Last month, the Supreme Court issued a plaintiff-friendly opinion reaffirming its prior ruling in Basic v. Levinson (1988) and likely making it more difficult for corporations to move to dismiss class action lawsuits for failure to adequately allege materiality. In Matrixx Initiatives, Inc. v. Siracusano, the Court was asked to "adopt a bright-line rule that reports of adverse events associated with a pharmaceutical company's products cannot be material absent a sufficient number of reports to establish a statistically significant risk that the product is in fact causing the events." Though some circuit courts had adopted such tests, such as the 2nd Circuit in In re Carter-Wallace, Inc. Secs. Litig., the Supreme Court declined to do so.
Matrixx Initiatives markets Zicam and other cold remedies. Several investors commenced a securities fraud class action lawsuit, alleging that they were injured by the failure to adequately disclose adverse event reports and other research that revealed the possible link between Zicam and anosmia (loss of smell) and by materially misleading statements made by Matrixx.