McKesson 2008 Annual Report Download - page 99

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
92
III. Product Liability Litigation
The Company is a defendant in approximately 575 cases alleging that the plaintiffs were injured by Vioxx, an
anti-inflammatory drug manufactured by Merck & Company (“Merck”). The cases typically assert causes of action
for strict liability, negligence, breach of warranty and false advertising for improper design, testing, manufacturing,
and warnings relating to the manufacture and distribution of Vioxx. None of the cases involving the Company is
scheduled for trial. The Company has tendered each of these cases to Merck and has reached an agreement with
Merck to defend and indemnify the Company.
The Company is a defendant in approximately 3 cases alleging that the plaintiffs were injured because they took
the drugs known as fen-phen, the term commonly used to describe the weight-loss combination of fenfluramine or
dexfenfluramine with phentermine. The Company has been named as a defendant along with several other
defendants in 41 cases and has accepted the tender of one of its customers named as a defendant in one additional
case. The cases are pending in state courts in California and Mississippi and in state and federal courts in Florida
and New York, and typically assert causes of action for strict liability, negligence, breach of warranty, false
advertising and unfair business practices for improper design, testing, manufacturing and warnings relating to the
distribution and/or prescription of fen-phen. The Company has tendered each of these cases, including the three
remaining matters, to its suppliers and has reached an agreement with its major supplier to defend and indemnify the
Company and its customers.
We, through our former McKesson Chemical Company division, are named in approximately 450 cases
involving the alleged distribution of asbestos. These cases typically involve either single or multiple plaintiffs
claiming personal injuries and unspecified compensatory and punitive damages as a result of exposure to asbestos-
containing materials. Pursuant to an indemnification agreement signed at the time of the 1987 sale of McKesson
Chemical Company to what is now called Univar USA Inc. (“Univar”), we have tendered each of these actions to
Univar. Univar has raised questions concerning the extent of its obligations under the indemnification agreement.
Univar continues to defend the Company in some of these cases, but since February 2005 has been rejecting tenders
and accordingly, the Company is incurring defense costs in connection with the more recently served actions. The
Company believes that Univar remains obligated under the terms of the indemnification agreement. The Company
has filed an arbitration demand against Univar pursuant to the indemnification agreement seeking a determination
that the liability for these cases is Univar’ s responsibility. Arbitrators have been identified and agreed upon, but no
date is yet set for the arbitration. In addition to its indemnification rights against Univar, the Company believes that
portions of these claims are covered by insurance and is pursuing that coverage.
IV. Other Litigation and Claims
On May 3, 2004, judgment was entered against us and one of our employees in the action captioned: Roby v.
McKesson HBOC, Inc. et al. (Superior Court for Yolo County, California, Case No. CV01-573). Former employee
Charlene Roby (“Roby”) brought claims for wrongful termination, disability discrimination and disability-based
harassment against McKesson and a claim for disability-based harassment against her former supervisor. The jury
awarded Roby compensatory damages against McKesson and against her supervisor in the total amount of $4
million, and punitive damages in the amount of $15 million against McKesson. Following post-trial motions, the
trial court reduced the amount of compensatory damages against McKesson to $3 million; the punitive damages
awarded against both defendants and the compensatory damages awarded against the individual employee defendant
were not reduced. We filed a Notice of Appeal, seeking reduction or reversal of the compensatory and punitive
damage awards and the award of attorneys’ fees. On December 26, 2006, the Court of Appeal for the Third
Appellate District of California issued its decision reversing the verdict for harassment against Roby’ s supervisor,
reducing the compensatory damages from $3 million to $1 million, and reducing punitive damages from $15 million
to $2 million. Following the rejection of Roby’ s petition for rehearing before the Court of Appeals, plaintiff
petitioned for review by the California Supreme Court, which was granted on April 18, 2007. Roby has filed her
opening brief; the Company has filed its brief in opposition, and plaintiff is scheduled to file her reply brief in May,
2008. A hearing will thereafter be scheduled by the Court.