Fund v. Public Co.

Accounting Oversight Board,

561 U.S. 477 (2010) ......................................... 12, 21

FTC v. Ruberoid Co.,

343 U.S. 470 (1952) ............................................... 14

Gui Cun Liu v. Ashcroft,

372 F.3d 529 (3d Cir. 2004) .................................... 7

v

Hollingsworth v. Perry,

558 U.S. 183 (2010) ................................................. 9

Integrity Advance, LLC v. Consumer

Fin. Prot. Bureau,

48 F.4th 1161 (10th Cir. 2022) ............................. 12

Jarkesy v. SEC,

34 F.4th 446 (5th Cir. 2022) ............... 15, 17, 18, 19

Kaufmann v. Kijakazi,

32 F.4th 843 (9th Cir. 2022) ................................. 15

Lorenzo v. SEC,

872 F.3d 578 (D.C. Cir. 2017)........................... 8, 16

Lucia v. SEC,

138 S. Ct. 2044 (2018) ........................................... 17

MCP No. 165 v. United States DOL,

20 F.4th 264 (6th Cir. 2021) ................................... 5

Michigan v. EPA,

576 U.S. 743 (2015) ................................................. 4

Murphy v. NCAA,

138 S. Ct. 1461 (2018) ........................................... 13

Niz-Chavez v. Garland,

141 S. Ct. 1474 (2021) ............................................. 8

NLRB v. Wyman-Gordon Co.,

394 U.S. 759 (1969) ................................................. 7

Rop v. Fed. Hous. Fin. Agency,

50 F.4th 562 (6th Cir. 2022) ........................... 13, 14

vi

Ryder v. United States,

515 U.S. 177 (1995) ............................................... 14

SEC v. Chenery Corp.,

318 U.S. 80 (1943) ........................................... 2, 5, 6

SEC v. Chenery Corp.,

332 U.S. 194 (1947) ................................................. 5

Seila Law LLC v. Consumer Financial

Protection Bureau,

140 S. Ct. 2183 (2020) ..................................... 12, 13

Stern v. Marshall,

564 U.S. 462 (2011) ............................................... 19

Thompson v. Lynch,

788 F.3d 638 (6th Cir. 2015) .................................. 8

Thunder Basin Coal Co. v. Reich,

510 U.S. 200 (1994) ............................................. 3, 9

Tull v. United States,

481 U.S. 412 (1987) ......................................... 18, 19

United States v. Arthrex, Inc.,

141 S. Ct. 1970 (2021) ............................... 13, 14, 16

United States v. Schwarzbaum,

24 F.4th 1355 (11th Cir. 2022) ............................... 6

United States Steel Corp. v. EPA,

595 F.2d 207 (5th Cir. 1979) .................................. 8

Whole Woman’s Health v. Jackson,

142 S. Ct. 522 (2021) ............................................. 12

vii

Williams v. Pennsylvania,

136 S. Ct. 1899 (2016) ........................................... 18

Constitution

U.S. Const. Art. II, § 1, cl. 1 ....................................... 16

U.S. Const. amend. VII .............................................. 19

Statutes

5 U.S.C. § 706 ................................................................ 8

5 U.S.C. § 706(2)(B) .................................................... 13

Other Authorities

Aaron A. Neilson, Three Views of the

Administrative State: Lessons from

Collins v. Yellen, 2020-2021 Cato

Sup. Ct. Rev. 141 (2021) ....................................... 11

Andrew N. Vollmer, Accusers as

Adjudicators in Agency Enforcement

Proceedings,

52 U. Mich. J.L. Reform 103 (2018) ..................... 18

Evan D. Bernick, Is Judicial Deference

to Agency Fact-Finding Unlawful?,

16 Geo. J.L. & Pub. Pol’y 27 (2018) ..................... 18

Gary Lawson, The Rise and Rise of the

Administrative State,

107 Harv. L. Rev. 1231 (1994) ............................. 18

viii

Henry J. Friendly,

Chenery Revisited: Reflections on

Reversal and Remand of

Administrative Orders,

1969 Duke L.J. 199 (1969)...................................... 5

Jameson Payne, Taken for Granted?

SEC Implied For-Cause Removal

Protection and Its Implications, Yale

Notice and Comment (June 24, 2022) ................. 16

Jeffrey M. Hirsch,

Defending the NLRB: Improving the

Agency’s Success in the Federal

Courts of Appeals,

5 FIU L. Rev. 437 (2010) .................................... 5, 9

Mila Sohoni, Agency Adjudication and

Judicial Nondelegation: An Article

III Canon,

107 Nw. U.L. Rev. 1569 (2013) ............................ 21

Note, The SEC Is Not an Independent

Agency,

126 Harv. L. Rev. 781 (2013)................................ 16

OPM, ALJs By Agency,

https://www.opm.gov/services-foragencies/administrative-lawjudges/#url=ALJs-by-Agency ............................... 21

1

BRIEF OF AMICUS CURIAE

IN SUPPORT OF PETITIONER

Under Supreme Court Rule 37.2, Americans for

Prosperity Foundation (“AFPF”) respectfully submits

this amicus curiae brief in support of Petitioner.1

INTEREST OF AMICUS CURIAE

Amicus curiae Americans for Prosperity

Foundation (“AFPF”) is a 501(c)(3) nonprofit

organization committed to educating and training

Americans to be courageous advocates for the ideas,

principles, and policies of a free and open society. As

part of this mission, it appears as amicus curiae before

federal and state courts.

AFPF has an interest in this case because it

believes judicially created barriers to meaningful

Article III review are inconsistent with the separation

of powers. Those facing ultra vires or unconstitutional

agency enforcement actions should not have to face

years of potentially ruinous costs to have their day in

court. And courts should not shy away from their

solemn duty under the Constitution of saying what

the law is, particularly where an unconstitutionally

structured administrative body has imposed on a

private citizen substantial civil penalties and a

1 All parties have received timely notice of amicus curiae’s intent

to file this brief. Amicus curiae states that no counsel for any

party authored this brief in whole or in part, and no entity or

person, aside from amicus curiae or its counsel, made any

monetary contribution intended to fund the preparation or

submission of this brief.

2

lifetime ban on pursuing his chosen profession

through an inhouse administrative process suffering

myriad constitutional infirmities.

Nor should courts be in the business of fixing

agencies’ shoddy work to the detriment of individual

litigants, as happened here. Due process and

fundamental

fairness

demand

that

federal

administrative bodies must, at the least, make

decisions free from serious legal errors.

SUMMARY OF ARGUMENT

This Court should grant Mr. Calcutt’s Petition for

at least two reasons, both of which are sufficiently

important to warrant this Court’s intervention.

First, the panel majority’s application of SEC

v. Chenery Corp. (Chenery I), 318 U.S. 80 (1943),

inadvertently rolls out the red carpet for agency

abuse, overreach, and regulatory ping pong in a host

of contexts. The Chenery principle is supposed to

guard against haphazard agency decisions that ignore

or incorrectly apply governing law. Toward this end,

“[w]hen an agency’s decision rests on a collapsed legal

foundation,” see Pet. App. 125a (Murphy, J.,

dissenting), Chenery instructs that courts are not

supposed to rescue the agency from its mistakes. Just

as a schoolteacher correcting a student’s sloppy

homework and then awarding an A+ grade would

send a bad message to the student, when courts step

in to correct agencies’ mistakes, it incentivizes more

shoddy work. That is what happened here. See Pet.

App. 52a–72a; Pet. App. 125a–126a (Murphy, J.,

dissenting). If this precedent is allowed to stand, it

would invite the FDIC and other agencies to cite it as

3

the administrative law equivalent of a “the-dog-atemy-homework” excuse to justify sloppy decisions.

Second, the panel majority put the cart before the

horse, overreading Collins v. Yellen, 141 S. Ct. 1761

(2021), to bar meaningful relief on Mr. Calcutt’s

separation-of-powers claims without first deciding

those claims on the merits. An agency should not be

allowed “to duck and weave its way out of meaningful

judicial review.” See Fleming v. USDA, 987 F.3d 1093,

1111 (D.C. Cir. 2021) (Rao, J., concurring in part,

dissenting in part). And Collins should not become the

next Thunder Basin Coal Co. v. Reich, 510 U.S. 200

(1994), used by agencies to evade accountability for

their actions and bar the courthouse doors to

meritorious constitutional claims. See, e.g., Burgess v.

FDIC, No. 22-cv-00100, 2022 U.S. Dist. LEXIS

213050, at *24–*25 (N.D. Tex. Nov. 6, 2022) (finding

“Plaintiff’s claims that the FDIC Board structure and

the double removal protections afforded FDIC ALJs

are unconstitutional have merit” but that “Plaintiff

[was] unlikely to succeed on the merits of the remedy”

based on Circuit precedent interpreting Collins). But

that is exactly the kind of mischief the panel decision’s

framing of Collins would invite, providing agencies

with a roadmap for weaponizing Collins to insulate

themselves from constitutional scrutiny.

In considering Mr. Calcutt’s Petition, this Court

should not turn a blind eye to the reality that in

addition to the Article II violations raised by

Petitioner, myriad other constitutional infirmities

permeate the FDIC’s inhouse administrative process.

After all, “[t]he FDIC did not just prosecute this action.

It also adjudicated the action [inhouse]—finding

Calcutt guilty and imposing a punishment on him in

4

the form of an end to his career and a $125,000

penalty.” See Pet. App. 99a (Murphy, J., dissenting).

The FDIC’s administrative process thus denied Mr.

Calcutt a right to a jury trial before his peers in an

independent, neutral Article III court, subject to the

protections of the Federal Rules of Civil Procedure

and Federal Rules of Evidence. This arrangement

offends due process, Article III, and the Seventh

Amendment. The FDIC’s use of its administrative

machinery to deprive Mr. Calcutt of core private

rights cannot be reconciled with the Constitution.

For these reasons, this Court should grant review

on both questions.

ARGUMENT

I.

The Panel’s Application of

Warrants This Court’s Review.

Chenery

As this Court recently reaffirmed, “[t]he basic rule

here is clear: An agency must defend its actions based

on the reasons it gave when it acted.” Dep’t of

Homeland Sec. v. Regents of the Univ. of Cal., 140 S.

Ct. 1891, 1909–10 (2020). As a corollary, “a court may

uphold agency action only on the grounds that the

agency invoked when it took the action.” Michigan v.

EPA, 576 U.S. 743, 758 (2015); see also Encino

Motorcars, LLC v. Navarro, 579 U.S. 211, 224 (2016)

(“It is not the role of the courts to speculate on reasons

that might have supported an agency’s decision.”).

As Judge Sutton explained: “It is a staple of

administrative law that federal courts may not uphold

5

a rule on a ground never addressed by the agency.” 2

MCP No. 165 v. U.S. Dep’t of Labor, 20 F.4th 264, 277

(6th Cir. 2021) (Sutton, C.J., dissenting from denial of

initial hearing en banc) (citing Chenery I, 318 U.S. at

87); see also Regents, 140 S. Ct. at 1934 (Kavanaugh,

J., concurring in judgment in part, dissenting in part)

(“[T]he post hoc justification doctrine merely requires

that courts assess agency action based on the official

explanations of the agency decisionmakers, and not

based on after-the-fact explanations advanced by

agency lawyers during litigation (or by judges).”). But

that is exactly what happened here, with the panel’s

acceptance and approval. See Pet. App. 61a–67a; Pet.

App. 125a–126a (Murphy, J., dissenting).

“Chenery requires that an agency’s discretionary order be

upheld, if at all, on the same basis articulated in the order by the

agency itself.” Burlington Truck Lines v. United States, 371 U.S.

156, 168–69 (1962). “If those grounds are inadequate or

improper, the court is powerless to affirm the administrative

action by substituting what it considers to be a more adequate or

proper basis.” SEC v. Chenery Corp. (Chenery II), 332 U.S. 194,

196 (1947). “The rationale for Chenery is fairness to the parties

and recognition that a court cannot adequately review a decision

based on reasons not contained in the decision itself.” Jeffrey M.

Hirsch, Defending the NLRB: Improving the Agency’s Success in

the Federal Courts of Appeals, 5 FIU L. Rev. 437, 448 (2010). “The

Chenery rule . . . likewise serves the ‘think-it-over’ function.”

Henry J. Friendly, Chenery Revisited: Reflections on Reversal

and Remand of Administrative Orders, 1969 Duke L.J. 199, 209

(1969).

2

6

Under Chenery, “an order may not stand if the

agency has misconceived the law.”3 Chenery I, 318

U.S. at 94. “[T]he FDIC’s order is riddled with legal

error.”4 Pet. App. 126a (Murphy, J., dissenting); see

Pet. App. 52a–73a; Pet. 10–12. For that reason alone,

vacatur was required. This remains true “even if the

reviewing court believes that the agency either would

reinstate its order under a different theory or would

reach the same decision under the proper rule of law.”

Fla. Dep’t of Labor & Emp’t Sec. v. U.S. Dep’t of Labor,

893 F.2d 1319, 1322 (11th Cir. 1990) (citing Chenery

I, 318 U.S. at 94); see FEC v. Akins, 524 U.S. 11, 25

(1998) (“If a reviewing court agrees that the agency

misinterpreted the law, it will set aside the agency’s

action and remand the case—even though the agency

(like a new jury after a mistrial) might later, in the

exercise of its lawful discretion, reach the same result

for a different reason.”). Instead, the panel majority

upheld the order, finding remand here would

“amount[] to ‘an idle and useless formality.’” Pet. App.

The FDIC’s administrative process is unconstitutional for a

host of reasons. But as a general principle, and to the extent an

agency action is not ultra vires or otherwise unconstitutional,

remand is appropriate where that action is infected with legal

error. See, e.g., United States v. Schwarzbaum, 24 F.4th 1355,

1365 (11th Cir. 2022).

4 The FDIC agrees the panel “erred in sustaining the Board’s

removal and prohibition order based on a narrower set of

harmful effects than the Board itself found.” FDIC Stay Resp. 16.

3

7

73a (quoting NLRB v. Wyman-Gordon Co., 394 U.S.

759, 766 n.6 (1969) (plurality op.)). Not so.5

Leaving aside the best reading of the statute’s

sweep,6 requiring agencies to defend their actions

based on the reasons the agency itself gave at the time

“serves important values of administrative law,”

promoting agency accountability and discouraging

administrative gamesmanship. See Regents, 140 S. Ct.

at 1909. It also serves due process values. See id. at

1934 (Kavanaugh, J., concurring in part, dissenting in

part) (“[A]gency adjudications . . . implicate the due

process interests of the individual parties to the

adjudication.”).

Further still, remand would have allowed the

FDIC to exercise its discretion with respect to the

5 Cf. Gui Cun Liu v. Ashcroft, 372 F.3d 529, 534 (3d Cir. 2004)

(Alito, J.) (“[R]emand is appropriate where, as here, we have

made a legal determination . . . that fundamentally upsets the

balancing of facts and evidence upon which an agency’s decision

is based.”).

6 There is reason to think the statute’s scope has been expanded

well beyond its textual bounds by judicial decisions grounded in

“legislative history” and statutory purpose. See Pet. App. 114a

(Murphy, J., dissenting). This has happened before in other

contexts. See, e.g., AMG Capital Mgmt., LLC v. FTC, 141 S. Ct.

1341 (2021) (unanimously rejecting this atextual mode of

interpretation). The text of the statute—which “can deprive

citizens of their property and livelihoods”—should, if anything,

instead be construed strictly, consistent with the rule of lenity.

See Pet. App. 111a (Murphy, J., dissenting). Cf. Buffington v.

McDonough, 143 S. Ct. 14, 19 (2022) (Gorsuch, J., dissenting

from denial of certiorari) (discussing the ancient doctrines of

lenity and contra proferentem).

8

proper sanction without the taint of the agency’s

incorrect understanding of the law. 7 See Pet. App.

126a (Murphy, J., dissenting). Cf. Chenery I, 318 U.S.

at 88; Lorenzo v. SEC, 872 F.3d 578, 602 (D.C. Cir.

2017) (Kavanaugh, J., dissenting) (“I hope that the

SEC on remand pays attention, comes to its senses,

and (at a minimum) dramatically scales back the

sanctions in this case.”); De La Fuente v. FDIC, 332

F.3d 1208, 1226–27 (9th Cir. 2003).

As Judge Murphy suggested, the panel majority’s

“analysis [thus] runs afoul of basic administrative-law

principles.” Pet. App. 125a (Murphy, J., dissenting).

Cf. Thompson v. Lynch, 788 F.3d 638, 649 (6th Cir.

2015) (Sutton, J., concurring in part, concurring in

judgment). This misapplication of the Chenery

principle should not be allowed to stand as precedent,

as it will stack the deck against individuals and

businesses and put a thumb on the scale in favor of

the government in countless other proceedings. After

all, “[i]f men must turn square corners when they deal

with the government, it cannot be too much to expect

the government to turn square corners when it deals

with them.” Niz-Chavez v. Garland, 141 S. Ct. 1474,

1486 (2021); see Regents, 140 S. Ct. at 1909. By all

accounts, the FDIC did not do so here.

As Petitioner explains, see Pet. 14–23, this Court’s

intervention is warranted to correct this error, which,

7 To be sure, 5 U.S.C. § 706 provides that “due account shall be

taken of the rule of prejudicial error.” But “[a]bsence of . . .

prejudice must be clear for harmless error to be applicable.”

United States Steel Corp. v. EPA, 595 F.2d 207, 215 (5th Cir.

1979). Such is not the case here.

9

if allowed to stand, will metastasize.8 Cf. DISH

Network Corp. v. NLRB, 953 F.3d 370, 380 n.5 (5th

Cir. 2020) (“According to one professor who spent four

years working in the NLRB’s Appellate Court Branch,

the frequency of the practice” of making improper post

hoc arguments barred by Chenery “manifested itself

in shorthand shoptalk[.]” (citing Hirsch, 5 FIU L. Rev.

437 at 448 n.45)). The effects of the panel’s no-remand

ruling radiate far beyond the facts and context of this

case, not only threatening the separation of powers

but, perhaps worse, freezing in place harsh penalties

supported by liability findings infected by legal error.

At a minimum, the panel majority’s misapplication of

Chenery warrants summary reversal.

II.

The Panel’s Application of

Warrants This Court’s Review.

Collins

As two cases currently before this Court, Axon v.

FTC, No. 21-86, and SEC v. Cochran, No. 21-1239,

illustrate, at times lower courts overread dicta in this

Court’s decisions in ways that allow agencies to evade

accountability for their unconstitutional actions,

barring the courthouse doors to meritorious claims.

And this precedent, once entrenched, tends to

metastasize, spreading itself in ever-expanding

contexts. This Court should not allow this to happen

again. Collins should not become the new Thunder

Basin, 510 U.S. 200—invoked and expanded by

The FDIC agrees that “as to the first question presented,

applicant has shown both a reasonable probability that the Court

will grant review and a fair prospect that it will reverse the

judgment below.” Govt. Resp. 16. See Hollingsworth v. Perry, 558

U.S. 183, 190 (2010).

8

10

administrative bodies and courts alike to sweep a host

of constitutional elephants under the rug. This Court

should grant Mr. Calcutt’s Petition to prevent history

from repeating itself, nip this trend in the bud, and

clarify Collins does not require a heightened showing

of harm to invalidate agency actions for Article II

removal-restriction violations to grant prospective, as

opposed to retrospective, relief.

A. The Panel Overread Collins.

Collins solely addressed the showing necessary to

obtain retrospective relief for Article II removalrestriction violations.9 See 141 S. Ct. at 1787 (“only

remaining remedial question concerns retrospective

relief”); id. at 1795 (Gorsuch, J., concurring in part)

(“the only question before us concerns retrospective

relief”); see also Consumers’ Research v. Consumer

Prod. Safety Comm’n, 592 F. Supp. 3d 568, 587 (E.D.

Tex. 2022) (“Collins does not address requests for

prospective relief.”).10 Cf. Cochran v. SEC, 20 F.4th

9 Collins was brought to the panel’s attention by the FDIC via a

Rule 28(j) letter, see CA6 ECF 46, about three weeks before Mr.

Calcutt filed his reply, see CA6 ECF 48. The panel thus did not

have available to it extensive briefing by the parties, and Mr.

Calcutt’s numerous amici, on whether and how the remedial

portion of Collins applied to Mr. Calcutt’s Article II claims. Oral

argument was held without supplemental briefing on Collins.

10 A Fifth Circuit panel in a different case subsequently reached

the contrary conclusion in the context of a constitutional

challenge to a CFPB regulation, citing the Sixth Circuit’s

decision in Calcutt, further underscoring the necessity of this

Court’s guidance on the remedial issue. See Cmty. Fin. Servs.

Ass’n of Am. v. Consumer Fin. Prot. Bureau, 51 F.4th 616, 632

(5th Cir. 2022), cert. pending, Nos. 22-448, 22-663.

11

194, 210 n.16 (5th Cir. 2021) (en banc) (“Collins does

not impact our conclusion in this case because

Cochran does not seek to ‘void’ the acts of any SEC

official. Rather, she seeks an administrative

adjudication untainted by separation-of-powers

violations.”), cert. granted sub nom., 142 S. Ct. 2707

(2022). Thus, as Professor Aaron Nielson presciently

observed, “it is unclear whether Collins will prevent a

party subject to ongoing agency action from seeking

forward-looking injunctive relief. The majority did not

resolve this issue, so we’ll have to wait and see.”11

Aaron A. Neilson, Three Views of the Administrative

State: Lessons from Collins v. Yellen, 2020-2021 Cato

Sup. Ct. Rev. 141, 163 (2021).

Here, Mr. Calcutt is seeking prospective relief:

vacatur of the stayed FDIC order before it becomes

operative and an adjudication untainted by

separation-of-powers violations. Indeed, the panel

majority recognized “[t]he Removal and Prohibition

Order’s prospective effect[.]” Pet. App. 35a. Yet the

panel majority mistakenly elided the critical

distinction between retrospective and prospective

relief, instead concluding “[t]hat distinction does not

11 One district

court has described a passage in the remedial

portion of Collins as “[t]o be honest . . . baffling.” Bhatti v. Fed.

Hous. Fin. Agency, No. 17-CV-2185, 2022 U.S. Dist. LEXIS

226527, at *10-13 (D. Minn. Dec. 16, 2022).

12

matter here.” Pet. App. 34a. That was error.12 And it

should not be allowed to stand as precedent.

Even if Collins’s remedial holding applied to

claims seeking prospective relief, this matter should

have been remanded for discovery into whether “the

unconstitutional

removal

restriction

inflicted

harm.”13 See 141 S. Ct. at 1789. Cf. Collins v. Yellen,

27 F.4th 1068, 1069 (5th Cir. 2022) (en banc)

(remanding to district court); Bhatti v. Fed. Hous. Fin.

Agency, 15 F.4th 848, 854 (8th Cir. 2021) (same);

Integrity Advance, LLC v. Consumer Fin. Prot.

Bureau, 48 F.4th 1161, 1170 (10th Cir. 2022)

(“Collins left open an avenue of relief for potential

injuries stemming from the actions of an

unconstitutionally structured agency.”); Consumer

Fin. Prot. Bureau v. Nationwide Biweekly Admin.,

Inc., Nos. 18-15431, 18-15887, 2023 U.S. App. LEXIS

2190, at *4 (9th Cir. Jan. 27, 2023). That the panel

declined to do so here underscores the degree to which

the panel’s “concrete” proof of prejudice standard, see

Pet. App. 36a, effectively immunizes all Article II

12 Indeed, “[t]he negative injunction remedy . . . is a standard tool

of equity that federal courts have authority to entertain under

their traditional equitable jurisdiction[.]” Whole Woman’s Health

v. Jackson, 142 S. Ct. 522, 540 (2021) (Thomas, J., concurring in

part, dissenting in part) (cleaned up).

13

This Court “ha[s] held that a litigant challenging

governmental action as void on the basis of the separation of

powers is not required to prove that the Government’s course of

conduct would have been different in a ‘counterfactual world’ in

which the Government had acted with constitutional authority.”

Seila Law LLC v. Consumer Fin. Prot. Bureau, 140 S. Ct. 2183,

2196 (2020) (citing Free Enter. Fund v. Pub. Co. Accounting

Oversight Bd., 561 U.S. 477, 512 n.12 (2010)).

13

removal claims—no matter how meritorious,

vigorously pressed, and well preserved—from Article

III review.14 But cf. 5 U.S.C. § 706(2)(B) (courts “shall

. . . hold unlawful and set aside agency action . . .

found to be . . . contrary to constitutional right”).

B. Collins Does Not Bar Meaningful Review

of Article II Removal Claims.

At a minimum, this Court should clarify that,

regardless of the precise relief to which Mr. Calcutt is

entitled on his Article II removal claim, “[t]he words

of the Constitution are not suggestions or mere

formalities.” Rop v. Fed. Hous. Fin. Agency, 50 F.4th

562, 577 (6th Cir. 2022) (Thapar, J., concurring in

part, dissenting in part). And “the Constitution’s

structural protections are as important for individual

liberty as amendments like the First or Fourth.” Id. at

The most straightforward remedial approach would be to

simply “set aside” the FDIC’s order under 5 U.S.C. § 706(2)(B).

Cf. United States v. Arthrex, Inc., 141 S. Ct. 1970, 1990 (2021)

(Gorsuch, J., concurring in part and dissenting in part) (“Early

American courts did not presume a power to ‘sever’ and excise

portions of statutes in response to constitutional violations.

Instead, when the application of a statute violated the

Constitution, courts simply declined to enforce the statute in the

case or controversy at hand.”). It should be left to Congress to

decide whether and, if so, how to fix the FDIC’s unconstitutional

administrative process, instead of choosing which removal

restrictions to edit out of the statute. See Murphy v. NCAA, 138

S. Ct. 1461, 1486 (2018) (Thomas, J., concurring) (“[C]ourts

cannot take a blue pencil to statutes[.]”); Seila Law, 140 S. Ct. at

2220 (Thomas, J., concurring in part and dissenting in part)

(“[T]he power of judicial review does not allow courts to revise

statutes[.]”); Barr v. Am. Ass’n of Political Consultants, 140 S. Ct.

2335, 2365–66 (2020) (Gorsuch, J., dissenting in part) (similar).

14

14

587 (Thapar, J., concurring in part, dissenting in

part); see Collins, 141 S. Ct. at 1780 (“separation of

powers is designed to preserve the liberty of all the

people”).

“[O]ne who makes a timely challenge to the

constitutional validity of the appointment of an officer

who adjudicates his case is entitled to a decision on

the merits of the question and whatever relief may be

appropriate[.]” Ryder v. United States, 515 U.S. 177,

182–83 (1995). That proposition should hold equally

true for unconstitutional removal restrictions. “If

anything, removal restrictions may be a greater

constitutional evil than appointment defects.” Collins,

141 S. Ct. at 1796 (Gorsuch, J., concurring in part).

After all, “[i]n the case of a removal defect, a wholly

unaccountable government agent asserts the power to

make decisions affecting individual lives, liberty, and

property. . . . Few things could be more perilous to

liberty than some ‘fourth branch’ that does not answer

even to the one executive official who is accountable to

the body politic.” Id. at 1797 (Gorsuch, J., concurring

in part) (citing FTC v. Ruberoid Co., 343 U.S. 470, 487

(1952) (Jackson, J., dissenting)); see also Arthrex, 141

S. Ct. at 1978–79 (“The President is responsible for

the actions of the Executive Branch and cannot

delegate that ultimate responsibility or the active

obligation to supervise[.]” (cleaned up)).

Lower courts should not be permitted to overread

Collins to insulate Article II violations from judicial

review. At the least, and irrespective of the question

of remedy, Mr. Calcutt was entitled to a ruling on the

15

merits of his Article II claim,15 particularly where, as

here, the Board’s Order must be vacated and

remanded to the agency because it is (by all accounts)

riddled with legal error. Cf. Collins, 141 S. Ct. at 1794

n.33 (Thomas, J., concurring) (“There is a colorable

argument

that

a

Government

official’s

misunderstanding about the scope of the President’s

removal authority would render an agency action

arbitrary or capricious in certain cases.”). If the FDIC

scheme is unconstitutional, let the chips fall where

they may. But it is no answer to “allow the agency to

duck and weave its way out of meaningful judicial

review” of that question. See Fleming, 987 F.3d at

1111 (Rao, J., concurring in part, dissenting in part);

see also Cohens v. Virginia, 19 U.S. (6 Wheat.) 264,

404 (1821) (Marshall, C.J.) (“Questions may occur

which we would gladly avoid; but we cannot avoid

15 That is the approach the Fifth Circuit took in Jarkesy v. SEC,

34 F.4th 446 (5th Cir. 2022), reh’g en banc denied, 51 F.4th 644

(5th Cir. 2022), reaching the merits of Mr. Jarkesy’s Article II

removal-restriction claims and holding that “the statutory

removal restrictions for SEC ALJs are unconstitutional,” id. at

463, before (and without) reaching the question of remedy, see id.

at 463 n.17 (“Because we vacate the SEC’s judgment on various

other grounds, we do not decide whether vacating would be the

appropriate remedy based on this error alone.”). Cf. Kaufmann

v. Kijakazi, 32 F.4th 843, 849–50 (9th Cir. 2022) (reaching merits

of removal restriction challenge before concluding that Claimant

was not entitled to retrospective relief under Collins). And that

is the approach the Sixth Circuit panel could permissibly have

followed here, had it vacated the Board’s Order, as it should have

done, because it was infected with a smorgasbord of legal errors.

See Pet. App. 121a–126a (Murphy, J., dissenting). On remand,

the FDIC could then consider these constitutional defects

infecting its administrative process in exercising its discretion to

set an appropriate penalty.

16

them. All we can do is, to exercise our best judgment,

and conscientiously to perform our duty.”).

III.

The FDIC’s Administrative Process is

Unconstitutional.

As this Court considers whether to grant the

Petition, it should not turn a blind eye to the myriad

constitutional infirmities plaguing the FDIC’s

administrative prosecution process. Cf. Lorenzo, 872

F.3d at 602 (Kavanaugh, J., dissenting) (“[A]gencycentric process is in some tension with Article III of

the Constitution, the Due Process Clause of the Fifth

Amendment, and the Seventh Amendment.”);

Arthrex, 141 S. Ct. at 1993 (Gorsuch, J., concurring in

part, dissenting in part) (“Any suggestion that the

neutrality and independence the framers guaranteed

for courts could be replicated within the Executive

Branch was never more than wishful thinking.”).

To begin, “under our constitutional structure” the

activities of administrative bodies “must be exercises

of—the ‘executive Power.’” 16 City of Arlington v. FCC,

569 U.S. 290, 304 n.4 (2013) (citing U.S. Const. Art.

II, §1, cl. 1). Because FDIC ALJs are Officers of the

It is unclear whether the Board enjoys for-cause removal

protections. See Pet. App. 79a–81a (Murphy, J., dissenting); see

also Jameson Payne, Taken for Granted? SEC Implied For-Cause

Removal Protection and Its Implications, Yale Notice and

Comment (June 24, 2022), https://www.yalejreg.com/nc/sec-forcause-removal-protection/; Note, The SEC Is Not an Independent

Agency, 126 Harv. L. Rev. 781, 801 (2013). If so, those restrictions

would violate Article II. This Court should squarely address that

important question on the merits.

16

17

United States, see Lucia v. SEC, 138 S. Ct. 2044,

2051–56

(2018),

who

presumably

“perform

substantial executive functions,” Jarkesy, 34 F.4th at

463, the multi-tier removal restrictions violate Article

II, see id. at 463–65; Fleming, 987 F.3d at 1113–23

(Rao, J., concurring in part, dissenting in part).17

Further, as Judge Murphy observed:

The parties assume that the FDIC

performs only executive functions. Our

resolution should not be taken to have

impliedly adopted that premise. The

FDIC did not just prosecute this action.

It also adjudicated the action—finding

Calcutt

guilty

and

imposing

a

punishment on him in the form of an end

to his career and a $125,000 penalty.

Once an Article III court finally enters

the picture, moreover, it may review the

FDIC’s factual findings only under a

deferential substantial-evidence test—a

test that has been called more

deferential than the one governing our

review of a district court’s factual

findings.

17 The only basis on which Mr. Calcutt’s Article II removal claim

would fail is if the FDIC ALJs do not exercise Article II executive

power but rather Article III judicial power. This is plausible. Cf.

Pet. App. 76a, 99a–101a (Murphy, J., dissenting); Jarkesy, 34

F.4th at 450–59. If so, the ALJs would appear to be usurpers in

an unlawful office, whose actions are void ab initio. Cf. Pet. App.

90a–92a (Murphy, J., dissenting).

18

Pet. App. 99a (Murphy, J., dissenting); see also City of

Arlington, 569 U.S. at 312–13 (Roberts, C.J.,

dissenting).

The FDIC administrative prosecution scheme—in

which the FDIC acts as investigator, prosecutor, and

judge of its own cause—also violates due process. See

Williams v. Pennsylvania, 579 U.S. 1, 8 (2016) (“[A]n

unconstitutional potential for bias exists when the

same person serves as both accuser and adjudicator in

a case.”). See generally Andrew Vollmer, Accusers as

Adjudicators in Agency Enforcement Proceedings, 52

U. Mich. J.L. Reform 103 (2018).

And because the FDIC’s inhouse prosecution of Mr.

Calcutt implicates his core private rights, it violates

Article III.18 See also Pet. App. 99a–101a (Murphy, J.,

dissenting). Cf. B&B Hardware, Inc. v. Hargis Indus.,

575 U.S. 138, 171 (2015) (Thomas, J., dissenting)

(“Because federal administrative agencies are part of

the Executive Branch, it is not clear that they have

power to adjudicate claims involving core private

rights.”). This Court “has held that actions seeking

civil penalties are akin to special types of actions in

debt from early in our nation’s history which were

distinctly legal claims.” Jarkesy, 34 F.4th at 454

(citing Tull v. United States, 481 U.S. 412, 417–19

(1987)). “A civil penalty was a type of remedy at

18 The statutory provision mandating judicial deference to the

FDIC’s factual findings may well also be unconstitutional. See

also Evan D. Bernick, Is Judicial Deference to Agency FactFinding Unlawful?, 16 Geo. J.L. & Pub. Pol’y 27, 42–58 (2018);

Gary Lawson, The Rise and Rise of the Administrative State, 107

Harv. L. Rev. 1231, 1247 (1994).

19

common law that could only be enforced in courts of

law.” Tull, 481 U.S. at 422. Accordingly, the FDIC’s

enforcement action against Mr. Calcutt simply “is not

the sort that may be properly assigned to agency

adjudication under the public-rights doctrine.”

Jarkesy, 34 F.4th at 455. Instead, if the FDIC wishes

to prosecute Mr. Calcutt, the Constitution requires it

do so in an Article III court. 19 See generally B&B

Hardware, 575 U.S. at 171 (Thomas, J., dissenting)

(“Under our Constitution, the ‘judicial power’ belongs

to Article III courts and cannot be shared with the

Legislature or the Executive.” (citing Stern v.

Marshall, 564 U. S. 462, 482–83 (2011). To the extent

the FDIC ALJs are, in fact, purporting to exercise the

“judicial Power,” that office should not exist. Cf. Pet.

App. 90a–92a (Murphy, J., dissenting).

Mr. Calcutt also had a Seventh Amendment right

to be tried before a jury of his peers before the FDIC

could end his career and extract substantial civil

penalties from him. See U.S. Const. amend. VII; Tull,

481 U.S. at 422; Jarkesy, 34 F.4th at 453–55. Cf. Pet.

App. 99a–101a (Murphy, J., dissenting). The FDIC’s

inhouse process violated that right too. See Burgess,

2022 U.S. Dist. LEXIS 213050, at *32 (“Plaintiff has

shown a substantial likelihood of success on the

merits of his claim that the FDIC violated

Plaintiff’s Seventh Amendment right to a jury trial.”).

19 “Article III could neither serve its purpose in the system of

checks and balances nor preserve the integrity of judicial

decisionmaking if the other branches of the Federal Government

could confer the Government’s ‘judicial Power’ on entities outside

Article III.” Stern, 564 U.S. at 484.

20

As Judge Murphy noted in dissent: “There must be

some limit to the government’s ability to dissolve the

Constitution’s usual separation-of-powers and dueprocess protections by waving a nebulous ‘public

rights’ flag at a court.” Pet. App. 101a. Whatever the

limit, the FDIC’s process exceeds it. The FDIC’s

administrative prosecution trampled upon Mr.

Calcutt’s constitutional rights. It should not be

allowed to stand. See Burgess v. FDIC, No. 22-cv00100, 2022 U.S. Dist. LEXIS 223387, at *5 (N.D. Tex.

Dec. 1, 2022) (“As the entire Enforcement Proceeding

is unconstitutional, the Court finds it must enjoin the

entire Enforcement Proceeding.”).

IV.

Granting Meaningful Relief for Article II

Violations Affecting Private Rights Will

Not Cause the Floodgates to Open.

Granting meaningful relief for Article II removalrestriction violations affecting private rights to liberty

or property, like those at issue here, see Pet. App. 99a–

101a (Murphy, J., dissenting), would not cause

practical or floodgates problems. This also is true with

respect to addressing the broader constitutional

problems with inhouse enforcement processes

implicating private, as opposed to public, rights.

After all, matters involving garden variety public

rights, such as claims involving government benefits

and federal employment disputes, need not be

21

addressed by Article III courts in the first instance.20

As Professor Mila Sohoni has explained, “a

government denial of Social Security benefits or a

termination of a government employee for cause

would not” implicate private rights. Mila Sohoni,

Agency Adjudication and Judicial Nondelegation: An

Article III Canon, 107 Nw. U.L. Rev. 1569, 1586

(2013); see also Austin v. Shalala, 994 F.2d 1170, 1177

(5th Cir. 1993) (noting “public right for the

government to recover the overpayment of social

security benefits” properly assigned to agency).

Accordingly, these matters may be initially assigned

to administrative forums.

The overwhelming majority of ALJs are tasked

with this sort of work. To put this in perspective, as of

2017, there were 1,655 Social Security Administration

ALJs and 101 Department of Health and Human

Services/Office of Medicare Hearings and Appeals

ALJs. See generally OPM, ALJs By Agency (as of

March

2017),

https://www.opm.gov/services-foragencies/administrative-law-judges/#url=ALJs-byAgency. By contrast, of the nearly two thousand ALJs

employed by the federal government, id., the FDIC

uses two ALJs, see Pet. App. 9a (“Two ALJs currently

make up the pool in OFIA.”); Pet 6.

Cf. Free Enter. Fund, 561 U.S. at 542–43 (Breyer, J.,

dissenting) (“[T]he Federal Government relies on 1,584 ALJs to

adjudicate administrative matters in over 25 agencies. These

ALJs adjudicate Social Security benefits, employment disputes,

and other matters highly important to individuals.”).

20

22

CONCLUSION

This Court should grant plenary review on both

questions presented by the Petition.

Respectfully submitted,

Michael Pepson

Counsel of Record

Cynthia Fleming Crawford

AMERICANS FOR PROSPERITY FOUNDATION

1310 N. Courthouse Road, Ste. 700

Arlington, VA 22201

(571) 329-4529

mpepson@afphq.org

Counsel for Amicus Curiae

February 24, 2023