On Tuesday, the U.S. Supreme Court refused to dismiss a complaint alleging securities fraud based on a company's failure to disclose reports that its cold remedy product caused consumers to lose their sense of smell. In Matrixx Initiatives, Inc. v. Siracusano, plaintiffs claimed that the manufacturer made optimistic statements about expected sales of its product, Zicam, and didn't disclose that some doctors and consumers had reported adverse impacts.
The company argued that the law requires disclosure only when it knows of sufficient adverse events to establish a statistically significant risk that the product is in fact causing the events. The Supreme Court, affirming the Ninth Circuit, refused to adopt a bright-line rule that adverse events that are less than statistically significant need not be disclosed. Instead, the relevant inquiry continues to be whether a reasonable investor would view the undisclosed information as altering the "total mix" of information made available.