Oral argument: Jan. 10, 2010
Appealed from: United States Court of Appeals for the Ninth Circuit (Oct. 28, 2009)
SECURITIES EXCHANGE ACT, ADVERSE EVENT REPORTS, MATERIALITY, SCIENTER, STATISTICAL SIGNIFICANCE
Petitioners, Matrixx Initiatives Inc. and three of its officers (“Matrixx”), argue that the Ninth Circuit erred in allowing respondents, James Siracusano and other Matrixx shareholders (“Siracusano”), to sue under the Securities and Exchange Act of 1934 for Matrixx’s alleged failure to share product information with its shareholders. Specifically, Siracusano claims that Matrixx should have disclosed so-called adverse event reports that linked one of its products, Zicam Cold Remedy (“Zicam”), to anosmia, a condition that affects an individual’s ability to smell. Supreme Court precedent provides that, as part of the plaintiff’s case in showing a securities violation, the plaintiff must establish that the defendant misrepresented or omitted a material fact. In arguing that it was not required to disclose the studies, Matrixx relies on a statistical significance standard in determining whether the studies linking the drug to anosmia were material. Siracusano rejects the statistical significance standard, arguing that Matrixx should have shared such studies with investors regardless of the significance of the statistical correlation between Zicam and anosmia. The Ninth Circuit rejected the statistical significance standard and engaged in a factual analysis of Siracusano’s claims, finding that the allegations were sufficient. The Supreme Court will decide whether shareholders' ability to state a claim turns on the statistical significance of the withheld information, or whether a factual analysis is required.