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After Merck & Co.’s stunning announcement that it was withdrawing its blockbuster arthritis drug Vioxx because it could increase the risk of heart attacks and strokes, personal injury lawyers 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% 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 widened 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 federal court against Merck, which had $22.5 billion in sales in 2003. One was on behalf of stockholders. The other was on behalf of more than 39,000 Merck employees holding company stock in 401(k) plans. Last week, a third complaint was filed, also on behalf of the employees. All are potential class actions. Merck officials immediately went on the offensive, holding a press conference in New York recently 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. No ‘slam dunk’ “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, New York’s Hughes Hubbard & Reed would seem to have the inside track. For almost a year, the 330-lawyer firm has been defending a class action securities case in Louisiana over stock losses said to stem from failure to disclose Vioxx risks. 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 said he believes that 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 said, allows plaintiffs directly to name the defendant company’s insurance carriers. Gregory Nespole, a lawyer in the Arnoff v. Merck & Co. class action filed in New Jersey on behalf of shareholders, disagrees. “I believe the litigation belongs in New Jersey,” he said. “The company is [based] 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 [Food and Drug Administration] were all in New Jersey.” Nespole is a partner at New York’s Wolf Haldenstein Adler Freeman & Herz, which will be vying with Milberg Weiss and Stull, Stull & Brody for lead counsel status. 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. “They knew that there were definite problems with this drug, and they continued to put money into Merck stock, causing an astronomical loss,” alleged Lisa Rodriguez of Haddonfield, N.J.’s Trujillo Rodriguez & Richards. Rodriguez is co-counsel with Hartford, Conn.’s Schatz & Nobel, a securities/ERISA boutique that served as lead counsel in cases against Campbell Soup, AT&T and Tyco, among others.

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