Third Circuit Reinstates Vioxx Class Action Suit Against Merck

Holding:

In this precedential case, a divided U.S. Court of Appeals for the Third Circuit reversed a district court's judgment dismissing a securities class action law suit against Merck & Co., Inc. ("Merck") relating to its pain reliever drug, Vioxx. Appellants, share holders of Merck, filed the law suit in the U.S. District Court for the District of New Jersey, alleging that the company misrepresented the safety profile and commercial viability of Vioxx. The district court dismissed the action, holding that appellants were put on inquiry notice of the alleged fraud more than two years before they filed suit, and thus their claims were time-barred by the statute of limitations. On appeal, the Third Circuit reversed. In particular, it held that the district court acted prematurely in finding as a matter of law that appellants were on inquiry notice of the alleged fraud before October 9, 2001. As of that date, market analysts, scientists, the press, and even the Food and Drug Administration ("FDA") agreed that a particular hypothesis relating to the drug's safety profile was plausible, at the very least. None suggested that Merck believed otherwise. On the other hand, Senior Judge Jane R. Roth dissented. She wrote that FDA’s September 17, 2001 warning letter, in and of itself, provided sufficient warnings to put the appellants on inquiry notice of their claims regardless of any significant change in stock price or analysts’ stock ratings or projections at that time.

Detailed Summary:

Appellants, purchasers of Merck stock, filed the first of several class action securities fraud complaints on November 6, 2003, alleging that the company and certain of its officers and directors (collectively, “Merck”) misrepresented the safety profile and commercial viability of Vioxx, a pain reliever that was withdrawn from the market in September 2004 due to safety concerns. Opinion, p. 3.

The district court granted Merck’s motion to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure, holding that appellants were put on inquiry notice of the alleged fraud more than two years before they filed suit, and…

More Updates