McKesson 2005 Annual Report Download - page 9

McKESSON CORPORATION
Item 3. Legal Proceedings
I. Accounting Litigation
Since the announcements by McKesson in April, May and July of 1999 that McKesson had determined that certain software sales
transactions in its Information Solutions segment, formerly HBO & Company (“HBOC”) and now known as McKesson Information Solutions
LLC, were improperly recorded as revenue and reversed, as of March 31, 2005, ninety-one lawsuits have been filed against McKesson, HBOC,
certain of McKesson’s or HBOC’s current or former officers or directors, and other defendants, including Bear Stearns & Co. Inc. and Arthur
Andersen LLP.
Federal Actions
On January 12, 2005, we announced that we reached an agreement to settle the previously-reported class action in the Northern District of
California captioned: In re McKesson HBOC, Inc. Securities Litigation (Case No. C-99-20743 RMW) (the “Consolidated Action”) pending
before the Honorable Ronald M. Whyte of the United States District Court (the “Court”) for the Northern District of California. In general,
under the agreement to settle the Consolidated Action, we will pay the settlement class a total of $960 million in cash and accordingly, in the
third quarter of 2005, we accrued this amount. The settlement will resolve the Consolidated Action as to all defendants, other than Arthur
Andersen LLP and Bear Stearns & Co Inc. Other previously reported federal and state cases are not resolved by the settlement. The settlement
agreement is subject to various conditions, including, but not limited to, preliminary approval by the Court, notice to the Class and final
approval by the Court after a hearing. Judge Whyte held a hearing on March 25, 2005, to determine whether to grant preliminary approval of
the settlement, but has not yet issued a decision.
The previously-reported individual actions in the Northern District of California captioned Jacobs v. McKesson HBOC, Inc., et al. (C-99-
21192 RMW), Jacobs v. HBO & Company (Case No. C-00-20974 RMW), Bea v. McKesson HBOC, Inc. et al. (Case No. C-00-20072 RMW),
Cater v. McKesson Corporation et al. (Case No. C-00-20327 RMW), Baker v. McKesson HBOC, Inc., et al. (Case No. CV 00-0188), Pacha, et
al. v. McKesson HBOC, Inc., et al. (Case No. C01-20713 PVT), and Hess v. McKesson HBOC, Inc. et al. (Case No. C-20003862), remain
stayed and are consolidated with the Consolidated Action.
The related federal class action, In re McKesson HBOC Inc. ERISA Litigation (Northern District of California No. C-02-0685 RMW) (the
“ERISA Action”), pending before Judge Whyte, involves ERISA claims brought on behalf of the HBOC Profit Sharing and Savings Plan (the
“HBOC Plan”) and the McKesson Profit Sharing and Investment Plan (the “McKesson Plan”), as well as participants in those plans. On May 6,
2005, a Stipulation and Agreement of Settlement was executed for that portion of the ERISA Action that involves HBOC Plan claims. The
proposed settlement resolves all claims by the HBOC Plan and its participants in consideration of an $18.2 million cash payment by the
Company. The settlement is subject to various conditions, including, but not limited to, notice to the class and final approval by the Court.
Judge Whyte has scheduled a hearing on final approval of the HBOC Plan settlement for September 9, 2005. The separate ERISA claims of the
McKesson Plan and its participants are not resolved by this settlement. The Company’s motion to dismiss those claims remains pending before
this Court.
State Actions
Twenty-four actions have been 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. Ten of those state court actions remain
pending in California and Georgia.
In the previously-reported actions pending in California Superior Court captioned Yurick v. McKesson HBOC, Inc. et al. (Case No. 303857),
The State of Oregon by and through the Oregon Public Employees Retirement Board v. McKesson HBOC, Inc. et al. (Case No. 307619), Utah
State Retirement Board v. McKesson HBOC, Inc. et al. (Case No. 311269), Minnesota State Board of Investment v. McKesson HBOC, Inc. et
al. (Case No. 311747), and Merrill Lynch Fundamental Growth Fund et al. v. McKesson HBOC, Inc. et al. (Case No. CGC-02-405792)
(“Merrill Lynch”), the trial court has set a trial date of October 3, 2005. The Merrill Lynch plaintiffs have moved for summary judgment on
their common law fraud claim, and the hearing on that motion is presently set for July 1, 2005.
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