I tried merging two contacts in Marketo and I received the following System Error: Failed to merge leads 
Anyone know what this means?
Support may know.
usually when a merge error occurs it is because Marketo cannot merge the records in the CRM.
I actually did a write-up of this very issue for someone else a few days ago; I hope this helps you out.
Thanks Courtney! The duplicate was never added to Salesforce (dupe blocker) so I wanted to merge them to update the existing lead record with the history. I've done this before so I don't know what else is causing the error. I opened a case with support so stay tuned.