McKesson 2010 Annual Report Download - page 104

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
98
On May 3, 2004, judgment was entered against the Company 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 the Company and a claim for disability-based harassment against her former supervisor.
The jury awarded Roby compensatory damages against the Company and against plaintiff’s supervisor in the total
amount of $4 million and punitive damages in the amount of $15 million against the Company. Following post-trial
motions, the trial court reduced the amount of compensatory damages to $3 million, the punitive damages awarded
against both defendants and the compensatory damages awarded against the individual employee defendant were not
reduced. Defendants 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 Appeals 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. On November 30,
2009, the California Supreme Court issued its decision in this matter, reducing the ratio of punitive damages to
compensatory damages from that ordered by the California Court of Appeals, and reinstating the harassment claim
previously stricken by the Court of Appeals with a revised award of $4 million, before interest. Both parties filed
petitions for rehearing before the California Supreme Court and those petitions were denied on February 12, 2010.
McKesson has paid the revised award. The only remaining issue to be resolved by the trial court relates to Roby’s
claim for fees and costs on appeal.
Between 1976 and 1987, the Company’s former McKesson Chemical Company division operated a repackaging
facility in Santa Fe Springs, California. The Company has been actively remediating the contamination at this site
since 1994. Angeles Chemical Company (“Angeles”) conducted similar repackaging activities at its property
adjacent to the Company’s site between 1976 and 2000. In late 2001, Angeles filed an action against McKesson,
Angeles Chemical Company v. McKesson Corporation, et al. (United States District Court for the Central District
of California Case No. 01-10532-TJH) claiming that McKesson’s contamination migrated to Angeles’ property.
The causes of action in the latest complaint purport to state claims based on the federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (as amended, the “Superfund” law or its state law
equivalent) and the Resource Conservation and Recovery Act, as well as allege various state law claims, such as
nuisance, trespass, negligence, defamation, interference with prospective advantage, unfair business practices and
for declaratory relief, among others. Angeles seeks injunctive relief, as well as compensatory and punitive damages,
attorneys’ fees and costs in an unspecified amount. On January 5, 2010, the Company entered into a settlement
agreement, which fully resolves all outstanding disputes between the Company and the Angeles parties.
The Company is a defendant in approximately 519 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, through its former McKesson Chemical Company division, is 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”), the Company tendered each of these actions
to Univar. Univar subsequently raised questions concerning the extent of its obligations under the indemnification
agreement. Univar continued to defend the Company in some of these cases, but in February of 2005, Univar began
rejecting tenders and accordingly, the Company incurred defense costs and de minimis settlement costs in
connection with the more recently served actions. The Company filed an arbitration demand against Univar
pursuant to the indemnification agreement seeking a determination that the liability for these cases is Univar’s
responsibility. On February 9, 2010, the parties executed a settlement agreement, which provides that Univar will
defend and indemnify the Company for all pending and future matters.