that unduly and unreasonably protracted the
final resolution of the matter in controversy.
‘‘(4) AWARDS IN DISCOVERY PROCEEDINGS.—
In adjudicating any motion for an order compelling
discovery or any motion for a protective order made
in any implied private action arising under this Act,
the court shall award the prevailing party reasonable
fees and other expenses incurred by the party in
bringing or defending against the motion, including
reasonable attorney fees, unless the court finds that
special circumstances make an award unjust.
‘‘(5) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) The term ‘fees and other expenses’
includes the reasonable expenses of expert wit-
nesses, the reasonable cost of any study, analy-
sis, report, test, or project which is found by
the court to be necessary for the preparation of
the party’s case, and reasonable attorney fees
and expenses. The amount of fees awarded
under this section shall be based upon prevail-
ing market rates for the kind and quality of
services furnished.
‘‘(B) The term ‘substantially justified’
shall have the same meaning as in section
2412(d)(1) of title 28, United States Code.
‘‘(c) ABUSIVE PRACTICES..—
‘‘(1) SHARES OF AWARDS TO REPRESENTATIVE
PLAINTIFFS.—In any implied private action arising
under this Act that is certified as a plaintiff class
action pursuant to the Federal rules of civil proce-
dures, the share of any final judgment or of any set-
tlement that is awarded to any party serving as a
representative plaintiff shall be calculated in the
same manner as the shares of the final judgment or
settlement awarded to all other members of the
plaintiff class.
‘‘(2) REPRESENTATION OF CLASS ACTIONS.—
(A) In any implied private action arising under this
Act that is certified as a plaintiff class action pursu-
ant to the Federal rules of civil procedure, the plain-
tiff class may not be represented by (i) any attorney
who directly or indirectly owned or otherwise had a
beneficial interest in the securities that are the sub-
ject of the litigation, or (ii) any attorney affiliated
with such an attorney. An attorney who knowingly
violates this prohibition shall be barred from rep-
resenting any party in any action arising under this
Act or under the Securities Act of 1933.
‘‘(B) In any implied private action arising
under this Act that is certified as a plaintiff class
action, an attorney may not represent the plaintiff
class if the attorney has paid or is obligated to pay
a fee to a third party who assisted him in obtaining
the representation of any party to the action. An at-
torney who knowingly violates this prohibition shall
be barred from representing any party in any action
arising under this Act or under the Securities Act of
1933.
‘‘(3) DISGORGED FUNDS.—(A) Funds disgorged
as a result of any action brought by the Commission
in Federal court or of any Commission administra-
tive action shall not be distributed as payment for
attorney fees or expenses incurred by private parties
seeking distribution of the disgorged funds.
‘‘(B) Any judgment awarded against any person
in any implied private action arising under this Act
shall be diminished by the amounts, if any, that
such person has been or may be required to dis-
gorge, pursuant to a court order obtained at the in-
stance of the Commission in a proceeding brought
under section 21(d) of this Act, or in connection
with any Commission administrative action, relating
to the same alleged misconduct.
‘‘(d) BURDEN OF PROOF.—In any implied cause of
action arising under this Act in which the plaintiff may
recover money damages only if it proves that the defend-
ant acted with scienter, the plaintiff must establish that
element of his claim by clear and convincing evidence in
order to establish a right to recover money damages.
‘‘(e) PLEADING
REQUIREMENT.—In any implied
cause of action arising under this Act in which the plain-
tiff may recover money damages only if it proves that the
defendant acted with scienter, the plaintiff must allege in
its complaint facts suggesting that the defendant acted
with that state of mind.
‘‘(f) AIDING AND ABETTING LIABILITY.—In any im-
plied cause of action arising under this Act in which the
plaintiff may recover damages only if it proves that the
defendant acted with scienter, a defendant may be held
liable as an aider and abettor only if the plaintiff proves
that the defendant knew that another party had violated
a provision of this Act and that the defendant, acting with
deliberate intent to deceive, manipulate, or defraud for the
defendant’s own direct pecuniary benefit, provided sub-
stantial assistance to the other party’s violation. Direct
pecuniary benefit shall not include ordinary compensation
for services provided.’’.
SEC. 4. EFFECTIVE DATE.
The provisions of this Act shall apply to all actions
commenced on or after the date of the enactment of this
Act.
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