On Tuesday, March 22, 2011, the United States Supreme Court decided Matrixx Initiatives, Inc. v. Siracusano, No. 09-1156. The Court concluded unanimously “that the materiality of adverse event reports cannot be reduced to a bright-line rule.” (Slip Op. at 1-2.) To evaluate materiality, the Supreme Court returned to the rule previously announced in Basic v. Levinson, 485 U.S. 224 (1988). “In Basic, we held that this materiality requirement 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.” (Slip Op. at 9-10) (quoting Basic, 485 U.S. at 231-32.) Thus, materiality will depend on the context in which a statement was made. This includes an evaluation of the connection between the company’s actual statement and the quality and nature of the information about adverse events that is omitted.

The Court did not adopt the rule proposed by the defendants, which would have required that plaintiffs demonstrate that the omitted adverse events showed a statistically significant connection to a drug or medical device to state a claim. While the degree of statistical significance continues to be relevant to the analysis, this factor alone is not determinative, and courts can evaluate statistical significance and many other factors to determine whether omitted information causes a company’s statement to be materially misleading within the meaning of the securities laws.