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Washington—With the initial glare of public scrutiny and market recoil over Vioxx behind it, Merck & Co. now is arming for another battle that will be key in determining the company’s survival. For the beleaguered pharmaceutical giant, a looming courtroom battle entails building an expansive legal infrastructure to deal with liabilities that could be as much as $18 billion, according to a recent Merrill Lynch analysis, over its arthritis drug Vioxx. Merck took Vioxx off the market on Sept. 30 after a new study showed that the painkiller may double the risk of heart attacks and stroke among its users. The company has hired a handful of firms for its defense, but observers say that Merck’s final legal lineup could change as the litigation takes shape. The task of compiling an outside legal team may present challenges for a company that highly values privacy and prefers to turn to its in-house lawyers. High stakes for Merck The stakes are high for Merck: Vioxx brought in sales of $2.5 billion in 2003, accounting for 11% of the company’s revenue. Merck also faces shareholder claims, as well as investigations by the Department of Justice, the Securities and Exchange Commission and Congress. Hughes Hubbard & Reed, a 330-lawyer New York firm for which Merck is already a major client, is serving as the Whitehouse Station, N.J.-based company’s national counsel in the Vioxx suits. Reed Smith, Baker Botts of Houston, Dechert and Venable have also been hired, according to court filings. Lawyers at those firms did not return calls for comment or would not comment. A source close to Hughes Hubbard who would not allow his name to be used said that “Merck is continuing to quickly add to the infrastructure needed to deal with the litigation.” The company itself, which says that it has 115 in-house lawyers, declines to comment on its outside legal staffing. But plaintiffs’ lawyers, who have taken out ads and mounted Internet campaigns to chase clients and held conferences to coordinate strategy, aren’t the only ones poised to get cash benefits from the Vioxx fallout. The firms lining up behind the scenes to represent Merck will also reap millions. Merck could pay well above $100 million to outside law firms in 2005 for litigation related to Vioxx, of which the lead firm could get as much as $20 million to $50 million, according to one of the company’s former legal consultants. The pecking order of Merck’s outside counsel could change, but for now, Hughes Hubbard holds the top spot. Partner Norman Kleinberg has signed off on court papers in Vioxx suits nationwide, along with counsel at other, larger firms like Reed Smith. Peers say Kleinberg is better known for his work in insurance coverage litigation, rather than for defending products liability suits. That could signal that other firms with specific expertise in products liability will be brought on board. Kleinberg did not return calls for comment. In 2002, Kleinberg helped score a win for Hartford Insurance against tobacco company Liggett Group Inc., which lost a bid to force 33 insurance firms to pay hundreds of millions of dollars in defense and indemnity costs. Hughes Hubbard lists roughly 40 lawyers in its products liability and toxic torts practice and this year was named among 20 “new elite” firms by The American Lawyer, a sister publication of The National Law Journal. In 1990, it was lead defense counsel in one of the largest products liability trials ever in the United States, representing a wallpaper manufacturer in claims stemming from the San Juan Dupont Plaza Hotel fire in Puerto Rico that killed nearly 100 people and injured hundreds. However, Hughes Hubbard ultimately may end up as one of a team of national firms orchestrated by Merck to handle the defense. Embattled companies are increasingly opting to hire a team of stars from different law firms, lining up one firm to provide lead trial counsel, another to provide special counsel for matters requiring particular expertise, such as medical issues, and another to do the grunt work, providing large numbers of associates and paralegals for tasks like document review, said corporate law department consultant Joel Henning.

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