Merck Prevails in Vytorin Securities Litigation

Paul, Weiss secured the final dismissal of remaining claims brought by investors in a decade-long securities law dispute against our clients Merck & Co., Inc. and Schering-Plough Corporation.

The cases against the pharmaceutical giants began in 2008, when shareholders of Merck and Schering Plough brought class action litigation following the companies’ receipt of disappointing clinical trial results concerning their cholesterol-lowering drug, Vytorin. We litigated those claims for five years and, on the eve of settling the class actions, 16 institutional investors – representing more than $130 million in claims – declined to accept the settlement and opted out of the classes. After the class action settlements were final, the opt-out plaintiffs brought four actions in the District of New Jersey alleging the same misconduct and federal claims at issue in the class actions, as well as a state law claim for common-law fraud. The district court initially denied Merck’s motion to dismiss the federal opt out claims as barred by the five-year statutes of repose applicable to claims under the Securities Exchange Act of 1934. It did, however, grant Merck’s motion to certify an interlocutory appeal to the U.S. Court of Appeals for the Third Circuit, which accepted Merck’s petition. In 2017, the Third Circuit agreed with Merck’s position that plaintiffs’ federal claims were not tolled by the pendency of the class actions and were barred by the Exchange Act’s statute of repose.

On remand to the district court, Merck moved to dismiss the plaintiffs’ remaining common-law fraud claim as barred by the Securities Litigation Uniform Standards Act (SLUSA), which precludes “covered class actions” from asserting securities-fraud claims under state law. The plaintiffs argued that their actions did not “proceed as a single action” with the class actions, and thus did not meet the “covered class action” definition, because they filed their lawsuits after the class actions had concluded. In a case of first impression that “tests the limits of SLUSA’s preclusive scope,” the district court disagreed. In its 48-page decision, the court adopted Merck’s argument that the opt-out actions functionally “proceeded as a single action” with the class actions because the plaintiffs sought to derive a benefit from the pleadings, discovery and other court filings in the class actions. The district court dismissed the plaintiffs’ common-law fraud claim with prejudice under SLUSA, and ordered that the four opt out cases be closed.

Litigation partner Daniel Kramer argued both the repose issue before the Third Circuit and the SLUSA issue in the District Court. The Paul, Weiss team also included litigation partner Ted Wells, of counsel Chuck Davidow and counsel Daniel Juceam.