Judicial Noncompliance with Mandatory Procedural Rules Under the PSLRA

Abstract

Do judges follow the law? In a naïve model of judging, Congress writes statutes, which courts know about and then slavishly apply. Although interpretation differences could explain deviation between congressional will and the law as applied, in this model there should be no divergence where the law is unambiguous. Section 21D(c)(1) of the Securities Exchange Act is such a clear law: it requires courts to certify attorneys complied with Rule 11(b) of the Federal Rules of Civil Procedure, which forbids frivolous or unsupported claims, in every case arising under the Act. In this paper, we provide data that rejects the naïve model: courts make the required findings in less than 14 percent of cases in which such findings were required by law. This suggests judges either do not know of the law or, if they do, fail to follow it. We also show that required Rule 11(b) findings about sanctions are made overwhelmingly in cases where sanctions would be least likely – that is, in orders approving settlements – and such findings are extremely rare in cases where sanctions would other be more likely – that is, where motions to dismiss are granted. To explain this seeming paradox, we offer an account that highlights crucial ways in which the incentives of the judge and of the attorneys may interact in complex cases.

Note: Previously circulated as "Do Judges Follow the Law? An Empirical Test of Congressional Control Over Judicial Behavior"