IN RE: WALMART INC. SECURITIES LITIGATION
KIM KENGLE AND ROSEANNE LACY, Appellants
No. 24-1818
United States Court of Appeals for the Third Circuit
August 29, 2025
2025 Decisions 720
Before: CHAGARES, Chief Judge, SCIRICA, and RENDELL, Circuit Judges.
PRECEDENTIAL
Opinions of the United States Court of Appeals for the Third Circuit
8-29-2025
In re: Walmart Inc. Securities Litigation
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ARGUED: April 17, 2025
(Filed: August 29, 2025)
Sara Fuks [ARGUED]
Rosen Law Firm
Counsel for Appellants
Sean M. Berkowitz
Nicholas J. Siciliano
Latham & Watkins
330 N Wabash Avenue Suite 2800 Chicago, IL 60611
Ben Harris
Latham & Watkins
1271 Avenue of the Americas New York, NY 10020
Roman Martinez [ARGUED]
Latham & Watkins
555 11th Street NW Suite 1000 Washington, DC 20004
Whitney Weber
Latham & Watkins
505 Montgomery Street Suite 2000 San Francisco, CA 94111
Robert W. Whetzel
Richards Layton & Finger
920 N King Street
Counsel for Appellees
OPINION OF THE COURT
SCIRICA, Circuit Judge
This is a case about whether and when it is misleading for a company to omit a pending government investigation from a disclosure of its “reasonably possible” liabilities. From 2016 to 2018, the United States Attorney‘s Office for the Eastern District of Texas investigated Walmart over its pharmacies’ opioid dispensation practices. While prosecutors ultimately did not bring an indictment, Walmart‘s share price dropped in 2020 after ProPublica published an article about the investigation.
Plaintiffs, Walmart investors, brought a putative securities fraud class action, contending Walmart had not sufficiently disclosed the investigation in certain annual and quarterly filings. The District Court granted Walmart‘s motion to dismiss and denied plaintiffs’ motion for leave to amend, finding no misrepresentation or omission of material fact in those filings, and plaintiffs appealed. Because we agree with the District Court that Walmart‘s statements were not misleading, and Walmart‘s disclosures as the investigation progressed were sufficient, we will affirm.
We draw the following facts from the Second Amended Complaint, which we accept as true for the purpose of our review of the grant of the motion to dismiss. Fowler v. UPMC Shadyside, 578 F.3d 203, 206, 210 (3d Cir. 2009). For our review of the court‘s denial of plaintiffs’ motion for leave to amend, which we discuss later, we accept as true the facts in the Proposed Third Amended Complaint.
A.
Walmart operates a network of 5,000 pharmacies across the country which dispense controlled substances, including opioids.1 As a distributor of controlled substances, Walmart is subject to the Controlled Substances Act (“CSA“), which regulates the manufacture, distribution, and use of certain drugs. Violations of its requirements can carry heavy penalties. Walmart “obtained a heightened awareness of its obligations” under the CSA, plaintiffs claim, when Walmart entered into a memorandum of agreement (“MOA“) with the Drug Enforcement Agency (“DEA“) in 2011 “to resolve a DEA administrative action.” App. 81. This MOA covered all Walmart stores until 2015 and imposed various compliance and monitoring requirements.
“[O]n March 28, 2018, AUSA Rattan informed Walmart of her intention to indict the Company.” App. 125. Walmart “immediately requested a meeting with” EDTX prosecutors to “resolve any criminal and civil proceedings in one shot,” which prosecutors granted. App. 125. The meeting occurred in April 2018, but did not resolve “whether [Walmart‘s conduct] justified a criminal charge.” App. 126. Walmart met with EDTX again on May 3 and 4, 2018, where prosecutors told Walmart they would “imminently indict the Company” unless Walmart agreed to a billion-dollar settlement. App. 127 (emphasis deleted). In a fourth meeting on July 2, 2018, prosecutors reaffirmed their intent to bring an indictment. As before, prosecutors agreed to postpone any indictment to allow Walmart time to present its case to prosecutors, which Walmart did on July 26.
ProPublica, an investigative journalism nonprofit, published an article on March 25, 2020, titled “Walmart Was Almost Charged Criminally Over Opioids. Trump Appointees Killed the Indictment,” detailing EDTX‘s attempts to bring the case and DOJ‘s ultimate declination to indict. App. 872. The article “disclos[ed] . . . that the Department of Justice had been criminally investigating Walmart for violating the CSA and related laws . . . since 2016,” that Walmart entered into an MOA with the DEA in 2011, and other DEA actions previously taken against Walmart. App. 179. Walmart shares dropped about 5% after publication. “On December 22, 2020 . . . the DOJ announced . . . it had filed a lawsuit against Walmart,” alleging civil violations of the CSA. App. 181. “That civil case,” according to Walmart, “remains ongoing.” Appellee‘s Br. 9. After the announcement, “Walmart‘s stock price fell $2.75 per share, or 1.88%, over the next two trading days.” App. 183.
B.
The Company is involved in a number of legal proceedings. The Company has made accruals with respect to these matters, where appropriate, which are reflected in the Company‘s Condensed Consolidated Financial Statements. For some matters, a liability is not probable or the amount cannot be reasonably estimated and therefore an accrual has not been made. However, where a liability is reasonably possible and may be material, such matters have been disclosed.
Walmart‘s next regular filing was its 10-K for the fiscal year of 2017, filed on March 30, 2018. This was the first filing after AUSA Rattan informed Walmart of her intent to bring an indictment on March 28. The 2017 10-K‘s “Contingencies” section led with the same language as above. This form included for the first time a section titled “National Prescription Opiate Litigation.” App. 157–58. Most of the section was devoted to In re Nat‘l Prescription Opiate Litig., the multidistrict litigation (“MDL“) that was centralized in the Northern District of Ohio in December 2017. The discussion of the MDL read as follows:
In December 2017, the United States Judicial Panel on Multidistrict Litigation ordered consolidated numerous lawsuits filed against a wide array of defendants by various plaintiffs,
including counties, cities, healthcare providers, Native American tribes, individuals, and third-party payors, asserting claims generally concerning the impacts of widespread opioid abuse. The consolidated multidistrict litigation is entitled In re National Prescription Opiate Litigation (MDL No. 2804), and is pending in the U.S. District Court for the Northern District of Ohio. The Company is named as a defendant in some of the cases included in this multidistrict litigation, including cases filed by several counties in West Virginia; by healthcare providers in Mississippi, Alabama, Texas, and Florida; and by the St. Croix Chippewa Indians of Wisconsin. Similar cases that name the Company have been filed in state courts by various counties and municipalities; by health care providers; and by various Native American Tribes. The Company cannot predict the number of such claims that may be filed, and cannot reasonably estimate any loss or range of loss that may arise from such claims. The Company believes it has substantial factual and legal defenses to these claims, and intends to defend the claims vigorously.
App. 157. Like previous statements, this one did not reference the ongoing investigations into Walmart‘s controlled substances dispensing practices.
The next set of disclosures begins with Walmart‘s first-quarter 2018 10-Q, filed June 4, 2018—Walmart‘s first regular filing after meeting with federal prosecutors, who confirmed
In December 2017, the United States Judicial Panel on Multidistrict Litigation ordered numerous lawsuits filed against a wide array of defendants by various plaintiffs be consolidated, including counties, cities, healthcare providers, Native American tribes, and third-party payors, asserting claims generally concerning the impacts of widespread opioid abuse. The consolidated multidistrict litigation is entitled In re National Prescription Opiate Litigation (MDL No. 2804), and is pending in the U.S. District Court for the Northern District of Ohio. The Company is named as a defendant in some of the cases included in this multidistrict litigation. Similar cases that name the Company have been filed in state courts by various counties and municipalities; by health care providers; and by various Native American Tribes. The relief sought by various plaintiffs is compensatory and punitive damages, as well as injunctive relief including abatement. The Company cannot predict the number of such claims that may be filed, and cannot reasonably estimate any loss or
range of loss that may arise from such claims. The Company believes it has substantial factual and legal defenses to these claims, and intends to defend the claims vigorously. The Company has also been responding to subpoenas, information requests and investigations from governmental entities related to nationwide controlled substance dispensing practices involving the sale of opioids. The Company can provide no assurance as to the scope and outcome of these matters and no assurance as to whether its business, financial condition or results of operations will not be materially adversely affected.
Id. (emphasis added). Walmart‘s 10-Q and 10-K forms for the remainder of the class period included the same disclosures relevant to contingencies, the opioids crisis, and opioids-related litigation. One form—the 2019 10-K—additionally disclosed that Walmart had been responding to investigative demands from the Federal Trade Commission and Middle District of Pennsylvania regarding its consumer fraud and anti-money laundering procedures and noted Walmart did not believe the matters would have a material adverse effect but could provide no assurances to that end.
C.
A putative class of plaintiffs, owners of Walmart stock during the class period, brought a securities fraud lawsuit in January 2021 against Walmart, Walmart CEO Douglas McMillon, and Walmart CFO Brett Biggs in the District of Delaware. Plaintiffs alleged Walmart‘s disclosures during the
Plaintiffs advanced several theories of fraud, but only two are relevant here. First, they contended Walmart‘s statement that it disclosed all reasonably possible material liabilities was misleading because it omitted the EDTX investigations, which plaintiffs contend amounted to reasonably possible material liabilities. Second, plaintiffs contended Walmart‘s failure to disclose the investigations violated ASC 450, a Generally Accepted Accounting Principles (“GAAP“) rule mandating the disclosure of “loss contingencies” in financial statements.
The District Court appointed Kim Kengle, trustee of the Kim K. Kengle 2000 Trust, lead plaintiff. The court twice granted plaintiffs leave to amend their complaint. Walmart moved to dismiss the Second Amended Complaint in November 2022. After a series of hearings and another motion for leave to amend, which the court denied, the court granted Walmart‘s motion to dismiss.
The court rejected the first theory of fraud, holding there was “no legal authority for the proposition that being the subject or target of an investigation constitutes a ‘liability.‘” App. 19. Accordingly, Walmart‘s decision not to disclose the investigations before EDTX prosecutors confirmed their intent to indict Walmart “did not make the representation ‘where a liability is reasonably possible and may be material, such
Plaintiffs timely appealed, contending the court erred in finding their complaint did not plausibly allege Walmart‘s disclosures were misleading, and that the disclosures did not violate ASC 450. Plaintiffs also challenge the court‘s denial of leave to amend their complaint a third time, and provide a proposed third amended complaint.
II.
“The district courts of the United States . . . have exclusive jurisdiction” over claims alleging violations of Section 10(b), Rule 10b-5, and Rule 20(a).
“By virtue of Civil Rule 9(b) and the Private Securities Litigation Reform Act of 1995 (the ‘PSLRA‘), heightened pleading standards govern securities fraud claims brought under § 10(b) and Rule 10b-5.” Prudential, 70 F.4th at 680.
District courts may deny leave to amend where, inter alia, amendment would be futile. Krantz v. Prudential Invs. Fund Mgmt. LLC, 305 F.3d 140, 144 (3d Cir. 2002). We ordinarily review denial of leave to amend for abuse of discretion, id., but we review de novo “the underlying legal conclusion whether the proposed amendments to the complaint would have been futile,” U.S. ex rel. Raynor v. Nat‘l Rural Utils. Co-Op. Fin. Corp., 690 F.3d 951, 957 (8th Cir. 2012); accord Gen. Refractories Co. v. Fireman‘s Fund Ins. Co., 337 F.3d 297, 309 (3d Cir. 2003) (reviewing de novo the district
III.
We first address the period from March 30, 2017, the first disclosure of the class period, to June 4, 2018, immediately before Walmart‘s first-quarter 2018 10-Q, discussing each theory of liability in turn.4 We then consider the period after that disclosure in Part III(C), again discussing both theories.
Plaintiffs must prove the same elements to prevail under either theory. “In cases involving publicly traded securities and purchases or sales in public securities markets,” the “basic elements” for the “private damages action” implied from Section § 10(b) are “(1) a material misrepresentation (or omission),” “(2) scienter, i.e., a wrongful state of mind,” “(3) a connection with the purchase or sale of a security,” “(4)
The District Court assessed only the first element in dismissing the case, and we will do the same. The misrepresentation theory turns on whether Walmart‘s statement that it had disclosed all reasonably possible liabilities that may be material was misleading given its omission of the EDTX investigations. And the ASC 450 theory turns on whether accounting rules required Walmart to disclose the investigations as loss contingencies.
A.
Plaintiffs’ first theory of fraud is that Walmart‘s disclosures before its June 4, 2018 10-Q were misleading because—without disclosing the EDTX investigations—the form stated, “where a liability is reasonably possible and may be material, such matters have been disclosed.” “[Section] 10(b) and Rule 10b-5(b) do not create an affirmative duty to disclose any and all material information. Disclosure is required under [those] provisions only when necessary to make . . . statements made, in the light of the circumstances under which they were made, not misleading.” Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 45 (2011) (quotation marks omitted) (citing
We start with Walmart‘s disclosures from the beginning of the class period until March 28, 2018. The only alleged misleading statement in this period is the general language at the top of the “Contingencies” section.
The complaint clearly alleges there was an ongoing investigation involving Walmart during this period, and that Walmart was aware of it. Walmart admits as much. But the complaint falls short in alleging Walmart‘s disclosures during this period were misleading or false—that is, that the investigation amounted to a liability that was reasonably possible and may have been material, such that omitting it made the language in the “Contingencies” section fraudulent.
The District Court disagreed with plaintiffs’ contention that the investigations were a material liability, and reasoned there was “no legal authority for the proposition that being the subject or target of an investigation constitutes ‘a liability.‘” App. 19. Nor do we find support for that proposition, nor are we convinced the investigations here, whose initial scope only concerned the activities of two doctors, constituted a reasonably possible liability for Walmart. Plaintiffs contend “[i]n reaching that conclusion, the court refused to attach any meaningful weight to the factors which made the Investigations a material liability: namely, Walmart‘s violation of the MOA and Defendants’ actual knowledge of Walmart‘s acute CSA violations.” Appellant‘s Br. 31. We are not persuaded either of these factors converted the early-stage investigations into a reasonably possible liability. As the complaint notes, the MOA expired in 2015, making its relevance to the investigations questionable. And Walmart
The portion of the class period where this question is closest is March 28, 2018 to June 4, 2018, between when an EDTX prosecutor told Walmart she intended to indict the company, and when Walmart‘s disclosures were updated. The only potentially misleading statement plaintiffs point to during this period is, again, the general “Contingencies” language. They argue that if Walmart‘s statement that it had disclosed all reasonably possible material liabilities was not misleading
But one prosecutor stating her intent to bring an indictment did not, on these facts, transform the investigation into a “reasonably possible,” “material” liability. The same uncertainties surrounding the investigation that existed before the communication continued to exist after and until Walmart was able to meet with prosecutors, despite Walmart‘s proactive attempts to resolve those uncertainties. March 28 was the first time a potential indictment was mentioned, and the specifics regarding any indictment were unclear, the investigation remained ongoing, and no indictment or notice regarding the nature of any potential claims had come. To date, as far as Walmart knew, the investigation was focused on two doctors’ activities. And as plaintiffs noted, Walmart “immediately requested a meeting with federal prosecutors” after AUSA Rattan‘s communication. App. 125. During this part of the class period, based on the facts in the complaint, we cannot see how the investigations constituted a liability or a reasonably possible liability, and thus how omitting the investigation could be misleading given Walmart‘s statement it had disclosed all “reasonably possible” liabilities that “may be material.” Accordingly, Walmart‘s “Contingencies” language in its 2017 10-K—its only disclosure between the March 28, 2018 email and its disclosure of the investigation in its first-quarter 2018 10-Q—did not constitute a material misrepresentation or omission.
Plaintiffs further contend “[c]ourts across the country have routinely sustained claims under §10(b) where defendants
Accordingly, because the complaint does not plausibly allege the investigations into Walmart constituted a liability or a reasonably possible liability, or that Walmart’s disclosures implied it was not under investigation, plaintiffs’ first theory fails through this part of the class period.
B.
Plaintiffs’ second theory of fraud is more technical. ASC 450 is a GAAP rule which requires the disclosure of certain “loss contingencies” in financial statements, and which plaintiffs contend Walmart violated by not disclosing the EDTX investigations. Walmart does not dispute that misrepresenting a financial statement as complying with GAAP could be misleading.
a.
ASC 450 generally requires the disclosure of certain loss contingencies. A loss contingency is “[a]n existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an entity that will ultimately be resolved when one or more future events occur or fail to
Not every possible loss, however, is a loss contingency, and not every loss contingency needs to be disclosed. “Under ASC 450, companies must assess whether the likelihood that a future event will confirm a loss is remote, reasonably possible, or probable,” and need only disclose the event if the loss is at least reasonably possible. Eugene Goldman & Scott Taub, Assessing Loss Contingencies From Litigation and Regulatory Exposures, Bloomberg Law (April 2021), https://www.bloomberglaw.com/external/document/X8HJMK1O000000/capital-markets-professional-perspective-assessing-loss-continge. And where the loss contingency is litigation that is only threatened, there are further conditions before companies are obligated to disclose it. “Disclosure is not required of a loss contingency involving an unasserted claim or assessment if there has been no manifestation by a potential claimant of an awareness of a possible claim or assessment unless . . . a. It is considered probable that a claim will be asserted,” and “b. There is a reasonable possibility that the outcome will be unfavorable.” ASC 450-20-50-6 (emphasis added).
“Accounting for contingent liabilities” under this rule accordingly “requires a subjective evaluation of the risk that the liability will require a payment.” 79 New York University Annual Institute on Federal Taxation § 5.08; see also 8 Bus. &
b.
Plaintiffs’ theory that the disclosures violated GAAP turns on whether the EDTX investigations were a “loss contingency” that Walmart was required to disclose. We conclude at least until Walmart’s June 4, 2018 disclosure, they were not. Through this period, the complaint does not plausibly allege the investigations were definite enough in scope that any loss was at least reasonably possible.
First, on the facts alleged, the investigations appear to fall under ASC 450’s broad definition of a loss contingency. They are a “set of circumstances involving uncertainty as to a possible loss to [Walmart] that [would] ultimately be resolved when one or more future events occur or fail to occur,” i.e., if the investigation resulted in an indictment, which in turn, could result in a settlement or penalties—all of which were uncertain through the class period. ASC 450-10-20. On this, the parties do not seem to disagree.
The Implementation Guidance to ASC 450 shows why these inferences are not plausible from the facts alleged in the complaint. It explains how entities might “[a]ssess[] [the p]robability of the [i]ncurrence of a [l]oss.” ASC 450-20-55. Where, as here, “the underlying cause of the litigation, claim, or assessment is an event occurring before the date of an entity’s financial statements” (i.e., Walmart’s opioids dispensing practices), the following are “[a]mong the factors that should be considered” in assessing “the probability of an outcome unfavorable to the entity”: “[t]he nature of the litigation, claim, or assessment,” “[t]he progress of the case,” “[t]he opinions or views of legal counsel and other advisers” to the entity, “[t]he experience of the entity [and other entities] in similar cases,” and “how the entity intends to respond to the lawsuit, claim, or assessment.” ASC 450-20-55-12.
Each of the factors relevant in this case cuts against Walmart’s needing to disclose the investigations before or in its 2017 10-K on March 30, 2018. The “nature of the . . . claim”
“According to the plaintiffs, MTS could have easily estimated its loss; they say that MTS knew “(i) [it] had violated the FCPA, (ii) it was probable that its violations would result in a material loss to MTS, and (iii) of the dollar amount of corrupt bribes the Company had paid in violation of the FCPA, and could thus reasonably estimate the amount of that loss” as soon as it was aware that the DOJ was investigating. (Id. at ¶ 160.) In my view, the circumstances were far less obvious and straightforward. When MTS learned of the investigation, it could not predict the outcome: whether the government would file charges, what those charges would be, whether the government would have agreed to a [deferred prosecution agreement] at all and, if it did, what its terms would be. Nor could the company predict whether it would be willing to settle, or would contest the charges, assuming there were charges. And, at that point, MTS was not cooperating with the DOJ and could not predict whether it would ultimately receive cooperation or remediation credit.”
Salim v. Mobile Telesystems PJSC, No. 19-cv-1589, 2021 WL 796088, at *7 (E.D.N.Y. Mar. 1, 2021) (emphasis added), aff’d, 2022 WL 966903 (2d Cir. Mar. 31, 2022). As in Salim, indeterminacy is key here—Walmart could not predict the
Accordingly, plaintiffs’ GAAP theory fails during this part of the class period.
C.
That leaves us with Walmart’s disclosures on and after June 4, 2018. Because the complaint does not plausibly allege these disclosures were misleading or otherwise insufficient, neither of plaintiffs’ theories of fraud can succeed from June 4, 2018 to the end of the class period.
From its first-quarter 2018 10-Q to the end of the class period, Walmart’s disclosures stated Walmart “has also been responding to subpoenas, information requests and investigations from governmental entities related to nationwide controlled substance dispensing practices involving the sale of opioids,” and Walmart could “provide no assurance as to the scope and outcome of these matters and no assurance as to whether its business, financial condition or results of operations will not be materially adversely affected.” App. 159. Walmart argues, and the District Court agreed, those disclosures “were entirely adequate” because they informed investors of 1) the fact that Walmart was subject to an investigation, 2) the subject matter of the investigation, i.e., opioids and controlled substances dispensing practices, and 3) the investigation “could ultimately result in liability for the Company” that it could not assure would not be material.
Plaintiffs respond that the disclosure’s lack of detail renders it unsatisfactory. They contend, first, that ASC 450’s requirement that Walmart “disclose the ‘nature of the contingency’” specifically required Walmart to disclose it was possibly subject to “a criminal penalty,” and second, that Walmart’s more detailed disclosure of “numerous investigations and litigations in [its] financial statements that were far less threatening than the Investigations” obligated them to disclose EDTX’s CSA investigation in the same detail. Appellant’s Br. 48.
Neither response is persuasive. First, ASC 450 does not require the granularity plaintiffs suggest—i.e., Walmart did not need to explain that the “nature of the contingency” is not only losses that could be incurred after a government investigation, but specifically a criminal penalty. See, e.g., 1 Donald Resseguie, Applying GAAP and GAAS § 8.09[3][b] (2025) (“A reporting entity must use terminology that is descriptive of the nature of the accrual. For example, the disclosure should indicate if there is an estimated liability, or a liability of an estimated amount.” (emphasis added)). Walmart’s disclosure was adequate, describing that it was under investigation, what it was for, and that there was not an estimated liability. Nor does the complaint plausibly allege Walmart was yet privy to information that a criminal penalty was necessarily the “nature of the contingency” at these stages, since not every investigation—nor even every indictment—leads to a criminal penalty, as opposed to a deferred prosecution agreement, another form of settlement, or, as here, no action at all. In our reading, Walmart’s disclosure included “the nature of the contingency”—that is, it was subject to an investigation into a
Second, that a company describes one item in more detail than another does not make the less detailed description fraudulent. The securities laws do not require disclosure of all material facts in equal detail. Nor should they. Companies do not always have the same information or certainty about all events included in their disclosures, and neither the law nor the market encourages companies to disclose down to the lowest common denominator. See generally Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 575 U.S. 175, 195 (2015) (observing that a speaker can avoid misleading listeners by “mak[ing] clear the real tentativeness” of her assertion).
We are also convinced Walmart’s disclosure passes muster under Omnicare, which lays out scenarios in which opinion statements can be fraudulent.5 Plaintiffs can plead an
opinion is false or misleading by plausibly alleging any of three scenarios: (1) the speaker does not “actually hold[] the stated belief,” (2) the opinion statement “contain[s] embedded statements of fact” that are untrue, or (3) there are “particular (and material) facts going to the basis for the issuer’s opinion . . . whose omission makes the opinion statement at issue misleading to a reasonable person reading the statement fairly and in context,” and those facts are “in the issuer’s possession at the time.” Omnicare, 575 U.S. at 184–186, 189, 194; see also Prudential, 70 F.4th at 685 (“Omnicare’s framework for evaluating opinion falsity applies to claims under
On the facts pled in the complaint, if this disclosure is an opinion statement (both parties assume so), it is not fraudulent. The first Omnicare scenario is inapplicable because the complaint does not plausibly suggest Walmart or the individual defendants subjectively thought Walmart could provide “assurance as to the scope” of the investigations or “as to whether [Walmart’s] business . . . [would] be materially adversely affected.” App. 159. There is also no embedded, untrue statement of fact that would put this in the second scenario. And Omnicare’s third scenario is also not met here because Walmart did not omit a fact in its possession that would make its statement misleading. True, Walmart could have disclosed its full history with government authorities regarding dispensing controlled substances here. But “[a]n opinion statement . . . is not necessarily misleading when an issuer knows, but fails to disclose, some fact cutting the other
Plaintiffs argue further that Walmart’s filings were misleading because they omitted Walmart was, in fact, violating the CSA and engaging in the conduct for which it was being investigated. But the Second Circuit, in an opinion we find persuasive, concluded—where a company disclosed to investors it was under investigation for facilitating tax evasion—the company did not also need to disclose that it was “engaged in an ongoing tax evasion scheme.” City of Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173, 184 (2d Cir. 2014). Rather, the company did enough “[b]y disclosing its involvement in multiple legal proceedings and government investigations” and “indicating that its involvement could expose [it] to substantial” penalties—just as Walmart did here. Id.
Accordingly, the complaint does not plausibly allege Walmart’s disclosures from June 4, 2018 to the end of the class period were misleading or violated ASC 450.6 We agree with
IV.
Finally, plaintiffs contend the court abused its discretion in denying leave to amend. Plaintiffs’ proposed amendment would have added to their complaint allegations from a parallel derivative lawsuit against Walmart in Delaware Chancery Court over similar conduct. This would have included evidence gleaned from discovery in that case to support the inference that “Walmart’s board of directors, including defendant McMillon . . . knew Walmart was violating the CSA and MOA.” App. 1065. The court reasoned amendment would be futile because plaintiffs’ proposed amendments sought to “bolster the [Second Amended Complaint’s] scienter allegations,” but the court dismissed that complaint without reaching scienter. App. 29–30 (emphasis added). Plaintiffs argue this was an abuse of discretion because “falsity”—i.e., the first element of a securities fraud claim—“and scienter are inextricably intertwined in this case: whether Defendants’ statements were misleading depends upon whether they had a reasonable basis to conclude the Investigations did not threaten a material liability.” Appellant’s Br. 57.
Falsity and scienter are intertwined in many cases. But here, the scienter allegations in plaintiffs’ Proposed Third Amended Complaint would not have contributed to their falsity allegations—and plaintiffs’ brief in support of
Accordingly, even if we were to agree with plaintiffs that the court “implicitly consider[ed] scienter in dismissing the SAC,” Appellant’s Br. 57, we explicitly do not consider scienter in affirming that dismissal. Accordingly, we agree leave to amend would have been futile.
V.
Plaintiffs’ complaint alleges what they describe as a serious pattern of wrongdoing by Walmart in its opioids dispensing practices. Our opinion should not be read to pass judgment on its seriousness. Although the EDTX investigation did not lead to any charges, Walmart has faced, and may continue to face, public and private enforcement actions, scrutiny, and accountability for its role in the nationwide opioid epidemic. See In re Nat’l Prescription Opiate Litigation, 589 F. Supp. 3d 790, 803–07 (N.D. Ohio 2022);
But although Walmart is a public company, and although plaintiffs allege wrongdoing on its part, not everything is securities fraud7—a public company’s mischief is not actionable under the securities laws unless the company’s disclosures contain a misrepresentation or misleading omission of material fact about that mischief.
That is not the case here. Accepting the allegations in the complaint, at least as far as ASC 450 and its “Contingencies” statements are concerned, Walmart did what it had to do to avoid making them misleading—it did not disclose an investigation in its early stages whose contours were unclear; once it learned an indictment could come, it immediately arranged a meeting with prosecutors to clarify its scope and probability; and once the contours of the investigation were clearer, Walmart disclosed it was under investigation, what it was under investigation for, and that it faced possible losses relating to that investigation whose extent
Accordingly, plaintiffs do not plausibly allege Walmart’s disclosures were misleading, and we will affirm without reaching the remaining elements of the claim.8
For the foregoing reasons, we will affirm.
Because a violation of