Opinion ID: 203914
Heading Depth: 1
Heading Rank: 3

Heading: Smith Barney's Cross-Appeal

Text: In its cross-appeal, Smith Barney seeks attorneys' fees under the Puerto Rico Rules of Civil Procedure, as well as a remand to the district court for specific findings regarding compliance with Rule 11 of the Federal Rules of Civil Procedure, as required by the PSLRA, 15 U.S.C. § 78u-4(c).
Puerto Rico law governs the state law claim for attorneys' fees in this diversity action. See Mass. Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 552 F.3d 47, 74 (1st Cir.2009); Newell P.R. Ltd. v. Rubbermaid Inc., 20 F.3d 15, 24 (1st Cir.1994). Puerto Rico law provides that in the event that any party or its lawyer acted obstinately or frivolously, the court shall impose on such person the payment of a sum of attorneys' fees, which, in its judgment the court corresponds to such conduct. P.R. Tel. Co., 427 F.3d at 33 ( quoting P.R. R. Civ. P. 44.1(d)). It has long been understood that a finding of obstinacy requires that the court determine a litigant to have been unreasonably adamant or stubbornly litigious, beyond the acceptable demands of litigation, thereby wasting time and causing the court and the other litigants unnecessary expense and delay. P.R. Tel. Co., 427 F.3d at 33 ( quoting De Leon Lopez v. Corp. Insular de Seguros, 931 F.2d 116, 126 (1st Cir. 1991)). Reviewing Smith Barney's claims of obstinance and frivolousness, the district court found none. [12] This finding is due significant deference. Mass. Eye & Ear Infirmary, 552 F.3d at 74 ( citing French v. Corporate Receivables, Inc., 489 F.3d 402, 403 (1st Cir.2007)); see also De Jesus Nazario v. Morris Rodriguez, 554 F.3d 196, 199 (1st Cir.2009); B. Fernandez & HNOS v. Kellogg USA, Inc., 516 F.3d 18, 28 (1st Cir.2008). It is true that the district court did not delve deeply into the reasons why it concluded that Fernandez's prosecution of his suit was neither obstinate nor frivolous, but our precedents do not always require an exacting level of detail. See Mass. Eye & Ear Infirmary, 552 F.3d at 74 (explaining in context of federal fee shifting statute that district court's attorneys' fees finding need not be precise to the point of pedantry, infinitely precise, deluged with details, or even fully articulated )( citing United States v. One Star Class Sloop Sailboat, 546 F.3d 26, 42 (1st Cir.2008)) (emphasis added). Here, although further explanation by the district court would have been preferable, we cannot conclude that the district court's denial of fees was an abuse of discretion. [13]
The final question we must resolve is one of first impression in this circuit: whether the district court is required to make findings regarding compliance with Rule 11(b) of the Federal Rules of Civil Procedure, in a case in which a claim was made under the securities laws but where all claims were dismissed on state law grounds. The statute requiring such findings does not appear to brook any exceptions, see 15 U.S.C. § 78u-4(c)(1) (requiring such findings as to any complaint, responsive pleading or, dispositive motion in any private action raising a claim under the securities laws), and at least one other circuit has reached that conclusion. See Morris v. Wachovia Sec., Inc., 448 F.3d 268, 276 (4th Cir.2006) ([T]he Rule 11(b) inquiry is mandatory even if other claims in the action arise under other laws.). Moreover, the purpose of the PSLRA similarly supports requiring district courts to undertake a Rule 11 inquiry at the conclusion of any private securities fraud action. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71, 81-82, 126 S.Ct. 1503, 164 L.Ed.2d 179 (noting that Title I of the PSLRA represents Congress' effort to curb ... perceived abuses, by mandat[ing] imposition of sanctions for frivolous litigation). Whether or not a Rule 11(b) inquiry must be made into Fernandez's counterclaim, we needn't remand this case to the district court for that purpose. As noted, the PSLRA requires courts, upon final adjudication of an action, to make findings regarding parties' compliance with Rule 11(b) in private securities matters, and although it does not alter the standards used to judge compliance with Rule 11, see Dellastatious v. Williams, 242 F.3d 191, 197 n. 5 (4th Cir.2001); Simon DeBartolo Group, L.P. v. Richard E. Jacobs Group, Inc., 186 F.3d 157, 167 (2d Cir.1999), the PSLRA does change the consequences for a Rule 11 violation. Specifically, if a court concludes that Rule 11 has been violated, the PSLRA provides that the court shall impose sanctions on the offender. 15 U.S.C. § 78u-4(c)(2); Morris, 448 F.3d at 276 (noting that statute's use of the word shall creates an obligation impervious to judicial discretion, and requires the district court to impose sanctions for every violation). Rule 11(b) proscribes not only written arguments made with any improper purpose, but also advancing frivolous arguments, as well as the assertion of factual allegations without evidentiary support or the likely prospect of such support. Fed.R.Civ.P. 11(b); Young v. City of Providence ex rel. Napolitano, 404 F.3d 33, 39 (1st Cir.2005). We have said, however, that Rule 11(b) is not a strict liability provision, Young, 404 F.3d at 39, and a showing of at least culpable careless[ness] is required before a violation of the Rule can be found, Roger Edwards LLC v. Fiddes & Son, Ltd., 437 F.3d 140, 142 (1st Cir.2006). We have also been careful to make clear that [t]he mere fact that a claim ultimately proves unavailing, without more, cannot support the imposition or Rule 11 sanctions. Protective Life Ins. Co. v. Dignity Viatical Settlement Partners, L.P., 171 F.3d 52, 58 (1st Cir. 1999). [14] With these standards in mind, we conclude that no purpose would be served by remanding this case to the district court for Rule 11 findings. Although some courts have remanded cases in which the district court failed to make Rule 11 findings, see Rombach v. Chang, 355 F.3d 164, 178 (2d Cir.2004), in this case we see no reason to do so. The district court has already denied Smith Barney any attorneys' fees under a standard similar to Rule 11(b), and our review of the record does not suggest that Fernandez's claims were brought for an improper purpose, rose to the level of being frivolous, or made unsupportable factual allegations. Other circuits have noted that a remand for a Rule 11 determination is not necessary if the record provides no basis for awarding sanctions. See Dellastatious, 242 F.3d at 197 n. 5. Because our review of the record reveals no basis for finding a Rule 11 violation, we decline to remand this case to the district court.