The Third Circuit Court of Appeals issued an opinion today reversing the district court’s dismissal of the securities class action against Merck & Co. The district court ruled in April 2007 that plaintiffs were on inquiry notice of the alleged fraud more than two years before they filed suit, and thus their claims were barred by the statute of limitations.
Looking at the publicly available information, the Third Circuit considered whether a reasonable investor of ordinary intelligence would have discovered the information and recognized it as a “storm warning.” The Court ultimately concluded 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.”
In a press release today, Merck stated that it “presented several alternative grounds for dismissing the lawsuit. In reaching his April 2007 decision to dismiss the suit, the district judge considered arguments regarding the timeliness of the suit, but did not address the alternative grounds for dismissal that Merck had presented. As a result, if the ruling is not reversed, Merck will renew its request to dismiss the suit on those alternative grounds. In the process, the company will seek to rely upon a new standard established by the Supreme Court after the April 2007 ruling that imposes a higher bar for plaintiffs pursuing a securities case. The panel has made no ruling on the merits of the plaintiffs’ lawsuit.”