E-Alert Case Updates

Zicam Case Survives Motion to Dismiss

Matrixx Initiatives v. Siracusano
No. 09-1156 (U.S. 2011)
by Colleen K. O’Brien, Law Clerk
Semmes, Bowen & Semmes (www.semmes.com)

A recent decision delivered by the Hon. Sonia Sotomayor, writing for a unanimous Court, calls the heightened pleading requirements of Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal into question. To review, Twombly and Iqbal raised the standard for pleading in the federal courts from mere “notice pleading” to “plausibility pleading.” To prevail at the motion to dismiss stage, a Plaintiff’s Complaint must state enough facts to state a “plausible” claim. Although this case dealt with securities fraud, it will likely have repercussions in other areas of jurisprudence, particularly in product liability, as the case dealt with the issue of scientific reporting.

In the case, investors filed a securities fraud class action against Matrixx, the maker of the Zicam cold remedy. The suit was based on Matrixx’s alleged failure to disclose reports of a possible link between Zicam and the loss of smell. When the reports later surfaced in the media, the stock value of the product fell, and the investors brought suit against Matrixx for failing to disclose adverse event reports when they were considering investment in the company.

Matrixx moved to dismiss the Complaint, arguing that the investors had not sufficiently pled the necessary elements of material misstatement. Matrixx argued that the adverse event reports were not material because they did not establish a “statistically significant” risk that Zicam caused loss of smell. The Court disagreed, and concluded that the Complaint adequately alleged information linking Zicam to loss of smell, which would have been significant to a reasonable investor. Assuming the allegations of the Complaint to be true, as the Court must do at the motion to dismiss stage, the adverse event reports plausibly indicated a reliable causal link between Zicam and loss of smell, which allowed the claim to survive. The fact that the reports did not establish a statistical significance between Zicam and loss of smell was of no moment to the Court.

It is possible that the holding from this case may make it easier for plaintiffs in product liability cases to survive a motion to dismiss. However, strong scientific evidence will still be required in later stages of litigation, such as in a motion for summary judgment, or at trial.