grant this is the second appeal from denial of a application to amend this shareholder's derivative action under rule fifteen a as the court is aware that is leave which is generally freely given in this particular case the district court has decided now twice not to permit and then at this time on the grounds of futility the court did that by focusing on a few stay on the standard we set and one in work one that's correct the court the court determined that we had not pled what the court said in work when we were supposed to plead that is that the directors  face a substantial risk of liability because they deliberately or recklessly ignored a well established link between vioxx and cardiovascular risk we believe that that's not correct we believe that the court's finding below was based upon and focusing on statements of fairy few statements that were pulled selectively out of basically two articles which were taken out of context ignoring contrary information and we are entitled to the benefit of the contrary information from a host of articles which were cited and allegations which were made in a very lengthy and the court found i think well pleaded complaint where our inferences the inferences that we sought to have drawn were but not only reasonable but i suggest to this court mandatory we believe that the court below simply either misconstrued or misapplied the twelve b six dander which t the existence of this doesn't that protect them from taking having to take action either one way or the other way in this particular the answer is if there warnings about this drug on have a decent scientific basis i suggest that because of the mountain of evidence that was out there that that this drug was really killing people the board would have had a responsible do something to get some testing done about it because there was no testing done there was no testing done to confirm this type the proxy hypothesis in spite of the fact that by a legion of people from the a to the various authors the ones who were saying that there's a possibility maybe that there was some approx and related result here were saying to merck will you please test for this because we don't know it's just that's not what happened here i didn't interrupt you judge alex i'm sorry that's not what happened here though well i don't know you're not suggesting that the information at the board was receiving was entirely one sided i am suggesting that the information that the board was receiving was entirely one the but the board was reaching out for help and received help from management individuals who presented certain profiles to the board that neutralized the scientific evidence that was being present or signatories but they were getting two different versions so i don't think that it was entirely clear early on that the violence was is as dangerous as some scientific study suggests in other words they were getting to science and i had to make certain later ones where it seems that things shifted a little just the timing matter here the timing does matter because we are alleging that during the entire we legit during an entire period of time commencing sensually with with the vigor study and going through the time  in relatively early on in september of two thousand and one where the board was told by the f d a that their statement is a statement that that board approved a study to study the cardiovascular of an approved that they never proved to a study for for cardiovascular efficacy of this and to the extent they did they had no business telling the public that this drug was absolutely safe by the way in that same letter where the f d a cold merck statements that vioxx was safe simply in comprehensible they also said that this approximate hypothesis that  work was basing its entire defense on was unsupported by any scientific evidence and that's something that the company was told and that the board was told time and again was the case they were told presented has has said that that he conceded that there was no scientific basis for it that the mechanism the cardiovascular mechanism was was was that the cardiovascular problem mechanism based as as we were concerned that it new prox and related cardio protective effect without testing and that testing was never done i mean they concede all these things and judge went this in response to your request or it passed your question earlier we are entitled to the inference is to be drawn from this we are entitled to our version of the facts and we're entitled to to have the court believe that what we are saying the board knew and what we are saying the board saw particularly where there is evidence to show that is correct because that's the twelve the six standard this court cannot and the district court should not have sat down and said well you know i look at this and i look at that and i think perhaps i might draw a conferee contrary inference that's not right under twelve b six we aren't tied into the inference we aren't tied into the inference at the board knew all these things that the board saw all these things this same district court but you want to suppress room that the entire board was new in other words it had very good reason i want this court to assume that because the court has found it to be true the defendants considered it to be true and the law presumes it to be true the court in the opinion below said that the complaint had pled with specificity detailed information about what the board knew and that this sophisticated i'm using the word sophisticated although i think it's clear the board was very sophisticated sophisticated board received the test results and in fact the court held and the defendants can see to page eight of their brief that the board was informed about the results of the vioxx research all major scientific and regulatory developments with respect to vi act what do you suggest that the board should have done i mean  suggest that the board should stop promoting the use of via action if suspended or voted to suspend its use i said they the apparently didn't take any vote one way or the other you certainly haven't pointed to one the only vote that the board took with test the stuff plays and by the way people are dying as a result of the use of the stuff now it's possible that as a question you're talking about the should have done is that really at issue here rick talking about the futility of making a demand  isn't it which is a very threshold issue aren't we looking at whether you know if you're sitting in the in the seat of the of one of the directors that kind of the cloud goes over your head that says oh oh my god i got i got a problem here yeah because what yes i mean isn't that really what we're talking about and we're as we have put a very pretty heavy burden on that we're still talking about a link with respect to a risk and it's all about risk and whether the director is new that there was such a risk that they could be sued that's the basis for the whole futility isn't it yes we need concern ourselves with you know what they what they should have done isn't it the fact that they sat there and listened to this and listened to  marketing you know that maybe wasn't totally going to be totally forthright that the director you know the on my god factor is really what we're talking about i mean it has to be a definite that you couldn't be around that table without saying oh my god you couldn't be around that you're right judgment i was trying to response just want to squelch general i'm just i'm just trying to figure where we are with the issue that really is before us which is a very threshold yes are we going to allow this even to sit here because it would be futile to make a demand i agree and by the way the same district court that threw us out because they said that we simply hadn't had shown that there was any  because they would have feared being sued if that's the actor talking about yes they could not have acted with respect to a demand could not be expected to act disinterested legal perspective was demanded they could be held liable yes that's exactly right and as i our brief and as the district court had said and this is very early on in the period we're talking about by act tobar ninth two thousand and one three years before vioxx was pulled and overwhelming collection of information signaling that you haven't raised a reasonable inference here you haven't created a reasonable doubt that these directors might be liable for not doing something about not seeing and not focusing on something that was clear to everyone else in the world not so your l on let me ask a question the merck case that we decided that is on appeal to the supreme court back to the storm warnings issue yes would that result in the supreme court if there were a reversal with that in fact you i don't think you would  know if i know my time is up but i'd like to give you the why because i think that the next logical the next logical issue because the issue here is what what the board reasonably should have perceived what the board reasonably should have known it was before the board  i'm sorry i'm going to want the public yes yes and clearly the board was a little more a little more on the in here than the public was we know because the law presumes that scola can go martin told the board what they knew and they didn't necessarily let me start with the question of what the board knew because the last thing that opposing counsel say is not supported by any law the law does not presume that every member of the board of directors knows what every other member of the board of directors knows but isn't that something that would be if if the case like this went trial then who exactly knew what would be developed at the trial but to get enough allegations to go to trial isn't it sufficient to show in general what information was provided to the board that might put them in fear of not wanting to respond to a stockholder demand because of what they knew or should have known at the time well what the case law says what the merck one third circuit pownall said and it was following the delaware supreme court cases on this is that the standard is very high and very clear the facts the particularized facts need to show that  of the directors of the board twelve of thirteen of the relevant board are here are outside directors they're not management directors knew that vioxx caused cardiovascular harm that is not an overstatement it is not loose language the language of the delaware supreme court case says of where there is an external the tory charter provision as there is in this case a point if must plead particularized facts that demonstrate that the directors had actual or constructive knowledge that their conduct was legally improper they had the plaintiff has to put plead particularized facts not that show that there was a debate not that show that there was cause for concern not that show that there was notice of a problem or a risk they have to show intentional failure to act in the face of a known duty to act the the language the literal words of the third circuit one decision are correct they had to show by particularized pleaded facts that the board of directors knew the answer to a question that was at that time unanswered in the scientific community now you say w drugs the impact of the p drug and the t the tip the p and the t of the impact was on clotting such that there were you know there was scientific evidence that there was that li from comparisons of vioxx with the prox and vioxx did not cause any increase in cardiovascular events those studies were reviewed in detail with the board there are slides in the append to seize that have been furnished to the to the court plaintiff's counsel made reference to the f d a letter the f d a sent a very harsh very strongly worded letter saying to merck your telling the world that the answer is no props and what they say and i'm quoting is that is a possible explanation but you failed to disclose that it's hypothetical and there is another reasonable explanation that's in september of two thousand and one what the board no board knew about that letter what the board also knows is that over the ensuing six months merck scientists and f d a scientists and the medical community are debating this and what is the conclusion of that debate in april of two thousand and merck has not only not only has to deal with these the labeling dispute and the issues raised in the f d a warning letter but merck has in fact asked for an expansion of the indications for which is permitted to presented to the board of directors they were reviewed by the top scientists at merck including dr stall nick who himself had been a board member and by own nick himself exceeded that skolnick conceded it is true in the fall of two thousand and one dr skolnick said yes it could be either one we don't know and we're continuing to investigate and in fact with respect to the statement that there was no test there were continued tests and the board was informed that merck was continuing to perform tests and when the harvard study came out in the fall of two thousand and three and its reports are disturbing the merck board is is also told yes there are these there are these results but there are contrary results from the following other tests and we have an going clinical studies which are of the studies that ultimately resulted in the withdrawal of the drugs that were going on at that time the board was informed of the that those studies were going on in writing in a letter from the senior vice president mr frazier which is also in your appendix and that's what the board is being informed of here is there is a debate there isn't that for council to say there was no debate and this was dispositively proven that this drug was dangerous when the record shows clearly that the f d a which is locked in a very serious debate with merck about this over a very long period of time the expansion applications went in two years before they ultimately were granted the parent the problem here is the district court doesn't recount all of the things you have been talking about or back for this more in depth review of exactly what was known and when and a better assessment of the risks i quite frankly i find it with the just record here in light of all the facts to be giving it short shrift it shouldn't go back because the burden on the district court at this point at this stage in looking in a demand futility inquiry is not to determine in hindsight whether the board made the right judgment this is a classic business judgment situation there is no case that says that the directors are not permitted to rely on the senior scientists of the corporation the directors did role why they were repeatedly brief by the top scientists of this company you will not find a single case none has been cited to you under new jersey or delaware jurisprudence that suggests that the board can't that the board has to presume that ed skolnick is lying to them that dr green is lying to them that the other merck scientists are lying to them or that they don't know what they're doing at a certain point you agree that by x will the market and that the board certainly at a certain point vioxx the board was there a period of time between that decision or should have been a decision by the board and the time when vioxx is actually withdrawn that the board would have resisted any stockholder demand the board did not learn the information that put it on notice that le take the action it took until september the study results came out in september of two thousand and four six months after the derivative demand was made in this case and within days the board had acted to withdraw the drug are saying that not until that study did the board have sufficient knowledge that by action of then withdrawn and that they would be liable if it wasn't withdrawn so they would resist any demand from stockholders to take action absolutely i'm saying the board was not in a position to make that judgment to withdraw the drug until september of two thousand and four and the relevant board here is the march two thousand and four bore and that board was in possession of of conflicting information included including refuted assurances based on studies that were presented to the board that the drug was safe and that in comparison tests against placebo the drug had shown absolutely no worse no more tendency to cause adverse cardiovascular events than placebo the conflicting information didn't necessarily come from the studies themselves but from dr green and dr skolnick is fairly accurate where did the conflicting information come from that disputed the findings of these various studies the information was provided the studies were presented to the board and i'll give you the citations and if you look at appendix one forty three to one fifty two in volume two of the appendix that's dr presentation from the clinical trials through september two thousand in february of two thousand and one dr green presented graphs showing the favorable cardiovascular safety data data from clinical studies that conflicting information did not come from separate studies but rather from dr greene and dr scully it came from studies performed by merck scientists who had of the who were engaged in a number of tests showing the the the trying to demonstrate both the effectiveness of the drug and whether the drug was safe or not a separate test to dispute the the various other tests and i mentioned before that the separate tests do not dispute the results of of any of the of the studies that were shown the the tests that were presented that were also presented to the board where the vigor study which were that was the comparison with the process and what the f d a itself said this could mean what you say it means it could mean that the proxim had to be a point with warts and you know you know we have a problem here we have a big problem and we're not doing anything about it and we may be putting ourselves at some risk  that don't these studies suggest or can't you infer that that's precisely what took place no you can't what the what the law says is that it is not up to the board to resolve a scientific conflict when the when the information that the scientific data is suggesting is in fact in dispute and it was in dispute and it's significant risk presented that there was a there was a significant danger of the use of information showing that there were unusual numbers of people who were getting heart attacks from vioxx they were shown the results of of comparative studies most of which showed the opposite showed that the drug was as safe or safer than  perry let me ask your question and previous opinion are we concluded with the language about the well established link and we said the question before the district will be whether the additions permitted by virtue of this opinion will transform date because we have directed that we're trying to march two thousand and four is absolutely the relevant measuring point for for the conduct of this board of directors did the di four directors the district court looked at the march two thousand and four board and the material that was demonstrably in front of it it did not presume and the water doesn't authorize it to presume that the directors have every piece of information that is in the public domain the pfizer decision second circuit says with difficultly that the court isn't supposed to presume that nor that the board is in possession of every e mail that is written by employees but troubling that district court referred to september two thousand february two thousand and one never talked about any relevant later conduct that actually was much the board actually the court refers specifically to the f d a approval of the new packaging and labeling literature that says it discloses extensively the results of the vigor study and it says that the significance of the that data is is unanswered is unexplained and the significance of it is not known the f d a itself after months and months and months of review concluded that this was an unanswered question if i may you raised a question about the pending supreme court oh yes it is the case in supreme court the supreme court has granted cert to review the prior decision by the panel decision on which judge drof was the dissenting judge the the in our view either that decision stands in which case it is inconceivable that the there could be liability on the part of the director since that decision holds that all of the publicly available information which is the very same information the plaintiff's counsel is saying indicts the board that they're saying all of that information wasn't enough that wasn't it didn't even suggest the existence of a significant debate about the safety of the drug to put investors on notice if that decision stands then it seems a for she or i there can't possibly be a risk of date that district court that's true and one would have to look at the additional information that was available to the board that based a clinical studies that came between the fall two thousand and one inquiry notice thank you ron thank you marine from page seven fifty five of the transcript i'm sorry of the appendix it is the bottom of page three of the f d a is letter to merck and the specific section that i'm reading says to misleading and minimizes the potential seriousness of this finding that's not exactly what merck is telling you today and the law does presume that the directors are well informed and are kept will inform not only did the district court may find that to be the case in this case b was that conceded by the defendants in their brief i think correctly so but but see the very business judgment rule  that they seek to use as a shield in this case has as its core the presumption that the directors act in good faith and on an informal basis therefore one needs to presume that skolnick told the board because he was a director at this time the skolnick and bill martin did act in good faith and told the board what they knew and told the board what was in their own emails and that the board was well informed about these things if we agreed we are you  discretion if the discretion was in failing to allow us to amend the complaint where we have demonstrated failing to file be amended complaint where we have demonstrated precisely what the district court said we demonstrated and that is that the directors were aware of these of these issues that the directors not only did nothing to stop work from doing what it was doing but affirmatively went forth with board approved press releases which told the public something that the board reasonably knew was not true you're just you're suggesting that the district court did not feel evaluate information that you have presented to the i'm suggesting two things number one yes that's correct and number two it's not to the district court to evaluate and balance back and forth to the district court to determine whether we have made it over that relatively low hurdle of raising a reasonable doubt now we understand it did it fail to do anything that it should have done it overlook anything or made over thing it overlooked the great volume of studies that were before and overlooked the great volume of evidence that was in the complaint focused on i think basically basically trying to put things out of two different articles that have knowledge of the f d a letter oh yes so i think something of the significance of the f d a letter i think absolutely i think a board member would would be would be completely derelict in their responsibility if if in dealing with issues such as vioxx they were not aware of that f d a letter that that is that is actually a seminal seminal document with respect to this in the spec this through the company remember this isn't just some small little thing that was producing i hate to say some small things producing a couple of million dollars a year this was the biggest thing in mark's piggy bank this drug was producing over two billion dollars a year in sales for merck and work was pushing and pushing and pushing to get more this was the most important product this company had and any well informed director would have to be aware of what was happening with respect to this drug it was the core of the company thank you thanks as well argued mascot arrange for a transcript of our argument if you could contact the clerk