McKesson 2006 Annual Report Download - page 86

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
State Actions
Twenty-four actions were also filed in various state courts in California, Colorado, Delaware, Georgia, Louisiana and Pennsylvania (the
“State Actions”). Like the Consolidated Action, the State Actions generally allege misconduct by McKesson or HBOC (and others) in
connection with the events leading to McKesson’s decision to restate HBOC’s financial statements. Of these actions, only three Georgia
actions have not been resolved.
The actions pending in California Superior Court have all been settled. Utah State Retirement Board v. McKesson HBOC, Inc. et al. (Case
No. 311269) and Minnesota State Board of Investment v. McKesson HBOC, Inc. et al., (Case No. 311747) were settled in July 2005. The State
of Oregon by and through the Oregon Public Employees Retirement Board v. McKesson HBOC, Inc. et al., (Case No. 307619) was settled in
August 2005. Merrill Lynch Fundamental Growth Fund et al., v. McKesson HBOC, Inc. et al. (Case No. CGC-02-405792) was settled in
October 2005, and Yurick v. McKesson HBOC, Inc. et al., (Case No. 303857) was settled in November 2005.
On December 16, 2005, the Company and certain of its present and former directors and officers filed a stipulation in the Delaware Court of
Chancery setting out the terms of a settlement of the previously-reported derivative action captioned Saito et al. v. McCall et al., (Del Ch. C.A.
No. 17132-NC). Under the settlement, the Company’s insurance companies were required to pay $30 million, and the Company agreed to
release its claims against certain present or former directors and officers of the Company and HBOC, among other terms. The settlement also
required dismissal of two other previously reported derivative actions, one pending in federal court in California, Cohen v. McCall et al.,
(No. 99-20916-RMW) and one pending in state court in California, Mitchell v. McCall, et al., (S.F. Supr. No. 304415). The Delaware Court
approved the settlement on February 24, 2006, and the $30 million settlement amount has been received from the insurers by McKesson, which
in turn has paid $6 million of that amount over to the Saito plaintiffs’ attorneys in court approved attorneys’ fees and costs.
Two previously-reported actions pending in Georgia state courts, Suffolk Partners Limited Partnership et al. v. McKesson HBOC, Inc. et al.,
(Georgia State Court, Fulton County, Case No. 00VS010469A) and Curran Partners, L.P. v. McKesson HBOC, Inc. et al., (Georgia State
Court, Fulton County, Case No. 00 VS 010801) have been settled. Three Georgia actions remain pending in state courts: Holcombe T. Green
and HTG Corp. v. McKesson, Inc. et al., (Georgia Superior Court, Fulton County, Case No. 2002-CV-48407); Hall Family Investments, L.P. v.
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cKesson, Inc. et al. (Georgia Superior Court, Fulton County, Case No. 2002-CV-48612); and James Gilbert v. McKesson Corporation, et al.,
(Georgia State Court, Fulton County, Case No. 02VS032502C). The allegations in these actions are substantially similar to those in the
Consolidated Action. The Company and HBOC have answered the complaints in each of these actions, generally denying the allegations and
any liability to plaintiffs. The Green and Hall Family Investments actions were voluntarily dismissed by plaintiffs on April 26, 2006 in the
Georgia Superior Court and have been refiled in Georgia State Court, Fulton County Holcombe T. Green and HTG Corp. v. McKesson
Corporation, et al. (Georgia State Court, Fulton County, Case No. 06-VS-096767-D) and Hall Family Investments, L.P. v. McKesson
Corporation, et al. (Georgia State Court, Fulton County, Case No. 06-VS-096763-F). Plaintiffs there allege claims of fraud and deceit;
additionally, plaintiff Green seeks indemnification in connection with the ERISA Action and for other unspecified indemnification. The Gilbert
action asserts claims for fraud, deceit and negligent misrepresentation. The Gilbert action is in discovery, and no trial date has been set in that
matter.
In December of 2005, Bear Stearns filed a complaint captioned, Bear Stearns & Co., Inc v. McKesson Corporation, (Case No. 604304/5),
against the Company in the trial court for the State and County of New York. Bear Stearns alleges that the Company’s entry into the settlement
of the Consolidated Action, without providing for a full release of Bear Stearns in that settlement, was a breach of the engagement letter under
which Bear Stearns advised the Company in connection with its acquisition of HBOC. Bear Stearns’ complaint seeks monetary and other relief,
including an order enjoining the Company from performing under the settlement agreement. This same objection was made by Bear Stearns in
its opposition to preliminary and final approvals of the class action settlement. The objection was rejected by Judge Whyte as grounds for
denying approval of the settlement in his September 28, 2005 order granting preliminary approval and in his February 24, 2006 order granting
final approval.
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