From Thompson v. Jacoby, 2010 U.S. App. LEXIS 13371 (11th Cir. 2010):

If the court finds a party or attorney violated any requirement of Rule 11(b), the court "shall" impose sanctions in accordance with Rule 11. 15 U.S.C. § 78u-4(c)(3). If a complaint substantially fails to comply with Rule 11(b), the presumptive sanction is attorneys' fees and expenses. 15 U.S.C. § 78u-4(c)(2). Accordingly, the PSLRA's provisions eliminate a district court's discretion on two fronts: (1) in choosing whether to conduct the Rule 11(b) inquiry and (2) in determining whether to impose sanctions following a finding of a Rule 11(b) violation. See *** Simon DeBartolo Group, L.P. v. The Richard E. Jacobs Group, Inc., 186 F.3d 157, 167 (2d Cir. 1999) (noting the PSLRA circumscribes a district court's discretion "in choosing whether to conduct the Rule 11 inquiry at all and whether and how to sanction a party once a violation is found").

Although the PSLRA alters the consequences of a Rule 11(b) violation in a private securities fraud action, the substantive analysis under Rule 11 remains the same. *** Moreover, nothing in the PSLRA changes our abuse of discretion standard of review of the district court's Rule 11(b) findings. ***

In this case, however, the district court's conclusory Rule 11 analysis is not sufficient to permit meaningful appellate review. Although the district court explicitly denied Karp's motion for sanctions, 13 its one paragraph order provides no explanation of the basis for its ruling and does not include the specific findings the PSLRA requires. Specifically, the district court's order does not discuss "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 fact, nowhere in the June 12, 2007, order did the district court even mention the PSLRA or any of its requirements. As a result, we remand the case to the district court to permit it to make the PSLRA-mandated findings in the first instance. This approach is consistent with the procedure we use when a district court fails to make the PSLRA sanctions findings altogether. ***

It may be tempting to engage in sanctions determinations ourselves, given the apparent frivolity of the plaintiffs' claims. In fact, the extensive record on appeal may actually make such determinations possible. But, even assuming we have the ability to conduct a thorough Rule 11 analysis, doing so in this case would be ill-advised. Remand is the better route.

First, as is almost always the case, the district court is "better situated" than this Court "to marshal the pertinent facts and apply the fact-dependent legal standard mandated by Rule 11." *** Moreover, our analysis of the sanctions issue would likely further develop the record by, for example, expounding upon the relevant SEC filings or drawing inferences from undisputed facts. Consequently, if we elect to make such sanctions findings at the appellate level, the parties would necessarily be less involved in the process and would be unable to object if and when appropriate.

Further, our decision to remand recognizes that when the district court engaged in its sanctions analysis in 2007 our Circuit had not yet explicitly addressed the level of specificity required by the PSLRA. *** It is not until this case, however, that we emphasize just how extensive the district court's sanctions findings must be in the PSLRA context. Thus, in light of our reiteration and accentuation of the PSLRA's requirements, it is appropriate to permit the district court to engage in a PSLRA-compliant sanctions analysis prior to appellate review.

Additionally, we recognize the practical reality that this appeal arises from complex factual circumstances that have not been organized in such a manner to facilitate efficient sanctions review. As a result, prior to engaging in a Rule 11(b) analysis, we would first have to unravel the dense record and examine it in a way that no other issue in this case requires us to do. This task would require us to obtain a level of familiarity with the parties and the evidence that the district court already has; as a result, we would end up replicating much of the work that the district court has already completed. This is not a wise use of judicial resources. The better solution, from a practical standpoint, is for us to carefully and promptly decide the issues on appeal, and then to remand to the district court to address any outstanding fact-finding tasks. Expeditiousness is every bit as important to a well-functioning judiciary as is thoroughness.

Finally, even if we were to engage in a full PSLRA sanctions analysis, it would still be necessary to remand to the district court to determine a number of outstanding issues. For instance, we would be unable to determine whether either Thompson or Jacoby himself (as distinct from their lawyers) violated Rule 11 (the record is silent on this point), whether the lawyers violated Rule 11(b)(1) by filing the complaints for improper purposes (a subjective analysis that will likely require testimony), or whether the plaintiffs can rebut the PSLRA's presumptive award of attorneys' fees. These issues require the kind of record development in which appellate courts cannot engage. ***

Although Judge Tjoflat dissented, his opinion offers no solace to the target of sanctions and echoes his opinion in Ledford v. Peeples (see our post of June 26, 2010):

In Karp's cross-appeal for Rule 11 and PSLRA sanctions, the court errs for two reasons. First, the court's opinion fails to make perfectly clear that, on remand, the district court must review and make "specific findings regarding" plaintiffs and plaintiffs' counsel's compliance with each requirement of Rule 11(b) with respect to all three complaints. Second, the court should not have remanded with a blank slate; at bottom, the court should have instructed the district court to sanction plaintiffs' attorneys for noncompliance with Rule 11(b).