Should Merck be protected from shareholder suits over Vioxx warnings? Or do investors have the right to sue, even though they didn't file their complaints until more than two years after FDA first warned the company about the painkiller's risks? Luckily, we don't have to make that decision, because the U.S. Supreme Court will do that for us.
The High Court agreed to hear Merck's challenge to a circuit court decision to allow the investor suits, which are now consolidated into a class-action proceeding. The shareholders complain that Merck misled them about Vioxx's risks, subjecting them to a sudden-and-enormous fall in stock price when that blockbuster painkiller was pulled off the market.
At issue is the statute of limitations, which is two years for these complaints; when, exactly, did the clock start ticking for Merck shareholders? The company contends that public discussion of questions about Vioxx, which began in 2001, starts that two-year window. The shareholders say time didn't start running out till October 2003, when investors saw the first evidence that Merck's public assurances of Vioxx safety belied internal discussion about the drug's risks. A district court ruled with Merck on this question; the circuit court disagreed and reinstated the suits.
The case won't affect Merck alone: Companies of all stripes will be watching, because the Supremes' decision could affect shareholder suits all over the country.
- read the Philadelphia Inquirer story
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