ComplianceJuly 2, 2010

New Allegations Move Schering-Plough Stock Drop Suit

Retirement plan participants can move forward in their stock drop suit against drugmaker Schering-Plough after bringing forth new evidence.

Reported by Rebecca Moore

U.S. District Judge Dennis M. Cavanaugh in the U.S. District Court for the District of New Jersey denied the company’s motion to dismiss the case saying: “Plaintiffs have alleged “dire circumstances” sufficient to overcome the presumption of prudence at this stage. In particular, Plaintiffs have alleged: precipitous decline in the value of Company stock, Defendants’ knowledge of the anticipated harm to the company, as well as the conflicted status of fiduciaries.”

In his previous decision, Cavanaugh dismissed the suit because the participants’ allegations fell short of proving the company had advance knowledge of clinical trial results for the drug Vytorin (see Judge Tosses Schering-Plough Stock Drop Suit). According to the current opinion, he found that the case concerns more than claims of straightforward non-disclosures, as the plaintiffs not only offered evidence that the company omitted relevant information from government-required disclosures, but took active steps to prevent information from becoming public.

The participants allege the drugmaker deliberately suppressed the results to inflate Schering-Plough stock and that eventual disclosure of the findings caused the share price to drop and participants with investments in company stock to lose assets.

The case is In re Schering-Plough ERISA Litigation, D.N.J., No. 08-CV-1432 (DMC).