McKesson 2006 Annual Report Download - page 85

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Although most of those cases have been resolved as reported here and previously, certain matters remain pending as more fully described
below:
Federal Actions
On February 24, 2006, the Honorable Ronald M. Whyte signed a Final Judgment and Order of Dismissal (the “Judgment”), in which the
Court gave its final approval to the settlement of the Consolidated Action and dismissed on the merits and with prejudice all claims asserted in
the Consolidated Action against the Company, HBOC, and Defendants’ Released Persons (as that term is defined in the Judgment). On
March 23, 2006, Defendant Bear, Stearns filed an appeal of the Judgment to the United States Court of Appeals for the Ninth Circuit. The
appeal by Bear Stearns challenges certain provisions of the settlement that restrict Bear Stearns’ ability to bring certain claims in the future
against the Company, HBOC and certain other persons released in the settlement. The outcome of the Bear Stearns appeal will not affect the
Company’s right and ability to enjoy the other benefits of the settlement, including the releases of the Company, HBOC and the Defendants’
Released Persons (as that term is defined in the Stipulation of Settlement) by the members of the settlement class.
On March 30, 2006, the Company paid approximately $960 million into an escrow account established in connection with the settlement of
the Consolidated Action in full satisfaction of its payment obligations under the Judgment and the Stipulation of Settlement. Any distribution o
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the funds deposited into the escrow account to class members is subject to prior court approval. We show amounts paid into an escrow account
for future distribution to class members of our Securities Litigation settlement as restricted cash, and the corresponding liability in current
liabilities under the caption “Securities Litigation.” The liability will be discharged at such time as the settlement is declared effective by the
Court.
During December 2005 and January 2006, the Company agreed to settle the previously-reported actions pending in Federal Court in the
Northern District of California captioned: Jacobs v. McKesson HBOC, Inc. et al., (No. C-99-21192 RMW), Jacobs v. HBO & Company,
(No. C-00-20974 RMW), Bea v. McKesson HBOC, Inc. et al., (No. C-00-20072 RMW), Baker v. McKesson HBOC, Inc. et al., (No. CV 00-
0188), Pacha, et al. v. McKesson HBOC, Inc., et al., (No. C01-20713 PVT), and Hess v. McKesson HBOC, Inc. et al., (Case No. C-20003862).
The previously-reported action captioned Cater v. McKesson Corporation et al., (No. C-00-20327-RMW) remains the only individual action
pending in Federal Court.
On September 9, 2005, Judge Whyte granted final approval to our agreement to settle all claims brought under the Employee Retirement
Income Security Act of 1974 (“ERISA”) on behalf of a class of former participants in the HBO & Company Profit Sharing and Savings Plan in
the previously reported action captioned In re McKesson HBOC, Inc. ERISA Litigation, (No. C-00-20030 RMW) (the “ERISA Action”). In
March 2006, we reached an agreement to settle that portion of the ERISA Action that purports to assert claims on behalf of a class of former
participants in the McKesson Profit-Sharing Investment Plan for $19 million, plus certain accrued interest, minus certain costs and expenses
such as plaintiffs’ attorneys’ fees. The settlement remains subject to various contingencies, including notice to the class and approval by the
Court, and, if finalized, will accomplish the release of all remaining claims against all defendants in the ERISA Action.
On August 11, 2005, the Company and HBOC filed a complaint against Andersen and former Andersen partner Robert A. Putnam
(“Putnam”) in San Francisco Superior Court captioned McKesson Corporation et al. v Andersen et al., (No. 05-443987), which Putnam
subsequently removed to the United States District Court for the Northern District of California. Upon removal, the case was assigned to Judge
Whyte and given N.D. Cal. case No. 05-04020 RMW. In its complaint, as amended on March 28, 2006, McKesson asserts claims against
Andersen for negligent misrepresentation, breach of contract, equitable indemnity or declaratory relief, and contribution, and HBOC asserts
claims against Andersen for breach of contract, professional negligence, equitable indemnity or declaratory relief, and contribution. McKesson
and HBOC also assert claims against Putnam for equitable indemnity or declaratory relief, and contribution, in connection with Andersen’s
audits and reviews of HBOC’s financial results during 1996-1999. The complaint seeks unspecified damages, various forms of equitable and
declaratory relief, costs of suit and attorneys’ fees. On March 16, 2006, Andersen filed an action against the Company and HBOC in federal
court in San Jose captioned Andersen v. McKesson Corporation et al., (No. C-06-02035-JW). In its complaint, Andersen asserts claims against
McKesson and HBOC for fraud, negligent misrepresentation, breach of contract, breach of the covenant of good faith and fair dealing,
equitable indemnity and declaratory relief, in connection with Andersen’s prior audits and reviews of HBOC’s financial results. The complaint
seeks unspecified damages, including punitive damages in an unspecified amount, declaratory relief, and costs of suit.
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