The opinion of the court was delivered by: Whelan, District Judge.
ORDER DENYING DEFENDANTS' APPLICATION TO AMEND JUDGMENT
On February 9, 2001 Defendants Depotech Corporation, et al.
("Defendants") moved ex parte to amend this Court's judgment
dated January 26, 2001 (hereinafter "judgment"). (Doc. No. 100.)
Specifically, Defendants request that this Court amend its
judgment to include findings under Rule 11 of the Federal Rules
of Civil Procedure. Plaintiffs timely opposed. For the reasons
stated below, the Court finds that all parties have complied
with Rule 11 such that amendment of the judgment is not
On April 9, 1998 Plaintiffs Vincent M. DeMarco et al.
("Plaintiffs") initiated this class action alleging securities
fraud. Specifically, Plaintiffs alleged that Defendants
fraudulently manipulated the market prices of Depotech shares.
On January 26, 2001, after extensive litigation which included
three rounds of pleading, this Court dismissed this action with
prejudice. At no point in the litigation did the Court make any
Rule 11 findings. On February 9, 2001 Plaintiffs filed a Notice
of Appeal. On the same date, Defendants requested that this
Court amend its judgment to make Rule 11 findings and to impose
sanctions against Plaintiffs and their counsel pursuant to
15 U.S.C. § 78u-4(c)(1).
On a party's motion no more than ten days after entry of
judgment, a district court may amend its judgment. FED. R. CIV.
P. 59(e). District courts have broad discretion to amend or
refuse to amend judgments under Rule 59(e). See McDowell v.
Calderon, 197 F.3d 1253, 1256 (9th Cir. 1999) (citing
Pasatiempo v. Aizawa, 103 F.3d 796, 801 (9th Cir. 1996));
Safeway Stores v. Fannan, 308 F.2d 94, 98 (9th Cir. 1962)
(noting denial of 59(e) motion will only be reversed on
"manifest abuse of discretion").
Rule 11 requires a reasonable inquiry prior to signature of
any pleading, and that the pleading be based on existing law or
a nonfrivolous argument for a change in the law. See FED. R.
Civ. P. 11(b); Bus. Guides, Inc. v. Chromatic Communications
Enter., Inc., 498 U.S. 533, 548, 111 S.Ct. 922, 112 L.Ed.2d
1140 (1991). District courts have broad discretion to sanction a
party or attorney under Rule 11. See Cooter & Gell v. Hartmarx
Corp., 496 U.S. 384, 385, 110 S.Ct. 2447, 110 L.Ed.2d 359
(1990); Barber v. Miller, 146 F.3d 707, 709 (9th Cir. 1998).
Sanctions are appropriate if a claim is not "warranted by
existing law or by a nonfrivolous argument for the extension,
modification or reversal of existing law." See FED. R. Civ. P.
11(b)(2); Barber, 146 F.3d at 710. The signer's subjective
good or bad faith is irrelevant to the Rule 11 analysis, rather
an objective reasonableness standard applies. See Bus. Guides,
498 U.S. at 548, 111 S.Ct. 922; In re Keegan Management Co.,
Securities Litigation, 78 F.3d 431, 434 (9th Cir. 1996).
Plaintiffs argue that Rule 11 findings are premature because
final adjudication does not occur until all appellate remedies
are exhausted. 15 U.S.C. § 78u-4(c)(1) does not define "final
adjudication of the action." Despite efforts to locate
controlling authority on this issue, neither the parties nor
this Court have located a decision arising in the Ninth Circuit
which has defined "final adjudication" in the context of the
"In the absence of . . . a definition, [courts] construe a
statutory term in accordance with its ordinary or natural
meaning." Fed. Deposit Ins. Corp. v. Meyer, 510 U.S. 471, 476,
114 S.Ct. 996, 127 L.Ed.2d 308 (1994). "It is, however, a
fundamental principle of statutory construction (and, indeed, of
language itself) that the meaning of a word cannot be determined
in isolation, but must be drawn from the context in which it is
used." Smith v. United States, 508 U.S. 223, 241, 113 S.Ct.
2050, 124 L.Ed.2d 138 (1993) (Scalia, J., dissenting).
The specific language of the relevant PSLRA provision reads as
follows: "upon final adjudication of the action, the court shall
include in the record specific findings regarding . . .
Rule 11(b)[.]" 15 U.S.C. § 78u-4(c)(1). The Court concludes that §
78u-4(c)(1)'s plain meaning clearly reveals that "final
adjudication" occurs upon a terminating decision, such as a
verdict, summary judgment or dismissal with prejudice without
leave to amend. Section 78u-4(c)(1) requires the district court
to make Rule 11 findings in the record. Section 78u-4(c)(1)'s
very use of the term "record" directly suggests that the
proposed Rule 11 findings will be included in the appellate
record submitted to the Circuit Court of Appeals for appellate
review. If Congress actually intended that the district court
postpone its Rule 11 determination until after the exhaustion of
all appeals, Congress would have stated so explicitly.
The 104th Congress, which enacted the PSLRA, included such
explicit guidance in the Antiterrorism and Effective Death
Penalty Act's ("AEDPA") modification of
28 U.S.C. § 2244(d)(1)(A). AEDPA's statute of limitations begins to run on
"the date on which the judgment became final by the conclusion
of direct review or the expiration of the time for seeking such
review[.]" 28 U.S.C. § 2244(d)(1)(A). The 104th Congress
mandated that "final judgment" under AEDPA follow this special
definition: exhaustion of appellate review. Implicitly then, the
same Congress did not desire such a special definition for the
PSLRA's undefined "final adjudication." Rather, ...