Thursday, January 6, 2005
There has been a major fight between McKesson Corp. and counsel for shareholder plaintiffs suing the company for securities fraud and various state law fiduciary duty violations over the contents of the company's internal investigation report. The plaintiffs won the right to review the report in a California Court of Appeals decision, McKesson HBOC v. Superior Court, 115 Cal.App.4th 1229 (2003), which held that the company lost the right to claim the attorney-client privilege and work product protection because it turned over the report to federal prosecutors to avoid an indictment of the company.
The latest round in the fight will take place in the U.S. District Court in San Francisco, where former McKesson CFO Richard Hawkins is about to go on trial before Judge Martin Jenkins for securities fraud related to improper accounting that was the subject of the internal investigation. An article on Law.com (Jan. 5) reports that McKesson has requested that the trial be closed to the public--i.e. the shareholder plaintiffs counsel--for any discussion of the internal investigation report. The article states:
Hawkins' former employer, which is not a party to the criminal case, wants to close Jenkins' courtroom if witnesses discuss a controversial internal investigation. McKesson hired Skadden, Arps, Slate, Meagher & Flom to conduct the inquiry after allegations of corporate wrongdoing surfaced in 1999.
The Ninth Circuit has not yet ruled on the privilege waiver claim. Hawkins' attorneys have received a copy of the report, and any exculpatory or impeachment information contained in it will certainly be used by his defense counsel. It will be interesting to see if the judge takes this rather unique (even radical?) approach to protecting the privilege of a non-party as balanced against the public trial right. The motion is scheduled to be argued on Thursday, Jan. 6. (ph)