Matrixx Initiatives, Inc. v. Siracusano

Matrixx Initiatives, Inc. v. Siracusano

Opinion

 [*30]  Justice Sotomayor delivered the opinion of the Court.

This case presents the question whether a plaintiff can state a claim for securities fraud under § 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, as amended, 15 U.S.C. § 78j(b), and Securities and Exchange Commission (SEC) Rule 10b-5, 17 CFR § 240.10b-5 (2010), based on a pharmaceutical company's failure to disclose reports of adverse events associated with a product if the reports do not disclose a statistically significant number of adverse events. Respondents, plaintiffs in a securities fraud class action, allege that petitioners, Matrixx Initiatives, Inc., and three  [****7] of its executives (collectively Matrixx), failed to disclose reports of a possible link between Matrixx's leading product, a cold remedy, and loss of smell, rendering statements made by Matrixx misleading. Matrixx contends that respondents' complaint does not adequately allege that Matrixx made a material representation or omission or that it acted with scienter because the complaint does not allege that Matrixx knew of a statistically significant number of adverse events requiring disclosure. We conclude that the materiality of adverse [**1314]  event reports cannot be reduced to a bright-line rule. Although in many cases reasonable investors would not consider  [*31]  reports of adverse events to be material information, respondents have alleged facts plausibly suggesting that reasonable investors would have viewed these particular reports as material. Respondents have also alleged facts “giving rise to a strong inference” that Matrixx “acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A) (2006 ed., Supp. IV). We therefore hold, in agreement with the  [***405]  Court of Appeals for the Ninth Circuit, that respondents have stated a claim under § 10(b) and Rule 10b-5.

Through a wholly owned subsidiary,  [****8] Matrixx develops, manufactures, and markets over-the-counter pharmaceutical products. Its core brand of products is called Zicam. All of the products sold under the name Zicam are used to treat the common cold and associated symptoms. At the time of the events in question, one of Matrixx's products was Zicam Cold Remedy, which came in several forms including nasal spray and gel. The active ingredient in Zicam Cold Remedy was zinc gluconate. Respondents allege that Zicam Cold Remedy accounted for approximately 70 percent of Matrixx's sales.

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