McKesson Corp. Case 04/28/1999

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Company Name(s): 
McKesson Corp.
Case Name: 
McKesson Corp. Case 04/28/1999
Case Status: 
Lawsuit Filed
Case Status: 
Judgment Issued
Case Status: 
Settlement Proposed
Case Status: 
Settlement Approved
Case Status: 
Case Dismissed
Affected Securities
NYSE: MCK
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
04/28/1999
Class Period Begin: 
01/20/1997
Class Period End: 
04/27/1999
Court of Filing: 
United States District Court for the Northern District of California
Date Settled: 
09/25/2007
Settlement Amount: 
$960,000,000
Summary: 

According to a press release dated February 21, 2007, the purpose of this Summary Notice is to inform you of a proposed Settlement and that a hearing will be held on April 13, 2007 at 9:00 a.m., before the Honorable Ronald M. Whyte in the United States Courthouse, Courtroom 6, 4th Floor, 280 South First Street, San Jose, California 95113; for the purpose of determining: (1) whether the proposed Settlement of the claims in the Litigation against Arthur Andersen LLP (”AALLP”) for the sum of $72.5 million in cash, plus interest, plus certain contingent amounts, should be approved as fair, reasonable and adequate to the Settlement Class, and whether an order should be entered dismissing on the merits and with prejudice the claims that are, or ever have been, asserted in the Litigation by Lead Plaintiff and the Settlement Class against AALLP in the Litigation; (2) whether the Plan of Allocation, previously approved by the Court on February 26, 2006 in connection with the previous settlement in this Litigation, is fair and equitable and therefore should be approved in connection with this Settlement; and (3) whether the application of Lead Counsel for the payment of attorneys’ fees, reimbursement of expenses and interest thereon should be approved. The proposed Settlement Amount is in addition to the $960 million settlement with defendants McKesson HBOC, Inc. and HBO & Company (the “McKesson Settlement”) previously approved by the Court.
According to the Company’s FORM 8-K dated February 27, 2006, on February 24, 2006, in the previously disclosed consolidated securities class action pending in the United States District Court for the Northern District of California, In re McKesson HBOC, Inc. Securities Litigation, No. C99-20743 RMW (the “Class Action”), the Honorable Ronald M. Whyte signed a Final Judgment and Order of Dismissal (the “Judgment”), as jointly requested by the Company and the Lead Plaintiff pursuant to the previously reported settlement of the Class Action. The Judgment finally approves the settlement and dismisses on the merits and with prejudice all claims asserted in the Class Action by the Lead Plaintiff against the Company, HBO & Company, and Defendants’ Released Persons (as that term is defined in the Judgment). As previously reported, the Settlement Amount is $960 million. Under the Judgment, interest will begin to accrue on the Settlement Amount on March 11, 2006, at the interest rate for 90-day United States Treasury bills on that date. The Judgment requires McKesson to pay the Settlement Amount plus any accrued interest not later than 7 days after the Effective Date, which is the first day following the date on which the Judgment is finally affirmed on appeal or is no longer subject to appeal, subject to certain exceptions set forth in the Stipulation of Settlement. If no appeal is filed, the first day on which McKesson could be required to pay the Settlement Amount will be April 3, 2006, although McKesson may elect to pay the Settlement Amount prior to that date.
In a press release dated December 14, 2005, McKesson Corp. said Bear Stearns Cos. sued to block a proposed $960 million settlement of investor lawsuits over the drug distributor’s 1999 earnings restatement. Bear Stearns’s complaint alleges the settlement in the U.S. District Court in Northern California breached an agreement between McKesson and the bank, the San Francisco-based drug wholesaler said Monday in a Securities and Exchange Commission filing. The complaint was filed in New York. Bear Stearns’s objections were earlier rebuffed by U.S. District Judge Ronald Whyte in San Jose, Calif., according to an order filed Sept. 8. The suit may only delay approval of the settlement, said Lisa Gill, a JP Morgan Securities Inc. analyst in New York. The accord, reached in January, must win final approval before payouts can begin, and a hearing is set for Jan. 27. The settlement would be the sixth-largest in U.S. history, based on data compiled by Bloomberg.
In a press release dated October 26, 2005, a hearing will be held on January 27, 2006 at 9:00 a.m., before the Honorable Ronald M. Whyte in the United States Courthouse, Courtroom 6, 4th Floor, 280 South First Street, San Jose, California 95113; for the purpose of determining: (1) whether the proposed settlement of the claims in the Litigation against McKesson, HBOC and Defendants’ Released Persons for the sum of $960 million in cash, plus interest earned from 15 days after District Court Approval, should be approved as fair, reasonable and adequate to the Settlement Class, and whether an order should be entered dismissing on the merits and with prejudice the claims that are, or ever have been, asserted in the Litigation by Lead Plaintiff and the Settlement Class against McKesson, HBOC and Defendants’ Released Persons who are, or have been, named as defendants in the Litigation; (2) whether the Plan of Allocation is fair and equitable and therefore should be approved; and (3) whether the application of Lead Counsel for the payment of attorneys’ fees, reimbursement of expenses and interest thereon should be approved.
In a press release dated June 10, 2005, a $960 million settlement agreed upon by McKesson to resolve a shareholder lawsuit has been denied preliminary approval by a federal judge. U.S. District Court Judge Ronald Whyte objected to “two nonmonetary provisions of the settlement,” the San Francisco health care giant said in a filing Thursday with the Securities and Exchange Commission. “We believe we will be able to address and resolve the court’s issues, but this does create the possibility for delay in the payments,” said Larry Kurtz, a McKesson spokesman.
On January 12, 2005, McKesson Corporation announced that it reached an agreement to settle the consolidated securities class action arising out of a 1999 financial restatement pending against it and its subsidiary the former HBO & Co., Inc. in the U.S. District Court, Northern District of California, San Jose Division. Under the agreement, McKesson would pay the class members a total of $960 million in cash. The combination of the class action settlement announced and the decision by the company to establish reserves for the remaining HBOC restatement litigation arising out of the Restatement and related matters will result in an aggregate charge for McKesson’s third fiscal quarter ended December 31, 2004, of $1.2 billion pre-tax, $810 million after-tax, or approximately $2.70 per share.
The Complaint asserts that defendants violated Section 11 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 by making material misrepresentations and omissions that caused the HBOC’s and McKesson’s stock to trade at artificially inflated levels during the Class Period. The Complaint alleges that defendants falsely reported its financial results for fiscal year 1999, causing its stock price to rise to $89-3/4 during the Class Period. On April 29, 1999, McKesson HBOC disclosed that sales had been improperly recorded throughout fiscal year 1999, and the Company would have to restate its results. This stunning announcement caused McKesson’s stock price to plunge to as low as $32 per share, closing at $34-1/2, a 47% one-day drop.
On January 8, 2002 and on January 6, 2003, the district court, in separate orders, substantially upheld investors’ claims against McKesson HBOC, HBOC, Arthur Andersen, Bear Stearns and certain top officers at McKesson and HBOC.
In a separate proceeding, McKesson counter-sued the Common Retirement Fund and former HBOC shareholders, alleging that these investors were unjustly enriched when they received fully-valued McKesson shares in exchange for HBOC shares that were overvalued due to accounting improprieties at HBOC. The district court, however, dismissed the counter-claim.
On August 13, 2003, the Ninth Circuit Court of Appeals confirmed the dismissal of McKesson’s claims, essentially ending McKesson’s attempts to hold shareholders individually liable for corporate acts which were neither known nor countenanced by them. According to the Ninth Circuit, McKesson has “potential legal claims against any number of parties who, unlike the former shareholders, actually played a substantial role in the decision” to merge with HBOC, including “the phalanx of investment bankers, lawyers, auditors, accountants and other advisors associated with the transaction.” Moreover, “the sanctity of the corporate entity, as well as the policies mitigating against subjecting individual shareholders of a public company to a liability for a merger gone bad, defeat McKesson’s effort to turn corporate law inside out.”