HP 2005 Annual Report Download - page 126

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 17: Litigation and Contingencies (Continued)
Division of the Department of Justice, the General Services Administration Office of Inspector General
and other Federal agencies are conducting an investigation of allegations that HP and Compaq made,
or caused to be made, false claims for payment to the United States for computers known by HP and
Compaq to contain defective parts or otherwise to perform in a defective manner relating to the same
alleged floppy disk controller errors. HP agreed with the Department of Justice to extend the statute of
limitations on its investigation until June 6, 2006. HP is cooperating fully with this investigation.
Hanrahan v. Hewlett-Packard Company and Carleton Fiorina is a lawsuit filed on November 3, 2003
in the United States District Court for the District of Connecticut on behalf of a putative class of
persons who sold common stock of HP during the period from September 4, 2001 through
November 5, 2001. The lawsuit seeks unspecified damages and generally alleges that HP and Carleton
S. Fiorina, HP’s former CEO, violated the federal securities laws by making statements during this
period that were misleading in failing to disclose that Walter B. Hewlett, a former HP board member,
would oppose the proposed acquisition of Compaq by HP prior to Mr. Hewlett’s disclosure of his
opposition to the proposed transaction. The case has been transferred to the United States District
Court for the Northern District of California.
Neubauer, et al. v. Intel Corporation, Hewlett-Packard Company, et al. and Neubauer, et al. v. Compaq
Computer Corporation are separate lawsuits filed on June 3, 2002 in the Circuit Court, Third Judicial
District, Madison County, Illinois, alleging that HP and Compaq (along with Intel) misled the public by
suppressing and concealing the alleged material fact that systems that use the Intel Pentium 4 processor
are less powerful and slower than systems using the Intel Pentium III processor and processors made
by a competitor of Intel. The court in the HP action has certified an Illinois class as to Intel but denied
a nationwide class, and proceedings have been stayed pending resolution of plaintiffs’ appeal of this
decision. The plaintiffs seek unspecified damages, restitution, attorneys’ fees and costs, and certification
of a nationwide class. The class action certification against Compaq has been stayed pending resolution
of plaintiffs’ appeal in the HP action. Skold, et al. v. Intel Corporation and Hewlett-Packard Company is a
lawsuit that was initially filed in state court in Alameda County, California, to which HP was joined on
June 14, 2004, which is based upon factual allegations similar to those in the Neubauer cases. The Skold
case has since been transferred to state court in Santa Clara County, California. The plaintiffs seek
unspecified damages, restitution, attorneys’ fees and costs and certification of a nationwide class.
Tyler v. HP is a lawsuit filed in state court in Santa Clara, California on February 17, 2005 alleging
that HP engaged in wrongful business practices, including unfair competition, deceptive advertising,
fraud and deceit, breach of express and implied warranty and breach of the covenants of good faith
and fair dealing. Among other things, plaintiffs alleged that HP engineered ‘‘smart chip’’ inkjet
cartridges for use in certain inkjet printers to register ink depletion prematurely and to render the
cartridge unusable through a built-in expiration date that is hidden, not documented in marketing
materials to consumers, or both. Plaintiffs also contend that consumers received false ink depletion
warnings and that the design of the smart chip cartridge limits the ability of consumers to use the
cartridge to its full capacity or to choose competitive products. On February 17, 2005 and March 18,
2005 lawsuits captioned Obi v. HP and Weingart v. HP, respectively, were filed in state court in Los
Angeles, California with similar allegations. Feder v. HP and Ciolino v. Hewlett-Packard Company were
filed in the United States District Court for the Northern District of California on June 16, 2005, and
September 6, 2005, respectively, with similar allegations, seeking restitution, damages, injunctive relief,
interest, costs, attorneys’ fees and class certification. The Feder and Ciolino cases have been formally
consolidated in a single proceeding in the District Court for the Northern District of California under
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