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Stoneridge on Remand — Rule 11 under the PSLRA

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The Supreme Court decided Stoneridge in favor of the defendants, and, on remand, the defense affirmatively waived any Rule 11 sanctions and asked that judgment be entered in their favor. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 2008 U.S. App. LEXIS 5418 (8th Cir. March 3, 2008). One hiccup: The mandatory sanctions review required by the Private Securities Litigation Reform Act, which provides that, "upon final adjudication" of a private securities action, "the court shall include in the record specific findings regarding compliance by each party and each attorney representing any party with each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to any complaint, responsive pleading, or dispositive motion." 15 U.S.C. § 78u-4(c)(1). In Stoneridge, no party raised a Rule 11(b) issue in the district court, either before or after entry of final judgment, so the record lacked the requisite Rule 11(b) findings. In addition, no party raised the issue on appeal.

The Eighth Circuit noted that the PSLRA “does not state that the required findings must be part of the judgment, and because Rule 11 issues are often decided after final judgment, the absence of the required findings did not affect either the appealability or the validity of the district court's Rule 54(b) final judgment. See Bondiett v. Novell, Inc., 141 F.3d 1184 (table), 1998 U.S. App. LEXIS 7091, 1998 WL 166243, at * 1 (10th Cir. 1998).” The Court also noted a split in the Circuits where the issue has been raised on appeal

When Rule 11(b) issues have been raised in cross appeals by prevailing parties in actions to which the PSLRA applied, the few reported cases differ as to whether the absence of the statutory findings required a remand, or whether the court of appeals could decide the Rule 11(b) issue despite the absence of district court findings. Compare Rombach v. Chang, 355 F.3d 164, 178 (2d Cir. 2004), with Dellastatious v. Williams, 242 F.3d 191, 197 n.5 (4th Cir. 2001).

Held, Rule 11 review may be waived — and that conclusion may be constitutionally dictated:

Although Congress in the PSLRA clearly intended to reduce judicial discretion to ignore or not sanction Rule 11(b) violations, we conclude that the Rule 11(b) issue may still be waived on appeal, either when it is not timely raised by any party or when, as here, it is affirmatively waived by the parties who prevailed in the district court. Indeed, a broader reading of § 78u-4(c) might raise issues under Article III, Section 2, of the Constitution, which limits our judicial power to "Cases" and "Controversies."

It is refreshing to find a case vigorously, exhaustively, superlatively and civilly litigated.

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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