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After Merck & Co. Inc.’s stunning announcement that it was withdrawing its blockbuster arthritis drug Vioxx because it could increase the risk of heart attacks and strokes, the plaintiffs personal injury bar went into high gear trolling for clients. The products liability litigation will be huge – 20 million Americans and millions more in 80 other countries have used Vioxx since 1999 – but the most expensive battle facing the pharmaceutical giant will be on the securities side. The voluntary withdrawal from the market of a drug generating $2.55 billion in annual sales triggered a 27 percent dive in Merck’s stock. The one-day, per-share drop from $45 to $33 produced $26.6 billion in shareholder losses, and that loss ballooned to $32 billion when the stock price slumped to $30 a few days later. One day after the Sept. 30 bombshell rocked Wall Street, two suits arrived in New Jersey’s federal district against the $22.5 billion Whitehouse Station company. One was on behalf of stockholders, while the other was on behalf of more than 39,000 Merck employees holding company stock in their 401(k) plans. Last Wednesday, a third complaint was filed, also on behalf of the employees. All three are class actions. Merck officials immediately went on the offensive, holding a press conference in New York last Wednesday declaring that they withdrew the drug as soon as the company had definitive evidence that Vioxx showed a high rate of heart attack and stroke risk. No doubt litigation will focus on a series of studies done by Merck, with plaintiffs pointing to early results suggesting major problems and with the defense arguing that only the final, three-year study produced clear results that could be relied on. “This is not a slam dunk,” said a plaintiffs lawyer involved in one of the suits. “We have to prove fraud, intentional conduct and possibly recklessness.” Firms are scrambling for the legal work. On the plaintiffs’ side, the rush to the courthouse no longer means much since passage of the Private Securities Litigation Reform Act in 1995. The statute calls for the firm or firms with the largest clients – usually state pension funds or similar large institutional investors who lost the most – to be lead counsel. For the defense, Merck uses several national firms and in-state firms as local or co-counsel in national litigation. Though general counsel Kenneth Frazier did not return a telephone call or respond to e-mail, New York’s Hughes Hubbard & Reed would seem to have the inside track. For almost a year, the 300-lawyer firm has been defending a class-action securities case in Louisiana over stock losses said to stem from failure to disclose Vioxx risks. Moreover, Hughes Hubbard’s Jersey City presence could obviate the need for in-state local counsel. Partner Wilfred Coronato in that office is lead defense counsel in hundreds of personal injury cases consolidated with Superior Court Judge Carol Higbee in Atlantic County. The Louisiana case, Pringle v. Merck & Co., is in its early stages before U.S. District Judge Kurt Engelhardt in New Orleans. Merck’s lawyers have yet to move to dismiss. Formal discovery has yet to start, although lead plaintiffs’ lawyer Jules Brody said a lot of informal discovery has been done on both sides. The Louisiana case also could play a role in who will become lead plaintiffs counsel, as well as where the case may be venued if it is consolidated. Brody’s firm, Stull Stull & Brody of New York, is co-lead counsel along with Milberg Weiss Bershad & Schulman, also of New York, both of which are prominent in the plaintiffs’ class-action bar. After the withdrawal of Vioxx, the plaintiffs filed an amended complaint and are awaiting the judge’s approval. Brody says he believes all plaintiffs’ lawyers should file in New Orleans, not so much because Pringle is almost a year old but because of Louisiana’s direct action statute, which he says allows plaintiffs to directly name the defendant company’s insurance carriers. “In Louisiana, the public knows the whole story,” said Brody, noting that plaintiffs benefit when jurors know the company is covered. While Brody admits Louisiana law does not seem to permit the jury to know the policy limit, he said that adds to the plaintiffs’ advantage. “The jury does not know that there is a [policy] limit.” Brody chides his colleagues who have filed in New Jersey, or elsewhere: Because of the direct action statute, “this case belongs in Louisiana. The lawyers who are advocating Jersey are prejudicing the rights of their clients. Had they called me, I would have told them that.” Gregory Nespole, a lawyer in the Arnoff v. Merck & Co. class action filed in New Jersey on behalf of shareholders, disagrees, saying, “I believe the litigation belongs in New Jersey. The company is there. The acts were committed there. The science was there, their labs, their management and their clinicians. And the press releases and correspondence back and forth to the FDA were all in New Jersey.” Nespole is a partner with New York’s Wolf Haldenstein Adler Freeman & Herz, which will be vying with Milberg Weiss and Stull Stull for lead counsel status. Wolf Haldenstein’s local counsel is Andrew Jacobs of Epstein Fitzsimmons Brown Giola Jacobs & Sprouls. The other two cases filed in New Jersey are complaints under the Employee Retirement Income Security Act (ERISA). Those suits charge Merck executives, including the managers of the company’s two 401(k) plans, with violating their fiduciary duties by investing employee contributions in company stock while knowing the risks in light of the mounting negative data on the safety of Vioxx. In both plans, one for union members and one for nonunion members, workers opted for the Merck stock. However, the suits allege that the company stock should not have been offered as an option once management knew of the looming dangers of the drug. The complaint in Cimato v. Merck says $1.2 billion of the plans’ investments of $3.1 billion, or 38.7 percent, were in Merck stock. “They knew that there were definite problems with this drug, and they continued to put money into Merck stock, causing an astronomical loss,” said Lisa Rodriguez of Trujillo Rodriguez & Richards. Rodriguez is co-counsel with Schatz & Nobel, a securities/ERISA boutique that served as lead counsel in cases against Campbell Soup, AT&T and Tyco, among others. Schiffrin & Barroway of Bala Cynwyd, a 35-lawyer securities and class-action shop, filed the other ERISA class action a day after Merck’s announcement. Local counsel is Joseph DePalma, of Lite DePalma Greenberg & Rivas. The ERISA cases have been assigned to District Judge Mary Cooper, while the shareholders’ action has been assigned to District Judge Stanley Chesler, who has handled class actions against Merck in the recent past. Both sit in Trenton. The federal Multidistrict Litigation Panel will decide whether, and where, to consolidate the cases, and whether to join the product liability cases in federal court with the securities/ERISA matters. Said one plaintiffs lawyer about venue, “This case belongs in Louisiana as much as it belongs on the moon.” As for Hughes Hubbard using two lead firms to battle the product liability and securities cases, one veteran defense litigator said, “It would be extraordinary for Merck not to use two firms, primarily because of the enormous amount of work involved. Traditionally one firm would do product while another did securities.” Hughes Hubbard partner George Davidson in New York, who is defending in the Louisiana securities case, declined to comment when asked about how Merck intends to decide its lineup. Lawyers on both sides differ on whether the product liability cases will be consolidated with the securities cases. These lawyers, however, assume that the MDL panel will ship the cases to New Jersey and probably Trenton, the closest courthouse to Hunterdon County. One key to Merck’s defense would seem to be its position on a key study begun in 1999 that compared Vioxx with a generic painkiller called naproxen to determine the effects on colon polyps. In March 2000, the results of that study showed that patients with polyps who took Vioxx over a long term had four times the risk of heart attack as naproxen users. Merck, which gave the results to the Food and Drug Administration, argues that the result was due in large measure to naproxen’s heart-protecting ingredients. The most recent study showed Vioxx was putting patients at risk for heart attacks or strokes, said Merck scientists. “Any claim that Merck didn’t react responsibly is in direct conflict with the facts,” said Merck Research Laboratories president Peter Kim at last Wednesday’s press conference. But the complaints filed thus far say the makers of naproxen never marketed the drug for cardiac problems, and they and other critics maintain that Merck never did a big clinical trial to specifically prove that Vioxx was safe for the heart. Plaintiffs will rely heavily on an August 2001 paper, published in the Journal of the American Medical Association, by two Cleveland Clinic cardiologists who called for such a study. Also not helping Merck is a pair of warnings by the FDA to the company to change its labeling and promotion of the drug. A 2002 letter chastised the company for putting out a “false and misleading” press release, saying its claims that Vioxx has a “favorable cardiovascular safety profile” is “simply incomprehensible” given the heart problems found in the comparison study with naproxen. Merck countered that the company had no definitive proof of Vioxx’s danger until near the end of a third study, which did not start until 2003. One thing is sure. With thousands of patients alleging damage from Vioxx, and with thousands of investors and employees claiming the loss of untold millions, Merck’s legal team will be litigating for years. Meanwhile, the stock remains mired around $30 a share, down from its 12-month high of more than $49, which translates to $42 billion in losses. This article originally appeared in The New Jersey Law Journal , a publication of ALM.

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