The appeals court concluded that U.S. District Judge Stanley R. Chesler erred in not allowing the plaintiffs to amend their complaint with additional materials. Chesler had ruled on the grounds that those materials were acquired as a result of a consensual discovery agreement.

The panel said the district judge needs to determine whether the additional materials would affect the lawsuit's merit.

Since it is a shareholder suit, the plaintiffs normally would have been required to first make a demand upon the company's board of directors. But the plaintiffs said such a demand would have been futile at the time they began the lawsuit.

"Of course, we express no opinion about whether the newly acquired facts that are included in the amended complaint will alter this analysis," the 3rd Circuit judges wrote. "The allegations must not simply demonstrate an aloof or negligent board, but nonfeasance that rose to the level of egregiousness or bad faith."

"We look forward to presenting our arguments anew to the district court under the guidance provided by the appellate court today," said Ted Mayer, an attorney for Merck. "Given that today's ruling did not challenge the reasoning of the lower court in previously dismissing the lawsuit, we believe that the outcome should be the same."

A message left with an attorney for the plaintiffs was not immediately returned.