Matrixx Initiatives shareholders will be allowed to pursue lawsuits against the company for allegedly withholding information about dangerous side effects associated with <"http://www.yourlawyer.com/topics/overview/Zicam">Zicam Cold Remedy nasal products. In a unanimous decision, the high court said drug makers may be sued under the securities law for making statements that omit material information, which according to The New York Times, it defined as anything that reasonable investors would believe significantly alters the â€œtotal mixâ€ of available information.
Plaintiffs in the lawsuit, Matrixx Initiatives vs. Siricusano, claim that from 1999 to 2004, the company received scattered reports that some Zicam nasal product users had suffered anosmiaâ€”loss of sense of smell. According to the Times, Matrixx did not disclose the reports and in 2003, the company said it was â€œpoised for growth.” According to the plaintiffs, at that time, Zicam products accounted for 70 percent of the company’s sales. Once the link between Zicam nasal products and anosmia was reported in the media in 2004, Matrixx stock tanked.
Zicam Cold Remedy nasal products were recalled in 2009, after the U.S. Food & Drug Administration (FDA) said it had received scores of reports that people using the products had suffered anosmia. At the same time, the FDA issued a Warning Letter to Matrixx stating it had failed to inform the agency of an additional 800 anosmia reports linked to the recalled cold remedies. Matrixx admitted that it did not pass along those reports to the FDA, but maintained that its legal counsel advised it was not required to forward those reports to the agency
In trying to block the investor lawsuit, Matrixx claimed that drug makers are not required to make disclosures until reports of side effects become statistically significant. But all nine Supreme Court justices rejected that argument.
â€œGiven that medical professionals and regulators act on the basis of evidence of causation that is not statistically significant, it stands to reason that in certain cases reasonable investors would as well,â€ Justice Sonia Sotomayor wrote for the court.
The ruling paves the way for the case to be heard in a lower court.
According to an NPR report, the high court’s decision could also have broad implications for disclosure practices at other corporations. However, the decision did not provide detailed guidance on what a company must disclose and when.