A federal judge in New Jersey has dismissed a securities class action lawsuit brought against Merck & Co. by investors over its one-time blockbuster drug Vioxx because the statute of limitations has run out.
Investors had charged Merck with providing misleading information or omitted details that Vioxx, its pain reliever, increased the risk of heart disease. They claim that the shares they purchased were thus inflated because they didn’t properly reflect the heart risks.
But Judge Stanley R. Chesler of the U.S. District Court in Newark said in a ruling last Thursday that “the court finds that it is clear that storm warnings of fraud by the company existed more than two years before this complaint was filed.”
Sarbanes-Oxley, the corporate governance law enacted in July 2002, set a deadline of two years for securities fraud claims after the discovery of the facts or five years after the violation, whichever is earlier.
In his opinion, Judge Chesler wrote that the clock started ticking on Sept. 21, 2001, the date a warning letter from the U.S. Food and Drug Administration to Merck was published on its Web site. The FDA had admonished Merck for downplaying the risks of Vioxx.
The plaintiffs, who were investors who had bought Merck stock from May 21, 1999 through Oct. 29, 2004, filed the first Vioxx-related securities class-action lawsuit on Nov. 6, 2003. The lawsuits were later consolidated.
“The judge agreed with our arguments on the statute of limitations and the claimants are time-barred,” said Kent Jarrell, a spokesman for Merck’s outside counsel.
Sean Coffey, co-lead attorney for the plaintiffs, said they plan to appeal. He argued that it’s debatable whether the FDA letter should have started the countdown.
“Shortly after the FDA warning letter came out, Merck was assuring investors and analysts that this was still a blockbuster drug,” Coffey said. “Analysts were still very bullish.”
Merck, based in Whitehouse Station, N.J., withdrew Vioxx from the market on Sept. 30, 2004 after the drug was linked to an increased risk of heart attacks.
Separately, The Wall Street Journal reported that a state judge is about to try to dispose of thousands of liability lawsuits over Vioxx in Texas.
The paper said that Harris County District Court Judge Randy Wilson, who oversees all Texas Vioxx cases, told attorneys he will suspend about 1,000 liability lawsuits until the state’s appeals court rules whether an FDA policy rule exempts Merck from liability on the state level.
The policy rule from February 2006 stipulates if a company is already complying with FDA guidelines they are exempt from warning consumers on the state level. Wilson is expected to issue a written order next week.
Merck still faces more than 27,000 liability lawsuits over Vioxx.
Shares of Merck soared to their highest price in three and a half years. The stock rose nearly 9 percent, or $3.95 to $50.31 on the New York Stock Exchange. Shares closed at $3.85, up 8.3 percent, at $50.21.
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