The U.S. Court of Appeals for the Third Circuit determined sanctions were necessary when a party violated Rule 11, concluding that the Private Securities Litigation Reform Act of 1995 “requires that some sanction be imposed.”

In an April 5 opinion, the federal appeals court affirmed the majority of a Delaware district court’s ruling, determining that the court hadn’t abused its discretion in finding the plaintiffs, two investors in the defendant company, had violated Rule 11 by filing for an improper purpose and alleging claims without factual support. Nor had the court abused its discretion in concluding that plaintiff’s 10b-5 Securities Fraud claim hadn’t violated Rule 11, or in declining to award defendant Brian Askew attorney fees.

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