FILE PHOTO: A Walmart store is shown in Oceanside, California, U.S., May 15, 2025. REUTERS/Mike Blake/File Photo

By Jonathan Stempel

(Reuters) -Walmart defeated an appeal by shareholders who said the world's largest retailer defrauded them by failing to disclose that federal prosecutors were investigating its opioid-dispensing practices.

The 3rd U.S. Circuit Court of Appeals in Philadelphia said Walmart did not commit securities fraud by waiting until June 2018 to reveal it was being investigated, 1-1/2 years after the probe began and 10 weeks after a Texas prosecutor warned she intended to indict the company.

Walmart learned of the opioid probe after federal agents raided one of its stores, seeking records concerning two Texas doctors who were prescribing vast amounts of the painkillers.

The company was not indicted, but was hit with a U.S. Department of Justice civil lawsuit in December 2020. A trial is scheduled for November 2027. The Bentonville, Arkansas-based retailer has more than 5,000 Walmart and Sam's Club pharmacies.

Shareholders sued Walmart after ProPublica reported on the near-indictment on March 25, 2020.

Walmart shares fell 5.1% that day, wiping out about $16 billion of market value, and fell after the Justice Department announced its civil lawsuit.

In Friday's 3-0 decision, Circuit Judge Anthony Scirica said "not everything is securities fraud," and that while Walmart did not reveal the indictment threat it "did what it had to do" to avoid misleading disclosures.

"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," Scirica wrote.

"Once the contours of the investigation were clearer," he added, "Walmart disclosed it was under investigation, what it was under investigation for, and that it faced possible losses."

Friday's decision upheld an April 2024 dismissal by Chief Judge Colm Connolly of the Delaware federal court.

Lawyers for the shareholders did not immediately respond to requests for comment. A Walmart spokeswoman said the company was pleased with the outcome.

In November 2022, Walmart reached a $3.1 billion nationwide settlement of opioid claims by state, local and tribal governments.

The case is In re Walmart Inc Securities Litigation, 3rd U.S. Circuit Court of Appeals, No. 24-1818.

(Reporting by Jonathan Stempel in New York; Editing by Cynthia Osterman)