Stradling Team Secures Rare PSLRA Sanctions Order in Securities Fraud Case

Stradling successfully obtained a rare sanctions order on behalf of Harbor Diversified, Inc. and its senior executives in a securities fraud action in the U.S. District Court for the Eastern District of Wisconsin. The Stradling team successfully moved to dismiss the operative complaint, and then convinced the Court that the initial complaint was so defective as to warrant sanctions under Rule 11. The Court ordered plaintiff’s counsel to reimburse Harbor for the fees and costs incurred in responding to the defective complaint. Stradling partner Jason de Bretteville led the defense team.

The Court found that the initial complaint’s scienter allegations were so cursory that no reasonable lawyer could have believed that the initial complaint satisfied the Private Securities Litigation Reform Act’s (PSLRA) heightened pleading standards. The Court’s order describes an issue that has been seldom addressed in the nearly 30 years since the PSLRA’s enactment, and reinforces one of the statute’s core purposes: ensuring that securities litigation is supported by meaningful pre-filing investigation.