Two Supreme Court Rulings Make It Easier to Sue Businesses

The Supreme Court made it easier to haul businesses into court, ruling that investors can sue them for purposefully withholding damaging information about a product and that employees can sue them for retaliation without having to make a written complaint.

The court ruled unanimously to let a lawsuit by a group of investors against Matrixx Initiatives Inc., the makers of the now-discontinued Zicam nasal cold remedies, go forward, while ruling in a separate case on a 6-2 vote to let Kevin Kasten’s retaliation lawsuit against Saint-Gobain Performance Plastics Corp. proceed.

In the Matrixx case, the high court unanimously affirmed a decision by the 9th U.S. Circuit Court of Appeals to let a securities fraud lawsuit against the company go forward.

A group of investors had sued the Scottsdale, Ariz.-based company, complaining that the company made misleading statements about Zicam. The company said sales were going to rise and that reports of its product causing loss of smell were “completely unfounded and misleading.”

A federal judge had agreed to Matrixx’s request to throw out the lawsuit accusing the company of misleading investors because there was no statistical proof at that time that the loss of smell was directly linked to Zicam.

But Justice Sonia Sotomayor, writing for the court, said companies don’t have to have concrete data before sharing what they have with investors. “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 said.

Sotomayor also said all of the allegations against Matrixx “give rise to a ‘cogent and 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 case now goes back to the lower court.

Matrixx withdrew Zicam Cold Remedy Swabs and Zicam Cold Remedy Gel from the market in June 2009 after the Food and Drug Administration told consumers they should stop using the products because they can permanently damage the sense of smell.

In the Saint-Gobain case, the justices ruled that there doesn’t have to be a written complaint to a government agency for a worker to claim anti-retaliation protection under the Fair Labor Standards Act.

Kasten was fired from a Saint-Gobain Performance Plastics facility in Portage, Wis.

He had complained to Saint-Gobain that the time clocks were placed in a location where employees would lose overtime. The company moved the clocks the same day he was fired, and settled with other employees for nearly $1.5 million.

Kasten sued, saying he was fired because he spoke up. He claimed retaliation protection under the Fair Labor Standards Act, but the company said, and the 7th U.S. Circuit Court of Appeals agreed, that to get protection workers who have “filed any complaint” about workplace conditions must have written it down.

But Justice Stephen Breyer, writing for the majority, said he didn’t believe that Congress meant to limit complaints in such a way.

“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 said.

Plus, forcing workers to write down complaints could “prevent government agencies from using hotlines, interviews and other oral methods of receiving complaints,” Breyer said.

Justices Antonin Scalia and Clarence Thomas disagree with the majority’s ruling, saying that workers have to complain to a government agency or court.

The law “makes clear that the retaliation provision contemplates an official grievance filed with a court or an agency, not oral complaints — or even formal written complaints — from an employee to an employer,” Scalia said.

The case now goes back to the lower court.

Justice Elena Kagan did not participate in the Saint-Gobain case because she worked on it while serving as solicitor general.

The cases are Matrixx Initiatives, Inc. v. Siracusano, 09-1156 and Kasten v. Saint-Gobain Performance Plastics Corp., 09-834.