The United States Supreme Court just decided Merck v. Reynolds, in favor of the plaintiffs (a 31-page PDF file). The securities claims may now be tried in the New Jersey District Court. [Background here, and here.]
Bad news for Merck, that:
. . . .Contrary to Merck’s argument, facts showing scienter are among those that “constitut[e] the violation.” Scienter is assuredly a “fact.” In a §10(b) action, it refers to “a mental state embracing intent to deceive, manipulate, or defraud,” Ernst & Ernst v. Hochfelder, 425 U. S. 185, 194, n. 12, and “constitut[es]” an important and necessary element of a §10(b) “violation.” See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U. S. 308, 319. Because the scienter element of §10(b) fraud cases has special heightened pleading requirements, see 15 U. S. C. §78u–4(b)(2), unless a §10(b) complaint sets out facts showing that it is more likely than not that the defendant acted with the relevant intent, the claim will fail. It would frustrate the very purpose of the discovery rule codified in §1658(b)(1) if the limitations period began to run regardless of whether a plaintiff had “discover[ed]” any facts suggesting scienter. . . .
And the Court cannot accept Merck’s argument that the limitations period begins at “inquiry notice,” meaning the point where the facts would lead a reasonably diligent plaintiff to investigate further, because that point is not necessarily the point at which the plaintiff would already have “discover[ed]” facts showing scienter or other “facts constituting the violation.” The statute says that the plaintiff’s claim accrues only after the “discovery” of those latter facts. It contains no indication that the limitations period can sometimes begin before “discovery” can take place. . . .
Indeed. More soon, but this is just as I had predicted back in November 2009.