Merck & Co. v. Reynolds

(Slip Opinion) OCTOBER TERM, 2009 1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader.

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

MERCK & CO., INC., ET AL. v. REYNOLDS ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

No. 08–905. Argued November 30, 2009—Decided April 27, 2010

On November 6, 2003, respondent investors filed a securities fraud ac

tion under §10(b) of the Securities Exchange Act of 1934, alleging

that petitioner Merck & Co. knowingly misrepresented the heart

attack risks associated with its drug Vioxx. A securities fraud com

plaint is timely if filed no more than “2 years after the discovery of

the facts constituting the violation” or 5 years after the violation. 28

U. S. C. §1658(b). The District Court dismissed the complaint as un

timely because the plaintiffs should have been alerted to the possibil

ity of Merck’s misrepresentations prior to November 2001, more than

2 years before the complaint was filed, and they had failed to under

take a reasonably diligent investigation at that time. Among the

relevant circumstances were (1) a March 2000 “VIGOR” study com

paring Vioxx with the painkiller naproxen and showing adverse car

diovascular results for Vioxx, which Merck suggested might be due to

the absence of a benefit conferred by naproxen rather than a harm

caused by Vioxx (the naproxen hypothesis); (2) an FDA warning let

ter, released to the public on September 21, 2001, saying that Merck’s

Vioxx marketing with regard to the cardiovascular results was “false,

lacking in fair balance, or otherwise misleading”; and (3) pleadings

filed in products-liability actions in September and October 2001 al

leging that Merck had concealed information about Vioxx and inten

tionally downplayed its risks. The Third Circuit reversed, holding

that the pre-November 2001 events did not suggest that Merck acted

with scienter, an element of a §10(b) violation, and consequently did

not commence the running of the limitations period.

Held:

1. The limitations period in §1658(b)(1) begins to run once the

plaintiff actually discovered or a reasonably diligent plaintiff would

2 MERCK & CO. v. REYNOLDS

Syllabus

have “discover[ed] the facts constituting the violation”—whichever

comes first. In the statute of limitations context, “discovery” is often

used as a term of art in connection with the “discovery rule,” a doc

trine that delays accrual of a cause of action until the plaintiff has

“discovered” it. The rule arose in fraud cases but has been applied by

state and federal courts in other types of claims, and legislatures

have sometimes codified this rule. When “discovery” is written di

rectly into a statute, courts have typically interpreted the word to re

fer not only to actual discovery, but also to the hypothetical discovery

of facts a reasonably diligent plaintiff would know. Congress in

tended courts to interpret the word “discovery” in §1658(b)(1) simi

larly. That statute was enacted after this Court determined a gov

erning limitations period for private §10(b) actions, Lampf, Pleva,

Lipkind, Prupis & Petigrow v. Gilbertson, 501 U. S. 350, concluding

that such actions “must be commenced within one year after the dis

covery of the facts constituting the violation . . . ,” id., at 364 (empha

sis added). Since then, Courts of Appeals deciding the matter have

held that “discovery” occurs both when a plaintiff actually discovers

the facts and when a hypothetical reasonably diligent plaintiff would

have discovered them. In 2002, Congress repeated Lampf’s critical

language in enacting the present limitations statute. Normally,

when Congress enacts statutes, it is aware of relevant judicial prece

dent. See, e.g., Edelman v. Lynchburg College, 535 U. S. 106, 116–

117, and n. 13. Given the history and precedent surrounding the use

of “discovery” in the limitations context generally as well as in this

provision, the reasons for making this assumption are particularly

strong here. Merck’s claims are evaluated accordingly. Pp. 8–12.

2. In determining the time at which “discovery” occurs, terms such

as “inquiry notice” and “storm warnings” may be useful insofar as

they identify a time when the facts would have prompted a reasona

bly diligent plaintiff to begin investigating. But the limitations pe

riod does not begin to run until the plaintiff thereafter discovers or a

reasonably diligent plaintiff would have discovered “the facts consti

tuting the violation,” including scienter—irrespective of whether the

actual plaintiff undertook a reasonably diligent investigation.

Pp. 12–17.

(a) 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 in

tent to deceive, manipulate, or defraud,” Ernst & Ernst v. Hochfelder,

425 U. S. 185, 194, n. 12, and “constitut[es]” an important and neces

sary 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

Cite as: 559 U. S. ____ (2010) 3

Syllabus

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 “dis

cover[ed]” any facts suggesting scienter. Pp. 12–14.

(b) The Court also rejects Merck’s argument that, even if “discov

ery” requires facts related to scienter, facts that tend to show a mate

rially false or misleading statement (or material omission) are ordi

narily sufficient to show scienter. Where §10(b) is at issue, the

relation of factual falsity and state of mind is more context specific.

For instance, an incorrect prediction about a firm’s future earnings,

by itself, does not automatically show whether the speaker deliber

ately lied or made an innocent error. Hence, “discovery” of additional

scienter-related facts may be required. The statute’s inclusion of an

unqualified bar on actions instituted “5 years after such violation,”

§1658(b)(2), should diminish Merck’s fear that this requirement will

give life to stale claims or subject defendants to liability for acts

taken long ago. P. 14.

(c) And the Court cannot accept Merck’s argument that the limi

tations period begins at “inquiry notice,” meaning the point where

the facts would lead a reasonably diligent plaintiff to investigate fur

ther, 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 some

times begin before “discovery” can take place. Merck also argues that

determining when a hypothetical reasonably diligent plaintiff would

have “discover[ed]” the necessary facts is too complicated for judges

to undertake. But courts applying the traditional discovery rule have

long had to ask what a reasonably diligent plaintiff would have

known and done in myriad circumstances and already undertake this

kind of inquiry in securities fraud cases. Pp. 14–17.

3. Prior to November 6, 2001, the plaintiffs did not discover, and

Merck has not shown that a reasonably diligent plaintiff would have

discovered, “the facts constituting the violation.” The FDA’s Septem

ber 2001 warning letter shows little or nothing about the here

relevant scienter, i.e., whether Merck advanced the naproxen hy

pothesis with fraudulent intent. The FDA itself described the hy

pothesis as a “possible explanation” for the VIGOR results, faulting

Merck only for failing sufficiently to publicize the less favorable al

ternative, that Vioxx might be harmful. The products-liability com

plaints’ general statements about Merck’s state of mind show little

4 MERCK & CO. v. REYNOLDS

Syllabus

more. Thus, neither these circumstances nor any of the other pre-

November 2001 circumstances reveal “facts” indicating the relevant

scienter. Pp. 17–19.

543 F. 3d 150, affirmed.

BREYER, J., delivered the opinion of the Court, in which ROBERTS,

C. J., and KENNEDY, GINSBURG, ALITO, and SOTOMAYOR, JJ., joined.

STEVENS, J., filed an opinion concurring in part and concurring in the

judgment. SCALIA, J., filed an opinion concurring in part and concur

ring in the judgment, in which THOMAS, J., joined.

Cite as: 559 U. S. ____ (2010) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Wash

ington, D. C. 20543, of any typographical or other formal errors, in order

that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

No. 08–905

_________________

MERCK & CO., INC., ET AL., PETITIONERS v. RICHARD

REYNOLDS ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT

[April 27, 2010]

JUSTICE BREYER delivered the opinion of the Court.

This case concerns the timeliness of a complaint filed in

a private securities fraud action. The complaint was

timely if filed no more than two years after the plaintiffs

“discover[ed] the facts constituting the violation.” 28

U. S. C. §1658(b)(1). Construing this limitations statute

for the first time, we hold that a cause of action accrues (1)

when the plaintiff did in fact discover, or (2) when a rea

sonably diligent plaintiff would have discovered, “the facts

constituting the violation”—whichever comes first. We

also hold that the “facts constituting the violation” include

the fact of scienter, “a mental state embracing intent to

deceive, manipulate, or defraud,” Ernst & Ernst v.

Hochfelder, 425 U. S. 185, 194, n. 12 (1976). Applying this

standard, we affirm the Court of Appeals’ determination

that the complaint filed here was timely.

I

The action before us involves a claim by a group of inves

tors (the plaintiffs, respondents here) that Merck & Co.

and others (the petitioners here, hereinafter Merck) know

ingly misrepresented the risks of heart attacks accompany

2 MERCK & CO. v. REYNOLDS

Opinion of the Court

ing the use of Merck’s pain-killing drug, Vioxx (leading to

economic losses when the risks later became apparent).

The plaintiffs brought an action for securities fraud under

§10(b) of the Securities Exchange Act of 1934. See 48 Stat.

891, as amended, 15 U. S. C. §78j(b); SEC Rule 10b–5, 17

CFR §240.10b–5(b) (2009); Dura Pharmaceuticals, Inc. v.

Broudo, 544 U. S. 336, 341–342 (2005).

The applicable statute of limitations provides that a

“private right of action” that, like the present action,

“involves a claim of fraud, deceit, manipulation, or con

trivance in contravention of a regulatory requirement

concerning the securities laws . . . may be brought not

later than the earlier of—

“(1) 2 years after the discovery of the facts constituting

the violation; or

“(2) 5 years after such violation.” 28 U. S. C. §1658(b).

The complaint in this case was filed on November 6,

2003, and no one doubts that it was filed within five years

of the alleged violation. Therefore, the critical date for

timeliness purposes is November 6, 2001—two years

before this complaint was filed. Merck claims that before

this date the plaintiffs had (or should have) discovered the

“facts constituting the violation.” If so, by the time the

plaintiffs filed their complaint, the 2-year statutory period

in §1658(b)(1) had run. The plaintiffs reply that they had

not, and could not have, discovered by the critical date

those “facts,” particularly not the facts related to scienter,

and that their complaint was therefore timely.

A

We first set out the relevant pre-November 2001 facts,

as we have gleaned them from the briefs, the record, and

the opinions below.

1. 1990’s. In the mid-1990’s Merck developed Vioxx. In

1999 the Food and Drug Administration (FDA) approved it

for prescription use. Vioxx suppresses pain by inhibiting

Cite as: 559 U. S. ____ (2010) 3

Opinion of the Court

the body’s production of an enzyme called COX–2 (cyclooxy-

genase-2). COX–2 is associated with pain and inflamma-

tion. Unlike some other anti-inflammatory drugs in its

class like aspirin, ibuprofen, and naproxen, Vioxx does not

inhibit production of a second enzyme called COX–1

(cyclooxygenase-1). COX–1 plays a part in the functioning

of the gastrointestinal tract and also in platelet aggregation

(associated with blood clots). App. 50–51.

2. March 2000. Merck announced the results of a study,

called the “VIGOR” study. Id., at 291–294. The study

compared Vioxx with another painkiller, naproxen. The

study showed that persons taking Vioxx suffered fewer

gastrointestinal side effects (as Merck had hoped). But

the study also revealed that approximately 4 out of every

1,000 participants who took Vioxx suffered heart attacks,

compared to only 1 per 1,000 participants who took

naproxen. Id., at 296, 306; see Bombardier et al., Com-

parison of Upper Gastrointestinal Toxicity of Rofecoxib

and Naproxen in Patients with Rheumatoid Arthritis, 343

New England J. Medicine 1520, 1523, 1526–1527 (2000).

Merck’s press release acknowledged VIGOR’s adverse

cardiovascular data. But Merck said that these data were

“consistent with naproxen’s ability to block platelet aggre-

gation.” App. 291. Merck noted that, since “Vioxx, like all

COX–2 selective medicines, does not block platelet aggre-

gation[, it] would not be expected to have similar effects.”

Ibid. And Merck added that “safety data from all other

completed and ongoing clinical trials . . . showed no indica-

tion of a difference in the incidence of thromboembolic

events between Vioxx” and either a placebo or comparable

drugs. Id., at 293 (emphasis deleted).

This theory—that VIGOR’s troubling cardiovascular

findings might be due to the absence of a benefit conferred

by naproxen rather than due to a harm caused by Vioxx—

later became known as the “naproxen hypothesis.” In

advancing that hypothesis, Merck acknowledged that the

4 MERCK & CO. v. REYNOLDS

Opinion of the Court

naproxen benefit “had not been observed previously.” Id.,

at 291. Journalists and stock market analysts reported all

of the above—the positive gastrointestinal results, the

troubling cardiovascular finding, the naproxen hypothesis,

and the fact that the naproxen hypothesis was unproved.

See id., at 355–391, 508–557.

3. February 2001 to August 2001. Public debate about

the naproxen hypothesis continued. In February 2001, the

FDA’s Arthritis Advisory Committee convened to consider

Merck’s request that the Vioxx label be changed to reflect

VIGOR’s positive gastrointestinal findings. The VIGOR

cardiovascular findings were also discussed. Id., at 392–

395, 558–577. In May 2001, a group of plaintiffs filed a

products-liability lawsuit against Merck, claiming that

“Merck’s own research” had demonstrated that “users of

Vioxx were four times as likely to suffer heart attacks as

compared to other less expensive, medications.” Id., at

869. In August 2001, the Journal of the American Medical

Association wrote that the available data raised a “cau

tionary flag” and strongly urged that “a trial specifically

assessing cardiovascular risk” be done. Id., at 331–332;

Mukherjee, Nissen, & Topol, Risk of Cardiovascular

Events Associated with Selective Cox-2 Inhibitors, 286

JAMA 954 (2001). At about the same time, Bloomberg

News quoted a Merck scientist who claimed that Merck

had “additional data” that were “very, very reassuring,”

and Merck issued a press release stating that it stood

“behind the overall and cardiovascular safety profile . . . of

Vioxx.” App. 434, 120 (emphasis deleted; internal quota

tion marks omitted).

4. September and October 2001. The FDA sent Merck a

warning letter released to the public on September 21,

2001. It said that, in respect to cardiovascular risks,

Merck’s Vioxx marketing was “false, lacking in fair bal

ance, or otherwise misleading.” Id., at 339. At the same

time, the FDA acknowledged that the naproxen hypothesis

Cite as: 559 U. S. ____ (2010) 5

Opinion of the Court

was a “possible explanation” of the VIGOR results. Id., at

340. But it found that Merck’s “promotional campaign

selectively present[ed]” that hypothesis without adequately

acknowledging “another reasonable explanation,” namely,

“that Vioxx may have pro-thrombotic [i.e., adverse cardio

vascular] properties.” Ibid. The FDA ordered Merck to

send healthcare providers a corrective letter. Id., at 353.

After the FDA letter was released, more products

liability lawsuits were filed. See id., at 885–956. Merck’s

share price fell by 6.6% over several days. See id., at 832.

By October 1, the price rebounded. See ibid. On October

9, 2001, the New York Times said that Merck had reexam

ined its own data and “found no evidence that Vioxx in

creased the risk of heart attacks.” App. 504. It quoted the

president of Merck Research Laboratories as positing

“ ‘two possible interpretations’ ”: “ ‘Naproxen lowers the

heart attack rate, or Vioxx raises it.’ ” Ibid. Stock ana

lysts, while reporting the warning letter, also noted that

the FDA had not denied that the naproxen hypothesis

remained an unproven but possible explanation. See id.,

at 614, 626, 628.

B

We next set forth three important events that occurred

after the critical date.

1. October 2003. The Wall Street Journal published the

results of a Merck-funded Vioxx study conducted at Bos

ton’s Brigham and Women’s Hospital. After examining

the medical records of more than 50,000 Medicare pa

tients, researchers found that those given Vioxx for 30-to

90 days were 37% more likely to have suffered a heart

attack than those given either a different painkiller or no

painkiller at all. Id., at 164–165. (That is to say, if pa

tients given a different painkiller or given no painkiller at

all suffered 10 heart attacks, then the same number of

patients given Vioxx would suffer 13 or 14 heart attacks.)

6 MERCK & CO. v. REYNOLDS

Opinion of the Court

Merck defended Vioxx and pointed to the study’s limita

tions. Id., at 165–167.

2. September 30, 2004. Merck withdrew Vioxx from the

market. It said that a new study had found “an increased

risk of confirmed cardiovascular events beginning after 18

months of continuous therapy.” Id., at 182 (internal quo

tation marks omitted). A Merck representative publicly

described the results as “totally unexpected.” Id., at 186.

Merck’s shares fell by 27% the same day. Id., at 185, 856.

3. November 1, 2004. The Wall Street Journal published

an article stating that “internal Merck e-mails and mar

keting materials as well as interviews with outside scien

tists show that the company fought forcefully for years to

keep safety concerns from destroying the drug’s commer

cial prospects.” Id., at 189–190. The article said that an

early e-mail from Merck’s head of research had said that

the VIGOR “results showed that the cardiovascular events

‘are clearly there,’ ” that it was “ ‘a shame but . . . a low

incidence,’ ” and that it “ ‘is mechanism based as we wor

ried it was.’ ” Id., at 192. It also said that Merck had

given its salespeople instructions to “ ‘DODGE’ ” questions

about Vioxx’s cardiovascular effects. Id., at 193.

C

The plaintiffs filed their complaint on November 6,

2003. As subsequently amended, the complaint alleged

that Merck had defrauded investors by promoting the

naproxen hypothesis, knowing the hypothesis was false.

It said, for example, that Merck “knew, at least as early as

1996, of the serious safety issues with Vioxx,” and that a

“1998 internal Merck clinical trial . . . revealed that . . .

serious cardiovascular events . . . occurred six times more

frequently in patients given Vioxx than in patients given a

different arthritis drug or placebo.” Id., at 56, 58–59

(emphasis and capitalization deleted).

Merck, believing that the plaintiffs knew or should have

Cite as: 559 U. S. ____ (2010) 7

Opinion of the Court

known the “facts constituting the violation” at least two

years earlier, moved to dismiss the complaint, saying it

was filed too late. The District Court granted the motion.

The court held that the (March 2001) VIGOR study, the

(September 2001) FDA warning letter, and Merck’s (Octo

ber 2001) response should have alerted the plaintiffs to a

“possibility that Merck had knowingly misrepresented

material facts” no later than October 9, 2001, thus placing

the plaintiffs on “inquiry notice” to look further. In re

Merck & Co. Securities, Derivative & “ERISA” Litigation,

483 F. Supp. 2d 407, 423 (NJ 2007) (emphasis added).

Finding that the plaintiffs had failed to “show that they

exercised reasonable due diligence but nevertheless were

unable to discover their injuries,” the court took October 9,

2001, as the date that the limitations period began to run

and therefore found the complaint untimely. Id., at 424.

The Court of Appeals for the Third Circuit reversed. A

majority held that the pre-November 2001 events, while

constituting “storm warnings,” did not suggest much by

way of scienter, and consequently did not put the plaintiffs

on “inquiry notice,” requiring them to investigate further.

In re Merck & Co. Securities, Derivative & “ERISA” Litiga

tion, 543 F. 3d 150, 172 (2008). A dissenting judge consid

ered the pre-November 2001 events sufficient to start the

2-year clock running. Id., at 173 (opinion of Roth, J.).

Merck sought review in this Court, pointing to dis

agreements among the Courts of Appeals. Compare Theo

harous v. Fong, 256 F. 3d 1219, 1228 (CA11 2001) (limita

tions period begins to run when information puts plaintiffs

on “inquiry notice” of the need for investigation), with

Shah v. Meeker, 435 F. 3d 244, 249 (CA2 2006) (same; but

if plaintiff does investigate, period runs “from the date

such inquiry should have revealed the fraud” (internal

quotation marks omitted)), and New England Health Care

Employees Pension Fund v. Ernst & Young, LLP, 336 F. 3d

495, 501 (CA6 2003) (limitations period always begins to

8 MERCK & CO. v. REYNOLDS

Opinion of the Court

run only when a reasonably diligent plaintiff, after being

put on “inquiry notice,” should have discovered facts con

stituting violation (internal quotation marks omitted)).

We granted Merck’s petition.

II

Before turning to Merck’s arguments, we consider a

more basic matter. The parties and the Solicitor General

agree that §1658(b)(1)’s word “discovery” refers not only to

a plaintiff’s actual discovery of certain facts, but also to

the facts that a reasonably diligent plaintiff would have

discovered. We agree. But because the statute’s language

does not make this interpretation obvious, and because we

cannot answer the question presented without considering

whether the parties are right about this matter, we set

forth the reasons for our agreement in some detail.

We recognize that one might read the statutory words

“after the discovery of the facts constituting the violation”

as referring to the time a plaintiff actually discovered the

relevant facts. But in the statute of limitations context,

the word “discovery” is often used as a term of art in con

nection with the “discovery rule,” a doctrine that delays

accrual of a cause of action until the plaintiff has “discov

ered” it. The rule arose in fraud cases as an exception to

the general limitations rule that a cause of action accrues

once a plaintiff has a “complete and present cause of ac

tion,” Bay Area Laundry and Dry Cleaning Pension Trust

Fund v. Ferbar Corp. of Cal., 522 U. S. 192, 201 (1997)

(citing Clark v. Iowa City, 20 Wall. 583, 589 (1875); inter

nal quotation marks omitted). This Court long ago recog

nized that something different was needed in the case of

fraud, where a defendant’s deceptive conduct may prevent

a plaintiff from even knowing that he or she has been

defrauded. Otherwise, “the law which was designed to

prevent fraud” could become “the means by which it is

Cite as: 559 U. S. ____ (2010) 9

Opinion of the Court

made successful and secure.” Bailey v. Glover, 21 Wall.

342, 349 (1875). Accordingly, “where a plaintiff has been

injured by fraud and remains in ignorance of it without

any fault or want of diligence or care on his part, the bar

of the statute does not begin to run until the fraud is

discovered.” Holmberg v. Armbrecht, 327 U. S. 392, 397

(1946) (internal quotation marks omitted; emphasis

added). And for more than a century, courts have under

stood that “[f]raud is deemed to be discovered . . . when, in

the exercise of reasonable diligence, it could have been

discovered.” 2 H. Wood, Limitation of Actions §276b(11),

p. 1402 (4th ed. 1916); see id., at 1401–1403, and nn. 74–

84 (collecting cases and statutes); see, e.g., Holmberg,

supra, at 397; Kirby v. Lake Shore & Michigan Southern

R. Co., 120 U. S. 130, 138 (1887) (The rule “regard[s] the

cause of action as having accrued at the time the fraud

was or should have been discovered”).

More recently, both state and federal courts have ap

plied forms of the “discovery rule” to claims other than

fraud. See 2 C. Corman, Limitation of Actions §§11.1.2.1,

11.1.2.3, pp. 136–142, and nn. 6–13, 18–23 (1991 and 1993

Supp.) (hereinafter Corman) (collecting cases); see, e.g.,

United States v. Kubrick, 444 U. S. 111 (1979). Legisla

tures have codified the discovery rule in various contexts.

2 Corman §11.2, at 170–171, and nn. 1–9 (collecting stat

utes); see, e.g., 28 U. S. C. §2409a(g) (actions to quiet title

against the United States). In doing so, legislators have

written the word “discovery” directly into the statute. And

when they have done so, state and federal courts have

typically interpreted the word to refer not only to actual

discovery, but also to the hypothetical discovery of facts a

reasonably diligent plaintiff would know. See, e.g., Pea

cock v. Barnes, 142 N. C. 215, 217–220, 55 S. E. 99, 100

(1906); Davis v. Hibernia Sav. & Loan Soc., 21 Cal. App.

444, 448, 132 P. 462, 464 (1913); Roether v. National

Union Fire Ins. Co., 51 N. D. 634, 640–642, 200 N. W. 818,

10 MERCK & CO. v. REYNOLDS

Opinion of the Court

821 (1924); Goldenberg v. Bache & Co., 270 F. 2d 675, 681

(CA5 1959); Mobley v. Hall, 202 Mont. 227, 232, 657 P. 2d

604, 606 (1983); Tregenza v. Great American Communica

tions Co., 12 F. 3d 717, 721–722 (CA7 1993); J. Geils Band

Employee Benefit Plan v. Smith Barney Shearson, Inc., 76

F. 3d 1245, 1254 (CA1 1996).

Thus, treatise writers now describe “the discovery rule”

as allowing a claim “to accrue when the litigant first

knows or with due diligence should know facts that will

form the basis for an action.” 2 Corman §11.1.1, at 134

(emphasis added); see also ibid., n. 1 (collecting cases); 37

Am. Jur. 2d, Fraud and Deceit §347, p. 354 (2001 and

Supp. 2009) (noting that the various formulations of “dis

covery” all provide that “in addition to actual knowledge of

the fraud, once a reasonably diligent party is in a position

that they should have sufficient knowledge or information

to have actually discovered the fraud, they are charged

with discovery”); id., at 354–355, and nn. 2–11 (collecting

cases).

Like the parties, we believe that Congress intended

courts to interpret the word “discovery” in §1658(b)(1)

similarly. Before Congress enacted that statute, this

Court, having found in the federal securities laws the

existence of an implied private §10(b) action, determined

its governing limitations period by looking to other limita

tions periods in the federal securities laws. Lampf, Pleva,

Lipkind, Prupis & Petigrow v. Gilbertson, 501 U. S. 350

(1991). Noting the existence of various formulations

“differ[ing] slightly in terminology,” the Court chose the

language in 15 U. S. C. §78i(e), the statutory provision

that governs securities price manipulation claims. 501

U. S., at 364, n. 9. And in doing so, the Court said that

private §10(b) actions “must be commenced within one

year after the discovery of the facts constituting the viola

tion and within three years after such violation.” Id., at

364 (emphasis added). (The Court listed among the vari

Cite as: 559 U. S. ____ (2010) 11

Opinion of the Court

ous formulations the one in 15 U. S. C. §77m, on which the

concurrence relies. See post, at 2–4 (SCALIA, J., concurring

in part and concurring in judgment); Lampf, supra, at 360,

and n. 7 (quoting §77m).)

Subsequently, every Court of Appeals to decide the

matter held that “discovery of the facts constituting the

violation” occurs not only once a plaintiff actually discov

ers the facts, but also when a hypothetical reasonably

diligent plaintiff would have discovered them. See, e.g.,

Law v. Medco Research, Inc., 113 F. 3d 781, 785–786 (CA7

1997); Dodds v. Cigna Securities, Inc., 12 F. 3d 346, 350,

353 (CA2 1993); see In re NAHC, Inc. Securities Litigation,

306 F. 3d 1314, 1325, n. 4 (CA3 2002) (collecting cases).

Some of those courts noted that other limitations provi

sions in the federal securities laws explicitly provide that

the period begins to run “ ‘after the discovery of the untrue

statement . . . or after such discovery should have been

made by [the] exercise of reasonable diligence,’ ” whereas

the formulation adopted by the Court in Lampf from 15

U. S. C. §78i(e) does not. Tregenza, supra, at 721 (quoting

§77m; emphasis added in Tregenza); see Lampf, supra, at

364, n. 9. But, courts reasoned, because the term “discov

ery” in respect to statutes of limitations for fraud has long

been understood to include discoveries a reasonably dili

gent plaintiff would make, the omission of an explicit

provision to that effect did not matter. Tregenza, supra, at

721; accord, New England Health Care, 336 F. 3d, at 499–

500.

In 2002, when Congress enacted the present limitations

statute, it repeated Lampf’s critical language. The statute

says that an action based on fraud “may be brought not

later than the earlier of . . . 2 years after the discovery of

the facts constituting the violation” (or “5 years after such

violation”). §804 of the Sarbanes-Oxley Act, 116 Stat. 801,

codified at 28 U. S. C. §1658(b) (emphasis added). (This

statutory provision does not make the linguistic distinc

12 MERCK & CO. v. REYNOLDS

Opinion of the Court

tion that the concurrence finds in a different statute,

§77m, and upon which its argument rests. Cf. 29 U. S. C.

§1113(2) (statute in which Congress provided that an

action be brought “three years after the earliest date on

which the plaintiff had actual knowledge of the breach or

violation” (emphasis added)).) Not surprisingly, the

Courts of Appeals unanimously have continued to inter

pret the word “discovery” in this statute as including not

only facts a particular plaintiff knows, but also the facts

any reasonably diligent plaintiff would know. See, e.g.,

Staehr v. Hartford Financial Servs. Group, Inc., 547 F. 3d

406, 411 (CA2 2008); Sudo Properties, Inc. v. Terrebonne

Parish Consolidated Govt., 503 F. 3d 371, 376 (CA5 2007).

We normally assume that, when Congress enacts stat

utes, it is aware of relevant judicial precedent. See, e.g.,

Edelman v. Lynchburg College, 535 U. S. 106, 116–117,

and n. 13 (2002); Commissioner v. Keystone Consol. Indus

tries, Inc., 508 U. S. 152, 159 (1993). Given the history

and precedent surrounding the use of the word “discovery”

in the limitations context generally as well as in this

provision in particular, the reasons for making this as

sumption are particularly strong here. We consequently

hold that “discovery” as used in this statute encompasses

not only those facts the plaintiff actually knew, but also

those facts a reasonably diligent plaintiff would have

known. And we evaluate Merck’s claims accordingly.

III

We turn now to Merck’s arguments in favor of holding

that petitioners’ claims accrued before November 6, 2001.

First, Merck argues that the statute does not require

“discovery” of scienter-related “facts.” See Brief for Peti

tioners 19–28. We cannot agree, however, that facts about

scienter are unnecessary.

The statute says that the limitations period does not

begin to run until “discovery of the facts constituting the

Cite as: 559 U. S. ____ (2010) 13

Opinion of the Court

violation.” 28 U. S. C. §1658(b)(1) (emphasis added).

Scienter is assuredly a “fact.” In a §10(b) action, scienter

refers to “a mental state embracing intent to deceive,

manipulate, or defraud.” Ernst & Ernst, 425 U. S., at 194,

n. 12. And the “ ‘state of a man’s mind is as much a fact as

the state of his digestion.’ ” Postal Service Bd. of Gover

nors v. Aikens, 460 U. S. 711, 716 (1983) (quoting Edging

ton v. Fitzmaurice, [1885] 29 Ch. Div. 459, 483).

And this “fact” of scienter “constitut[es]” an important

and necessary element of a §10(b) “violation.” A plaintiff

cannot recover without proving that a defendant made a

material misstatement with an intent to deceive—not

merely innocently or negligently. See Tellabs, Inc. v.

Makor Issues & Rights, Ltd., 551 U. S. 308, 319 (2007);

Ernst & Ernst, supra. Indeed, Congress has enacted

special heightened pleading requirements for the scienter

element of §10(b) fraud cases. See 15 U. S. C. §78u–4(b)(2)

(requiring plaintiffs to “state with particularity facts

giving rise to a strong inference that the defendant acted

with the required state of mind” (emphasis added)). As a

result, unless a §10(b) plaintiff can set forth facts in the

complaint showing that it is more likely than not that the

defendant acted with the relevant knowledge or intent, the

claim will fail. See Tellabs, supra, at 328. It would there

fore frustrate the very purpose of the discovery rule in this

provision—which, after all, specifically applies only in

cases “involv[ing] a claim of fraud, deceit, manipulation, or

contrivance,” §1658(b)—if the limitations period began to

run regardless of whether a plaintiff had discovered any

facts suggesting scienter. So long as a defendant con

cealed for two years that he made a misstatement with an

intent to deceive, the limitations period would expire

before the plaintiff had actually “discover[ed]” the fraud.

We consequently hold that facts showing scienter are

among those that “constitut[e] the violation.” In so hold

ing, we say nothing about other facts necessary to support

14 MERCK & CO. v. REYNOLDS

Opinion of the Court

a private §10(b) action. Cf. Brief for United States as

Amicus Curiae 12, n. 1 (suggesting that facts concerning a

plaintiff’s reliance, loss, and loss causation are not among

those that constitute “the violation” and therefore need not

be “discover[ed]” for a claim to accrue).

Second, Merck argues that, even if “discovery” requires

facts related to scienter, facts that tend to show a materi

ally false or misleading statement (or material omission)

are ordinarily sufficient to show scienter as well. See

Brief for Petitioners 22, 28–29. But we do not see how

that is so. We recognize that certain statements are such

that, to show them false is normally to show scienter as

well. It is unlikely, for example, that someone would

falsely say “I am not married” without being aware of the

fact that his statement is false. Where §10(b) is at issue,

however, the relation of factual falsity and state of mind is

more context specific. An incorrect prediction about a

firm’s future earnings, by itself, does not automatically tell

us whether the speaker deliberately lied or just made an

innocent (and therefore nonactionable) error. Hence, the

statute may require “discovery” of scienter-related facts

beyond the facts that show a statement (or omission) to be

materially false or misleading. Merck fears that this

requirement will give life to stale claims or subject defen

dants to liability for acts taken long ago. But Congress’

inclusion in the statute of an unqualified bar on actions

instituted “5 years after such violation,” §1658(b)(2), giv

ing defendants total repose after five years, should dimin

ish that fear. Cf. Lampf, 501 U. S., at 363 (holding compa

rable bar not subject to equitable tolling).

Third, Merck says that the limitations period began to

run prior to November 2001 because by that point the

plaintiffs were on “inquiry notice.” Merck uses the term

“inquiry notice” to refer to the point “at which a plaintiff

possesses a quantum of information sufficiently suggestive

of wrongdoing that he should conduct a further inquiry.”

Cite as: 559 U. S. ____ (2010) 15

Opinion of the Court

Brief for Petitioners 20. And some, but not all, Courts of

Appeals have used the term in roughly similar ways. See,

e.g., Franze v. Equitable Assurance, 296 F. 3d 1250, 1254

(CA11 2002) (“[I]nquiry notice [is] “ ‘the term used for

knowledge of facts that would lead a reasonable person to

begin investigating the possibility that his legal rights had

been infringed’ ”). Cf. Dodds, 12 F. 3d, at 350 (“duty of

inquiry” arises once “circumstances would suggest to an

investor of ordinary intelligence the probability that she

had been defrauded”); Fujisawa Pharmaceutical Co. v.

Kapoor, 115 F. 3d 1332, 1335–1336 (CA7 1997) (“The facts

constituting [inquiry] notice must be sufficien[t] . . . to

incite the victim to investigate” and “to enable him to tie

up any loose ends and complete the investigation in time

to file a timely suit”); Great Rivers Cooperative of South

eastern Iowa v. Farmland Industries, Inc., 120 F. 3d 893,

896 (CA8 1997) (“Inquiry notice exists when the victim is

aware of facts that would lead a reasonable person to

investigate and consequently acquire actual knowledge of

the defendant’s misrepresentations” (emphasis added)).

If the term “inquiry notice” refers to the point where the

facts would lead a reasonably diligent plaintiff to investi

gate further, that point is not necessarily the point at which

the plaintiff would already have discovered facts showing

scienter or other “facts constituting the violation.” But the

statute says that the plaintiff’s claim accrues only after the

“discovery” of those latter facts. Nothing in the text sug

gests that the limitations period can sometimes begin before

“discovery” can take place. Merck points out that, as we

have discussed, see supra, at 8–9, the court-created “discov

ery rule” exception to ordinary statutes of limitations is not

generally available to plaintiffs who fail to pursue their

claims with reasonable diligence. But we are dealing here

with a statute, not a court-created exception to a statute.

Because the statute contains no indication that the limita

tions period should occur at some earlier moment before

16 MERCK & CO. v. REYNOLDS

Opinion of the Court

“discovery,” when a plaintiff would have begun investigat

ing, we cannot accept Merck’s argument.

As a fallback, Merck argues that even if the limitations

period does generally begin at “discovery,” it should none

theless run from the point of “inquiry notice” in one par

ticular situation, namely, where the actual plaintiff fails to

undertake an investigation once placed on “inquiry no

tice.” In such circumstances, Merck contends, the actual

plaintiff is not diligent, and the law should not “effectively

excuse a plaintiff’s failure to conduct a further investiga

tion” by placing that nondiligent plaintiff and a reasonably

diligent plaintiff “in the same position.” Brief for Petition

ers 48.

We cannot accept this argument for essentially the same

reason we reject “inquiry notice” as the standard gener

ally: We cannot reconcile it with the statute, which simply

provides that “discovery” is the event that triggers the 2

year limitations period—for all plaintiffs. Cf. United

States v. Mack, 295 U. S. 480, 489 (1935) (“Laches within

the term of the statute of limitations is no defense at

law”). Furthermore, the statute does not place all plain

tiffs “in the same position” no matter whether they inves

tigate when investigation is warranted. The limitations

period puts plaintiffs who fail to investigate once on “in

quiry notice” at a disadvantage because it lapses two years

after a reasonably diligent plaintiff would have discovered

the necessary facts. A plaintiff who fails entirely to inves

tigate or delays investigating may well not have discov

ered those facts by that time or, at least, may not have

found sufficient facts by that time to be able to file a §10(b)

complaint that satisfies the applicable heightened plead

ing standards. Cf. Young v. Lepone, 305 F. 3d 1, 9 (CA1

2002) (“[A] reasonably diligent investigation . . . may

consume as little as a few days or as much as a few years

to get to the bottom of the matter”).

Merck further contends that its proposed “inquiry no

Cite as: 559 U. S. ____ (2010) 17

Opinion of the Court

tice” standard is superior, because determining when a

hypothetical reasonably diligent plaintiff would have

“discover[ed]” the necessary facts is too complicated for

judges to undertake. But courts applying the traditional

discovery rule have long had to ask what a reasonably

diligent plaintiff would have known and done in myriad

circumstances. And courts in at least five Circuits already

ask this kind of question in securities fraud cases. See,

e.g., Rothman v. Gregor, 220 F. 3d 81, 97 (CA2 2000); New

England Health Care, 336 F. 3d, at 501; Young, supra, at

1, 9–10; Sterlin v. Biomune Systems, 154 F. 3d 1191, 1201

(CA10 1998); Marks v. CDW Computer Centers, Inc., 122

F. 3d 363, 367–368 (CA7 1997). Merck has not shown this

precedent to be unworkable. We consequently find that

the “discovery” of facts that put a plaintiff on “inquiry

notice” does not automatically begin the running of the

limitations period.

We conclude that the limitations period in §1658(b)(1)

begins to run once the plaintiff did discover or a reasona

bly diligent plaintiff would have “discover[ed] the facts

constituting the violation”—whichever comes first. In

determining the time at which “discovery” of those “facts”

occurred, terms such as “inquiry notice” and “storm warn

ings” may be useful to the extent that they identify a time

when the facts would have prompted a reasonably diligent

plaintiff to begin investigating. But the limitations period

does not begin to run until the plaintiff thereafter discov

ers or a reasonably diligent plaintiff would have discov

ered “the facts constituting the violation,” including sci

enter—irrespective of whether the actual plaintiff

undertook a reasonably diligent investigation.

IV

Finally, Merck argues that, even if all its other legal

arguments fail, the record still shows that, before Novem

18 MERCK & CO. v. REYNOLDS

Opinion of the Court

ber 6, 2001, the plaintiffs had discovered or should have

discovered “the facts constituting the violation.” In re

spect to scienter Merck primarily relies upon (1) the FDA’s

September 2001 warning letter, which said that Merck

had “ ‘minimized’ ” the VIGOR study’s “ ‘potentially serious

cardiovascular findings’ ” and (2) pleadings filed in prod

ucts-liability actions in September and October 2001

alleging that Merck had “ ‘omitted, suppressed, or con

cealed material facts concerning the dangers and risks

associated with Vioxx’ ” and “purposefully downplayed

and/or understated the serious nature of the risks associ

ated with Vioxx.” Brief for Petitioners 36–37 (quoting

App. 340, 893).

The FDA’s warning letter, however, shows little or

nothing about the here-relevant scienter, i.e., whether

Merck advanced the naproxen hypothesis with fraudulent

intent. See Part I–A(4), supra. The FDA itself described

the pro-Vioxx naproxen hypothesis as a “possible explana

tion” for the VIGOR results, faulting Merck only for failing

sufficiently to publicize the alternative less favorable to

Merck, that Vioxx might be harmful. App. 340.

The products-liability complaints’ statements about

Merck’s knowledge show little more. See Part I–A(3),

supra. Merck does not claim that these complaints con

tained any specific information suggesting the fraud al

leged here, i.e., that Merck knew the naproxen hypothesis

was false even as it promoted it. And, without providing

any reason to believe that the plaintiffs had special access

to information about Merck’s state of mind, the complaints

alleged only in general terms that Merck had concealed

information about Vioxx and “purposefully downplayed

and/or understated” the risks associated with Vioxx—the

same charge made in the FDA warning letter. App. 893.

In our view, neither these two circumstances nor any of

the other pre-November 2001 circumstances that we have

set forth in Part I–A, supra, whether viewed separately or

Cite as: 559 U. S. ____ (2010) 19

Opinion of the Court

together, reveal “facts” indicating scienter. Regardless of

which, if any, of the events following November 6, 2001,

constituted “discovery,” we need only conclude that prior

to November 6, 2001, the plaintiffs did not discover, and

Merck has not shown that a reasonably diligent plaintiff

would have discovered, “the facts constituting the viola

tion.” In light of our interpretation of the statute, our

holdings in respect to scienter, and our application of

those holdings to the circumstances of this case, we must,

and we do, reach that conclusion. Thus, the plaintiffs’ suit

is timely. We need not—and do not—pass upon the Court

of Appeals’ suggestion that the November 2003 Brigham

and Women’s study might have triggered the statute of

limitations. The judgment of the Court of Appeals is

Affirmed.

Cite as: 559 U. S. ____ (2010) 1

Opinion of STEVENS, J.

SUPREME COURT OF THE UNITED STATES

_________________

No. 08–905

_________________

MERCK & CO., INC., ET AL., PETITIONERS v. RICHARD

REYNOLDS ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT

[April 27, 2010]

JUSTICE STEVENS, concurring in part and concurring in

the judgment.

In my opinion the Court’s explanation of why the com

plaint was timely filed is convincing and correct. Ante, at

12–19. In this case there is no difference between the time

when the plaintiffs actually discovered the factual basis

for their claim and the time when reasonably diligent

plaintiffs should have discovered those facts. For that

reason, much of the discussion in Part II of the Court’s

opinion, see ante, at 8–12, is not necessary to support the

Court’s judgment. Until a case arises in which the differ

ence between an actual discovery rule and a constructive

discovery rule would affect the outcome, I would reserve

decision on the merits of JUSTICE SCALIA’s argument, post,

at 1–7 (opinion concurring in part and concurring in

judgment). With this reservation, I join the Court’s excel

lent opinion.

Cite as: 559 U. S. ____ (2010) 1

Opinion of SCALIA, J.

SUPREME COURT OF THE UNITED STATES

_________________

No. 08–905

_________________

MERCK & CO., INC., ET AL., PETITIONERS v. RICHARD

REYNOLDS ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT

[April 27, 2010]

JUSTICE SCALIA, with whom JUSTICE THOMAS joins,

concurring in part and concurring in the judgment.

Private suits under §10(b) of the Securities Exchange

Act of 1934, 15 U. S. C. §78j(b), must be brought within

“(1) 2 years after the discovery of the facts constituting the

violation” or “(2) 5 years after such violation,” whichever

comes first. 28 U. S. C. §1658(b)(1). I agree with the

Court that scienter is among the “facts constituting the

violation” that a plaintiff must “discove[r]” for the limita

tions period to begin. Ante, at 12–14 (internal quotation

marks omitted). I also agree that respondents’ suit is

timely, but for a reason different from the Court’s: Merck

has not shown that respondents actually “discover[ed]”

scienter more than two years before bringing suit.

In ordinary usage, “discovery” occurs when one actually

learns something new. See Webster’s New International

Dictionary of the English Language 745 (2d ed. 1957)

(defining “discovery” as “[f]inding out or ascertaining

something previously unknown or unrecognized”). As the

Court notes, however, ante, at 8–10, in the context of

statutes of limitations “discovery” has long carried an

additional meaning: It also occurs when a plaintiff, exer

cising reasonable diligence, should have discovered the

facts giving rise to his claim. See, e.g., Wood v. Carpenter,

101 U. S. 135, 140–142 (1879); 2 H. Wood, Limitations of

2 MERCK & CO. v. REYNOLDS

Opinion of SCALIA, J.

Actions §276b(11)–(13), pp. 1401–1408 (4th ed. 1916);

Dawson, Undiscovered Fraud and Statutes of Limitation,

31 Mich. L. Rev. 591, 619, and n. 77 (1933). Read in isola

tion, “discovery” in §1658(b)(1) might mean constructive

discovery.

In context, however, I do not believe it can. Section 13

of the Securities Act of 1933, 48 Stat. 84, explicitly estab

lished a constructive-discovery rule for claims under §§11

and 12 of that Act:

“No action shall be maintained to enforce any liability

created under section 77k or 77l(a)(2) of this title

unless brought within one year after the discovery of

the untrue statement or the omission, or after such

discovery should have been made by the exercise of

reasonable diligence . . . .” 15 U. S. C. §77m.

“[D]iscovery” in §77m obviously cannot mean constructive

discovery, since that would render superfluous the phrase

“or after such discovery should have been made by the

exercise of reasonable diligence.” Ibid. With §77m al

ready on the books, Congress added limitations periods in

the 1934 Act, 15 U. S. C. §§78i(e), 78r(c), that did not

contain similar qualifying language; instead, each estab

lished a time bar that runs from “discovery” simpliciter.

When Congress enacted §1658(b)(1) in 2002, establishing

a limitations period for private actions for “fraud, deceit,

manipulation, or contrivance in contravention of a regula

tory requirement concerning the securities laws,” specifi

cally including the 1933 and 1934 Acts, see 15 U. S. C.

§78c(a)(47), it likewise included no constructive-discovery

caveat. To interpret §1658(b)(1) as imposing a construc

tive-discovery standard, one must therefore assume, con

trary to common sense, that the same word means two

very different things in the same statutory context of

limitations periods for securities-fraud actions under the

1933 and 1934 Acts.

Cite as: 559 U. S. ____ (2010) 3

Opinion of SCALIA, J.

True, the sensible presumption that a word means the

same thing when it appears more than once in the same

statutory context—or even in the very same statute—is

rebuttable. See General Dynamics Land Systems, Inc. v.

Cline, 540 U. S. 581, 595–596 (2004). Context may make

clear that in one instance the word carries one meaning,

and in a second instance another. See, e.g., id., at 596–

597. But nothing in the context of §77m or §1658(b)(1)

suggests that is the case. Both provisions impose limita

tions periods for federal-law claims based on various false

statements or omissions involving securities. The former

applies to false statements or omissions in registration

statements, §77k, and offers to sell securities, §77l(a)(2);

the broad language of the latter (“claim[s] of fraud, deceit,

manipulation, or contrivance in contravention of a regula

tory requirement concerning the securities laws”) covers

other “manipulative or deceptive device[s] or contriv

ance[s]” made “in connection with the purchase or sale” of

a security in violation of Securities and Exchange Com

mission regulations, §78j(b), including SEC Rule 10b–5, 17

CFR §240.10b–5(b) (2009). There is good reason, more

over, for providing an actual-discovery rule for private

§10(b) claims but providing (explicitly) a constructive

discovery rule for claims governed by §77m: The elements

of §10(b) claims, which include scienter, are likely more

difficult to discover than the elements of claims under

§77k or §77l(a)(2), which do not, see Herman & MacLean

v. Huddleston, 459 U. S. 375, 382 (1983); Ernst & Ernst v.

Hochfelder, 425 U. S. 185, 208–209 (1976); In re Morgan

Stanley Information Fund Securities Litigation, 592 F. 3d

347, 359 (CA2 2010). And a constructive-discovery stan

dard may be easier to apply to the claims covered by §77m.

Determining when the plaintiff should have uncovered an

untrue assertion in a registration statement or prospectus

is much simpler than assessing when a plaintiff should

have learned that the defendant deliberately misled him

4 MERCK & CO. v. REYNOLDS

Opinion of SCALIA, J.

using a deceptive device covered by §10(b).1

Unable to identify anything in the statutory context that

warrants giving “discovery” two meanings, the Court

relies on the historical treatment of “discovery” in limita

tions periods (particularly for fraud claims) as incorporat

ing a constructive-discovery rule. Ante, at 8–10, 12. But

that history proves only that “discovery” can carry that

technical meaning, and that without §77m it would be

reasonable (other things equal) to read it that way here.

It does not show what “discovery” means in §1658(b)(1) in

light of §77m’s codification of a constructive-discovery

rule. In my view, the meaning of “discovery” in the

broader context of limitations provisions is overcome by its

meaning in the more specific context of the federal securi

ties laws.

The Court’s other reason for rejecting the more natural

reading of §1658(b)(1) rests on a consensus among the

Courts of Appeals before the provision’s enactment. Ante,

at 11–12. In Lampf, Pleva, Lipkind, Prupis & Petigrow v.

Gilbertson, 501 U. S. 350 (1991), the Court notes, we

explicitly adopted the terms of §78i(e)—which like

§1658(b)(1) refers only to discovery with no mention of

reasonable diligence—as the limitations period for the

private §10(b) cause of action we created. Id., at 364, and

——————

1 The Court appears to believe that §77m’s distinction between actual

and constructive discovery has no bearing on §1658(b)(1)’s meaning

because the latter does not itself draw the same distinction. Ante, at

11–12. The point, however, is that both provisions use the same word

(“discovery”) with no contextual clue that it carries different meanings;

and its use in §77m makes clear that the meaning is actual discovery.

The Court suggests that usages of the same word in other statutes

are irrelevant, ante, at 11–12, but of course it does not believe that. Its

entire argument rests on the meaning courts have ascribed to “discov

ery” in other limitations provisions (some enacted decades ago by state

legislatures), ante, at 8–10. Yet while the Court considers that broader

context, it provides no explanation for ignoring the more specific

context of securities-fraud claims under the 1933 and 1934 Acts.

Cite as: 559 U. S. ____ (2010) 5

Opinion of SCALIA, J.

n. 9.2 Since every Circuit to address the issue between

Lampf and §1658(b)(1)’s enactment 11 years later had held

constructive discovery applicable to §10(b) claims—and

since Congress copied §78i(e)’s key text into §1658(b)(1)

with no indication it intended to adopt a contrary rule—the

Court assumes Congress meant to codify (or at least not to

disturb) that consensus. Ante, at 11–12.

Even assuming that Congress intended to incorporate

the Circuits’ views—which requires the further unrealistic

assumption that a majority of each House knew of and

agreed with the Courts of Appeals’ opinions—that would

be entirely irrelevant. Congress’s collective intent (if such

a thing even exists) cannot trump the text it enacts, and in

any event we have no reliable way to ascertain that intent

apart from reading the text. See Graham County Soil and

Water Conservation Dist. v. United States ex rel. Wilson,

559 U. S. ___, ___ (2010) (SCALIA, J., concurring in part

and concurring in judgment) (slip op., at 1).

The only way in which the Circuits’ pre-2002 decisions

might bear on §1658(b)(1)’s meaning is if all (or nearly all)

of the Circuits had interpreted “discovery” in §78i(e) to

mean constructive discovery. If that were true, one could

say that those decisions had established the public mean

ing of the term in this context—whether Congress knew of

(or agreed with) that meaning or not. Jerman v. Carlisle,

McNellie, Rini, Kramer & Ulrich LPA, 559 U. S. ___, ___,

n. 1 (2010) (SCALIA, J., concurring in part and concurring

——————

2 The Court notes that Lampf chose §78i(e)’s limitations period as the

time bar for §10(b) claims, even though it was aware of §77m, 501 U. S.,

at 360, and n. 7, 364, and n. 9; see ante, at 10–11. But I fail to see how

that provides any support for the Court’s interpretation. To the con

trary, the fact that in enacting §1658(b)(1) Congress did not copy

§77m’s constructive-discovery proviso—but decreed instead that “dis

covery” alone starts the clock (as it had done in §78i(e), which we

borrowed in Lampf)—is what makes equating §77m and §1658(b)(1) so

implausible.

6 MERCK & CO. v. REYNOLDS

Opinion of SCALIA, J.

in judgment) (slip op., at 2, n. 1).

But as amici note, that is not so. See Brief for Faculty

at Law and Business Schools as Amici Curiae 23–29 (here

inafter Faculty Brief). Some circuit cases cited by the

Court and amici can conceivably be read as interpreting

the language Lampf adopted from §78i(e) as imposing

some form of constructive discovery. See Theoharous v.

Fong, 256 F. 3d 1219, 1228 (CA11 2001); Menowitz v.

Brown, 991 F. 2d 36, 41 (CA2 1993) (per curiam); Howard

v. Haddad, 962 F. 2d 328, 329–330 (CA4 1992); Anixter v.

Home-Stake Production Co., 947 F. 2d 897, 898–899 (CA10

1991), vacated on other grounds, 503 U. S. 978 (1992).

Others, however, cannot be so construed. Two were not

interpreting §78i(e) at all, but looked directly to §77m,

despite Lampf’s explicit selection of §78i(e)’s terms. Great

Rivers Cooperative of Southeastern Iowa v. Farmland

Industries, Inc., 120 F. 3d 893, 896 (CA8 1997); Topalian

v. Ehrman, 954 F. 2d 1125, 1135 (CA5 1992). Another

court candidly acknowledged that §78i(e)’s text—unlike

§77m’s—forecloses constructive discovery, but it nonethe

less held that courts remain “free to apply to [§78i(e)] the

judge-made doctrine of inquiry notice” as a “modest and

traditional . . . exercise of judicial creativity,” since “Con

gress could not have known when it enacted [§78i(e)] that

this section would someday provide the statute of limita

tions for a wide range of securities frauds.” Tregenza v.

Great American Communications Co., 12 F. 3d 717, 721–

722 (CA7 1993) (Posner, J.).

The rest of the Circuits apparently had not decided the

issue before §1658(b)(1)’s enactment. See Betz v. Trainer

Wortham & Co., 519 F. 3d 863, 874 (CA9 2008); New

England Health Care Employees Pension Fund v. Ernst &

Young, LLP, 336 F. 3d 495, 500–501, and n. 3 (CA6 2003);

In re NAHC, Inc. Securities Litigation, 306 F. 3d 1314,

1325 (CA3 2002); see also Cooperativa de Ahorro y Credito

Aguada v. Kidder, Peabody & Co., 129 F. 3d 222, 224 (CA1

Cite as: 559 U. S. ____ (2010) 7

Opinion of SCALIA, J.

1997) (applying pre-Lampf rule under 15 U. S. C. §78aa–

1). And of those that were undecided, two had cast doubt

on a constructive-discovery view in dicta—of which the

omniscient Congress of the Court’s imagining should also

have been aware. See Berry v. Valence Technology, Inc.,

175 F. 3d 699, 703–705 (CA9 1999); Gruber v. Price Water

house, 911 F. 2d 960, 964, n. 4 (CA3 1990).

This motley assortment of approaches comes nowhere

near establishing that the word “discovery” in §78i(e)

meant constructive rather than actual discovery despite

§77m. Absent any textual or contextual reason to read

“discovery” differently in §1658(b)(1) and §77m, I would

hold that only actual discovery suffices to start the limita

tions period for §10(b) claims. Since Merck points to no

evidence showing respondents actually discovered scienter

more than two years before bringing this suit, I agree with

the Court that the suit was not time barred.

Respondents suggested at oral argument, Tr. of Oral

Arg. 29, and their amici imply, see Faculty Brief 33–34,

that in fraud-on-the-market cases there is little if any

difference between actual and constructive discovery

because of the presumption of reliance applicable in such

cases, see Basic Inc. v. Levinson, 485 U. S. 224, 247 (1988).

It seems to me Basic has no bearing on the question dis

cussed here. A presumption of reliance upon market-price

signals is not a presumption of knowledge of all public

information, much less knowledge of nonpublic informa

tion that a reasonably diligent investor would have inde

pendently uncovered. In any event, whether or not a

constructive-discovery standard will in many cases yield

the same result, actual discovery is what §1658(b)(1)

requires to start the limitations period.