Two purported shareholder class action lawsuits have been filed against the Company and certain of its present and former executive officers, alleging violations of federal securities laws. Among other things, the lawsuits allege that between October 2003 and February 2004, defendants issued materially false and misleading statements regarding the company's Zicam Cold Remedy product, including failing to adequately disclose to the public the details of certain of the product liability lawsuits.
As summarized in the Company’s Form 10-Q for the quarter ended September 30, 2005, on January 18, 2005, the cases were consolidated and the court appointed James V. Sircusano as lead plaintiff. The amended complaint also includes the Company’s Vice President of Research and Development as a defendant and was filed March 4, 2005. The consolidated case is Sircusano, et al. vs. Matrixx Initiatives, Inc., et al., in the United States District Court, District of Arizona, Case No. CV04-0886 PHX DKD.
On March 8, 2006, the Court entered the Order and Judgment signed by U.S. District Judge Mary H. Murguia granting the motion to dismiss the First Amended Complaint without prejudice. On April 3, 2006, the plaintiffs filed a Notice of Appeal in the U.S. Court of Appeals for the Ninth Circuit.
According to an article dated October 30, 2009, in an October 28, 2009 opinion in a case in which the Ninth Circuit found the plaintiffs’ allegations met the heightened pleading standards of Twombley and Tellabs, the appellate court reversed the district court’s dismissal of the plaintiffs’ complaint in the Matrixx Initiatives securities class action lawsuit. … After reviewing the plaintiffs’ allegations, the Court found that the complaints allegations were sufficient to meet the PSLRA’s pleading requirements for materiality and, citing Twombley, to "nudge" the plaintiffs’ claims "across the line from conceivable to plausible."
On June 21, 2010, the Supreme Court entered an order granting the petition for a writ of certiorari.
In a unanimous opinion by the U.S. Supreme Court issued on March 22, 2011, the Court rejected the defendant’s argument that adverse product reports must be "statistically significant" in order for a manufacturer to have an obligation to disclose the reports to investors.
The Justice delivering the opinion went on to state, that absent a duty to speak, silence cannot be the basis of securities liability. Disclosure is only required when necessary to make previous statements not misleading; "Even with respect to information that a reasonable investor might consider material, companies can control what they have to disclose under these provisions by controlling what they say to the market."
As a result, shareholders claims against the company for its alleged failure to disclose reports that its Zicam cold remedy caused loss of smell for some users will now proceed.
On April 26, 2011, the Court entered the Mandate from the U.S. Court of Appeals, reversing and remanding the District Court decision.
On September 30, 2011, the plaintiffs filed a motion to certify the class.
On February 24, 2012, the Court granted the plaintiffs’ motion of class certification and defined the class as: as all persons or entities who, between October 22, 2003, and February 6, 2004, inclusive, purchased the publicly traded securities of Matrixx Initiatives, Inc. (“Matrixx” or the “Company”) and who were damaged thereby (the “Class”). Excluded from the Class are defendants, directors and officers of Matrixx and their families and affiliates.
On July 27, 2012, a stipulation of settlement was struck by the parties.
On November 13, 2012, the Court entered its Final Judgment and Order of Dismissal with Prejudice. On the same day, the Court also issued an Order Awarding Attorneys’ Fees and Expenses.