Labor & Employment Law Daily Wrap Up, LITIGATION NEWS, TRENDS—Bank exec renews challenges to FDIC enforcement action after decision on remand, (May 6, 2026)

By Justin Marcus Smith, J.D.

The major legal issue after remand is whether the executive was entitled to a jury trial, but the executive also challenged multiple other aspects of the FDIC’s adopted findings and new decision about a breach of fiduciary duty.

Former Northwestern Bank CEO Harry C. Calcutt intends to appeal a final decision and order by the FDIC, after remand from the Sixth Circuit Court of Appeals, in a long-running dispute tracing back to a $125,000 civil money penalty (CMP) that the Federal Deposit Insurance Corporation initially imposed in 2013. Calcutt moved for an emergency stay of the FDIC decision pending appellate review. Calcutt argued he has a strong likelihood of success on the merits. He reiterated his contention that the FDIC imposed a CMP through in-house agency proceedings without a jury in violation of the Seventh Amendment and Article III. He also continued to take issue with the FDIC’s substantive findings concerning breach of fiduciary duty. He asked the Sixth Circuit Court of Appeals to review and vacate or modify the FDIC’s most recent order, or, in the alternative render judgment in his favor (Calcutt v. Fed. Deposit Ins. Corp., No. 26-3393 (6th Cir. Apr. 29, 2026)).

Background. In 2013, the FDIC ordered Harry C. Calcutt III and two other persons, individually and as institution-affiliated parties of Northwestern Bank, Traverse City, Mich., to pay CMPs in connection with putatively unsafe or unsound banking practices. The FDIC assessed the practices to be breaches of fiduciary duty to the bank for defaulted loans. Specifically, the FDIC ordered the removal of Calcutt from his position as CEO, prohibited him from participating in any insured depository institution, and ordered him to pay $125,000 (see Banking and Finance Law Daily, Oct. 1, 2013).

In 2022, the Sixth Circuit Court of Appeals denied Calcutt’s petition for review. Calcutt asserted several constitutional challenges to the appointments and removal restrictions of FDIC officials in light of the Supreme Court’s decision in Lucia v. SEC. Calcutt also attacked the conduct and findings in his individual proceedings, but the Sixth Circuit court denied his petition, stating that his challenges to the removal restrictions at the FDIC were unavailing because he did not show entitlement to relief; his 2019 hearing satisfied Lucia’s mandate; and, any error committed by the ALJ as to limits on cross-examination at that hearing were harmless. In addition, the Sixth Circuit said it found substantial evidence in the record to support FDIC Board findings regarding the elements of 12 U.S.C. section 1811(e)(1) on FDIC removal and prohibition orders (Calcutt v. FDIC, 37 F.4th 293 (6th Cir. 2022)) (see Banking and Finance Law Daily, Jun. 13, 2022).

On Calcutt’s petition for certiorari, the U.S. Supreme Court granted the petition in part and issued a rare summary ruling for reversal and remand to the FDIC Board to correct its application of the wrong causation standard, albeit substantial evidence otherwise supported the FDIC order under the proper legal rules (Calcutt v. FDIC, 143 S. Ct. 1317 (2023)) (see Banking and Finance Law Daily, May 22, 2023).

At length after remand, and 17 months after briefing closed, on April 29, 2026, the FDIC found culpability satisfied under 12 U.S.C. § 1818(e) based on findings of “personal dishonesty” and “willful and continuing disregard for the safety and soundness of the Bank” amounting to breaches of fiduciary duty. Effects included a $30,000 loan charge off, financial gain through breach of fiduciary duty, and over $6 million in losses to the bank in connection with certain loan defaults. The FDIC accordingly found Calcutt subject to a second tier CMP and adopted the administrative law judge (ALJ) recommendation of $125,000.

The FDIC also held it did not need to decide whether Calcutt waived or forfeited his “right to a jury trial” arguments because the FDIC Board could not decide them under the “mandate rule.” The Sixth Circuit issued a limited remand to address specific issues, which did not include the right to a jury trial. The FDIC Board said the Seventh Amendment in any event does not require a jury trial for the respondent. According to the FDIC, removal and prohibition order in this case was injunctive, it did not involve a legal remedy, and it therefore did not implicate the Seventh Amendment. The removal, prohibition, and CMP were also said to be remedial in nature and subject to adjudication within the Executive Branch because they concerned public rights.

Seventh Amendment. Calcutt argues that Jarkesy “upended” the ability of agencies to impose punitive sanctions in agency proceedings (see SEC v. Jarkesy, 603 U.S. 109 (2024)). Monetary penalties are “legal” in nature if they are meant to punish or deter rather than restore the status quo. Calcutt argues that FDIC allegations that he breached fiduciary duty under 12 U.S.C. § 1818(e)(1)(A)(iii) are “at the heart of traditional legal claims for breach of fiduciary duty, gross negligence, and fraud.”

Moreover, Calcutt contended the Sixth Circuit is likely to disagree with a Fifth Circuit decision that § 1818 monetary penalties fall within the public rights exception because the instant matter involves a state-chartered bank, not a national bank.

Even if the remedies were equitable and did not require a jury trial, Article III, in Calcutt’s view, would still require the FDIC to proceed in federal court because the underlying matter is essentially keyed to common law or equity.

Calcutt continued that the mandate rule does not foreclose his challenges because the Supreme Court remand was a classic general remand, and Jarkesy represents a change in the law. It now compels a different conclusion and a jury trial.

Substantive objections. Calcutt also took issue with the FDIC’s substantive findings. As to the actual loss finding, he said his actions did not proximately cause any portion of the charge-offs. Every loan was underwritten, collateralized, and underwater before the at-issue Bedrock Transaction. The loans went into default before Calcutt acted, and the Bank would have probably incurred some loss no matter what Calcutt did. According to Calcutt, FDIC expert witnesses admitted they could not determine whether the bank would have been better or worse off if the Bank had foreclosed earlier.

As for the $30,000 charge-off, Calcutt contended the FDIC Board never analyzed whether it exceeded the losses that would have occurred absent the loan. Essentially, Calcutt contends the Bedrock Transaction benefitted the Bank.

The Calcutt motion brief continued that the Board again misapplied the “unsafe or unsound practice” standard in a way that remains putatively inconsistent with statutory meaning, as the Sixth Court had previously rejected.

Irreparable harm. Calcutt argued he will be irreparably harmed absent a stay because the FDIC has removed him from his livelihood, in an unconstitutional proceeding. In contrast, a stay will not harm the FDIC and would serve the public interest. The Sixth Circuit granted a stay previously, and the FDIC itself stayed the case for months on remand and then waited 17 more months after completion of briefing. In Calcutt’s view, the FDIC cannot now claim a stay would cause harm. The public interest also calls for a stay because removing Calcutt from his present position as chair of the State Savings Bank, a community bank in Michigan, would harm the bank’s reputation, employees, and wider community.

The case is No. 26-3393.

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