HP 2008 Annual Report Download - page 156

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 17: Litigation and Contingencies (Continued)
• In September 2006, HP received a request from the U.S. Federal Communications Commission
for records and information relating to the processes employed in the leak investigation. HP has
responded to that request.
In addition, four stockholder derivative lawsuits have been filed in California purportedly on behalf
of HP stockholders seeking to recover damages for alleged breach of fiduciary duty and to require HP
to improve its corporate governance and internal control procedures as a result of the activities of the
leak investigation: Staehr v. Dunn, et al. was filed in Santa Clara County Superior Court on
September 18, 2006; Worsham v. Dunn, et al. was filed in Santa Clara County Superior Court on
September 14, 2006; Tansey v. Dunn, et al. was filed in Santa Clara County Superior Court on
September 20, 2006; and Hall v. Dunn, et al. was filed in Santa Clara County Superior Court on
September 25, 2006. On October 19, 2006, the Santa Clara County Superior Court consolidated the
four California cases under the caption In re Hewlett-Packard Company Derivative Litigation. The
consolidated complaint filed on November 19, 2006, also seeks to recover damages in connection with
sales of HP stock alleged to have been made by certain current and former HP officers and directors
while in possession of material non-public information. Two additional stockholder derivative lawsuits,
Pifko v. Babbio, et al., filed on September 19, 2006, and Gross v. Babbio, et al., filed on November 21,
2006, were filed in Chancery Court, County of New Castle, Delaware; both seek to recover damages for
alleged breaches of fiduciary duty and to obtain an order instructing the defendants to refrain from
further breaches of fiduciary duty and to implement corrective measures that will prevent future
occurrences of the alleged breaches of fiduciary duty. On January 24, 2007, the Delaware court
consolidated the two cases under the caption In re Hewlett-Packard Company Derivative Litigation and
subsequently stayed the proceedings, as the parties had reached a tentative settlement. The HP Board
of Directors appointed a Special Litigation Committee consisting of independent Board members
authorized to investigate, review and evaluate the facts and circumstances asserted in these derivative
matters and to determine how HP should proceed in these matters. On December 14, 2007, HP and
the plaintiffs in the California and Delaware derivative actions entered into an agreement to settle
those lawsuits. Under the terms of the settlement, HP agreed to continue certain corporate governance
changes until December 31, 2012 and to pay the plaintiffs’ attorneys’ fees. The California court granted
final approval to the settlement on March 11, 2008 and subsequently granted plaintiffs’ counsel’s fee
application and dismissed the action. On June 12, 2008, the Delaware court granted final approval to
the settlement and the plaintiffs’ application for attorneys’ fees and also dismissed the action. Because
neither the dismissal of the California nor the Delaware derivative action was thereafter appealed, both
cases are now concluded.
Environmental
HP is subject to various federal, state, local and foreign laws and regulations concerning
environmental protection, including laws addressing the discharge of pollutants into the air and water,
the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites,
the content of its products and the recycling, treatment and disposal of its products including batteries.
In particular, HP faces increasing complexity in its product design and procurement operations as it
adjusts to new and future requirements relating to the chemical and materials composition of its
products, their safe use, the energy consumption associated with those products and product take-back
legislation. HP could incur substantial costs, its products could be restricted from entering certain
jurisdictions, and it could face other sanctions, if it were to violate or become liable under
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