Matrixx Initiatives, Inc. v. Siracusano (.pdf) was a securities fraud class action where claimants alleged that Matrixx failed to disclose reports of a potential link between its cold medicine, Zicam, and loss of smell. The district court dismissed the claim because the reports lacked statistical significance and, therefore, could not have formed a “material” omission under the Securities Exchange Act. The Ninth Circuit reversed the dismissal.

In a unanimous opinion, authored by Justice Sotomayor, the Supreme Court held that the district erred in employing a statistical significance requirement. Instead, the court should have considered the “total mix” of information available to investors. No single bright-line test of materiality is controlling, and the allegation taken as a whole permitted the inference that the adverse reports could have affected a reasonable investor.

Although the opinion does not concern the admissibility of expert testimony, the Court’s discussion of the reliability of a causation inference in the absence of statistically significant findings will doubtless be cited in future Daubert battles.

Also of general interest is the Court’s explanation of how the facts pleaded met the Twombly plausibility requirements. Indeed, the case may serve as a template for pleading fraud by omission.