Securities Fraud Ruling Regarding Vioxx in Merck & Co. v. Reynolds, No. 08-905

Merck & Co. v. Reynolds, No. 08-905, concerned a 2003 securities fraud class action alleging that Merck & Co. knowingly misrepresented the heart-attack risks associated with its drug Vioxx.  The Supreme Court affirmed the Third Circuit Court of Appeals' reversal of the district court's dismissal of the complaint as untimely, on the grounds that 1) the limitations period in 28 U.S.C. section 1658(b)(1) begins to run once the plaintiff actually discovers or a reasonably diligent plaintiff would have discovered the facts constituting the violation (including scienter), whichever came first; and 2) prior to November 6, 2001, the plaintiffs did not discover, and Merck did not show that a reasonably diligent plaintiff would have discovered the facts constituting the violation.

As the Court wrote:  "This case concerns the timeliness of a complaint filed in a private securities fraud action. The complaint wastimely if filed no more than two years after the plaintiffs "discover[ed] the facts constituting the violation." 28 U. S. C. §1658(b)(1). Construing this limitations statutefor the first time, we hold that a cause of action accrues (1) when the plaintiff did in fact discover, or (2) when a reasonably diligent plaintiff would have discovered, "the facts constituting the violation"--whichever comes first. We also hold that the "facts constituting the violation" include the fact of scienter, "a mental state embracing intent to deceive, manipulate, or defraud," Ernst & Ernst v. Hochfelder, 425 U. S. 185, 194, n. 12 (1976). Applying this standard, we affirm the Court of Appeals' determination that the complaint filed here was timely."

Related Resources

• Full Text of Merck & Co. v. Reynolds, No. 08-905
• 28 U.S.C. 1658