McKesson 2006 Annual Report Download - page 87

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
II. Other Litigation and Claims
In addition to commitments and obligations in the ordinary course of business, we are subject to various claims, other pending and potential
legal actions for product liability and other damages, investigations relating to governmental laws and regulations and other matters arising out
of the normal conduct of our business. These include:
Product Liability Litigation and Other Claims
Our subsidiary, McKesson Medical-Surgical Inc., is one of multiple defendants in approximately 10 cases in which plaintiffs claim they
were injured due to exposure, over many years, to latex proteins in gloves manufactured by numerous manufacturers and distributed by a
number of distributors, including McKesson Medical-Surgical Inc. Efforts to resolve tenders of defense to its suppliers are continuing and final
agreements have been reached with two major suppliers.
The Company is a defendant in approximately 500 California 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 42 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 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 375 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 1986 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, and while Univar continues to defend us in
many of these cases, it has been rejecting our tenders of new cases since February 2005. We believe Univar remains obligated for all tendered
cases under the terms of the indemnification agreement; however we are beginning to incur defense costs in connection with these more
recently-served actions. We also believe that a portion of the claims against us will be covered by insurance, and we are pursuing the available
coverage.
On May 3, 2004, judgment was entered against the Company and one of its employees in the action Roby v. McKesson HBOC, Inc. et al.
(Superior Court of Yolo County, California, Case No. CV01-573). Former employee Charlene Roby (“Roby”) brought claims for wrongful
termination, disability discrimination and disability-based harassment against the Company and a claim for disability-based harassment against
her former supervisor. The jury awarded Roby compensatory damages against the Company and against her supervisor in the amount of
$4 million, and punitive damages in the amount of $15 million against the Company and a nominal amount against her supervisor. Following
post-trial motions, the trial court reduced the amount of compensatory damages against the Company to $3 million; the punitive damages
awarded against both defendants and the compensatory damages awarded against the individual employee defendant were not reduced. On
October 18, 2004, the trial court awarded Roby her attorney’s fees. The Company filed a Notice of Appeal, seeking reduction or reversal of the
compensatory and punitive damage awards and the award of attorney’s fees. The briefing on that appeal is complete, but no hearing date for
argument has yet been set.
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