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Wednesday, April 13, 2011

Duty to Disclose to Shareholders: Matrixx Initiatives v. Siracusano

Michael V. Seitzinger
Legislative Attorney

On January 10, 2011, the U.S. Supreme Court heard oral arguments in the case Matrixx Initiatives v. Siracusano. The question presented was whether a plaintiff can state a claim under section 10(b) of the Securities Exchange Act and Securities and Exchange Commission (SEC) Rule 10b- 5 based upon a pharmaceutical company’s nondisclosure of adverse event reports, despite the lack of an allegation that the reports are statistically significant. On March 22, 2011, the Court unanimously held that the plaintiffs in this case had stated a claim under section 10(b) and rule 10b-5.

The case was first brought in U.S. District Court for the District of Arizona. The district court found that there were not statistically significant data as to the accuracy of reports that the company’s cold medication caused cases of the loss of smell and granted the defendants’ motion to dismiss.

The shareholders appealed the district court’s decision to the U.S. Court of Appeals for the Ninth Circuit. That court, analyzing issues of required materiality and scienter under the Private Securities Litigation Reform Act (PSLRA), held that the shareholders had sufficiently complied with the requirements and reversed the district court’s decision. The U.S. Supreme Court agreed with the Ninth Circuit Court of Appeals and affirmed its decision.

Date of Report: April 4, 2011
Number of Pages: 6
Order Number: R41710
Price: $19.95

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