Trapped in the Matrixx: The U.S. Supreme Court and the Need for Statistical Significance

Abstract

In Matrixx Initiatives Inc. v. Siracusano, 131 S. Ct. 1309 (2011), the Supreme Court granted certiorari to consider “[w]hether a plaintiff can state a claim under § 10(b) of the Securities Exchange Act and SEC Rule 10b-5 based on a pharmaceutical company’s nondisclosure of adverse event reports even though the reports are not alleged to be statistically significant.” The Court answered in the affirmative. It explained that a reasonable investor might want to know of such reports if they (along with other information) are sufficiently extensive and disturbing that they could prompt the FDA to take some action or might lead to costly lawsuits. That is enough to trigger a duty to disclose in order to prevent other company statements from being misleading. This article defends this pleading rule but argues for a narrow reading of dicta in the opinion about proof of causation in product liability cases. It suggests that the unanimous opinion conflates issues of study design with statistical significance. Disentangling these concepts shows that the Court’s remarks do not address the limited value of adverse event reports in establishing causation in toxic tort litigation.

Keywords: statistical significance, controlled experiments, adverse event reports, observational data, causation, securities regulation, product liability

JEL Classification: C12