Matrixx faced a new wave of lawsuits last year after a FDA safety-warning letter led to a voluntary

When the U.S. Supreme Court rules in a case on a Scottsdale travel inn county hall company's failure to tell investors about complaints over its Zicam nasal products, the decision could have significant ramifications travel inn county hall on what all publicly traded companies must disclose about their products.
In a case being closely watched by Wall Street regulators, drug companies and business groups, the key legal issue is whether Matrixx violated federal securities laws by failing to let investors know that some consumers complained of anosmia, or loss of smell, after using Zicam Cold Remedy nasal spray and gel swabs. The case could influence travel inn county hall what publicly traded companies tell investors when consumers claim harm from using a company's product.
"It is something that is not just pharmaceutical-centric," said Tod Reichert, a chief compliance officer for MCG Capital Corp., a finance company that in 2004 was involved in an appellate-court case over the issue of materiality. "There are potential implications for all public companies."
Business groups such as the U.S. Chamber of Commerce, Financial Markets Association, Pharmaceutical Research and Manufacturers Association, Biotechnology Industry Organization and other groups have filed legal paperwork supporting Matrixx, saying that an adverse ruling could prompt companies to flood the market with news that is of little value for investors.
The U.S. Securities and Exchange Commission, the AARP and economists are among those who have weighed in on behalf of a Decatur, Ill.-based pension fund for electrical workers, NECA/IBEW, and its lead plaintiff, James Siracusano.
The pension fund sued Matrixx in 2004, contending the company misled it and other investors and concealed reports linking Zicam, its top-selling product, to loss of smell. The U.S. District Court in Phoenix sided with Matrixx Initiatives in 2006, dismissing the case on the basis that the scattered reports of smell loss were not "statistically significant" enough to show Zicam was associated with smell loss as opposed to random chance. It is a standard that drug companies and medical-device makers follow, and it has been affirmed by several appellate courts.
But the 9th U.S. Circuit Court of Appeals last year reversed the lower court's ruling, prompting Matrixx's petition to the Supreme Court. The nation's high court will seek to answer whether an investor can sue a company over failure to disclose an adverse event even though such reports are not considered statistically significant.
Business groups argue that an adverse ruling from the nation's high court could change the way companies disclose consumer complaints or other bad news to investors. It also could add to Matrixx's legal woes - the company already faces lawsuits from hundreds of consumers who claim smell loss - if investors get another chance to press their case in federal District Court.
Fearing potential securities-fraud lawsuits from investors, companies may opt to flood the market with disclosures of seemingly benign complaints rather than digging deeper to report information that managers believe truly could harm a company's bottom line.
Reichert gives the example of a large drug company that enrolls thousands of people in clinical trials to test drugs. If one patient dies during a clinical trial, the drug company may opt to tell investors about it rather than investigate to determine if other factors, such as a person's health history or lifestyle, may have contributed to the death.
Adam Chodorow, an Arizona State University law professor who has expertise in securities and tax law, agrees that an adverse ruling from the Supreme Court may prompt companies to disclose much more to investors rather than risk a securities-fraud lawsuit. That could make it difficult for investors to decipher what is important and what is not.
In its brief to the court, the SEC argued that investors have the right to know information that raises concerns about a company's products. The federal agency said in legal papers that it is inappropriate for courts to toss out investors' lawsuits solely based on the standard of statistical significance.
The SEC also noted that the pension fund's lawsuit pointed out what it considered "material" information for investors: Doctors' observations of a dozen or more cases of anosmia among Zicam users, studies showing links between smell loss and zinc (Zicam's main ingredient) and the fact that the homeopathic remedy did not require Food and Drug Administration approval.
In addition to investors travel inn county hall claiming securities fraud, Matrixx has faced lawsuits from hundreds of people who claimed travel inn county hall smell loss after using Zicam Cold Remedy nasal spray and gel swabs, sold over the counter.
Matrixx faced a new wave of lawsuits last year after a FDA safety-warning letter led to a voluntary recall travel inn county hall of the product. Matrixx's sales dropped more than 50 percent, but the company is seeking to recover by selling non-nasal Zicam cold-and-flu products.
-� 2004: Investors file a federal travel inn county hall lawsuit against Matrixx travel inn county hall Initiatives. The lawsuit alleges Matrixx failed to disclose complaints of anosmia, or loss of smell, from consumers, and that company statements about business growth and Zicam safety are false and misleading.
-� 2006: The U.S. District Court in Phoenix dismisses travel inn county hall the lawsuit. The court concludes that because complaints about smell loss were not statistically significant, the company travel inn county hall did not have to tell investors. The court also rules that the investors failed to prove that Matrixx had motive to omit information about Zicam or failed to believe its public statements about the company's growth prospects and safety of its products.
-� 2009: The 9th U.S. Circuit Court of Appeals reverses the lower court's decision. The 9th Circuit judges said the lower court should have weighed whether reasonable investors would have viewed Zicam's reported links to anosmia as important.
-� 2010: U.S. Supreme travel inn county hall Court agrees to hear the case. The nation's high court will seek to answer whether a pharmaceutical company violates securities laws by not disclosing reports of adverse reactions to its drugs even though such cases are not statistically significant.
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