ASSOCIATED PRESS
Lawyers for Merck & Co. told the Supreme Court on Monday that investors waited too long and didn’t do all of the necessary investigations to sue the drug maker over whether it properly warned about the risks of its blockbuster painkiller Vioxx.
Whether the high court agrees with the drug maker will help clarify the legal standards for determining exactly when the clock starts running for the two-year window to sue a company accused of defrauding investors.
Merck wants the high court to overturn a decision by the 3rd U.S. Circuit Court of Appeals that will let proceed a class-action securities lawsuit related to the tens of billions of dollars in shareholder value lost overnight after Merck pulled Vioxx off the market.
The Whitehouse Station, N.J.-based company withdrew the drug from the market on Sept. 30, 2004, because it doubled the risks of heart attack, stroke and death.
Investors had accused Merck of providing misleading information or omitting information about the risks of Vioxx. After a widely publicized study — comparing Vioxx with naproxen, another pain reliever — found about five times more heart attacks in the patient group taking Vioxx, Merck officials argued repeatedly that was because naproxen protected the heart.
Experts have dismissed that.
“It would be the height of irony that for Merck’s success in concealing its fraud through the scientific uncertainty that was occurring with the naproxen hypothesis, that it would have this suit thrown out on statute of limitations grounds and never face the day in court that the investors here expect and deserve,” investor lawyer David C. Frederick said.
After it pulled Vioxx from the market, Merck was hit with a deluge of lawsuits from shareholders, patients and their survivors claiming Vioxx caused heart attacks and strokes, and from insurance plans seeking reimbursement for their costs for covering Vioxx prescriptions.
Merck says the investors should have known from public information there could be problems with Vioxx, because the regulatory Food and Drug Administration had issued warnings to Merck about Vioxx risks late in September 2001.
“There was sufficient information in the public domain,” Merck lawyer Kannon Shanmugam said.
Merck officials, in a statement released after arguments, said they think “the intense public discussion of data surrounding Vioxx had put investors on inquiry notice of the relevant issues.”
A U.S. district judge agreed and dismissed the November 2003 lawsuit, ruling it was filed after the two-year statute of limitations expired.
But the Philadelphia-based appeals court reversed that decision, allowing the many shareholder lawsuits, now consolidated in federal court, to proceed.
The court said the investors could not have known more than two years ahead of time of the possible wrongdoing by Merck. The court will make a decision on the case next year.
Also on Monday, the Supreme Court threw out an appeals court ruling ordering the disclosure of photographs of detainees being abused by their U.S. captors. In doing so, the high court cited a recent change in federal law that allows the pictures to be withheld.
The justices issued a brief order directing the 2nd U.S. Circuit Court of Appeals in New York to take another look at a lawsuit filed by the American Civil Liberties Union to obtain the photos of detainee abuse. President Obama at first didn’t oppose the release, but he changed his mind, saying they could whip up anti-American sentiment overseas and endanger U.S. troops.
The administration appealed the matter to the Supreme Court, but also worked with Congress to give Defense Secretary Robert M. Gates the power to keep from the public all pictures of foreign detainees being abused.
Mr. Gates invoked his new authority in mid-November, saying widespread distribution of the pictures would endanger American soldiers.
The high court also refused Monday to hear an appeal from a student who sued her Colorado high school, which punished her for talking about her religion during her graduation speech in 2006. School officials screened Erica Corder’s speech in advance but she changed her text, urging the audience to consider the Christian faith.
The principal made her write a letter acknowledging the remarks were her personal views, before she was given her diploma. Miss Corder sued, but federal courts threw out her lawsuit. Judges say the school didn’t violate her rights because her remarks were school-sponsored, rather than private speech.
The Supreme Court also left in place an $82.6 million award to a woman who in 2002 was paralyzed after her Ford Explorer rolled over in California.
The justices rejected Ford Motor Co.’s challenge to the portion of the award, $55 million, that was intended as punitive damages. Ford argued that it should not be punished because its design of the vehicle met federal safety standards.
A California state appeals court earlier upheld the award to Benetta Buell-Wilson.
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