Gardy & Notis, LLP achieves a historic $175 million settlement in McKesson Corporation derivative litigation
April 22, 2020
Gardy & Notis, LLP is a court appointed lead counsel for stockholders suing McKesson Corporation's officers and directors for breach of their fiduciary obligations to the company by failing to provide oversight of McKesson's compliance with the Controlled Substances Act and related regulations. Specifically, the complaint in the case alleged that McKesson's officers and directors failed to comply with its obligations in a 2008 settlement with the U.S. Drug Enforcement Administration designed to prevent the diversion of controlled substances, which settlement resulted in the company paying a $32 million fine. McKesson failed to maintain effective internal controls required by the 2008 settlement and repeated the same improper reporting and distribution, which resulted in McKesson paying an additional $150 million in a 2017 settlement with the U.S. Department of Justice and other federal agencies.

After three years of litigation, Gardy & Notis, LLP achieved a settlement that included a $175 million cash recovery plus substantial changes to improve McKesson's corporate governance.

The settlement is an extraordinary and historic result. The $175 million cash component of the settlement is one of the largest-ever recoveries in a "Caremark" failure of oversight case and represents a large portion of what stockholders would likely have been able to collect, post-judgment, from defendants' insurance and personal assets. The settlement also achieved state-of-the-art governance reforms that are targeted at fixing the compliance issues at the heart of the case. The governance reforms improve board oversight and reduce the risk of future compliance failures at McKesson and include: the separation of the CEO and Chairman roles; term limits for directors; the addition of two new independent directors; reforms to the composition, mandate, and training of McKesson's Compliance Committee; improvements in reporting to the Compliance Committee by management, advisors, and committees and reporting by the Compliance Committee to the Board; revisions to the company's executive compensation clawback policy; enhancements to the company's disclosures relating to McKesson's lobbying efforts concerning controlled substances; and adjustments to executive compensation based on legal or compliance costs.

The case is In re McKesson Corporation Derivative Litigation, No. 17-cv-1850, in the United States District Court for the Northern District of California.
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