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7 J. Bus. & Tech. L. Proxy 1 (2012)

handle is hein.journals/jbtprxy7 and id is 1 raw text is: MARCIE BRECHER*

Matrixx Initiatives, Inc. v. Siracusan. Nasal Spray
Decision Throws Corporations Off the Scent of
Materiality Definition
COURT considered whether a plaintiff bringing a securities fraud claim under the
Securities Exchange Act Section 10(b)' and Securities Exchange Commission
(SEC) Rule 10b-5' must allege that a pharmaceutical company's undisclosed
adverse event reports are statistically significant. Citing Basic Inc. v. Levinson,5 the
Court held that materiality turns on whether a reasonable investor would consider
the undisclosed information to have significantly altered the 'total mix' of available
information, stating that, while statistical significance is not required, something
more than allegations of adverse events alone is necessary.6 The Court's
something more standard makes it difficult for business entities to ascertain
materiality, and consequently, to know when a duty to disclose is triggered and for
courts to treat similarly situated defendants comparably. The Court's silence on
how to apply the standard across industries may initiate unnecessary disclosures of
non-material information, hindering an investor's informed decision-making.8
© 2012 Marcie Brecher
' J.D. Candidate 2012, University of Maryland Francis King Carey School of Law. I would like to thank
my parents for their unwavering support and my journal colleagues for their invaluable comments and
1. 131 S. Ct. 1309 (2011).
2. 15 U.S.C. § 78j (2006).
3. 17 C.F.R. § 240.10b-5 (2010).
4. 131 S. Ct. 1309, 1313 (2011). An adverse event is defined by the Food and Drug Administration as
[a]ny adverse event associated with the use of a drug in humans, whether or not considered drug related...
21 C.F.R. § 314.80 (a) (2010). Statistical significance is generally stated as a five-percent standard deviation
from the norm, but the percentage may differ by specific circumstances. David H. Kaye, Trapped in the Matrixx:
The U.S. Supreme Court and the Need for Statistical Significance, 11 Expert Evidence Rep. (BNA) No. 494, at 2
(Oct. 24, 2011) (noting that a p-value of 0.05 ensures that inferring that something other than randomness is
at work when, in fact, randomness is all there is to it occurs no more often than 1 time in 20 (in the long run)).
5. 485 U.S. 224 (1988).
6. Matrixx, 131 S. Ct. at 1318-23. See also infra Part III.
7. See infra Part IV.
8. See infra Part IV.


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