Supremes wary of Merck's Vioxx arguments

The U.S. Supreme Court cast a gimlet eye on some of Merck's arguments in a shareholder lawsuit over Vioxx. According to the Wall Street Journal, Justices Anthony Kennedy and Stephen Breyer called out a seeming contradiction in Merck's case: The company argues that a.) Investors should have sued earlier because there was plenty of public evidence available by late 2001 suggesting that the company may have defrauded them; and b.) The investors don't have enough evidence to make a case.

"Companies can't have it both ways," Kennedy said during oral arguments. Breyer said that, by Merck's reasoning, investors would have to sue before they had enough evidence to back up their claims, adding, "That doesn't make sense to me."

Even the generally pro-business Justice Antonin Scalia raised his eyebrows. When Merck lawyer Kannon Shanmugam said that the FDA specifically had accused Merck of "deliberate wrongdoing in connection with its public representations" about Vioxx's safety, Scalia suggested that the FDA didn't go far enough to support fraud. Justice Ruth Bader Ginsburg agreed.

This case could be important to companies besides Merck, even those beyond Big Pharma. However the Justices rule, the Court will better define just how easy--or difficult--it should be for investors to file class action suits. The Obama administration is siding with the investors, incidentally.

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