PSLRA Class Action Defense Cases–In re Charter Communications: Eighth Circuit Holds As Matter Of First Impression That District Court Failure To Include In Judgment Findings Required By Rule 11(b) Does Not Require Remand

Apr 28, 2008 | By: Michael J. Hassen

Following Dismissal of Securities Fraud Class Action, District Court Failure to Include Rule 11(b) Statutory Findings in Judgment may be Decided by Court of Appeal Eighth Circuit Holds

Plaintiff filed a putative securities fraud class action against various defendants, including Scientific-Atlanta and Motorola. The district court dismissed the class action claims against Scientific-Atlanta and Motorola and entered a separate, final judgment under Rule 54(b). Plaintiff appealed, and the Eighth Circuit affirmed. See In re Charter Communications, Inc., Securities Litig., 443 F.3d 987 (8th Cir. 2006). Plaintiff filed a petition for writ of certiorari with the U.S. Supreme Court; the High Court granted the writ and affirmed the Eighth Circuit’s decision. See Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., ___ U.S. ___, 128 S.Ct. 761 (2008). (Our summary of the Supreme Court opinion may be found here.) On remand, the Eighth Circuit was confronted with a matter of first impression: specifically, a provision of the PSLRA (Private Securities Litigation Reform Act of 1995) states that the district 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.” In re Charter Communications, Inc., Securities Litig., 519 F.3d 730, 731 (8th Cir. 2008) (quoting 15 U.S.C. § 78u-4©(1)). The district court had failed to include such findings, though no party had raised this issue either in the district court or on appeal. Id. Defense attorneys notified the Circuit Court that Scientific-Atlanta and Motorola “waive all rights in this case to assert, that Plaintiff-Appellant did not comply with Fed.R.Civ.P. 11(b)” and requested entry of a final judgment dismissing the class action complaint. Id.

The Eighth Circuit held that the failure to include the required findings “did not affect either the appealability or the validity of the district court’s Rule 54(b) final judgment.” In re Charter Communications, at 731 (citation omitted). After noting that courts have reached different decisions as to whether the failure to include Rule 11(b) statutory findings required a remand to the district court or whether, in the absence of district court findings, the Circuit Court could decide the Rule 11(b), and after confirming that “Congress in the PSLRA clearly intended to reduce judicial discretion to ignore or not sanction Rule 11(b) violations,” the Eighth Circuit held 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.” Id. Accordingly, the Circuit Court reissued its mandate affirming the final judgment of the district court, id., at 732.

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