The court of appeals reversed a district court judgment and remanded. The court held that a district erred by relying on the statistical significance standard as a bright-line rule to determine the sufficiency of a class action complaint’s materiality allegations under the Private Securities Litigation Reform Act.
Pharmaceutical company Matrixx Initiatives, Inc. sold a product called Zicam Cold Remedy. The NECA-IBEW Pension Fund and James Siracusano brought a class action against Matrixx and certain Matrixx executives under the Private Securities Litigation Reform Act (PSLRA), contending that Matrixx violated the Securities Exchange Act of 1934 by failing to disclose material information regarding Zicam. The suit, brought on behalf of investors who bought Matrixx securities during the class period, alleged in particular that Zicam caused anosmia, which is a loss of the sense of smell, in its users. According to the suit, the Matrixx defendants were aware of the issue but failed to disclose the risk and instead issued false and misleading statements regarding Zicam.
