Corporate Governance

Matrixx v. Siracusana: Revisiting the Materiality Standard (Part 9)

By J Robert Brown Jr.

So where does this leave the Supreme Court?  It was sold a pig in a poke.  The likelihood is that the majority of justices voting for this case expected to get an opportunity to draw a bright line in connection with the analysis of materiality under Rule 10b-5 (that statistically insignificant data never qualified as material).  Instead, what they have gotten is a case that, like all of the other cases addressing materiality, turns on the "total mix" of available information.  This total mix includes not only the adverse health reports received by the Company but also the evidence of law suits, the alleged admission about the lack of knowlege about the health effects of the drug, and the apparent knowledge that there was a link between zinc sulfate and loss of smell.

Whatever the outcome, it will be based upon the totality of the facts.  There is no bright line to draw in this or any other case involving an analysis of materiality.

For the cert petition and the reply, we have posted them on the DU Corporate Governance web site.

Full post as published by The Race to the Bottom on June 28, 2010 (boomark / email).