## Facts

- Matrixx Initiatives, Inc. sold Zicam, an intranasal cold remedy containing zinc gluconate.
- Investors brought a class action alleging Matrixx and three executives violated §10(b) of the Securities Exchange Act and SEC Rule 10b‑5 by touting Zicam’s prospects while withholding information that Zicam might cause anosmia (loss of smell).
- Alleged undisclosed information included multiple physician reports of anosmia following Zicam use, communications from researchers and clinicians suggesting a possible causal link, and emerging product-liability litigation.
- During the class period, Matrixx made optimistic public statements about continued growth and Zicam’s commercial prospects without disclosing the adverse-event information and related legal risks.
- After the safety concerns became public through media coverage and litigation, Matrixx’s stock price allegedly fell about 23.8% in one day.

## Issues

1. Whether adverse-event reports can be material under §10(b) and Rule 10b‑5 absent statistically significant evidence of causation.
2. Whether the complaint plausibly alleged that Matrixx’s omission of adverse-event information rendered its affirmative statements misleading under the “total mix” standard.
3. Whether the complaint pleaded a strong inference of scienter under the PSLRA and Tellabs.

## Decision

- The Supreme Court unanimously affirmed the Ninth Circuit.
- The Court held that plaintiffs stated a claim under §10(b) and Rule 10b‑5.
- The Court rejected a bright-line rule that adverse-event reports are immaterial unless statistically significant.
- Applying the “total mix” standard, the Court held the alleged omissions could be material to a reasonable investor.
- Considering the allegations collectively, the Court held plaintiffs plausibly alleged a strong inference of scienter.

## Legal Principles

- Materiality turns on whether there is a substantial likelihood a reasonable investor would view the omitted fact as significantly altering the total mix of available information.
- Courts should not impose rigid, categorical materiality rules; materiality is fact-specific and context dependent.
- Statistical significance is neither a necessary nor sufficient condition for materiality in securities-fraud pleading; qualitative indications of risk may be material.
- §10(b) and Rule 10b‑5 do not impose a freestanding duty to disclose all material information, but once an issuer speaks, it must not omit material facts needed to make its statements not misleading.
- Scienter is adequately pleaded when the alleged facts, considered holistically, support an inference of intent to deceive or deliberate recklessness that is cogent and at least as compelling as competing inferences.

## Conclusion

The Court held that investors may plausibly plead securities fraud based on a pharmaceutical company’s omission of adverse-event information even without statistically significant proof of causation, where the omission could alter the total mix for reasonable investors and the allegations support a strong inference of scienter.


Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (2011)