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

By Robert Barnes
Tuesday, March 22, 2011; 5:34 PM

The Supreme Court ruled unanimously Tuesday that a group of stockholders may proceed with its lawsuit against the makers of the nasal-spray cold remedy Zicam, saying the manufacturer should have disclosed that some who used the product lost their sense of smell.

The investors said Matrixx Initiatives had been warned about such a possibility, but that even after lawsuits were filed against the company, it 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 dropped to $9.94 from $13.04.

Matrixx said it had no reason to disclose incidents in which users reported a loss of smell because the number was not statistically significant. But Justice Sonia Sotomayor said such information was a part of the mix of knowledge stockholders look at when making investments.

"This is not a case about a handful of anecdotal reports, as Matrixx suggests," Sotomayor wrote. She added the investors intend to prove that "Matrixx received information that plausibly indicated a reliable causal link between Zicam and anosmia," the medical term for a loss of smell.

The investors would also have to prove 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, Matrixx Initiatives v. Siracusano, now goes back to lower courts for the investors to try to prove their claims.

In a second decision Tuesday in which the court ruled against business interests, justices said that an oral complaint against an employer was enough to protect a worker against retaliatory action, such as firing.

Kevin Kasten said he told his employer, Saint-Gobain Performance Plastics Corp., that its placement of time clocks was illegal and was meant to cheat employees. The company moved the clocks - and 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 Breyer, writing for five other members of the court, said it did not. 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 many 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 to prompt the act's protection, not simply the employer.

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.

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