From October 2003 to February 2004, James Siracusano purchased thousands of Matr

Question

From October 2003 to February 2004, James Siracusano purchased thousands of Matrixx Initiatives Inc. shares. After purchasing shares, Siracusano argued that the company had violated the security and change act of 1934 when it had sold him those shares. Specifically he argued that before October 2003, the company had found out that one of its drugs had harmful side effects and this information was not released. The drug, Zicam, had allegedly been systematically leading to a permanent loss of smell. However, to win his case Siracusano needed to not only point out the matrixx knew about the harmful effects of the drug before the period in which he bought hey shares but also that there was a high statistical rate of the occurrence of the adverse side effects. How do you Think the case turned out? [Matrixx Initiatives v. Siracusano, 131 S. Ct. 1309 (2011)]

Explanation / Answer

The “statistically significant” rule violates the Supreme Court’s rejection of “bright-line” materiality rules in the seminal Basic v. Levinson decision. Moreover, plaintiff had pleaded a strong inference of defendants’ scienter, finding sufficient the allegations that Matrixx deliberately withheld from investors information relating to Zicam’s adverse effects and the related lawsuits.

Thus it is not required to prove that there is statistically significant occurence of side effects. Also, it is clear from the news reports that the company was aware abbout the harmful side effects. Thus, this case shoudl turn out in favour of James Siracusano.

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