Most everyone knows by now that the Private Securities Litigation Reform Act of 1995 made winning a federal securities lawsuit a lot harder — including by setting a tougher test for pleading scienter, which in context means the defendant intended to defraud someone. 

Fewer people have heard that the PSLRA also raised the stakes for a plaintiff that loses such a case.

The Second Circuit brought the latter point home today.  It held that the statute (1) requires district courts to find whether or not the losing party did things that warrant Rule 11 sanctions, (2) allows sanctions even if the losing party could've stopped sanctions by invoking the Rule 11 safe harbor in non-PSLRA cases, and (3) doesn't demand proof that the losing party acted in "bad faith".  ATSI Communications, Inc. v. The Shaar Fund, Ltd., No. 08-1815 (2d Cir. Sept. 2, 2009).

The court went on to reverse the sanctions amount.  It asked the district court on remand to look into whether the defendants could have avoided incurring fees if they'd moved for Rule 11 sanctions sooner.