The US Supreme Court relaxed the deadlines for shareholder fraud actions, allowing investors to proceed with accusations that Merck & Co, the pharmaceutical company, misled the public about the health risks posed by its Vioxx painkiller, which was withdrawn because of links to heart attacks and strokes.
The Supreme Court ruled that the two year window for shareholder actions under US federal law had not closed by the time the first shareholders sued the company in November 2003. The Court decided that the two year period does not commence until investors have indications of intentional company wrongdoing.
The decision will extend the length of time companies are vulnerable to actions over alleged misconduct. It will allow a greater number of shareholder actions in the pharmaceutical industry and could lead to an increase in securities litigation generally.