Third Circuit disposition — 24-1818

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________
No. 24-1818
________________
IN RE: WALMART INC. SECURITIES LITIGATION
KIM KENGLE AND ROSEANNE LACY,
Appellants
_______________________
On Appeal from the United States District Court
for the District of Delaware
(D.C. Civil No. 1:21-cv-00055)
District Judge: Honorable Colm F. Connolly
______________
ARGUED: April 17, 2025
Before: CHAGARES, Chief Judge, SCIRICA, and
RENDELL, Circuit Judges.
(Filed: August 29, 2025)
Sara Fuks [ARGUED]
Rosen Law Firm

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275 Madison Avenue
40th Floor
New York, NY 10016
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

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One Rodney Square
Wilmington, DE 19801
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.

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I.
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.
1 This case arises in the wake of the opioid epidemic,
“one of the largest public health crises in this nation’s history.”
Harrington v. Purdue Pharma L.P., 603 U.S. 204, 209 (2024)
(citation omitted). Its tragedies are too many to recount here.

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In late 2016, “federal prosecutors began investigating
two Texas doctors (Howard Diamond and Randall Wade) who
were prescribing vast amounts of opioids.” App. 121. The
DEA raided a Texas Walmart store that December seeking
records concerning Diamond and Wade. This raid alerted
Walmart that it was part of a criminal investigation. In March
2017, an Assistant United States Attorney (“AUSA”) in the
Eastern District of Texas (“EDTX”), Heather Rattan, “issued
an email search warrant to” Walmart “related to documents
involving certain pharmacists in Texas.” App. 124. Rattan
“expanded the search warrant” to Walmart’s “dispensing
controlled substances generally” in June 2017. Id. Walmart
received “broad document demands” from another AUSA in
EDTX in November 2017, who told Walmart “he was
conducting a parallel civil investigation.” App. 124–25.
EDTX also issued several DEA administrative subpoenas
during these investigations.
“[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.

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After further discussion between Walmart and EDTX, a
prosecutor from the Department of Justice’s (“DOJ”)
headquarters “directed Walmart’s counsel to present
Walmart’s submission” about the propriety of an indictment
“to the Criminal Division” on August 10, 2018. App. 130.
Seemingly satisfied, “the DOJ informed Walmart it was then
declining to criminally prosecute the Company” on August 31,
2018, and later also “declined to permit a criminal prosecution”
by EDTX. App. 131–32. EDTX told Walmart a civil
investigation for CSA violations would continue, however, and
it did.
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.

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Plaintiffs claim thirteen of Walmart’s securities filings
through the class period (March 31, 2017, through December
22, 2020) wrongfully omitted or misrepresented the
investigation.2 The first set of filings we will discuss is from
the beginning of the class period to Walmart’s 10-K filed in
2018. The first filing in this set is Walmart’s 10-K for the 2016
fiscal year, filed in March 2017. The 2016 10-K included a
“Contingencies” section, which stated as follows:
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.
2 There are two types of SEC filings at issue in this case:
10-Ks and 10-Qs. Form 10-K is an annual report prepared
“according to a set of accounting standards, conventions and
rules known as Generally Accepted Accounting Principles, or
GAAP” and includes information on the company’s business,
risk factors it faces, legal proceedings, its governance, and
more. How to Read a 10-K/10-Q, U.S. Secs. & Exch. Comm’n
(Jan. 25, 2021), https://www.investor.gov/introduction-
investing/general-resources/news-alerts/alerts-
bulletins/investor-bulletins/how-read. Form 10-Q “provides
similar but more abbreviated disclosure than the Form 10-K
and as it relates to the applicable fiscal quarter.” Id.

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App. 154–55 (emphasis deleted).3 The same disclosure
appears in Walmart’s first-quarter 2017 10-Q, filed June 2,
2017; its second-quarter 2017 10-Q, filed August 31, 2017; and
its third-quarter 2017 10-Q, filed December 1, 2017. Plaintiffs
allege by the time Walmart filed its 2016 10-K, Walmart “had
learned of the Criminal Investigation” and was “aware that a
material liability . . . was at least reasonably possible.” App.
155. And by the time of the third quarter 2017 10-Q, Walmart
was “aware that EDTX DOJ was conducting a parallel civil
investigation.” App. 156. None of the disclosures in this
period referred to the CSA investigations at issue here.
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,
3 This language is standard in public company annual
filings. E.g., Apple Inc., Annual Report (Form 10-K) 26 (Nov.
1, 2024).

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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

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EDTX’s intent to eventually bring an indictment. This filing
included the same disclosure regarding material liabilities
discussed supra, again at the top of the “Contingencies”
section, but the subheading dedicated to the MDL now read
“National Prescription Opiate Litigation and Related Matters.”
App. 159 (emphasis added). This section now included the
following statement, which we italicize, disclosing the then-
ongoing government investigations of Walmart’s opioids
practices:
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

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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

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class period either omitted entirely or made insufficient
reference to the EDTX investigation, violating Section 10(b)
of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
They also sought to impute liability to McMillon and Biggs
under Section 20(a) of the Securities Exchange Act, which
provides for “controlling person” liability.
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

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matters have been disclosed’ false or misleading.” App. 19.
And “no investor could read Walmart’s disclosures” after
Walmart’s 10-Q filed June 4, 2018, “without understanding
what was true—namely, that Walmart potentially faced losses
if the Investigation resulted in criminal charges or civil claims
and that the scope of any such losses was indeterminate.” App.
21. The court rejected the GAAP-based theory of fraud
because Walmart “could not have known a loss ‘may have been
incurred’ until EDTX prosecutors told Walmart at the end of
April 2018 that they intended to indict it,” and Walmart’s
disclosure afterwards sufficed. App. 23.
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). 15 U.S.C. §
78aa(a); see also City of Warren Police & Fire Ret. Sys. v.
Prudential Fin., Inc., 70 F.4th 668, 679 (3d Cir. 2023). We
have jurisdiction over the court’s grant of a motion to dismiss
under 28 U.S.C. § 1291. Fowler, 578 F.3d at 206. Our review
is de novo, accepting the facts alleged in the complaint and
reasonable inferences drawn therefrom as true. Id. at 210. To
survive a motion to dismiss, the complaint must plead “enough
facts to . . . nudge[] [plaintiffs’] claims across the line from
conceivable to plausible.” Bell Atl. Corp. v. Twombly, 550

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U.S. 544, 570 (2007).
“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.
Rule 9(b) requires parties “alleging fraud or mistake” to “state
with particularity the circumstances constituting fraud or
mistake,” a higher pleading standard than Rule 8. Fed. R. Civ.
P. 9(b). And “any private action arising under this chapter,”
including § 10(b) claims, is subject to the procedural
requirements of the PSLRA. 15 U.S.C. § 78u-4. “[I]n §
21D(b) of the PSLRA, Congress impose[d] heightened
pleading requirements in [§ 10(b) and Rule 10b-5 actions],”
which require “any private securities complaint alleging that
the defendant made a false or misleading statement” to “(1)
specify each statement alleged to have been misleading [and]
the reason or reasons why the statement is misleading,” and
“(2) state with particularity facts giving rise to a strong
inference that the defendant acted with the required state of
mind.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.
308, 321 (2007) (internal quotation marks omitted).
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

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court’s underlying futility determination in its denial of leave
to amend). “‘Futility’ means that the complaint, as amended,
would fail to state a claim upon which relief could be granted.”
Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000). Because
plaintiffs attached a proposed amended complaint, we review
it in determining whether amendment might have been futile.
See In re Adv. Battery Techs., Inc., 781 F.3d 638, 641–42 (2d
Cir. 2015).
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)
4 We decline Walmart’s invitation at oral argument to
hold that these theories are interdependent, i.e., that Walmart’s
general statements in its “Contingencies” section are “akin to
a statement saying [Walmart] ha[s] satisfied [its] disclosure
requirements under the accounting rule.” Oral Arg. at 31:22.
Accordingly, we treat them independently.

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reliance,” “(5) economic loss,” and “(6) ‘loss causation,’ i.e.,
a causal connection between the material misrepresentation
and the loss.” Dura Pharms., Inc. v. Broudo, 544 U.S. 336,
341–42 (2005).
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 17 C.F.R. § 240.10b-5(b)). Omissions are
actionable only when they render some other affirmative
statement misleading. Macquarie Infrastructure Corp. v.
Moab Partners, L.P., 601 U.S. 257, 264 (2024). Because the
complaint does not plausibly allege the EDTX investigations
amounted to a “reasonably possible” liability that “may be

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material” during this period, this theory does not carry the day.
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

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took steps towards compliance after the MOA expired, like
changing its pharmacy guidelines to “quot[e] the CSA and
explain[] that [its regulations were] . . . the basis for nearly all
criminal actions the DEA took against pharmacies,” listing
multiple red flags—further reducing the relevance of violations
during the MOA period. App. 80. Defendants’ “actual
knowledge” of past CSA violations may bear on whether
Walmart sincerely or reasonably believed the investigations
did not represent a reasonably possible risk of material
liability. But plaintiffs have not adequately connected the
government’s preliminary and somewhat undefined
investigations with these past violations, leaving unclear
whether the investigations were in fact “likely to uncover [that]
wrongdoing,” Bond v. Clover Health Invs., Corp., 587 F.
Supp. 3d 641, 673 (M.D. Tenn. 2022), or whether “the
government was on [Walmart’s] trail,” Menaldi v. Och-Ziff
Cap. Mgmt. Grp., LLP, 277 F. Supp. 3d 500, 515 (S.D.N.Y.
2015). Nor do they allege AUSA Rattan’s threat of indictment
in the spring of 2018 is connected to the MOA or Walmart’s
alleged violations of it, which nearly half of their complaint is
spent describing. In short, at this early stage, it was not
plausible to infer a “reasonabl[e] possib[ility]” that EDTX’s
search warrants and broad document demands could be a
liability, much less a loss that “may be material.”
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

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before, it at least became misleading after the prosecutor’s
communication, rendering fraudulent its March 30 10-K—the
only regular filing between AUSA Rattan’s communication
and Walmart’s June 4 10-Q, which disclosed the investigation.
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

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made affirmative statements about potential liabilities
stemming from investigations or threatened legal proceedings
and failed to disclose ongoing government investigations.”
Appellant’s Br. 41. But these cases have one feature in
common that is not present here—in each, the defendant made
a statement not merely that they had disclosed reasonably
possible liabilities, but implying the defendant was not under
investigation, when in fact, it was. Walmart’s statement, which
made no reference to investigations or subpoenas—only to
liabilities—does not resemble these disclosures. See Menaldi
v. Och-Ziff Cap. Mgmt. Grp., 164 F. Supp. 3d 568, 583–84
(S.D.N.Y. 2016) (holding Och-Ziff’s statement that it was “not
currently subject to any pending regulatory, administrative or
arbitration proceedings” and “may in the future” be subject to
“regulatory agency investigations, litigation, and subpoenas,”
was misleading because Och-Ziff had already been responding
to subpoenas and subject to investigations (emphasis added));
In re BioScrip, Inc. Sec. Litig., 95 F. Supp. 3d 711, 727–28
(S.D.N.Y. 2015) (holding BioScrip’s statements declining to
provide any “assurance [it] will not receive subpoenas or be
requested to produce documents in pending investigations or
litigation from time to time” misled investors by implying
BioScrip was not receiving subpoenas or requests for
document production when it was); Bond, 587 F. Supp. 3d at
658 (holding Clover Health Investments’ statements that it was
“not aware of any government investigation or other legal
proceeding that could have a material impact on its
performance” and that “there were no material pending or
threatened lawsuits . . . by any Governmental Authority” were
misleading when Clover had received investigative demands a
year prior (internal quotation marks omitted)). The Supreme
Court’s recent decision in Macquarie Infra. Corp. v. Moab
Partners, L.P. explains why § 10(b) liability was appropriate

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in those cases, and not here—the rule “covers half-truths, not
pure omissions.” 601 U.S. at 264.
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. 17 C.F.R. § 210.4-01(a)(1); see
generally In re Burlington Coat Factory Sec. Litig., 114 F.3d
1410, 1417–18 (3d Cir. 1997) (explaining plaintiffs can allege
securities fraud by pleading defendant’s “unreasonable
accounting practices . . . and how they distorted the disclosed
data”). We therefore assess whether the complaint plausibly
alleges Walmart’s disclosures violated ASC 450. We conclude
it does not.
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

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occur.” Financial Accounting Standards Board, Accounting
Standards Codification 450-10-20 [hereinafter “ASC”]. These
“can include contingent contractual claims, lawsuits,
environmental liabilities, and other contingent claims.” 79
New York University Annual Institute on Federal Taxation §
5.08. To simplify, a loss contingency can be thought of as a
liability that may occur in the future.
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. &

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Com. Litig. Fed. Cts. § 89:7 (5th ed.) (“No quantitative metrics
are used in the codified definitions of ‘probable,’ ‘reasonably
possible,’ or ‘remote.’ Accordingly, entities need to exercise
judgement when applying the terms.”); id. (“Pending litigation
or threatened claims are among the most common loss
contingencies subject to disclosure under ASC 450.
Management’s disclosures of or accruals for loss contingencies
related to legal proceedings require a high degree of judgment
and often rely on significant assumptions.” (emphasis added)).
And the rule codifies this subjectivity—ultimately, a
“judgment must be made as to the degree of probability of an
unfavorable outcome” if the entity judges the assertion of a
claim is probable. ASC 450-20-55-15.
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.

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The issue here is whether the complaint plausibly
alleges that before Walmart’s first meeting with EDTX,
Walmart judged the investigation itself to present a
“reasonably possible” or “probable” loss. We conclude it does
not. Plaintiffs contend ASC 450 mandated disclosure because
Walmart was “aware that the DOJ manifested an awareness of
a potential material claim against Walmart when it
commenced” its investigation in 2016, and “it was at least
reasonably possible that” the investigation “would result in . .
. a material liability.” App. 165–66. These arguments ignore
the room for judgment that ASC 450 leaves to Walmart, and
do not allege that Walmart believed that a loss was reasonably
possible during this stage. See ASC 450-20-55-15.
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”

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here was an investigation broad in scope, pursuing a yet-
uncertain theory of liability that may not have led to an
indictment of Walmart at all (as opposed to an indictment of
Dr. Diamond, for example). C.f. In re Lions Gate Ent. Corp.
Sec. Litig., 165 F. Supp. 3d 1, 21 (S.D.N.Y. 2016) (concluding
a Wells Notice and SEC investigation were “not pending or
threatened litigation,” putting them outside ASC 450’s
obligation to disclose “threatened litigation [as] a qualifying
loss contingency”). The “progress of the case” was limited to
document requests and search warrants, and there is no
allegation of any discussions with prosecutors during this
period that might indicate a threat of litigation prior to AUSA
Rattan’s communication. See Ind. Pub. Ret. Sys. v. SAIC, Inc.,
818 F.3d 85, 93–94 (2d Cir. 2016) (requiring disclosure of a
possible government claim as a loss contingency at least by the
time the government “alluded to [the entity’s] improper
actions” in a criminal complaint relating to a specific
government contract, the government announced reviews of
that contract, individual employees had been indicted by the
government and indemnified by the entity, and an audit made
the entity aware of its liability for breaching that contract and
the possible extent thereof); Secs. & Exch. Comm’n v. RPM
Int’l, Inc., 282 F. Supp. 3d 1, 21 (D.D.C. 2017) (distinguishing
Lions Gate because a “federal civil complaint . . . was actually
pending” against the entity, as opposed to the “mere existence
of an open investigation,” which would not have triggered
ASC 450). The complaint does not suggest Walmart had
similar cases from which it could infer possible liability, other
than the situation involving the MOA, which “imposed no
fines and [did not require] Walmart [to] admit[] . . .
wrongdoing,” Appellee’s Br. 4, so Walmart’s prior
experiences did not indicate a reasonable possibility of a loss
from this case, either.

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Consider how one District Court dismissed a similar
ASC 450 claim brought with similar facts:
“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

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outcome of the investigations, what the charges would be, or
what a settlement would look like. That Walmart had prior
run-ins with the law where the grounds of its potential liability
were clearer did not mean it could predict a disclosable
contingent liability here.
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.

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Appellee’s Br. 35–36.
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

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specific area of its operations that could lead to losses—and “a
statement that” “an estimate of the possible loss or range of
loss . . . could not be made.” ASC 450-20-50-3. This detail
also sufficed to make the disclosures’ general “Contingencies”
statement not misleading; if plaintiffs are right that the
investigations were a liability that could be material at this
point in the class period, Walmart explicitly disclosed them as
such.
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
5 We consider the statement added in the June 4, 2018
disclosure a statement of opinion. An opinion statement
typically includes “words like ‘I think’ or ‘I believe’” that
“convey some lack of certainty as to the statement’s content.”
Omnicare, 575 U.S. at 187. The statement here, that Walmart
could “provide no assurance as to the scope and outcome of
these matters” or “as to whether its business . . . will not be

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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 § 10(b) for
violations of Rule 10b-5.”).
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
materially adversely affected,” conveys that lack of certainty.
App. 159.

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way,” because “[r]easonable investors understand that
opinions sometimes rest on a weighing of competing facts.”
Omnicare, 575 U.S. at 189–90. And Walmart did not need to
disclose every fact that went to its opinion unless the omission
of those facts made the opinion misleading.
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
6 We do not hold—and need not—that on any given date
after the 2018 first-quarter 10-Q, this investigation became a
loss contingency Walmart needed to disclose or a “liability”
that was “reasonably possible and may be material.” App.
154–55. If it did, then Walmart timely disclosed it; and if it
did not, then Walmart’s disclosure was safely overinclusive
throughout the class period.

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the District Court that “no investor could read” these
disclosures “without understanding what was true”—
“Walmart potentially faced losses” depending on the result of
the investigations, and “the scope of any such losses was
indeterminate.” App. 21.
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

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amendment characterized any new facts as primarily
addressing scienter. See App. 1415 (“The Proposed [Third
Amended Complaint] bolsters the SAC’s strong inference of
scienter.”). Adducing evidence that McMillon and Biggs knew
of Walmart’s checkered history with the CSA, all before the
class period, does not change the fundamental flaw in the
complaint—on these facts, Walmart did not wrongly judge
whether this investigation was a liability that was both
“reasonably possible” and potentially material, so its
disclosure was not misleading. This is especially so given the
complaint does not show the MOA resulted in any material
losses. None of the facts plaintiffs would incorporate from the
derivative complaint suggest the EDTX investigations were a
more reasonably possible, or potentially material, liability than
they were without those facts.
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);

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Appellee’s Br. 9 (“In December 2020, DOJ brought a civil suit
against Walmart alleging violations of the CSA. That civil case
remains ongoing.” (citations omitted)). And its liability so far
has numbered in the billions of dollars. See, e.g., Walmart
Reaches Opioid Settlement Agreements with All 50 States,
Walmart News (Dec. 20, 2022),
https://corporate.walmart.com/news/2022/12/20/walmart-
reaches-opioid-settlement-agreements-with-all-50-states.
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
7 Matt Levine, Silence Is Not Securities Fraud,
Bloomberg (Apr. 15, 2024),
https://www.bloomberg.com/opinion/articles/2024-04-
15/silence-is-not-securities-fraud.

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it could not estimate.
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.
8 We also reject plaintiffs’ argument that Walmart made
a misleading statement under Item 105. In their briefing,
plaintiffs concede the court’s conclusion that Walmart’s risk
disclosures complied with Item 105—instead, they argue
Walmart’s “statements describing the risks associated with
Walmart’s pharmacy operations were misleading, irrespective
of Item 105.” Appellant’s Br. 33. But we do not see how a
reasonable investor could read Walmart’s Item 105 disclosures
as making any representation about an early-stage government
investigation, particularly when the “Contingencies”
disclosures were otherwise adequate. We do not reach
plaintiffs’ allegations concerning Item 103 because plaintiffs
do not dispute that aspect of the court’s decision. App. 25–26.
Because a violation of Section 20(a) requires an
underlying violation of Section 10(b), and we will affirm the
dismissal of the Section 10(b) claim, we will also affirm the
dismissal of the Section 20(a) claim. See 15 U.S.C. § 78t(a).

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