Supreme Court sides with investors, workers in two business-related cases

Ruling Tuesday on a pair of cases that had drawn the strong interest of the business community, the Supreme Court made it easier for stockholders and employees to sue companies.

In one, the court ruled unanimously that a group of investors may proceed with its lawsuit against the makers of the cold remedy Zicam, saying the manufacturer should have disclosed that some who used the nasal spray lost their sense of smell.

In the other, the justices said that an oral complaint against an employer was enough to protect a worker against retaliatory action, such as firing.

Both decisions were narrow in scope, and in each case the ruling only allows the investors and the fired worker to proceed with their respective lawsuits. But decisions of the court of Chief Justice John G. Roberts Jr. that concern business interests are closely scrutinized, especially by liberals who charge that the court has a pro-corporate bias.

Tuesday’s decisions show the court is not always predictable.

In the Zicam case, investors allege that Matrixx Initiatives had been warned about adverse reactions to its most popular drug but had issued statements saying such allegations were “completely unfounded and misleading.” When a doctor made such an allegation on ABC’s “Good Morning America” on Feb. 6, 2004, Matrixx’s stock price nose-dived.

Matrixx said it had no reason to disclose incidents in which users reported a loss of smell because the number was not statistically significant. It asked the court to set a rule that would protect companies from having to disclose such information.

But Justice Sonia Sotomayor, writing for the court, said such allegations were part of the mix of information stockholders look at when making investments.

“Given that medical professionals and regulators act on the basis of evidence of causation that is not statistically significant, it stands to reason that in certain cases reasonable investors would as well,” she wrote.

The unanimous decision did not provide detailed guidance on what a company must disclose and when. Sotomayor said that the ruling “does not mean that pharmaceutical manufacturers must disclose all reports of adverse events.”

To prevail, the investors must show that Matrixx made a decision not to disclose the information in order to deceive or manipulate the market. Sotomayor said Matrixx’s actions gave the plaintiffs at least a credible claim.

She said there is a compelling “inference that Matrixx elected not to disclose the reports of adverse events not because it believed they were meaningless but because it understood their likely effect on the market.”

The nasal spray is no longer sold.

The case is Matrixx Initiatives v. Siracusano.

Third ruling on retaliation

The other decision was the court’s third this term in a case in which an employee sued on the grounds that a firing was based on retaliation. In all three, the court sided with the employee.

Tuesday’s decision concerned Kevin Kasten, who told his Wisconsin employer, Saint-Gobain Performance Plastics, that its placement of time clocks was illegal and was meant to cheat employees. The company eventually moved the clocks and settled with workers but fired Kasten.

The Fair Labor Standards Act of 1938 prohibits retaliation against a worker who has “filed a complaint” against an employer. The question was whether the complaint must be written.

Justice Stephen G. Breyer, writing for five other members of the court, said it did not have to be.

He said dictionaries provide different meanings for the word “file” and thus could not answer the question. But he pointed out that government has often accepted and acted on oral complaints and that the law was passed at a time when some workers were illiterate.

“Why would Congress want to limit the enforcement scheme’s effectiveness by inhibiting use of the act’s complaint procedure by those who would find it difficult to reduce their complaints to writing, particularly illiterate, less educated, or overworked workers?” Breyer wrote.

“President Franklin Roosevelt pointed out at the time that these were the workers most in need of the act’s help.”

Justices Antonin Scalia and Clarence Thomas dissented. They said that whether or not the complaint is oral or written, it must be filed with a court or government agency, not simply the employer, to prompt the act’s protection.

Justice Elena Kagan did not take part in the case, Kasten v. Saint-Gobain Performance Plastics Corp., because of her previous work on it as President Obama’s solicitor general.

Robert Barnes has been a Washington Post reporter and editor since 1987. He has covered the Supreme Court since November 2006.
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