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In re Merck & Co.

March 23, 2009

IN RE MERCK & CO., INC. SECURITIES, DERIVATIVE & "ERISA" LITIGATION
THIS DOCUMENT RELATES TO: THE CONSOLIDATED ERISA ACTION



The opinion of the court was delivered by: Chesler, District Judge

NOT FOR PUBLICATION

MDL No. 1658 (SRC)

OPINION

This matter comes before the Court upon the Motion for Judgment on the Pleadings filed by Defendants Merck & Co., Inc. ("Merck") and various current and former Merck executives, officers and/or directors*fn1 (collectively, the "Merck Defendants"). [docket item no. 145] Defendant Merck-Medco Managed Care, LLC ("Medco") joins in the Merck Defendants' motion. [docket item no. 146] Defendant Edward Scolnick*fn2 filed his own motion for judgment on the pleadings, joining in the arguments made by the Merck Defendants. [docket item no. 148]

The motions, which are all before the Court and deal with the same issues, will be referred to as a single motion for purposes of simplicity. The Court will refer to all Defendants collectively, unless otherwise indicated. Plaintiffs, participants in Merck Savings and Stock Ownership Plans during the Class Period of October 1, 1998 through September 30, 2004, oppose the motion. This Court has considered the submissions by the parties in connection with this motion, and pursuant to Federal Rule of Civil Procedure 78, adjudicates the motion based on the papers submitted. For the reasons discussed below, this Court denies the motion.

I. BACKGROUND

The facts of this ERISA class action lawsuit are well-known to the parties and, moreover, set forth at length in this Court's July 11, 2006 Opinion [docket item no. 54] on Defendants' various motions to dismiss Plaintiffs' Consolidated Amended Class Action Complaint ("Amended Complaint"). See In re Merck & Co., Inc. Sec., Derivative & ERISA Litig., No. 05-2369, 2006 WL 2050577 (D.N.J. July 11, 2006). It revolves around investment losses allegedly sustained by Plaintiffs when Merck withdrew Vioxx, its blockbuster arthritis and pain relief medication, from the market on September 30, 2004 due to results of a clinical study indicating the drug posed an increased risk of cardiovascular event (such as heart attack or stroke). The Court, in that earlier opinion, recited in detail the facts, as alleged in the Amended Complaint, relevant to Defendants' challenge to the sufficiency of the claims under Federal Rule of Civil Procedure 12(b)(6). Because this motion, brought under Rule 12(c), also challenges the sufficiency of the claims as pled in the Amended Complaint, the Court incorporates by reference its factual synopsis as set forth in Section I of the July 11, 2006 Opinion.

It suffices to state, for purposes of this Opinion's clarity, that this suit was filed by and on behalf of participants in four Merck defined contribution employee benefit pension plans identified in the July 11, 2006 Opinion as the Salaried Plan, the Hourly Plan, the Medco Plan and the Puerto Rican Plan (collectively, the "Plans"). Though Merck's Management Pension Investment Committee ("MPIC"), whose members were appointed by the Merck Board of Directors' Compensation and Benefits Committee ("CBC"), was responsible for determining which investments would be permitted in the Plans, each Plan required that one of the investment funds available under the Plan must include shares of Merck common stock.*fn3 Thus, each Plan offered among its variety of investment options to participants a number of mutual funds and the Merck Common Stock Fund ("MCSF"), which invested primarily in Merck common stock. Plaintiffs are participants who invested in the MCSF, in which Plaintiffs allege that over one billion dollars of Plan assets were invested.

Merck stock plunged 27% on September 30, 2004, the day that Merck withdrew Vioxx from the market. The stock continued to fall, and by November 2004, the stock had fallen about 13% more. Vioxx was the biggest drug, measured by sales, ever withdrawn from the market at that time, and the stock plunge erased about $26.8 billion in market value for Merck. Plaintiffs, who invested in Merck stock through the Plans, charge that their losses occurred as a result of Defendants' breach of their fiduciary duty under ERISA in various ways concerning the administration of the Plans.

The Order filed with the July 11, 2006 Opinion granted in part and denied in part the Rule 12(b)(6) motions to dismiss. Among others, two claims survived the motions: the imprudent investment claim (Count I) against the MPIC Defendants and the communications claim (Count II) against Defendants Merck, Medco and the Merck Director Defendants. Over two years after the Court's ruling on those motions, Defendants once again challenge the merits of those claims, based on the facts alleged in the Amended Complaint. They assert that Third Circuit's opinion in Edgar v. Avaya, Inc., 503 F.3d 340 (3d Cir. 2007) and this Court's opinion in Graden v. Conexant Systems, Inc., 574 F.Supp.2d 456 (D.N.J. 2008), both issued subsequent to the Opinion and Order on the Rule 12(b)(6) motions to dismiss, articulated legal standards different than those applied by the Court on the motions to dismiss. The new legal standards, they contend, render the claims deficient based on the pleading itself.

Defendants filed the instant motion for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure.

II. DISCUSSION

Rule 12(c) permits a party to move for judgment on the pleadings "after the pleadings are closed -- but early enough not to delay trial." Fed.R.Civ.P. 12(c). Though procedurally it applies later in a case than a Rule 12(b) motion, which may be filed in lieu of a responsive pleading, a motion brought under 12(c) for failure to state a claim upon which relief may be granted is governed by the same standard applicable to Rule 12(b)(6) motions. Turbe v. Gov't of the V.I., 938 F.2d 427, 428 (3d Cir. 1991). The Court must therefore evaluate whether the Amended Complaint pleads "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007). Of course, the Court accepts all well-pleaded allegations as true and draws all reasonable factual inferences in favor of Plaintiffs. Id. at 1965; Turbe, 938 F.2d at 428. On this motion, it must determine "whether the claimant is entitled to offer evidence in support of the claims," not whether the claims will ultimately be meritorious. Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

The Court will apply this standard in evaluating whether Plaintiffs may proceed with their ...


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