Court Opinion

ID: 7013840
Source: CourtListenerOpinion
Date Created: 2022-07-24 04:14:40.041314+00
Date Added: 2024-06-11T16:10:18.211806
License: Public Domain

JOHN M. WALKER, Jr., Chief Judge,
concurring.
I concur in the majority’s judgment to vacate and remand in this case. I write separately, however, because there is no need to look beyond the text and structure of the statutory provisions at issue to ascertain their meaning.
Because a statute’s text embodies the duly enacted law and the final and authoritative expression of the legislative will, our principles of statutory construction emphasize the primacy of the statutory text. See S.E. Cmty. Coll. v. Davis, 442 U.S. 397, 405, 99 S.Ct. 2361, 60 L.Ed.2d 980 (1979) (“It is elementary that the starting point in every case involving construction of a statute is the language itself.”) (alteration, citation, and internal quotation marks omitted). In interpreting Congress’s statutory commands, courts should look not simply to the text of the particular provision at issue but also to the framework of the statute and the text of related provisions which provide the context for it. See K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291, 108 S.Ct. 1811, 100 L.Ed.2d 313 (1988) (stating that “[i]n ascertaining the plain meaning of the statute, the court must look to the particular statutory language at issue, as well as the language and design of the statute as a whole”). Read in their statutory setting, the provisions of the PSLRA are clear enough to resolve the issues raised by this case.
The majority arrives at its interpretation by what I consider to be less reliable means. Summarily concluding that the text of the statute does not make clear how to treat complaints that raise both frivolous and non-frivolous claims, Maj. Op., supra, at 219, the majority begins its interpretive analysis by inquiring into the *227underlying purpose of the statute, as revealed by the legislative history, id. at 219-20. This approach seems particularly ironic here given the majority’s ultimate conclusion that this case raises “a problem that Congress did not seem to have in mind.” Id. at 220. While the legislative history does refer to the general and conflicting policies that were on the minds of some of the congressional committee members, it offers virtually no guidance as to how these vague and general policies should be implemented in particular cases, much less as to how the presumption and rebuttal provisions at issue here should be interpreted.
I. The Invocation of the Presumptive Award
This appeal concerns the proper award of mandatory sanctions under the PSLRA for a complaint that asserts frivolous claims. The statute provides that
the court shall adopt a presumption that the appropriate sanction — (i) for failure of any responsive pleading or dispositive motion to comply with any requirement of Rule 11(b) ... is an award ... of the reasonable attorneys’ fees and other expenses incurred as a direct result of the violation; and (n) for substantial failure of any complaint to comply with any requirement of Rule 11(b) ... is an award ... of the reasonable attorneys’ fees and other expenses incurred in the action.
15 U.S.C. § 78u-4(c)(3)(A). The invocation of the presumption in this case thus turns on whether Gurary’s complaint “sub-stantialfly] fail[ed]” to comply with Rule 11(b) within the meaning of subsection (ii).
I easily conclude that Gurary’s complaint substantially failed to comply with Rule 11(b), notwithstanding the existence of non-frivolous claims. Where, as here, the only potentially non-frivolous claims surfaced, not in the complaint, but later on in an appeal from the motion to dismiss, the complaint substantially (and perhaps wholly) failed to comply with Rule 11(b). Indeed, unless the statutory presumption is to be given no effect, no other conclusion seems possible.
Thus I disagree with the majority’s contention that the mixture of frivolous and non-frivolous claims in this case raises an issue sufficiently difficult to warrant departure from the text. of the statute. Moreover, my conclusion would be the same even if the late-emerging non-frivolous claims had been in the complaint.
The majority discerns a gap in the statutory scheme, not by looking to the text of the statute, but by viewing this language through the filter of the legislative history. According to the majority, the statute is incomplete because Congress adopted the “substantial failure” language proposed in Judge Scirica’s letter but did not address his concern that an additional modification was necessary to indicate the consequences of a minor offense. Maj. Op., supra, at 220. This interpretation of the legislative history leads the majority to conclude that Congress “did not define clearly what was meant by a ‘substantial failure.’ ” Id. However, rebanee on Judge Scirica’s letter is not necessary because the text is clear; indeed, this approach is troubling for a number of other reasons.1
*228Whatever might have led the drafters to adopt the term “substantial,” the commonly understood meaning of this term is plain enough. Terms like “substantial” and the related term “material” are common coin of the legal realm. This is particularly true in the context of securities fraud, which is defined in Rule 10b-5 in terms of the “materiality” of the allegedly fraudulent statement, see 17 C.F.R. § 240.10b-5(b) (making unlawful “any untrue statement of a material fact or [the omission of] a material fact”).
Courts and attorneys would have little difficulty understanding that the “substantial failure” language requires an inquiry into whether the complaint’s Rule 11(b) violations make the complaint as a whole “[essentially,” “without material qualification,” “in the main,” or “materially” frivolous. Black’s Law Dictionary 1281 (5th ed.1979) (defining substantially). It would also be readily understood that this inquiry requires an evaluation of the factors identified by the majority, that is, the context in which the non-frivolous claims were asserted and the quality of those claims. Maj. Op., swpra, at 221-22. Obviously, the legislature cannot draft provisions that account for every situation that might arise, and one can foresee situations in which a finding concerning “substantial failure” would be a tough call. But the difficulty of applying the provisions in some cases does not make the statute unclear. To the contrary, given the case-specific inquiry prescribed by Congress, and the wide range of scenarios likely to arise in this context, see id. at 220, I fail to see how Congress could have spoken more clearly.
The text of the PSLRA also leads me to easily conclude that the presumptive award is for the full amount of expenses and not, as appellant contends, for only those costs incurred as a result of the frivolous claims. The presumptive award is for “the reasonable attorneys’ fees and other expenses incurred in the action.” 15 U.S.C. § 78u-4(c)(3)(A)(ii). The “in the action” language, which does not distinguish between any parts of the action, plainly commands an award for the entire amount of expenses. This is also made evident from a consideration of the parallel presumptive award provision, the only other subsection commanding a presumptive award. In that provision, the PSLRA prescribes the approach advocated by appellant, but limits it to responsive pleadings and dispositive motions. Id. § 78u-4(c)(3)(A)(i) (providing for an award “for failure of any responsive pleading or dis-positive motion to comply with any requirement of Rule 11(b) ... of the reasonable attorneys’ fees and other expenses incurred as a direct result of the violation”) (emphasis added). To conflate the two separate provisions, as appellant would in effect have us do, would therefore contravene the oft-repeated canon of statutory construction whereby courts are en*229joined to give force and effect to all of a statute’s provisions and to avoid rendering any of them superfluous. See Auburn Hous. Auth. v. Martinez, 277 F.3d 138, 145-46 (2d Cir.2002) (collecting cases).
II. The De Minimis Rebuttal Provision
The key to interpreting the de-minimis rebuttal provision can again be found in the statute that Congress actually passed. The entire rebuttal provision reads as follows:
The presumption described in subpara-graph (A) may be rebutted only upon proof by the party or attorney against whom sanctions are to be imposed that — (i) the award of attorneys’ fees and other expenses will impose an unreasonable burden on that party or attorney and would be unjust, and the failure to make such an award would not impose a greater burden on the party in whose favor sanctions are to be imposed; or (ii) the violation of Rule 11(b) of the Federal Rules of Civil Procedure was de minimis.
15 U.S.C. § 78u-4(c)(3)(B).
When the de minimis rebuttal provision, subsection (ii), is viewed in its statutory context, the problem that so bedevils the majority — avoiding the “paradoxical result ... that the presumption is rebutted by evidence that the presumption was inapplicable in the first instance,” Maj. Op., supra, at 222 — becomes more manageable. In particular, by viewing the de minimis provision in the context of the statute as a whole and the subsection in which it has been placed, one avoids the trap of considering the provision solely in terms of frivolous versus non-frivolous counts in a complaint. I suspect that the majority’s concentration on claims stems from its preoccupation with the legislative history, specifically the reference in the Conference Committee Report to the de minimis provision in connection with a complaint in which only one of twenty counts is frivolous. See id. at 221, 223 n. 3.
• To be sure, evaluating complaints on a claim-by-claim basis may be a proper application of the de minimis provision in some cases. But it is not the whole picture. Indeed, when the de minimis provision is viewed in light of the design of the statute, it is evident that that provision rebuts the presumption of mandatory sanctions for all of the Rule 11(b) violations listed in subsection (A); these violations may occur not only in complaints but also responsive pleadings and dispositive motions. In the latter cases, where “the failure” of a responsive pleading or dispos-itive motion to comply with “any requirement of Rule 11(b)” invokes the presumption, the majority’s claim-based approach is largely, if not entirely, irrelevant.
That a broader understanding of de min-imis is appropriate is further indicated by the other rebuttal provision, (B)(i). This rebuttal provision directs the court to weigh the equities of imposing the presumptive mandatory sanctions in terms of whether the award would impose “an unreasonable burden” and would be “unjust” for the sanctioned party, on the one hand, and whether the non-imposition of such an award would not impose “a greater burden” on the non-sanctioned party, on the other. As the majority correctly found, this inquiry is concerned with the fairness of making the sanctioned party pay and its relative ability to do so, given financial or other hardship, and the non-sanctioned party’s need to be paid. Id. at 221-22. Such a holistic approach is equally applicable to both responsive pleadings and dis-positive motions that simply fail to comply with some requirement of Rule 11(b) as well as to complaints that substantially fail to comply.
*230The de minimis rebuttal provision, subsection (B)(ii), should likewise be read to require that the Rule 11(b) violations be de minimis in the context of the case as a whole. Following the general pattern of its sister rebuttal provision, the de minimis rebuttal provision prescribes the weighing of the sanctioned party’s misconduct in, for example, filing a substantially frivolous complaint or a responsive pleading or dis-positive motion that violates Rule 11(b), against the rest of that party’s conduct in the action and the conduct of the non-sanctioned party. Whereas the first rebuttal provision is primarily concerned with whether the party can pay, the de .minimis provision is primarily concerned with whether that party should pay.
The de minimis provision, then, allows the rebuttal of the presumption where the presumed mandatory award would be manifestly and egregiously unfair because the sanctioned party’s misconduct in a part of the case, the filing of a sanctionable pleading or a dispositive motion, is de min-imis in light of that party’s conduct and the non-sanctioned party’s misconduct considered in the totality of the circumstances surrounding the action. Under this provision, the presumption would be rebutted, for example, where a sanctionable pleading or dispositive motion was met with even worse misconduct by the opposing party or attorney in the other phases of the litigation. It would also be invoked where, in the context of a substantially frivolous, complaint, a non-frivolous claim, whether joined in the complaint with many frivolous claims or added later in the action, turned out to win a large money judgment because of defendant’s gross misconduct in the events underlying the case.
Because of the heightened standards imposed by the rebuttal provision, this reading would not erode the protections provided by the presumption requiring mandatory sanctions for baseless complaints and abusive responsive pleadings and dispositive motions. The de minimis standard means that for the presumption to be rebutted, the equities must weigh very heavily in the favor of the party or attorney against whom sanctions are sought; .the sanctionable party’s misconduct must pale in significance or culpability in ’ light of the other party’s. When applied with its due stringency, the exception would not swallow the rule.
I fear the majority’s proposed reading of the de minimis provision as it affects complaints fails to give it a meaning that is sufficiently different from the substantial failure provision to harmonize these two provisions. I have difficulty imagining the circumstances under which the majority’s examples of possible de minimis violations — a “minor ... procedural flaw in a suit that ... [is] not in itself otherwise abusive” or a complaint in which only one of twenty counts violates Rule 11(b), Maj. Op., supra, at 223 n. 3 — would be found to be complaints (assuming the first example involved a complaint) that substantially failed to comply with Rule 11(b) in the first place. The latter example, which the majority has taken from the legislative history, id. at 221, 223 n. 3, seems to me an instance of misusing legislative history by following it even when it leads to a reading that would render one of the statute’s provisions meaningless.
In this case, I agree with the majority’s conclusion that appellant has failed to rebut the presumption under the “de minim-is” rebuttal provision or, for that matter, the “unreasonable burden” and “unjust” rebuttal provision. Here, too, the answer can be gleaned without much difficulty from the plain language of the statute. The PSLRA allows the presumption to be rebutted only where the party facing sanctions provides “proof’ that the award *231would be an unreasonable burden on him and would be unjust or that the violation was de minimis. 15 U.S.C. § 78u-4(e)(3)(B). As the majority points out, the ordinary meaning of unreasonable burden and its placement in the statute indicate a requirement of proof of some financial or similar hardship. Maj. Op., supra, at 221-22. By failing to produce any evidence of such hardship, appellant failed to satisfy this requirement and the district court erred by finding the statutory presumption rebutted on this basis. Similarly, appellant has failed to produce evidence that his substantially frivolous complaint was de minimis, however that provision is interpreted.
III. Fees and Expenses Incurred in Pursuing Sanctions
With respect to the final issue raised by this appeal, I agree with the majority that “the statutory language can support a reading that permits the fees and expenses incurred in pursuing the sanctions to be included in the award.” Id. at 225. Such a result follows from both the ordinary meaning of the text — which provides for an award of “the reasonable attorneys’ fees and other expenses incurred in the action,” 15 U.S.C. § 78u — 4(c)(3)(A)(ii) (emphasis added) — as well as from the meaning ascribed to similar language as used in similar statutes. See Black’s Law Dictionary 26 (5th ed.1979) (defining action to “include! ] all the formal proceedings in a court of justice attendant upon the demand of a right made by one person of another in such court, including an adjudication upon the right and its enforcement or denial by the court”); cf. Comm’r, INS v. Jean, 496 U.S. 154, 161-62, 110 S.Ct. 2316, 110 L.Ed.2d 134 (1990) (finding that the Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A), which provides for an award of “fees and other expenses ... incurred by that party in any civil action,” includes an award of expenses incurred in seeking fees); id. at 159, 110 S.Ct. 2316 (noting that the language “in any civil action” does not refer “to separate parts of the litigation, such as discovery requests, fees, or appeals”).
Accordingly, I respectfully concur in the judgment.

. In referring to Judge Scirica’s letter, the majority cites to a Senate debate, not on the "substantial failure" language, but on the level of particularity required in the PSLRA’s heightened pleading standards. See 141 Cong. Rec. S19037-02, S19044-45 (Dec. 21, 1995). Senator Domenici inserted the letter in the record to justify the fairness of this pleading standard in light of President Clinton's veto of a prior version of the bill and in response to a question raised by Senator Specter. Id. at SI9044 ("The reason we put *228in 'state with particularity the facts giving rise to a strong inference’ is because that is what Judge Scirica, speaking on behalf of the Judicial Conference, asked Congress to do.”). After uncovering this comment and the Scirica letter in a remarkable piece of sleuthing, the majority apparently deduces from the comment and the letter, which also recommends the adoption of "substantial” in the presumption, id. at SI9045, that "Congress adopted Judge Scirica's 'substantial failure’ language,” Maj. Op., supra, at 220. This bit of drafting lore, which leads the majority to endow the letter with such authority that it can ascribe Judge Scirica's view that a "gap” exists within the meaning of "substantial failure” as somehow binding Congress, is irrelevant as an interpretive matter. Congress passed the provision as drafted, not Judge Scirica’s letter, which no doubt few, if any, legislators read. Apart from confusion and misdirection, such use of legislative history raises deeper concerns: the predictability and transparency of the law.