Judicial Noncompliance with Mandatory Procedural Rules under the Private Securities Litigation Reform Act

Section 21D(c)(1) of the Securities Exchange Act subjects courts to an unusually clear mandate: courts must make findings on whether attorneys complied with Rule 11 of the Federal Rules of Civil Procedure (which sanctions frivolous or unsupported claims) in every case arising under the act. Yet we find that courts make these required findings less than 14 percent of the time. We also find that the required Rule 11 findings are not more likely in cases where parties seek sanctions under Rule 11 but are made overwhelmingly in court orders approving settlements—the circumstance in which sanctions are least likely. To explain these surprising results, we offer an account of judicial behavior that emphasizes judicial learning, judicial effort, and the crucial ways in which the incentives of the judge and of the attorneys may interact in complex cases.