The opioid crisis is not anything new; it has been around for years. Indeed, more than three years ago I posted an item noting the outbreak at the time of a rash of opioid-related securities class action lawsuits. But while the opioid crisis has been around for years, plaintiff shareholders continue to file opioid-related securities suits. On January 20, 2021, a plaintiff shareholder filed a securities class action lawsuit against Walmart in the District of Delaware based on the U.S. Department of Justice’s December 2020 lawsuit against the company alleging a role in the opioid epidemic. A copy of the securities class action lawsuit complaint can be found here.


The Lawsuit

On January 20, 2021, a plaintiff shareholder filed a securities class action lawsuit in the District of Delaware against Walmart and certain of its directors and officers. The complaint purports to be filed on behalf of a class of shareholders who purchased the company’s securities between March 30, 2016 and December 22, 2020. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.


The complaint consists largely of block quotations from the company’s various SEC filings during the class period, with respect to the company’s retail pharmacy operations. The complaint alleges that these various quoted statements were “materially false and/or misleading because they misrepresented or failed to disclose” that “(1) the Company knowingly filled prescriptions that were issued by so-called ‘pill-mill’ prescribers; (2) the Company filled thousands of prescriptions that showed obvious red flags, including highly-dangerous cocktails of drugs; (3) the Company’s managers made it difficult for Walmart pharmacists to comply with their legal obligations by pressuring them to fulfull as many orders as possible; (4) hence, the Company’s pharmacy revenue were inflated because the Company filled thousands of invalid prescriptions in violation of the Controlled Substance Act dispensing requirements; (5) the aforementioned conduct would subject the Company to regulatory scrutiny; and (6) as a result, Defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times.”


In support of these allegations, the complaint quotes at length and in full from the U.S. Department of Justice’s December 22, 2020 press release (here), in which the agency announced that it had filed a civil lawsuit against the company for violations of the Controlled Substances Act and for the Company’s role in the opioid epidemic.


Among other things, the press release states that the complaint alleges that the company “unlawfully dispensed controlled substances from pharmacies it operated across the country and unlawfully distributed controlled substances to those pharmacies throughout the height of the prescription opioid crisis.” The complaint alleges that this unlawful conduct “resulted in thousands of violations of the Controlled Substances Act.” The press release states that the Department of Justice seeks “civil penalties, which could total in the billions of dollars, and injunctive relief.”



As I noted above, the opioid crisis has already resulted in multiple securities class action lawsuits and other claims. Indeed, some of these claims have proven to be quite serious; as discussed here, the opioid-related shareholder derivative lawsuit filed against the board of McKesson was settled in January 2020 for an agreement to pay $175 million (to be funded entirely by D&O insurance).


Though opioid-related D&O claims can be and indeed have been serious, there are a few things about this new lawsuit that are worth noting at the outset. The first is that lawsuit basically tries to take on the supposed logic of every event-driven lawsuit – that is, that a bad thing happened to the company and so investors were misled. However, even where the bad thing that happened to a company appears to be quite serious, that does not necessarily mean that investors were misled or harmed in an actionable way.


The second thing to note about this lawsuit is that though the DOJ allegations appear to be quite serious, the company’s share price barely moved on the news. The complaint notes that after the DOJ lawsuit was announced, the company’s share price moved 1.88% over two trading days. This is hardly the dramatic share price movement on which securities class action plaintiffs typically base their complaints. I would be astonished to discover that during the supposed four year class period there were not a multitude of times when the company’s share price moved more than that simply as part of the day to day movements of the market. The plaintiffs will face an interesting challenge establishing loss causation and damages, even assuming for the sake of argument that the plaintiff can establish both misrepresentation and scienter. Given the barely perceptible share price movement, it is hard to guess why the plaintiffs’ lawyers are even bothering with this lawsuit, other than it involves a big target.


All of that said, it is noteworthy that this lawsuit represents yet another D&O claim arising out of the opioid crisis and that it is arising at this late date. While the real action on the opioid crisis is elsewhere, this lawsuit, like the other D&O claims that have preceded it, is a reminder that the ongoing opioid crisis does represent a D&O risk for companies whose operations became associated with opioids. This new lawsuit is also a reminder that though the opioid crisis is now many years old, the potential D&O risk associated with the crisis continues.


It does seem to me that the accountability process associated with the opioid crisis is continuing to spread outward, from the manufacturers, to the distributers, and now to the dispensing pharmacists – and in that regard, it seems as if the process has let to Walmart simply because of its size. Looked at from a distance, it does appear as if opioids have as their own special quality a sort of reverse-Midas touch, in which everything they touch turns to dross (and if this were not a family-oriented publication I would use a stronger word that “dross”). The baleful effect of opioids seems to spell the ruination of everything and everyone who becomes involved with the drugs.