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McKesson Loses $23.9 Million in DC Circuit Reversal

By Robyn Hagan Cain on February 29, 2012 | Last updated on March 21, 2019

McKesson Corporation, a pharmaceutical distributor and health care information technology company, suffered a setback in the D.C. Circuit Court of Appeals this week after decades of dairy litigation.

That's right: McKesson has spent years crying over spilled milk. But with good reason.

Sherkat Sahami Labaniat Pasteurize Pak (Pak) is a joint venture between San Francisco-based McKesson and private Iranian citizens. McKesson's had a 31 percent ownership interest in Pak at the time of the 1979 Islamic Revolution.

McKesson claims that in the wake of the Revolution, agents and instrumentalities of the government of Iran seized control of the board of directors of Pak. Through a series of hostile actions allegedly instigated by the government, the board effectively froze out McKesson's stake in Pak and blocked McKesson's receipt of dividend payments. In 1982, McKesson, joined by the Overseas Private Investment Corporation (OPIC), filed suit in a D.C. federal court, alleging that Iran had unlawfully expropriated its property without compensation.

The lawsuit has bounced around the federal courts for 30 years.

District Judge Richard Leon awarded McKesson around $44 million in damages in November 2010, including $23.9 million in compound interest, finding that Iran violated its own laws and international laws when it took control of Pak and withheld dividends from McKesson, reports Bloomberg. This week, the D.C. Circuit Court of Appeals reversed Judge Leon's ruling, and remanded the judgment to the district court for recalculation.

In her opinion for the three-judge panel, Judge Janice Rogers Brown wrote "In light of the utter lack of evidence indicating that compound interest is a recognized remedy under Iranian law, we reverse that portion of the award."

(Though Islamic and Sharia law forbid any payment of interest, Iran only contested the compound interest, not the simple interest, on appeal.)

In reversing the award, the D.C. Circuit Court of Appeals also expressed hope that the dispute between McKesson and Iran could finally be resolved. "Because the district court already conducted a detailed valuation of McKesson's equity interest in Pak in McKesson 2000, we hope the district court can put an end to nearly thirty years of litigation through some simple multiplication."

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