Walmart Wins Appeal Against Shareholder Lawsuit Over Opioid Probe

Walmart has successfully defeated an appeal from shareholders who claimed the retailer misled them about federal investigations into its opioid-dispensing practices. The ruling was delivered by the Third U.S. Circuit Court of Appeals in Philadelphia, which determined that Walmart did not engage in securities fraud by delaying the disclosure of the probe until June 2018. This timing came approximately 18 months after the investigation had begun and shortly after a Texas prosecutor indicated intentions to indict the company.

The case centers around a federal investigation that began when agents raided a Walmart store in search of records related to two Texas doctors who were prescribing large quantities of opioids. Although Walmart was not indicted, the U.S. Department of Justice filed a civil lawsuit against the company in December 2020, with a trial scheduled for November 2027.

Shareholders initiated the lawsuit following a report by ProPublica on March 25, 2020, which detailed the threat of indictment. On that day, Walmart’s stock dropped by 5.1 percent, erasing around US$16 billion in market value. The decline continued after the announcement of the civil lawsuit by the Justice Department.

In a unanimous decision, Circuit Judge Anthony Scirica stated, “not everything is securities fraud.” He noted that while Walmart did not reveal the specifics of the investigation immediately, the company acted appropriately by providing necessary disclosures once the situation became clearer. “The complaint does not plausibly allege the investigations into Walmart constituted a liability or a reasonably possible liability,” he wrote, emphasizing that Walmart disclosed relevant information as the investigation progressed.

This ruling upholds a dismissal made by Chief Judge Colm Connolly of the Delaware federal court in April 2024. Representatives for the shareholders did not immediately respond to requests for comments following the decision. A Walmart spokesperson expressed satisfaction with the outcome.

In a related matter, in November 2022, Walmart reached a significant settlement of US$3.1 billion concerning opioid claims from state, local, and tribal governments. This settlement aimed to resolve ongoing disputes related to the company’s role in the opioid crisis, further highlighting the broader legal challenges facing Walmart in this arena.

The case is formally identified as In re Walmart Inc Securities Litigation, third U.S. Circuit Court of Appeals, No. 24-1818. This latest ruling marks a pivotal moment for Walmart as it navigates the complex landscape of legal challenges tied to its opioid practices.