Dallas Fort Worth Injury Lawyer Blog
There is a big mess at Matrixx Initiatives, a Scottsdale, Ariz., maker of over-the-counter health care products. Best-known for its homeopathic Zicam Cold Remedy offerings, Matrixx hit a rough patch on June 16, when the Food and Drug Administration advised consumers to stop using two of its popular remedies.
The F.D.A. said that it had received more than 130 reports of anosmia — or loss of smell — from users of the products and that more than 800 such reports had been delivered to Matrixx. The agency told Matrixx that Zicam Cold Remedy Nasal Gel and the same treatment in swab form could no longer be marketed without government approval.
Matrixx maintains that the products, which contain zinc, are safe. But it immediately withdrew them from the market.
Matrixx shares have fallen 71 percent since the F.D.A. announcement. No surprise, given that Zicam cold remedies generated 71 percent of Matrixx’s $112 million in revenue last year. Its Cold Remedy Swabs are the company’s best-selling product, corporate filings show.
Matrixx’s problems grew when it said the Securities and Exchange Commission had begun an informal inquiry into the company related to the F.D.A. action.
This dire turn of events may have shocked some Matrixx shareholders, but it was foreshadowed back in 2002, when reports of smell loss among some Zicam users began surfacing in anonymous Internet posts.
Matrixx filed a defamation suit against the posters. Then, as part of the case, it subpoenaed Tim Mulligan, an independent research analyst who had published a critical report on the company in his accounting-oriented newsletter, The Eyeshade Report.
A former assistant United States attorney in Los Angeles who was licensed as a certified public accountant, Mr. Mulligan had set up his company, Forensic Advisors, in Rockville, Md., in 2001. Over the years, he had questioned the practices of several companies that were subsequently investigated by the S.E.C.
Matrixx never named Mr. Mulligan as a defendant in its defamation case, but the years of legal work and costs that he incurred defending himself against the company’s subpoena finally drove him to shutter his research operation in late 2005.
“It’s a shame that in our legal system you can pretty well keep somebody tied up in court without even naming them as a defendant,” Mr. Mulligan said.
The battle between Matrixx and Mr. Mulligan began in 2003, when he published a report focusing on what he called aggressive accounting practices at the company.
Citing regulatory filings and other public documents, Mr. Mulligan’s 24-page report that August also warned that Matrixx might not be able to supply the F.D.A. with adequate support for its claims that Zicam reduces the severity of cold symptoms. The report also noted criticisms in medical journals of the studies that Matrixx cited to support its claims. He published the report without knowledge of the defamation case, he said.
A month after Mr. Mulligan’s report, three doctors at a meeting of the American Rhinologic Society presented cases of smell loss after the use of zinc-laced nasal sprays. Consumers began to file lawsuits against Matrixx, which the company fought.
Then, in November 2003, Mr. Mulligan received a subpoena from Matrixx. It asked him to produce documents used to prepare his report.
Even though he thought that Maryland’s press-shield law meant that he did not have to submit, Mr. Mulligan said he handed over 383 pages of documents to Matrixx. Then he wrote three more reports on the company detailing the rising reports of smell loss among some Zicam users and the litigation risk they posed to the company.
Five months after his last report, Matrixx sent Mr. Mulligan a letter saying that he had been served with a second subpoena seeking his deposition and asking for his sources and clients, among other items. “If you do not appear, a warrant may be issued for your arrest,” the letter said, according to court documents.
Matrixx argued that it was entitled to Mr. Mulligan’s subscriber list because of its relevance to the Internet posters case. But Mr. Mulligan moved in state court to quash Matrixx’s subpoena, citing the Maryland shield law. When he made that motion, he included his 24-page report as an exhibit.
For two years he battled in court, winning some and losing some. Still, the subpoena stood.
Nine institutions filed supporting briefs before the appellate court on Mr. Mulligan’s behalf.
“This was tremendously time-consuming,” he recalled. “I was getting a little discouraged and thought anybody I write about can pull this same type of stunt and keep me tied up in court.”
So he decided to close up shop. In late 2005, The Eyeshade Report went dark.
Nevertheless, his case ground on. Only after the Maryland supreme court decided to hear the case in December 2006 did Matrixx drop the issue. It also dropped its suit against the Internet posters.
In addition to his dismay over the legal battle, Mr. Mulligan said he was perplexed by encounters with S.E.C. officials regarding Matrixx. Amid his legal wrangle, he contacted two S.E.C. enforcement officials offering his research about the company. They dismissed him as “suspicious,” Mr. Mulligan said, and refused to provide e-mail addresses to which he could send his work.
In April 2004, he wrote a letter to William H. Donaldson, then the chairman of the commission, about the hostility that he had met. “In my humble opinion, your agency’s purpose would be better served by being more open to outside information,” he wrote.
Mr. Mulligan received a letter from the S.E.C. promising to “carefully evaluate the information you supplied to us.” A spokesman for the S.E.C. declined to comment further.
To be sure, Mr. Mulligan’s encounters with the S.E.C. occurred five years ago. But the officials’ dismissal of him doesn’t appear to have been an anomaly — just think of the warnings that were ignored on Madoff.
Perhaps under its new leadership, S.E.C. officials will be more welcoming to independent financial sleuths. Given how outgunned it is by Wall Street and corporate America, surely the commission can use all the help it can get.
Review Matrixx Initiatives 8K here
If you or a family member has been injured because of the fault of someone else; by negligence, personal injury, slip and fall, car accident, medical malpractice, trucking accident, drunk driving, bad product, toxic injury etc then please contact the Fort Worth Texas Personal Injury Attorney Dr. Shezad Malik. For a no obligation, free case analysis, please call 817-255-4001 or Contact Me Online.
https://www.shezadmalik.com/lawyer-attorney-1348732.html
https://www.shezadmalik.com/lawyer-attorney-1348859.html
https://www.shezadmalik.com/lawyer-attorney-1459578.html