On March 22, 2011, the U.S. Supreme Court unanimously concluded in the securities fraud class action Matrixx Initiatives, Inc. v. Siracusano1 that the materiality of adverse-event reports cannot be reduced to a bright-line rule. The Court reaffirmed its decision in Basic Inc. v. Levinson2 that the materiality requirement in a private action under Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 adopted thereunder is satisfied when there is a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of information made available. The Court further determined that evidence of statistical significance is not required to establish either the materiality of a misstatement or omission, or the element of scienter to properly plead a securities fraud claim under Section 10(b) and Rule 10b-5.

The complaint alleged that Matrixx Initiatives, Inc. (Matrixx), maker of Zicam Cold Remedy (Zicam), violated Section 10(b) and Rule 10b-5 by failing to disclose a possible link between the usage of Zicam and the loss of a sense of smell—or anosmia—thereby rendering public statements Matrixx subsequently made regarding Zicam misleading.3 The complaint maintained that Zicam accounted for approximately 70 percent of Matrixx's sales, and that Matrixx had received reports from both medical experts and researchers reporting a possible link between Zicam and anosmia.4 Furthermore, the complaint contended that subsequent to receiving these medical reports suggesting a causal link between Zicam and anosmia—as well as the filing of two products liability lawsuits against Matrixx alleging Zicam damaged the plaintiffs' sense of smell—Matrixx published statements projecting strong growth and a greater-than 50-percent increase in revenues, and later amended that projection to a greater-than 80-percent increase in revenues.

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