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Merck v. Reynolds

Last week, the Supreme Court bucked the stereotype propounded by liberals that it is in the pocket of big business by unanimously affirming a Third Circuit opinion on the timing of the statute of limitations in a securities suit. The suit alleged a breach of duty over the disclosure of Vioxx problems; Merck had argued (successfully in the district court) that the statute of limitations started to run in September 2001 when there were first signs of trouble with Vioxx, putting plaintiffs on inquiry notice—am argument at some tension with Merck's position in product liability litigation that Merck had no reason to act in response to those same September 2001 intimations of potential trouble.

The Washington Legal Foundation takes issue with the decision, but I'm less troubled, both as a matter of law, and as a matter of policy. The PSLRA establishes a reasonably high bar for bringing a complaint under the securities laws; conclusory allegations are supposed to be dismissed. Defendants can't expect to have it both ways with a higher standard for bringing a complaint but a lower standard for running the statute of limitations. A rule establishing inquiry notice triggering the statute of limitations would reestablish the race to the courthouse and prompt any number of meritless lawsuits.

That's not to say that the current securities lawsuit is meritorious—and as a member of the putative class, I will scrutinize very closely any proposed settlement...

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.