March 22, 2011
Supreme Court Action Today
The Supreme Court issued two opinions today. The first is Matrixx Initiatives, Inc. v. James Siracusano (09-1156). The case comes to the Court at the pleading stage of a securities fraud claim under §10(b) of the Securities Exchange Act of 1934. Matrixx manufactures the cold remedy Zicam. There were reports that Zicam caused a loss of smell, the medical term for which is anosmia. These reports were never disclosed in its filings to the SEC or to investors. The respondents in the case filed a securities fraud class action on this basis in federal district court. Matrixx filed a motion to dismiss on the claim that the reports were not statistically relevant and was not a material omission or misstatement to plead scienter. The Ninth Circuit reversed.
The Supreme Court held that the pleading presented plausible claims for both omission and scienter. Federal regulatory agencies such as the FDA make decisions on evidence that is different from statistically significant reports. An investor would find the information about the link to anosmia relevant to making a decision. Scienter here is adequately plead because Matrixx did not disclose the reports because they were meaningless, but because the company knew the effect on the market if they did disclose. There were no dissents in the decision. The plaintiffs, of course, still have to prove their case. It's a nice plus for the Ninth Circuit given their string of losses in habeas cases.
The second opinion from today is Kasten v. Saint-Gobain Performance Plastics Corp (09-834). In this case, Kasten complained orally to Saint-Gobain that the placement of the time clocks prevented workers from getting time credit for putting on or taking off safety clothing. The company made changes but fired Kasten. He filed a retaliation claim. The trial court dismissed his Fair Labor Standards Act complaint, stating the act didn't cover oral complaints. The Seventh Circuit affirmed.
The Supreme Court reversed, holding that the statutory language "filed any complaint" to include those made orally. The Court noted that the statutory language taken as a whole does not necessarily answer the question. Dictionary definitions of "filed" did not suffice as some indicated writing and some included oral. A narrow interpretation of the Act requiring written filings would undermine the intent of Congress, the majority says, when less formal requirements than writing trigger enforcement of the Act. An interpretation that oral filings are valid are consistent with those of the Department of Labor and the EEOC. Other statutory construction arguments raised by Saint-Gobain do not apply.
Cue the predicatble dissent by Justice Scalia, joined by Justice Thomas. His view of the retaliation statute is that it only covers complaints to the government and not those made to an employer, written or otherwise. Get out of my Court you meddling kids! The decision was 6-2, with Justice Kagan abstaining. [MG]