U.S. Supreme Court

Is Satan Relevant in an Investor Class Action? Justices Debate Issue in Smell Loss Case

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Are rumors of Satanism the type of material information that must be disclosed to corporate investors?

The issue was part of a Supreme Court debate on Monday about required disclosures by a company that made nasal spray, the New York Times reports. Arizona company Matrixx Initiatives is facing an investor suit that claims it should have notified investors about a couple dozen reports that its Zicam nasal spray caused a loss of smell.

The lawyer for Matrixx, Jonathan Hacker, said all drug companies receive “anecdotal hearsay reports” on almost a daily basis, and a company shouldn’t have to disclose unless the numbers are statistically significant, the story says. Matrixx raised the Satan issue in a brief.

“For years many consumers would not purchase products from Procter & Gamble because of a ridiculous rumor that the company was Satanic,” the brief said. “But no decision of this court bases securities-law disclosure obligations on how ignorant or paranoid people might react to unreliable or even false information.”

Justices differed on the Satan argument, the Times says. Chief Justice John G. Roberts Jr. said investors would want to know if unreasonable investors were dumping their stock. But Justice Antonin Scalia said companies shouldn’t be held to “irrational standards.”

Hacker’s statistics argument, however, didn’t get much traction. The National Law Journal also reported that Hacker, a partner at O’Melveny & Myers, had a difficult time. “One sign that Jon Hacker was in hot water before the Supreme Court came early on Monday, when Justice Antonin Scalia called his client’s cold medication ‘zircon,’ instead of Zicam,” the NLJ said.

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