IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

ONTARIO PROVINCIAL COUNCIL OF

CARPENTERS’ PENSION TRUST FUND,

POLICE & FIRE RETIREMENT SYSTEM OF

THE CITY OF DETROIT, AND NORFOLK

COUNTY RETIREMENT SYSTEM, Derivatively

on Behalf of WALMART INC.,

Plaintiffs,

v.

S. ROBSON WALTON, GREGORY B. PENNER,

STEUART WALTON, TIMOTHY P. FLYNN,

THOMAS W. HORTON, MARISSA A. MAYER,

DOUG MCMILLON, STEVEN S. REINEMUND,

PHYLLIS HARRIS, and JAY JORGENSEN,

Defendants,

 and

WALMART INC.,

Nominal Defendant.

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C.A. No. 2021-0827-JTL

OPINION ADDRESSING DEFENDANTS’

MOTION TO DISMISS ON THE BASIS OF LACHES

Date Submitted: January 13, 2023

Date Decided: April 12, 2023

Gregory V. Varallo, Mae Oberste, & Daniel E. Meyer, BERNSTEIN LITOWITZ

BERGER & GROSSMANN LLP, Wilmington, Delaware; Mark Lebovitch & Edward G.

Timlin, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP, New York, New

York; Leslie R. Stern, Nathaniel L. Orenstein, & Steven L. Groopman, BERMAN

TABACCO, Boston, Massachusetts; Counsel for Police & Fire Retirement System of the

City of Detroit and Norfolk County Retirement System.
Ned Weinberger & Mark Richardson, LABATON SUCHAROW LLP, Wilmington, 

Delaware; David MacIsaac, LABATON SUCHAROW LLP, New York, New York; 

Counsel for The Ontario Provincial Council of Carpenters’ Pension Trust Fund.

Raymond J. DiCamillo & John M. O’Toole, RICHARDS, LAYTON & FINGER, P.A.,

Wilmington, Delaware; Sean M. Berkowitz & Nicholas J. Siciliano, LATHAM &

WATKINS LLP, New York, New York; Andrew W. Stern & Charlotte K. Newell, 

SIDLEY AUSTIN LLP, New York, New York; William M. Regan & Allison M. Wuertz, 

HOGAN LOVELLS US LLP, New York, New York; Frank R. Volpe, SIDLEY AUSTIN 

LLP, Washington, District of Columbia; Counsel for Defendants and Nominal Defendant.

LASTER, V.C.
Walmart Inc. operates over 5,000 pharmacies that dispense prescription opioids. 

Until April 2018, Walmart acted as a wholesale distributor of prescription opioids for its 

pharmacies. Walmart has incurred significant liabilities due to its involvement with 

prescription opioids. 

The plaintiffs are stockholders who seek to hold accountable the fiduciaries whom 

they say caused Walmart to suffer harm. They maintain that the directors and officers of 

Walmart breached their fiduciary duties by (i) knowingly causing Walmart to fail to 

comply with its obligations under the federal Controlled Substances Act and its 

implementing regulations (collectively, the “Controlled Substances Act”) when acting as a

dispenser of opioids through its pharmacies (the “Pharmacy Issues”), (ii) knowingly 

causing Walmart to fail to comply with its obligations under the Controlled Substances Act 

when acting as a distributor of opioids (the “Distributor Issues”), and (iii) knowingly 

causing Walmart to fail to comply with its obligations under a settlement with the U.S. 

Drug Enforcement Agency (the “DEA Settlement Issues”).

For each set of issues, the plaintiffs advance three species of claims: an InformationSystems Claim, a Red-Flags Claim, and a Massey Claim. The Information-Systems Claim 

asserts that Walmart’s directors and officers knew they had an obligation to establish 

information systems sufficient to enable them to monitor Walmart’s compliance with the 

Controlled Substances Act and the DEA Settlement, yet consciously failed to make a good 

faith effort to fulfill that obligation. The Red-Flags Claim asserts that a steady stream of 

red flags put Walmart’s directors and officers on notice of its noncompliance, yet the 

directors and officers consciously ignored them. The Massey Claim asserts that Walmart
2

did not comply with the Controlled Substances Act and the DEA Settlement because its 

officers and directors made a conscious decision to prioritize profits over legal compliance, 

thereby choosing to violate the law. 

In their lead argument for dismissal, the defendants argue that all of the plaintiffs’

claims are untimely. Applying the principles set forth in Lebanon County Employees’ 

Retirement Fund v. Collis, 287 A.3d 1160 (Del. Ch. 2022), this decision rejects that 

argument. 

In Collis, the court evaluated three different methods of measuring the time when a 

claim accrues: the discrete act approach, the continuing wrong approach, and the separate 

accrual approach. The Collis decision applied the separate accrual approach to a Red-Flags 

Claim and assumed that it would govern a Massey Claim, while holding out the possibility 

that because of the seriousness of a Massey Claim, the continuing wrong approach might 

apply. Addressing an issue of first impression, this decision holds that the separate accrual 

approach governs an Information-Systems Claim.

To apply the separate accrual approach, a court picks a lookback date by identifying 

when the plaintiff began pursuing its claims. Usually, that will be when the plaintiff filed 

suit, but when a plaintiff has engaged in diligent efforts to obtain books and records, the 

lookback date can be tied to those efforts. In this case, the plaintiffs filed suit on September 

27, 2021, but they started making diligent efforts to pursue books and records on May 4, 

2020. That is the lookback date for this case. 
3

The next step in the separate accrual approach is to measure backward from the 

lookback date using the statute of limitations for a closely analogous legal claim. The result 

is the actionable period. For a claim for breach of fiduciary duty, the analogous statute of 

limitations is three years. Measuring back from the lookback date of May 4, 2020, results 

in an actionable period that started on May 4, 2017. 

The third step in the separate accrual approach is to determine whether any of the 

ongoing conduct that gives rise to the claim occurred during the actionable period. If so, 

then the claim is timely. If not, then the court must analyze any tolling doctrines that the 

plaintiffs have asserted. 

The timeliness analysis for the Pharmacy Issues is straightforward. In August 2022, 

a federal judge entered an injunction order requiring Walmart to remediate deficient 

controls and reporting systems. Then, as part of a nationwide settlement that Walmart 

agreed to in November 2022, Walmart agreed to implement extensive procedures and 

controls. Those events support a reasonable inference that the Pharmacy Issues continued 

throughout the actionable period. The plaintiffs’ claims based on the Pharmacy Issues are 

timely. 

The timeliness analysis for the Distributor Issues is equally straightforward. 

Management decided to exit that business in November 2017, and the winddown was over 

by April 2018. The actionable period extends backward to May 2017, so there is overlap 

between the wrongdoing and the actionable period. Just as a filing under a discrete act 
4

approach is timely if it beats the statute of limitations by one day, so too is a plaintiff’s suit 

timely under the separate accrual approach if some overlap exists between the conduct and 

the actionable period. The plaintiffs’ claims based on the Distributor Issues are timely.

The analysis is more complex for the DEA Settlement Issues. The DEA Settlement 

expired on March 11, 2015, so any violations of the settlement ceased on that date. The 

actionable period only extends backward to May 4, 2017, so there is no overlap between 

the wrongdoing and the actionable period. Absent tolling, the plaintiffs’ claims based on 

the DEA Settlement Issues are untimely. 

Tolling doctrines can push back the starting date of the actionable period, which 

may enable a plaintiff to assert an otherwise untimely claim. The plaintiffs have invoked 

three tolling doctrines: equitable tolling, inherently unknowable injury, and fraudulent 

concealment. 

Equitable tolling applies because the defendants are fiduciaries, charged with acting 

in the best interests of the corporation and its stockholders. As stockholders, the plaintiffs 

were entitled to rely on the presumption that their fiduciaries were acting loyally, in good 

faith, and with due care. The pleading-stage record supports an inference that there was no 

information available about the DEA Settlement Issues until March 2020. During the 

intervening period, Walmart issued disclosures indicating that the directors and officers 

were fulfilling their fiduciary duties. There was no indication that Walmart’s directors and 
5

officers had breached their fiduciary duties by consciously disregarding the compliance 

requirements built into a settlement agreement with its primary regulator. 

Tolling cannot preserve an otherwise untimely claim after the point of inquiry 

notice. After that, a plaintiff must pursue the claim within a reasonable time. The 

defendants point to the barrage of cases filed against Walmart in 2016 and 2017, later 

consolidated into a multidistrict litigation (the “Opioid MDL”) and argue that those 

lawsuits put stockholders on inquiry notice that Walmart might not be complying with its 

obligations under the Controlled Substances Act. The defendants claim that by providing 

reason to suspect that Walmart might not be complying with its obligations under the 

Controlled Substances Act, those lawsuits also put stockholders on inquiry notice that 

Walmart might not be complying with other legal obligations, such as the compliance 

requirements built into an undisclosed settlement agreement with its primary regulator that 

was in effect from March 2011 until March 2015.

The court cannot determine at the pleading stage that the filing of the cases that led 

to the Opioid MDL put stockholders on inquiry notice about the DEA Settlement 

Agreement. For lawsuits to suggest potential problems at a company is one thing. It is 

something else entirely to argue that those lawsuits should have suggested to stockholders 

that Walmart might have entered into an undisclosed settlement agreement with its primary 

regulator and had failed to comply with its obligations under that settlement agreement.
6

The court can only apply the defense of laches at the pleading stage if it is clear 

from the face of the complaint that the claims are time-barred. Because of the uncertainties 

surrounding inquiry notice about the DEA Settlement Issues, the court cannot determine at 

the pleading state that those claims are time-barred.

The defendants’ motion to dismiss on the basis of laches is denied. The claims based 

on the Pharmacy Issues and the Distributor Issues are timely. The claims based on the DEA 

Settlement Issues may be timely because of equitable tolling, subject to further proceedings 

on the subject of inquiry notice. 

I. FACTUAL BACKGROUND

The facts are drawn from the operative complaint, the documents it incorporates by 

reference, and public documents that are subject to judicial notice.1 At this stage of the 

proceedings, the complaint’s allegations are assumed to be true, and the plaintiffs receive 

the benefit of all reasonable inferences, including inferences drawn from the documents.

1 The complaint incorporates by reference documents produced in federal 

proceedings involving Walmart. The complaint also incorporates documents filed with the 

U.S. Securities and Exchange Commission (the “SEC”). The court may consider both sets 

of documents at this stage of the proceedings.

Citations in the form “Compl. ¶ —” refer to the paragraphs of the operative 

complaint. Citations in the form “Ex. [number] at —” refer to exhibits that the defendants 

filed in support of their motion. Citations in the form “Ex. [letter] at —” refer to exhibits 

that the plaintiffs filed with their answering brief. Page citations refer to the internal 

pagination or, if there is none, then to the last three digits of the control number. 
7

A. Walmart, Its Governance, And The Applicable Regulatory Framework

Walmart is a Delaware corporation with its principal place of business in 

Bentonville, Arkansas. Walmart operates three primary business segments: Sam’s Club, 

Walmart International, and Walmart U.S. 

Walmart has a board of directors (the “Board”) charged with overseeing the 

business and affairs of the corporation. The Board meets at least four times per year. The 

Board’s duties include “overseeing the Company’s policies with respect to compliance 

with applicable laws and regulations and adopting policies of corporate conduct designed

to assure compliance with applicable laws and regulations and to assure maintenance of 

necessary accounting, financial, and other controls.” Ex. 4 at 3. 

The Board has established an Executive Committee that “[i]mplements policy 

decisions of the Board” and “[a]cts on the Board’s behalf between Board meetings.” Ex. 

80 at 28. The Executive Committee meets “as often as it determines to be necessary or 

appropriate.” Ex. 70 at 50. 

The Board has established an Audit Committee to oversee and monitor “compliance 

by the Company with legal and regulatory requirements.” Ex. 5 at 1. The Audit Committee 

meets at least quarterly and reports to the Board. The Audit Committee meets “no less than 

annually” with Walmart’s ethics and compliance senior executives. Id. at 8.

Through its Health and Wellness Division, Walmart operates one of the largest 

pharmacy chains in the United States, with more than 5,000 retail pharmacies located in its 

Walmart and Sam’s Club stores. Until 2018, Walmart engaged in the wholesale 
8

pharmaceutical distribution business by operating distribution centers that supplied its 

retail pharmacies. 

Walmart engaged in the retail dispensing and wholesale distribution of prescription 

opioids under licenses from the DEA, which required that Walmart comply with the 

Controlled Substances Act. See 21 U.S.C. § 801 et seq.; 21 C.F.R. § 1300 et seq. In its 

public filings, Walmart acknowledges that its business depends on compliance with its 

legal obligations related to the distribution and dispensing of controlled substances. See, 

e.g., Ex. 1 at 22. 

As a “dispenser,”

2

a pharmacy must establish and maintain “effective controls and 

procedures to guard against theft and diversion of controlled substances.” 21 C.F.R. § 

1301.71(a). The regulations for dispensers include specific requirements that pharmacies 

must meet. A pharmacy must implement security measures to maintain control over its 

inventory of controlled substances, 21 C.F.R. § 1301.75, and the security measures must 

enable the pharmacy to identify instances of loss or theft and notify the DEA, id. § 1301.76.

2 See 21 C.F.R. § 1300.01 (“Dispenser means an individual practitioner, institutional 

practitioner, pharmacy or pharmacist who dispenses a controlled substance.” (emphasis 

added)); see also 21 U.S.C. § 802(10) (defining dispenser as “a practitioner who so delivers 

a controlled substance to an ultimate user”). “[D]ispensers of controlled substances are 

obligated to check for and conclusively resolve red flags of possible diversion prior to 

dispensing those substances.” See In re Nat’l Prescription Opiate Litig., 477 F. Supp. 3d 

613, 629 (N.D. Ohio 2020), clarified on denial of reconsideration, 2020 WL 5642173 

(N.D. Ohio Sept. 22, 2020).
9

As a “practitioner,”

3

a pharmacy must maintain records about the prescriptions that 

its pharmacists process. See 21 C.F.R. § 1304.22(c). Exercising their professional 

judgment, pharmacists must refuse to fill prescriptions that are suspicious, report the 

refusal to the DEA, and maintain records on red-flagged prescriptions. See In re Nat’l 

Prescription Opiate Litig., 2020 WL 5642173, at *3 (N.D. Ohio Sept. 22, 2020).

While operating as a wholesale distributor of prescription opioids, Walmart was 

obligated to maintain “effective control against diversion of [opioids] into other than 

legitimate medical, scientific, and industrial channels.” 21 U.S.C. § 823(b)(1). A distributor 

must “design and operate a system” to identify “suspicious orders of controlled substances” 

and report them to the DEA. 21 C.F.R. § 1301.74(b). “Suspicious orders include orders of 

unusual size, orders deviating substantially from a normal pattern, and orders of unusual 

frequency.” Id. Once a distributor has reported a suspicious order, the distributor must 

either decline to ship the order or conduct due diligence to determine whether the order is 

likely to be diverted into illegal channels. The distributor can only ship the order if it 

determines after conducting due diligence that the order is not likely to be diverted into 

illegal channels. See Masters Pharm., Inc. v. Drug Enf’t Admin., 861 F.3d 206, 212 (D.C. 

3 See 21 U.S.C. § 802(21) (“The term ‘practitioner’ means a physician, dentist, 

veterinarian, scientific investigator, pharmacy, hospital, or other person licensed, 

registered, or otherwise permitted . . . to distribute, dispense, conduct research with respect 

to, administer, or use in teaching or chemical analysis, a controlled substance in the course 

of professional practice or research.” (emphasis added)).
10

Cir. 2017) (discussing distributor obligation under Southwood Pharm., Inc., 72 Fed. Reg. 

36,487, 36,501 (Drug Enf’t Admin. July 3, 2007)).

The Controlled Substances Act does not mandate strict compliance with its 

requirements. Only substantial compliance is necessary. In re Nat’l Prescription Opiate 

Litig., 2021 WL 3917174, at *3 (N.D. Ohio Sept. 1, 2021) (citing 21 C.F.R. § 1301.71(b)). 

B. The DEA Settlement

On November 13, 2009, the DEA issued an order to show cause regarding a 

Walmart pharmacy in San Diego, California. The order to show cause asserted that the 

pharmacy:

(1) improperly dispensed controlled substances to individuals based on 

purported prescriptions issued by physicians who were not licensed to 

practice medicine in California; 

(2) dispensed controlled substances to individuals located in California based 

on Internet prescriptions issued by physicians for other than a legitimate 

medical purpose and/or outside the usual course of professional practice 

in violation of federal and state law; and 

(3) dispensed controlled substances to individuals that [the San Diego 

Walmart pharmacy] knew or should have known were diverting 

controlled substances.

Ex. A § II. Walmart disputed the factual allegations alleged in the order to show cause and

disagreed with the DEA’s position. Id. 

In February 2011, Walmart and the DEA entered into the DEA Settlement, which 

required that Walmart implement and maintain a compliance program for all of its 
11

pharmacies and imposed a list of specific requirements. Id. § III.4.a. The term of the DEA 

Settlement ran from March 11, 2011 to March 11, 2015. Id. at § III.13. 

C. Walmart’s Initial Efforts To Comply With The DEA Settlement

Walmart took some steps to comply with the DEA Settlement. Most notably, 

Walmart generated a set of policies and procedures that documented various obligations 

that its personnel would fulfill. Those policies and procedures described an oversight 

structure for achieving compliance within the Health and Wellness Division. 

Problems arose when it came time to create the infrastructure that would enable 

Walmart’s pharmacists and other personnel to follow the policies and procedures. The team 

responsible for creating and implementing a monitoring program that would comply with 

the DEA Settlement estimated that it would require $40 million to complete all of the 

team’s projects. Walmart gave them a budget of $11 million. That budget could fund 

Walmart’s existing compliance projects, but would not cover the cost of any new programs. 

See Compl. ¶¶ 11, 156; Ex. 82. 

In January 2012, nine months into the term of the DEA Settlement, Walmart’s Chief 

Administrative Officer reported to the Audit Committee and the Executive Committee that 

compliance efforts had fallen behind schedule and that “[s]ignificant compliance issues 

remain unresolved.” Ex. 6 at ’035. A supporting slide deck explained that a “[n]ew 

compliance plan is being developed” to achieve compliance within five years. Id. at ’037. 

Compliance on that timeline meant January 2017, nearly two years after the DEA 

Settlement would expire. At this stage of the case, plaintiffs are entitled to the inference 
12

that the directors knew Walmart was not on track to comply with the DEA Settlement and 

would not achieve compliance during its term.

In November 2012, a committee of senior compliance executives held a meeting. 

The minutes span seven pages. Walmart redacted all of the substantive portions for nonresponsiveness and attorney-client privilege, with the exception of the following sentence: 

“Ms. Harris then provided an update to the Committee on the overall status of Health and 

Wellness Compliance projects.” Ex. 11 at 2. Without any other substantive text to draw on, 

there are at least two possible inferences. One is that the update described Walmart as 

making good progress and being on track to achieve compliance with the DEA Settlement. 

The other is that the update described Walmart as remaining behind and unable to achieve 

compliance with the DEA Settlement. At the pleading stage, the plaintiffs are entitled to 

the latter inference. 

In March 2013, Walmart’s Chief Compliance Officer provided a report to the Audit 

Committee. The report gave each project a color to indicate its status: green for “on 

schedule,” yellow for “watch list,” and red for “major issues.” See Ex. 46 at ’601. The 

report stated that the “diversion analytics tool to monitor suspicious controlled substance 

activity remains in a status of red.” Id. Development of the diversion analytics tool had 

stopped because of a problem with Walmart’s Data Centralization project, which was also 

in a status of red. Walmart had only purchased a limited amount of database capacity, and 

nothing could be done until more was purchased. Without more capacity, Walmart could 
13

only implement a read-only database, which could not support “several critical business 

and compliance initiatives.” Id. 

During a two-day meeting of the Board in September 2013, the Audit Committee, 

two members of the Executive Committee, and Walmart’s CEO had a “legal, compliance, 

and ethics session,” where Jay Jorgensen, Senior Vice President and Global Chief 

Compliance Officer for Walmart, presented a health and wellness compliance update. Ex. 

47 at 18. The meeting minutes comprised eighteen pages. Walmart redacted all but the 

following three lines: “Mr. Williams reported that the [Audit] Committee had conducted a 

legal, compliance and ethics session. He stated that during this session, the Committee had 

received [REDACTED] . . . reports regarding Walmart’s health and wellness compliance 

initiatives. . . .” Id. Mr. Williams is presumably Christopher J. Williams, then-Chairman of 

the Audit Committee. Consistent with Walmart’s redaction practice, the unredacted portion 

identifies a topic without providing any indication as to its substance. One inference is that 

Mr. Williams told his fellow directors that everything was on track. Another inference is 

that Mr. Williams told the directors that key aspects of Walmart’s program were not on 

track, that those components were in a status of red, and that Walmart was not complying 

with the DEA Settlement. At this stage of the proceedings, the plaintiffs are entitled to the 

latter inference.

In October 2013, the Health and Wellness Division provided the Board with an 

assessment of Walmart’s controlled substances risk, which reported that the project to 
14

“[d]esign & operate a systems [sic] to detect suspicious orders and report to the DEA when 

discovered” remained in red. Ex. C. at ’751. The summary reported that the project to 

“[e]stablish additional maximum order limits of highly abused drugs” was in yellow. Id. 

Neither project had a delivery date. For both, the delivery date was marked “TBD.” Id. 

The four-year term of the DEA Settlement was scheduled to end on March 11, 2015. 

As of October 2013, Walmart had used up two years and seven months of the four-year 

term. Walmart had only seventeen months left to implement the mandates in the DEA 

Settlement, including a full-scale suspicious order monitoring system.

D. Walmart Prioritizes Inventory Diversion.

In March 2014, Walmart publicly announced that during fiscal year 2014, the 

company had made certain improvements to its Health and Wellness compliance program 

that included “[c]reating a diversion analytics tool to deter, detect and remedy attempts at 

pharmaceutical diversion in U.S. Walmart and Sam’s Club pharmacies.”

4 Walmart’s new 

system only monitored for theft and loss of controlled substances within Walmart. The new 

system did not address other aspects of Walmart’s anti-diversion obligations. Walmart 

4 Compl. ¶ 352; Dkt. 40 at 51; accord Wal-Mart Stores, Inc., Definitive Additional 

Materials (Schedule 14A), at 9 (Apr. 23, 2014). Neither party submitted the proxy 

statement or its definitive additional materials as exhibits. The court may, however, take 

judicial notice of the statement. In re Rural Metro Corp. S’holders Litig., 2013 WL 

6634009, at *7 (Del. Ch. Dec. 17, 2013) (“Applying [Delaware] Rule [of Evidence] 201, 

Delaware courts have taken judicial notice of publicly available documents that ‘are 

required by law to be filed, and are actually filed, with federal or state officials.’” (quoting 

Tyson Foods, 919 A.2d at 584)).
15

notably took a step to meet a compliance obligation that helped its bottom line, while not 

taking steps that didn’t. See Compl. ¶ 191.

That same month, the head of compliance for the Health and Wellness Division

reported to the Audit Committee on the division’s compliance priorities for fiscal year 

2015. See Ex. B. The presentation included a photograph from a Walmart pharmacy in 

Tampa, Florida that depicted scores of patrons waiting in line at 7:00 a.m., two hours before 

the pharmacy opened, with a “very high number of prescriptions for Oxycodone.” Compl. 

¶ 185. The presentation reported that after the July 2012 incident, the compliance team 

“began to assess our processes” to avoid the “risk of our pharmacies becoming the 

pharmacy of choice for ‘pill mills.’” See Ex. B.

E. Additional Reports On Walmart’s Compliance Efforts

In May 2014, the Audit Committee received a fourteen-page report that summarized 

the status of compliance efforts within the Health and Wellness Division. The report 

discussed Walmart’s new diversion analytics tool that monitored for internal inventory

diversion. With the tool in place, the compliance team uncovered major instances of 

internal opioid diversion, including a shortfall of 16,000 dosage units from a pharmacy in 

Indiana and a shortfall of 4,689 dosage units from two pharmacies in Maryland. After 

discussing Walmart’s obligations under the Controlled Substances Act, the report observed 

that Walmart had experienced a 114% increase in incidents relative to the prior year. The 

report noted that during fiscal year 2014, state and federal regulatory agencies made 2,096 

visits to Walmart pharmacies, with 547 visits (26%) resulting in violations of record-
16

keeping requirements, associate licensing requirements, equipment deficiencies, 

prescription discrepancies, incomplete logs, or instances of internal diversion. 

The report did not mention the DEA Settlement, Walmart’s obligations under it, or 

the status of Walmart’s efforts to comply with those obligations. Only ten months remained 

before the term of the DEA Settlement ended. 

In June 2014, the Health and Wellness Division evaluated the progress of the 

suspicious order monitoring project. See Ex. D. The assessment recognized that the project 

was part of the DEA Settlement and that a suspicious order monitoring system still was not 

in place. The assessment included the following question: “Is the Risk being mitigated 

today by manual, systemic, or a combination of both today [sic] (regardless of optimal or 

not)?” Id. at ’701. The assessment gave a pointed answer: “No.” Id. The suspicious order 

monitoring project had “no process in place.” Id. The report stated “Board Informed,” 

supporting an inference that the Board had been informed of the situation. Id. 

In November 2014, the Board reviewed Walmart’s compliance with the Controlled 

Substances Act. Walmart withheld the meeting minutes in their entirety. Compl. ¶ 222. 

One inference is that the Board was told that everything was A-OK. Another inference is 

that the Board was told that Walmart was failing to comply with the DEA Settlement and 

could not achieve compliance before it expired. 

In February 2015, just one month before the DEA Settlement expired, a pharmacist 

in Texas wrote to one of Walmart’s compliance directors. The pharmacist expressed 
17

concern about filling prescriptions for a pill-mill doctor. Id. ¶¶ 124, 260. The compliance 

director candidly explained how Walmart had approached the DEA Settlement: 

The [DEA Settlement] that requires the reporting of Refusal to fills expires 

in 30 days. We have not invested a great amount of effort in doing analysis 

on the data since the agreement is virtually over. Driving sales and patient 

awareness is a far better use of our Market Directors and Market manager’s 

time. 

Id. ¶ 27. That statement openly prioritized profits (“[d]riving sales”) over compliance. 

F. The DEA Settlement Expires.

On March 11, 2015, the DEA Settlement expired. There are no non-privileged,

unredacted documents from the months leading up to the DEA Settlement that could 

support an inference that Walmart achieved compliance with its legal obligations under the 

DEA Settlement. To be clear, Walmart took some steps towards compliance. But at the

pleading stage, the plaintiffs are entitled to inferences that (i) Walmart did not achieve 

compliance with its legal obligations under the DEA Settlement, (ii) Walmart’s directors 

and officers knew that Walmart was not complying with its legal obligations, and (iii) 

Walmart’s directors and officers did not take action to cause Walmart to achieve 

compliance. 

In April 2015, just after the DEA Settlement expired, Walmart’s proxy statement 

disclosed that “management reported regularly to the Audit Committee regarding ongoing 

enhancements to our global compliance program and progress in implementing these 

objectives. At the end of fiscal 2015, the Audit Committee determined that, in its qualitative 
18

judgment, adequate progress had been achieved in implementing these objectives.”

5 The 

disclosure did not mention the DEA Settlement. Similar disclosures appeared in Walmart’s 

proxy statements for 2016, 2017, and 2018.

6

G. The Pharmacy Issues Continue. 

After the DEA Settlement expired, Walmart introduced a software program to 

capture information about prescriptions that pharmacists refused to fill. But Walmart 

prohibited pharmacists from accessing the information, thus limiting pharmacists’ ability 

to make informed decisions about whether to refuse to fill prescriptions. As of July 29, 

2018, pharmacists still could not access the information. Compl. ¶¶ 253–255.

In November 2016, there was a meeting of compliance function executives. Ex. 13

at ’682. The minutes of the meeting are virtually all redacted. The only substantive sentence 

5 Wal-Mart Stores, Inc., Definitive Proxy Statement (Schedule 14A), at 53 (Apr. 22, 

2015).

6 See Wal-Mart Stores, Inc., Definitive Proxy Statement (Schedule 14A), at 49–50 

(Apr. 20, 2016) (“[O]ver the past few years, our company has made significant 

improvements to our ethics and compliance program around the world. To further 

emphasize our commitment to ethics and compliance, in early fiscal 2016, our company’s 

senior leadership again developed a timetable for implementing further enhancements to 

our global ethics and compliance program on a prioritized basis. These objectives covered 

such subject matters as . . . health and wellness compliance . . . These objectives sought to 

enhance key elements of a corporate ethics and compliance program, including but not 

limited to developing and implementing enhanced compliance protocols and procedures, 

hiring and training of key compliance personnel, monitoring and assessment of various 

elements of the program, internal communications, and access to information.”); Wal-Mart 

Stores, Inc., Definitive Proxy Statement (Schedule 14A), at 60 (Apr. 20, 2017) (same); 

Walmart Inc., Definitive Proxy Statement (Schedule 14A), at 51 (Apr. 20, 2018) (same).
19

states, “Mr. Jorgensen noted that the materials for the Committee’s October 13, 2016 

meeting included U.S. Health and Wellness Compliance training materials.” Id. at ’683. 

One possible inference is that Mr. Jorgensen provided a positive update on the training 

materials. Another possible inference is that Mr. Jorgensen reported on inadequacies in the 

training materials. At this stage of the proceedings, the plaintiffs receive the benefit of the 

latter inference.

H. Distribution Issues

From the early 2000s until April 2018, Walmart distributed opioids to its pharmacies 

from its distribution center in Bentonville, Arkansas. Compl. ¶ 131. Before November 

2010, Walmart had no written policies or procedures about monitoring for suspicious 

orders. Id. ¶ 133. Instead, Walmart charged its hourly wage employees—who had no 

medical, pharmaceutical, or public health training—with identifying any orders that looked 

suspicious. Walmart did not provide any standards, training, or processes to assist them in 

making that determination. Id. ¶ 134.

In November 2010, Walmart implemented the first written policy for its distribution 

business. Titled “Identifying and Reporting Purchases of Controlled Substances,” it 

contemplated employees at the Bentonville distribution center reviewing a monthly report 

by hand and identifying any orders for controlled substances that constituted more than 

3.99% of a single pharmacy’s total drug purchases during the prior month. Id. ¶ 139. The 

policy did not identify any other criteria that could render an order suspicious. The 

employees were instructed to “forward the reports to the appropriate [Walmart] Drug 
20

Diversion Coordinator for further review.” Id. ¶ 140 (alteration in original). There were no 

written policies about what the Drug Diversion Coordinator was supposed to do. The 

Executive Committee and the Audit Committee were briefed on this system. Id. ¶ 141.

Walmart later determined that it needed a computerized system. Rather than 

obtaining a specialized compliance system, Walmart repurposed an existing inventory tool 

called Reddwerks that had not been designed for compliance. To flag suspicious orders, 

Walmart implemented “hard limits” on orders of more than 2,000 dosage units of 

oxycodone and 5,000 dosage units of other opioid medications. Id. ¶ 174. The Reddwerks 

system had no ability to flag suspicious orders based on other criteria. Id. ¶ 176.

Walmart’s policy called for identifying orders that exceeded those hard limits, 

labeling them as suspicious, and reporting them to the DEA. Choosing a more profitable 

approach, Walmart adopted a practice of cutting back suspicious orders and filling them 

up to the hard-limit thresholds as non-suspicious orders. Walmart then passed along the 

balance of the orders to another distributor to fill. Walmart thus ensured that all of the 

orders were filled, even though they exceeded the hard limits. Id. ¶¶ 173–177. 

The cut-back system resulted in Walmart reporting almost no suspicious orders to 

the DEA. At this stage of the proceedings, the plaintiffs are entitled to an inference that 

Walmart knowingly circumvented its own suspicious order monitoring system. 

In January 2014, Walmart hired an external consulting outfit, called MuSigma, to 

evaluate the repurposed Reddwerks system and its hard limits. MuSigma identified serious 
21

flaws and recommended modifications to enable the tool to do more than simply cap 

prescriptions at hard limits. The modifications would have cost $185,000. Walmart rejected 

the proposal. See id. ¶ 218–220.

Walmart did not contemplate implementing a true suspicious order monitoring 

system until 2015. At a meeting in February 2015, the Audit Committee reviewed 

Walmart’s compliance objectives for fiscal year 2016. Id. ¶ 224. A pre-meeting 

memorandum from the Global Chief Compliance Offer identified a noteworthy initiative: 

“In the U.S., implement controlled substance suspicious-order monitoring enhancements 

(which include both software and personnel changes) in the U.S. distribution facilities.”

Ex. 51 at ’002. The memorandum did not describe the “enhancements,” and the books and 

records produced by Walmart support a reasonable inference that Walmart did not have a 

meaningful system that could be enhanced. What Walmart contemplated was 

implementing its first meaningful system. 

The Audit Committee signed off on the plan, which called for implementation to 

begin in August 2015. The full Board met the following day, and the Audit Committee 

reported that it had approved Walmart’s compliance objectives. See Compl. ¶¶ 228–233.

All of the directors knew that Walmart was not yet complying with its obligations as a 

distributor under the Controlled Substances Act.

I. The Opioid MDL

During 2016 and 2017, Walmart faced a barrage of legal actions based on its roles 

as a dispenser and distributor of prescription opioids. In November 2017, Walmart
22

management decided to stop acting as a distributor of prescription opioids. After winding 

down the business, Walmart stopped distributing prescription opioids in April 2018. 

Walmart continued to dispense prescription opioids through its pharmacies. 

In December 2017, the federal cases that thousands of plaintiffs had filed across the 

country were consolidated into the Opioid MDL. The bellwether complaint alleged that 

Walmart failed to:

• “adequately train their pharmacists and pharmacy technicians on how to properly 

and adequately handle prescriptions for opioid painkillers”;

• “put in place effective policies and procedures to prevent their stores from 

facilitating diversion and selling into a black market”;

• “conduct adequate internal or external reviews of their opioid sales to identify 

patterns regarding prescriptions that should not have been filled”;

• “effectively respond to concerns raised by their own employees regarding 

inadequate policies and procedures regarding the filling of opioid prescriptions”; 

and

• “take meaningful action to investigate or to ensure that they were complying with 

their duties and obligations under the law with regard to controlled substances.”

Compl. ¶ 289.

J. Walmart Tries To Avoid Criminal Prosecution.

In May 2018, the U.S. Attorney for the Eastern District of Texas informed Walmart

that it would bring a criminal indictment against Walmart for its role in the opioid epidemic. 

Facing the threat of criminal charges, Walmart amended its pharmacy operating 

manual. The new manual detailed a number of prescriber and patient red flags. After taking 

this step, Walmart issued a press release titled, “Walmart Introduced Additional Measures 
23

to Help Curb Opioid Abuse And Misuse.” Ex. H. The press release promised that within 

the next sixty days, Walmart would restrict initial acute opioid prescriptions to no more 

than a seven-day supply. Walmart also promised to require e-prescriptions for controlled 

substances starting in January 2020:

In an effort to continue to be part of the solution to our nation’s opioid 

epidemic, Walmart is introducing new policies, programs and tools aimed at 

curbing opioid misuse and abuse. These initiatives apply to all Walmart and 

Sam’s Club pharmacies and pharmacists in the United States and Puerto 

Rico.

. . .

Further, by the end of August 2018 . . . [i]n states that allow access, the 

company’s pharmacists will have access to and use the controlled substance 

tracking tool, NarxCare. NarxCare is a tool that helps pharmacists make 

dispensing decisions and provides pharmacists with the real-time interstate 

visibility that currently exists.

Id.

K. The ProPublica Article

In March 2020, ProPublica published an article detailing Walmart’s role in the 

opioid epidemic. Before the article was published, Walmart stockholders were unaware of 

the DEA Settlement. The article also revealed that between 2000 and 2018, the DEA sent 

fifty letters of admonition to Walmart for its dispensing practices, and multiple pharmacists 

raised concerns about filling prescriptions for pill-mill doctors. 

On April 14, 2020, the Board met. There was no discussion of compliance issues in 

the Health and Wellness Division.
24

On September 14, 2020, Walmart issued a nine-page report summarizing the 

“important components of Walmart’s response to the opioid crisis and the Board’s 

oversight of Walmart’s activities related to the dispensing of prescription opioid 

medications in the United States.” See Ex. 12 at 1. The report asserted that “[a]s a whole 

and through its committees, Walmart’s Board of Directors oversees Walmart’s risk 

management policies and practices, including related [sic] to prescription opioids.” Id. 

According to the report, the Board oversaw Walmart’s “risk tolerance” and received 

“regular reports from Board committee chairpersons and members of senior management 

regarding risk-related matters.” Id. The report discussed the Audit Committee’s oversight 

of global compliance and emphasized that the committee consisted “solely of independent 

directors.” Id. 

As for steps that Walmart actually had taken to address the opioid crisis, the report 

highlighted the availability of NarxCare. The report then discussed Walmart’s deference 

to its pharmacists’ discretion in refusing to fill orders: 

We support our pharmacists when they exercise their professional judgment 

not to fill a controlled substance. Individual Walmart pharmacists may refuse 

to fill a particular prescription of concern (known as a “refusal to fill” or 

“RTF”), based on the presence of certain unresolved “red flags” (warning 

signs that a prescription might not be for a legitimate medical purpose) or 

combinations of unresolved red flags. If a pharmacist has more general 

concerns about a prescriber’s controlled-substance prescribing practices, the 

pharmacist may refuse to fill all controlled-substance prescriptions written 

by that provider (a “blanket refusal to fill” or “BRTF”).

Id. at 4.
25

In December 2020, the U.S. Department of Justice (the “DOJ”) filed a civil 

complaint against Walmart in the U.S. District Court for the District of Delaware. See

Complaint, United States v. Walmart Inc., No. 1:20-CV-01744-CFC (D. Del. Dec. 22, 

2020). The DOJ sought injunctive relief to restrain Walmart’s continuing violations of the 

law and alleged that Walmart repeatedly violated the Controlled Substances Act, both as a 

dispenser and as a distributor. Compl. ¶¶ 300, 350; Dkt. 40 at 24. 

The DOJ alleged that from June 2013 to November 2017, Walmart reported only 

2,014 suspicious orders to the DEA, even though it shipped an estimated 37.5 million 

orders of controlled substances to its pharmacies. By comparison, Walmart’s backup 

distributor, McKesson Corporation, reported more than 13,000 suspicious orders from 

Walmart’s pharmacies during the same period, despite fulfilling far fewer orders. Compl. 

¶ 25.

L. Liability In Opioid MDL

On November 23, 2021, after six weeks of trial, a jury in the Opioid MDL found 

that two Ohio counties “prove[d] by the greater weight of the evidence” that Walmart 

“engaged in intentional and/or illegal conduct which was a substantial factor” in the 

“oversupply of legal prescription opioids, and diversion of those opioids into the illicit 
26

market outside of appropriate medical channels.”

7 The jury found that “widespread 

prevalence of opioid-use disorder . . . and addiction” was “the direct and foreseeable result 

of the ‘oversupply of legal prescription opioids, and diversion of these opioids . . . ,’ caused 

by [Walmart’s] wrongful conduct.” Id. at *13. The jury also found that Walmart engaged 

in “improper dispensing conduct” as “evidenced by [its] systemic failures to investigate 

and resolve red-flag prescriptions . . . .” Id. at *30. “[S]pecific evidence . . . demonstrated 

that [Walmart] dispensed massive quantities of red-flagged prescriptions without taking 

adequate measures to investigate or otherwise ensure the prescriptions were appropriately 

dispensed.” Id. From this, “[t]he jury reasonably concluded that [Walmart] dispensed 

opioids without having in place effective controls and procedures to guard against 

diversion—controls and procedures they knew were required and knew they had not 

adequately employed.” Id. at *32.

During the trial, the jury heard from Susanne Hiland, a Walmart employee from the 

Health and Wellness Division, who observed that Walmart did not provide enough funding 

to pursue anti-diversion initiatives. During her testimony, Hiland confirmed that, as late as

March 4, 2016, regional directors did not have access to refusal-to-fill reports. Hiland also 

7 Abatement Order, In re Nat’l Prescription Opiate Litig., No. 1:17-MD-2804 (N.D. 

Ohio Aug. 17, 2022), 2022 WL 3443614 at *4, appeal pending, Trumbull Cnty. v. Purdue 

Pharma, L.P., No. 22-3753 (6th Cir.).
27

confirmed that pharmacists could not determine from Walmart’s system whether another 

Walmart pharmacy had refused to fill a prescription. Compl. ¶ 253–254.

After the jury verdict, the court held a bench trial to determine the appropriate 

remedy. In August 2022, the court directed Walmart and its fellow pharmacy defendants 

to pay $650.6 million into an abatement fund.8 The court entered an injunction order 

requiring Walmart to adopt substantially compliant reforms to remediate deficient controls 

and reporting systems under the Controlled Substances Act.9

M. The Books And Records Action

On May 4, 2020, two months after the Pro Publica article, two of the three plaintiffs 

sent Walmart a demand to inspect books and records under Section 220. Walmart rejected 

the demand in its entirety. See Compl. ¶¶ 57–63.

On June 17, 2020, Plaintiff Police and Fire Retirement System of the City of Detroit 

pursued its enforcement actions.10 Plaintiff Norfolk County Retirement System pursued its 

8

Judgment Order, In re Nat’l Prescription Opiate Litig., No. 1:17-MD-2804 (N.D. 

Ohio Aug. 22, 2022), 2022 WL 4099669, appeal pending, Trumbull Cnty. v. Purdue 

Pharma, L.P., No. 22-3753 (6th Cir.).

9

Injunction Order, In re Natl Prescription Opiate Litig., No. 1:17-MD-2804 (N.D. 

Ohio Aug. 17, 2022), ECF No. 4611-1, appeal pending, Trumbull Cnty. v. Purdue Pharma, 

L.P., No. 22-3753 (6th Cir.).

10 See Verified Complaint Pursuant to 8 Del. C. 220 to Compel Inspection of Books 

and Records, Police & Fire Ret. Sys. of City of Detroit v. Walmart Inc., C.A. No. 2020-

0478-JTL, Dkt. 1 (Del. Ch. June 17, 2020).
28

enforcement action on the same date. 11 Plaintiff Ontario Provincial Council of Carpenters’ 

Pension Trust Fund filed its enforcement action on August 21, 2020.

12 The three plaintiffs 

agreed to coordinate their Section 220 actions. On October 19, 2020, the court found that 

Walmart lacked any reasonable basis to dispute the proper purpose element for production 

under Section 220 and that the plaintiffs were entitled to many of Walmart’s books and 

records that they requested. See Walmart, C.A. No. 2020-0478-JTL, Dkt. 37 at 50–51. By 

final order dated October 29, 2020, the court required Walmart to produce various 

categories of documents. See Walmart, C.A. No. 2020-0478-JTL, Dkt. 39. 

On January 27, 2021, Walmart purported to complete its production of books and 

records and produced a certification of completeness. The plaintiffs asserted that 

Walmart’s Section 220 production and its privilege log were utterly deficient. After 

additional correspondence between the parties, Walmart produced a revised privilege log 

on April 9, 2021, and a supplemental production on April 12, 2021. 

11 See Verified Complaint Pursuant to 8 Del. C. 220 to Compel Inspection of Books 

and Records, Norfolk Cnty. Ret. Sys. v. Walmart Inc., C.A. No. 2020-0482-JTL, Dkt. 1 

(Del. Ch. June 17, 2020).

12 See Verified Complaint Pursuant to 8 Del. C. 220 to Compel Inspection of Books 

and Records, Ontario Provincial Council of Carpenters’ Pension Trust Fund v. Walmart 

Inc., C.A. No. 2020-0697-JTL, Dkt. 1 (Del. Ch. Aug. 21, 2020). 
29

N. This Litigation

The plaintiffs filed their initial complaint on September 27, 2021. Dkt. 1. The 

defendants moved to dismiss, and the plaintiffs filed an amended complaint as 

contemplated by Court of Chancery Rule 15(aaa). The plaintiffs filed the currently 

operative complaint on February 22, 2022. It names as defendants eight members of the 

Board and two Walmart officers who were not on the Board. Three members of the Board 

also served as Walmart officers.

In Count I, the complaint asserts that the directors breached their fiduciary duties by 

consciously failing to ensure that Walmart complied with the Controlled Substances Act

and the DEA Settlement. Compl. ¶ 363. The complaint alleges that the directors also failed 

to make a good faith effort “to implement and monitor internal reporting policies and 

systems.” Id. ¶ 364. 

In Count II, the complaint asserts that the officers breached their fiduciary duties in 

the same manner as the directors. An additional, officer-specific theory asserts that the 

officers breached their fiduciary duties “by failing to inform the Board about Walmart’s 

regulatory compliance failures in dispensing and self-distributing opioids.” Id. ¶ 375.

On June 24, 2022, the defendants moved to dismiss the amended complaint in its 

entirety. The defendants argued that the claims were time-barred, that the plaintiffs had not 

established demand futility under Rule 23.1, and that the claims against two of the 

defendants should be dismissed under Rule 12(b)(6). Alternatively, Walmart requested a 
30

stay of litigation pending resolution of the DOJ’s Delaware action. On September 28, 2022, 

the court heard oral argument on this motion. 

O. The Nationwide Settlement

On November 15, 2022, Walmart announced that it had agreed to “a $3.1 billion 

nationwide opioid settlement framework designed to resolve substantially all opioid

lawsuits and potential lawsuits by state, local, and tribal governments, if all conditions are 

satisfied.” Press Release, Walmart, Inc., Walmart Announces Nationwide Opioid 

Settlement Framework (Nov. 15, 2022). The settlement did not resolve all of the opioid 

cases involving Walmart. Most notably, the DOJ’s Delaware action remains pending. 

In the settlement, Walmart agreed to implement expansive procedures and controls, 

including procedures to avoid diversion of controlled substances. It is reasonable to infer 

that before the settlement, although Walmart had taken some steps over the years to 

improve its oversight policies, its policies remained inadequate. 

By letter dated as of November 21, 2022, the court asked the parties to address 

whether the settlement had implications for the court’s consideration of the pending 

motions. The parties submitted supplemental briefs on that topic on January 13, 2023. 

This decision addresses laches and whether the plaintiffs are entitled to equitable 

tolling of the statute of limitations. It does not address the defendants’ other bases for 

dismissal, nor does it address the stay.
31

II. LEGAL ANALYSIS

In their lead argument for dismissal, the defendants assert that the plaintiffs’ claims 

are untimely. When asserting a timeliness defense, a defendant contends that even if a 

claim were viable, the plaintiff cannot assert it. To analyze the timeliness issue, the court 

assumes the validity of the claim, then applies timeliness principles. Collis, 287 A.3d at 

1193. For a court to grant a motion to dismiss on timeliness grounds under Rule 12(b)(6), 

the complaint’s allegations must show that the claim was filed too late. Kahn v. Seaboard 

Corp., 625 A.2d 269, 277 (Del. Ch. 1993) (Allen, C.). A court “must draw the same 

plaintiff-friendly inferences required in a 12(b)(6) analysis” when evaluating whether the 

factual allegations in a complaint support a timeliness defense. State ex rel. Brady v. 

Pettinaro Enters., 870 A.2d 513, 524–25 (Del. Ch. 2005) (internal citation omitted).

13

13 The Pettinaro decision asserts that “[t]his plaintiff-friendly stance does not govern 

assertion of tolling exceptions to the operation of a statute of limitations (or the running of 

the analogous period for purposes of a laches analysis), however. A plaintiff asserting a 

tolling exception must plead facts supporting the applicability of that exception.” Id. at 525 

(citing In re Dean Witter P’ship Litig., 1998 WL 442456, at *6 (Del. Ch. July 17, 1998), 

aff’d, 725 A.2d 441 (Del. 1999) (TABLE) (“[T]he party asserting that tolling applies . . .

bear[s] the burden of pleading specific facts to demonstrate that the statute of limitations 

was, in fact, tolled.”)). As the quotation from the Dean Witter decision shows, that case 

supports the proposition that a plaintiff has the burden to allege facts at the pleading stage 

that support the application of a tolling doctrine. Other pre-Pettinaro authorities said the 

same thing. E.g., Carlton Invs. v. TLC Beatrice Int’l Hldgs., Inc., 1995 WL 694397, at *14 

(Del. Ch. Nov. 21, 1995) (Allen, C.); In re USACAFES, L.P. Litig., 1993 WL 18769, at *3 

(Del. Ch. Jan. 21, 1993). Those authorities do not say that once a plaintiff has pled facts 

that could support the application of a tolling doctrine, the plaintiff does not receive the 

benefit of pleading-stage inferences that would support the tolling doctrine’s application. 

The Pettinaro decision introduces that concept, without explaining why Rule 12(b)(6) 

would not govern the inferences to be drawn from pled facts. Subsequent decisions have 
32

When considering a Rule 12(b)(6) motion, the court (i) accepts as true all well-pled factual 

allegations in the complaint, (ii) credits vague allegations if they give the opposing party 

notice of the claim, and (iii) draws all reasonable inferences in favor of the plaintiffs. Cent. 

Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 535 (Del. 2011). 

Dismissal is inappropriate “unless the plaintiff would not be entitled to recover under any 

reasonably conceivable set of circumstances.” Id.

The plaintiffs have asserted an Information-Systems Claim, a Red-Flags Claim, and 

a Massey Claim.14 Each is an equitable claim for breach of fiduciary duty, so laches 

repeated Pettinaro’s statement about Rule 12(b)(6)’s inapplicability, without investigation. 

See, e.g., Bocock v. INNOVATE Corp., 2022 WL 15800273, at *12 (Del. Ch. Oct. 28, 

2022); Matter of Est. of du Pont Dean, 2017 WL 3189552, at *4 (Del. Ch. July 13, 2017); 

Eni Hldgs., LLC v. KBR Gp. Hldgs., LLC, 2013 WL 6186326, at *11 (Del. Ch. Nov. 27, 

2013).

Under Rule 8, a plaintiff must plead facts supporting an inference that tolling 

applies. If the plaintiff invokes fraudulent concealment, then the plaintiff must plead 

particularized facts in compliance with Rule 9. Regardless of the pleading burden, once the 

plaintiff meets it by adequately pleading the pertinent facts, then the plaintiff is entitled to 

all reasonable inferences to be drawn from those facts. I understand why a plaintiff must 

plead facts supporting a tolling doctrine. It is not clear why a plaintiff would not be entitled 

to inferences drawn from those pled facts, simply because the issue relates to a tolling 

doctrine. See, e.g., In re Am. Int’l Gp., Inc. Consol. Deriv. Litig. (AIG), 965 A.2d 763, 805–

06 (Del. Ch. 2009) (“But, even though fraud must be stated with particularity, this is still a 

motion to dismiss, and the Stockholder Plaintiffs are entitled to have me draw all 

reasonable inferences in their favor.” (internal citation omitted)), aff’d sub nom. Tchrs.’

Ret. Sys. of La. v. PricewaterhouseCoopers LLP, 11 A.3d 228 (Del. 2011) (TABLE). 

14 See In re McDonald’s Corp. S’holders Deriv. Litig., 289 A.3d 348, 359–63 (Del. 

Ch. 2023) (explaining origins and nature of an Information-Systems Claim and a Red-Flags 

Claim); City of Detroit Police & Fire Ret. Sys. v. Hamrock, 2022 WL 2387653, at *17 
33

provides the proper framework for analyzing timeliness. See Collis, 287 A.3d at 1194. 

Because the plaintiffs only seek money damages, which is relief available at law, the most

closely analogous statute of limitations establishes a presumptive period within which the 

claim must be filed after it accrues. Id. at 1195. For a claim for breach of fiduciary duty, 

the analogous statute of limitations is three years. Id.

To apply a limitations period, a court must determine when the claim accrued. Id.

The Collis decision considered three different approaches to claim accrual: the discrete act 

approach, the separate accrual approach, and the continuing wrong approach. Id. at 1195–

1201. The court held that for a Red-Flags Claim, the proper framework is the separate 

accrual approach, under which each day that the defendants’ ongoing course of conduct 

continues constitutes a separate violation for purposes of claim accrual. Id. at 1202–05. 

The Collis decision held that, at a minimum, the separate accrual approach applies to a 

Massey Claim, while holding out the possibility that the continuing wrong approach could 

apply. Id. at 1205–08. The Collis case did not involve an Information-Systems Claim. 

A. Selecting An Accrual Method For An Information-Systems Claim

Because this case involves an Information-Systems Claim, the court must determine 

what accrual method to use for that species of claim. 

(Del. Ch. June 30, 2022) (explaining origins and nature of a Red-Flags Claim and a Massey

Claim).
34

1. Choosing An Accrual Method Based On The Characteristics Of An 

Information-Systems Claim

The discrete act approach “makes the most sense when (i) the gravamen of the action 

involves a finite quantum of conduct that causes all of the harm which may result, such 

that the continuation or repetition of the act will not increase the plaintiff’s damages, and 

(ii) the initial impact of the act provides the potential plaintiff with both knowledge of the 

conduct and an incentive to sue.” See Collis, 287 A.3d at 1202 (citing Developments in the 

Law Statutes of Limitations, 63 Harv. L. Rev. 1177, 1205 (1950)). For a claim with those 

features, the discrete act approach gives the plaintiff an incentive to promptly file a single 

suit that can address all of the harm resulting from the discrete act. The continuing wrong 

approach and the separate accrual approach make more sense when it is difficult to identify 

a clear starting point for a claim and the conduct persists over time. Id.

The gravamen of an Information-Systems Claim is that corporate fiduciaries 

“utterly failed to implement any reporting or information system or controls” to address a 

central compliance risk. See Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006). “[W]hen 

directors fail to make any effort to establish an information system to address central 

compliance risks, then that failure supports an inference of bad faith.” In re McDonald’s 

Corp. S’holder Deriv. Litig. (McDonald’s Directors), — A.3d —, 2023 WL 2293575, at 

*17 (Del. Ch. Mar. 1, 2023). Essential and mission critical risks necessarily qualify as 

central compliance risks. Id. at *16.
35

To plead an Information-Systems Claim, a plaintiff must allege (i) facts supporting 

an inference that the risk in question was a central compliance risk and (ii) facts supporting 

an inference that the directors or officers did not make a good faith effort to establish an 

information system to address it. Sometimes the inherent nature of the issue will support a 

reasonable inference that it qualifies as a central compliance risk, such as food safety for 

an ice cream company or airplane safety for an airplane manufacturer. Other times, whether 

an issue qualifies as a central compliance risk will be less clear. 

One reason for ambiguity is that risks evolve over time. In 1996, when Chancellor 

Allen authored Caremark, the idea that cybersecurity might be a central compliance risk 

would not have registered. Even today, the relative importance of cybersecurity risk has 

not yet led to a Caremark claim surviving a motion to dismiss, although someday it might.

15

Another reason is that “[t]ime and attention are precious commodities, and with 

limited supplies of each, officers and directors must make judgments about what risks to 

monitor.” McDonald’s Directors, 2023 WL 2293575, at *17. The business judgment rule 

15 See Firemen’s Ret. Sys. of St. Louis v. Sorenson, 2021 WL 4593777, at *12 (Del. 

Ch. Oct. 5, 2021) (noting that cybersecurity threats could become a central compliance risk 

“as the legal and regulatory frameworks governing cybersecurity advance and the risks 

become manifest,” but dismissing Information-Systems Claim as pled); see also Constr. 

Indus. Laborers Pension Fund v. Bingle, 2022 WL 4102492, at *9 (Del. Ch. Sept. 6, 2022)

(rejecting Information-Systems Claim based on cybersecurity risks where the claim was 

pled as involving business risk rather than legal risk).
36

protects the decisions that officers and directors make about how and where to devote their 

time and resources. Id. 

Outside of what intuitively registers as a central compliance risk, a plaintiff will 

have difficulty rebutting the business judgment rule when officers or directors have used a 

rational process to identify risks and made a good faith decision about the level of 

monitoring resources to deploy. Id. By contrast, it may be difficult for a court not to draw 

a pleading-stage inference that an issue could qualify as a central compliance risk if a 

company:

• Has an enterprise risk management system and has identified a risk as central (such 

as an enterprise risk report identifying “Respectful Workplace” as a “Top Tier 2”

risk that is “Critical to [the company’s] mission and values,” id. at *18); or 

• Has a mission statement or set of policies that call out an issue as a priority for the 

company (such as Standards of Business Conduct and a Human Rights Policy that 

call for cultivating “respectful workplaces” and creating a professional environment 

that “builds trust, protects the integrity of our brand, and fuels our success,” id. at 

*3); or 

• Has touted the importance of and its proficiency in a particular area (such as a 

company that describes itself as providing “America’s best first job,” id.).

When a company makes statements like the examples above, it becomes reasonably 

conceivable that protecting employees is a central compliance risk. Id. at *17–18.

A party pleading an Information-Systems Claim must also allege facts supporting 

an inference that corporate fiduciaries failed to make a good faith effort to try to create a 

suitable monitoring system. Rarely will there be a single and definitive point at which 

directors or officers consciously fail to address a central compliance risk. Grounds for 
37

concern about a particular issue typically add up over time. At some point, a signal emerges 

from the noise and alerts fiduciaries to the risk. As the situation continues, the ongoing 

failure to address the risk supports an inference that the fiduciaries failed to make a good 

faith effort to try. 

Identifying the point when the bells start going off is not an easy task, and different 

individuals may hear them at different times. At some point, however, the fiduciaries have 

notice of the need to act. From then on, the fiduciaries are making an ongoing series of 

explicit or implicit decisions to continue not acting. Fiduciaries who have committed a 

knowing failure to act on day one continue to engage in the same knowing failure on day 

two and on each day thereafter until they make a good faith attempt to create a monitoring 

system. 

These attributes make the discrete act approach ill-suited for an InformationSystems Claim. Using the discrete act approach treats an Information-Systems Claim as if 

it were easy to identify a singular act of failing to make a good faith effort to implement a 

monitoring system. The approach ignores the developing and ongoing nature of the claim.

A discrete act approach also fares poorly when evaluated from the perspective of 

equity. Compared to other accrual methods, a discrete act approach is more likely to deliver 

the benefits of repose to defendants, because it is more likely to result in claims being timebarred. But the discrete act approach achieves these benefits at the cost of providing a fair 

opportunity for plaintiffs to identify and present their claims. Collis, 287 A.3d at 1203.
38

One typical justification for a discrete act approach is to encourage the prompt 

assertion of claims. In stockholder derivative litigation, entrepreneurial plaintiffs’ counsel 

already have powerful incentives to sue quickly because of the competitive dynamics 

involved in gaining control of a case. See La. Mun. Police Empls.’ Ret. Sys. v. Pyott, 46 

A.3d 313, 336–38 (Del. Ch. 2012), rev’d on other grounds, 74 A.3d 612 (Del. 2013). A 

discrete act regime would increase that pressure and generate cases about conceptual harms 

that might never ripen into meaningful disputes. Decisions addressing premature 

complaints are likely to result in dismissals, which under current law have preclusive effect 

on the ability of any other stockholder to pursue the same or similar claims. See Cal. State 

Tchrs.’ Ret. Sys. v. Alvarez, 179 A.3d 824, 843–44 (Del. 2018); Pyott v. La. Mun. Police 

Employs.’ Ret. Sys., 74 A.3d 612, 617 (Del. 2013). The resulting system would weaken 

Delaware’s ability to rely on private plaintiffs to enforce fiduciary duties. Meanwhile, 

because the premature lawsuits are unlikely to reach the merits, the potential benefits from 

resolving cases while evidence is fresh would never arise. Collis, 287 A.3d at 1204.

When the wrongdoing is ongoing, the discrete act approach cuts off the 

accountability mechanism and gives the wrongdoers a free pass once the limitations period 

runs. After it is too late to sue, the behavior can continue with impunity. The discrete act 

approach thus can facilitate ongoing wrongdoing, suggesting that the approach should not 

apply to an Information-Systems Claim. 
39

The next possibility is to apply the continuing wrong approach and treat an 

Information-Systems Claim as viable until the fiduciary takes action to address the 

compliance risk. Conceptually, that approach is a better fit, but it goes too far in the other 

direction. It affords full significance to the ongoing nature of the decision not to implement 

an information system, while eliminating any opportunity for repose. It thus opens the door 

to the potential assertion of stale claims, with an increased risk of erroneous results. 

The separate accrual approach takes the middle path. It recognizes that an 

Information-Systems Claim has two dimensions. The wrong begins at some point, then 

persists until the fiduciaries make an effort to implement a monitoring system or the issue 

no longer qualifies a central compliance risk. The separate accrual approach accommodates 

the difficulty in identifying when the claim arose and does not add another reason for a 

plaintiff to sue quickly. Unlike with the discrete act approach, a single point of accrual does 

not threaten to make wrongdoing nonactionable, and unlike the continuing wrong 

approach, the claim cannot extend back across time to the earliest possible point. Using a 

separate accrual approach for an Information-Systems Claim strikes an appropriate balance 

by respecting defendants’ interests in finality and repose, while preserving a litigation 

vehicle that can provide accountability and compensation. 

2. Choosing An Accrual Method Based On The Similarities Between The 

Three Types Of Claims

Using the separate accrual approach for an Information-Systems Claim also makes 

sense because of the similarities between an Information-Systems Claim, a Red-Flags 
40

Claim, and a Massey Claim. The three types are all variants of the same foundational 

concept: a breach of the duty of loyalty grounded on bad faith action. 

When stockholder plaintiffs contend that corporate fiduciaries have breached their 

duties, they often challenge an affirmative decision that the fiduciaries have made. A board 

has approved a merger, or granted a compensation package to a CEO, or adopted an

advance-notice bylaw. To evaluate whether the fiduciaries have breached their duties, the 

court applies one of three standards of review: the business judgment rule, enhanced 

scrutiny, or the entire fairness test. Reis v. Hazelett Strip-Casting Corp., 28 A.3d 442, 457 

(Del. Ch. 2011). Sometimes, evaluating the challenged decision may require considering 

events that happened during a period before or after the decision, such as when reviewing 

a sale process under enhanced scrutiny or examining a squeeze-out merger under the entire 

fairness test. But there remains a focal point—a decision itself—to which the standard of 

review applies.

In his landmark decision in Caremark, Chancellor Allen focused the corporate 

world’s attention on a different scenario: “a board of directors’ obligation to supervise or 

monitor corporate performance.” In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959, 961 

(Del. 1996). In this setting, there typically will not be an obvious decision to anchor the 

standard of review. Instead, there will be a period of time (perhaps prolonged) marked by 

a combination of inaction and occasional action, followed by a corporate trauma in which 

the corporation suffers substantial harm. The question becomes whether grounds exist to 
41

shift the loss that the corporation suffered to the fiduciaries who allegedly caused or 

permitted the harm to occur.

Many of us are fortunate not to encounter individuals in our day-to-day lives who 

intentionally seek to cause harm. Consistent with that experience, the most intuitive 

explanation for a corporate trauma is that it happened due to inadvertence by fiduciaries 

who otherwise would have prevented it. The logical foundation for oversight liability is 

therefore the duty of care, with liability premised on a showing of gross negligence.

After Caremark, considerable debate existed about whether oversight liability 

derived from the duty of care, the duty of loyalty, or both. In Graham v. Allis-Chalmers 

Manufacturing Co., the predecessor to Caremark, the Delaware Supreme Court 

contemplated potential liability for both, stating as follows:

In the last analysis, the question of whether a corporate director has become 

liable for losses to the corporation through neglect of duty is determined by 

the circumstances. If he has recklessly reposed confidence in an obviously 

untrustworthy employee, has refused or neglected cavalierly to perform his 

duty as a director, or has ignored either willfully or through inattention 

obvious danger signs of employee wrongdoing, the law will cast the burden 

of liability upon him. This is not the case at bar, however, for as soon as it 

became evident that there were grounds for suspicion, the Board acted 

promptly to end it and prevent its recurrence.

188 A.2d 125, 130 (Del. 1963).
42

In Caremark, Chancellor Allen used different formulations to frame or refer to the 

duty of oversight.16 Most his formulations drew on the duty of care.17 One passage, 

however, described the duty as follows:

Generally where a claim of directorial liability for corporate loss is 

predicated upon ignorance of liability creating activities within the 

corporation, as in Graham or in this case, in my opinion only a sustained or 

systematic failure of the board to exercise oversight—such as an utter failure 

to attempt to assure a reasonable information and reporting system exists—

will establish the lack of good faith that is a necessary condition to liability. 

Such a test of liability—lack of good faith as evidenced by sustained or 

systematic failure of a director to exercise reasonable oversight—is quite 

high. But, a demanding test of liability in the oversight context is probably 

beneficial to corporate shareholders as a class, as it is in the board decision 

context, since it makes board service by qualified persons more likely, while 

16 See, e.g., Stephen M. Bainbridge et al., The Convergence of Good Faith and 

Oversight, 55 UCLA L. Rev. 559, 596–97 (2008) (describing different passages); Robert 

T. Miller, Wrongful Omissions by Corporate Directors: Stone v. Ritter and Adapting the 

Process Model of the Delaware Business Judgment Rule, 10 U. Pa. J. Bus. & Emp. L. 911, 

937–40 (2008) (discussing different formulations).

17 Caremark, 698 A.2d at 960 (“The suit involves claims that the members of 

Caremark’s board of directors . . . breached their fiduciary duty of care to Caremark . . . 

.”); id. at 964 (“The original complaint, dated August 5, 1994, alleged, in relevant part, that 

Caremark’s directors breached their duty of care . . . .”); id. at 967 (“The complaint charges 

the director defendants with breach of their duty of attention or care in connection with the 

on-going operation of the corporation’s business.”); id. (referencing the “good policy 

reasons why it is so difficult to charge directors with responsibility for corporate losses for 

an alleged breach of care”); id. at 967 (discussing how to evaluate “compliance with a 

director’s duty of care”); id. at 968 (explaining that “the core element of any corporate law 

duty of care inquiry” is “whether there was good faith effort to be informed and exercise 

judgment”); id. at 970 (analyzing the “claims asserted with this concept of the directors’ 

duty of care ... in mind”); id. at 971 (discussing what the plaintiffs would have to establish 

“[i]in order to show that the Caremark directors breached their duty of care”).
43

continuing to act as a stimulus to good faith performance of duty by such 

directors.

Id. at 971. Those references suggested that liability required disloyal conduct that took the 

form of a lack of good faith.18

Writing as a member of this court, Chief Justice Strine took up the question and held 

that liability for a breach of the duty of oversight always requires a showing of bad faith. 

See Guttman v. Huang, 823 A.2d 492, 506 (Del. Ch. 2003). Conceived in that way, the 

oversight duty only derives from the duty of loyalty, with no room for the duty of care. In 

Stone v. Ritter, the Delaware Supreme Court adopted the Guttman formulation and held 

that a breach of the duty of loyalty, such as action in bad faith, is a “necessary condition to 

liability.” 911 A.2d 362, 369–70 (Del. 2006); see Bainbridge et al., supra, at 595. 

After Stone, then-Vice Chancellor Strine acknowledged that although the duty of 

oversight might carry overtones of care, director liability requires more: “[T]o hold 

directors liable for a failure in monitoring, the directors have to have acted with a state of 

mind consistent with a conscious decision to breach their duty of care.” Desimone v. 

Barrows, 924 A.2d 908, 935 (Del. Ch. 2007). After becoming the Chief Justice, he authored 

18 One possible explanation for the different lineaments in the decision is that the 

corporation in Caremark had an exculpatory provision in its charter that eliminated director 

liability for breaches of the duty of care. See 698 A.2d at 971 & n.28. Theoretically, 

therefore, the Caremark framework could have treated the oversight duty as implicating 

both loyalty and care, but with the exculpatory provision ruling out the possibility of 

liability for a breach of the latter duty.
44

a Delaware Supreme Court decision that made a similar statement: “If Caremark means 

anything, it is that a corporate board must make a good faith effort to exercise its duty of 

care. A failure to make that effort constitutes a breach of the duty of loyalty.” Marchand v. 

Barnhill, 212 A.3d 805, 824 (Del. 2019). Liability for the duty of oversight is not subject 

to exculpation because the duty of care has been conceptually excluded. After the 

reformulation, exculpatory provisions are irrelevant to an oversight claim.19

An Information-Systems Claim, a Red-Flags Claim, and a Massey Claim each 

operate within this framework. The Information-Systems Claim and the Red-Flags Claim 

rest on the premise that a conscious decision not to act is itself a decision that can be the 

19 That fact notwithstanding, Delaware decisions continue to refer to the presence 

of an exculpatory provision as a factor when analyzing an oversight claim, consistent with 

the intuitive reaction that oversight liability is more closely associated with care. See, e.g., 

Firemen’s Ret. Sys. of St. Louis v. Sorenson, 2021 WL 4593777, at *8 (Del. Ch. Oct. 5, 

2021) (“Because Marriott’s certificate of incorporation contains a provision exculpating its 

directors for breaches of the duty of care, as permitted under 8 Del. C. § 102(b)(7), the 

plaintiff must plead with particularity facts that support a meritorious claim for breach of 

the duty of loyalty.” (cleaned up)); In re Goldman Sachs Gp., Inc. S’holder Litig., 2011 

WL 4826104, at *18 (Del. Ch. Oct. 12, 2011) (“The likelihood of directors’ liability [for a 

Caremark claim] is significantly lessened where, as here, the corporate charter exculpates 

the directors from liability to the extent authorized by 8 Del. C. § 102(b)(7).”); In re 

Citigroup Inc., S’holder Deriv. Litig., 964 A.2d 106, 125 (Del. 2009) (“[T]he protection of 

an exculpatory § 102(b)(7) provision, and the difficulty of proving a Caremark claim 

together function to place an extremely high burden on a plaintiff to state a claim for 

personal director liability for a failure to see the extent of a company’s business risk.”).
45

product of bad faith.20 The Massey Theory looks for or implies an affirmative decision to 

violate the law, which is itself a decision to act in bad faith.

For each theory, the court looks at a series of fiduciary inactions and actions, made 

over time, to determine whether they support an inference that the corporate fiduciaries 

were operating in bad faith. In each case, the evidentiary pattern may suggest a point when 

the court can infer conscious wrongdoing. If so, then from that point on, the conscious 

wrongdoing continues until the corporate fiduciaries cause the wrongdoing to cease. 

A strong pattern of conduct can support an inference that the corporate fiduciaries 

intentionally decided to cause the corporation to violate the law, typically because of the 

20 See Aronson, 473 A.2d at 813 (“[A] conscious decision to refrain from acting may 

nonetheless be a valid exercise of business judgment and enjoy the protections of the rule”);

Quadrant Structured Prods. Co. v. Vertin, 102 A.3d 155, 183 (Del. Ch. 2014) (“The 

Complaint alleges that the Board had the ability to defer interest payments on the Junior 

Notes, that the Junior Notes would not receive anything in an orderly liquidation, that 

[Defendant] owned all of the Junior Notes, and that the Board decided not to defer paying 

interest on the Junior Notes to benefit [Defendant]. A conscious decision not to take action 

is just as much of a decision as a decision to act.”); In re China Agritech, Inc. S’holder 

Deriv. Litig., 2013 WL 2181514, at *23 (Del. Ch. May 21, 2013) (“The Special Committee 

decided not to take any action with respect to the Audit Committee’s termination of two 

successive outside auditors and the allegations made by Ernst & Young. The conscious 

decision not to take action was itself a decision.”); Krieger v. Wesco Fin. Corp., 30 A.3d 

54, 58 (Del. Ch. 2011) (“Wesco stockholders had a choice: they could make an election 

and select a form of consideration, or they could choose not to make an election and accept 

the default cash consideration.”); Hubbard v. Hollywood Park Realty Enters., Inc., 1991 

WL 3151, at *10 (Del. Ch. Jan. 14, 1991) (“From a semantic and even legal viewpoint, 

‘inaction’ and ‘action’ may be substantive equivalents, different only in form.”); Jean-Paul 

Sartre, Existentialism Is a Humanism 44 (Carol Macomber trans., Yale Univ. Press 2007) 

(“[W]hat is impossible is not to choose. I can always choose, but I must also realize that, 

if I decide not to choose, that still constitutes a choice.”).
46

cost of compliance and its effect on profits. It is highly unlikely that any formal record of 

such a decision would exist, nor will there be an after-the-fact confession. What will exist 

are external manifestations from which, using the theory of mind, an external observer like 

a judge or a jury can infer conscious intent.21 The inference that corporate fiduciaries made 

a decision to violate the law is the foundation for a Massey Claim.

A less strong pattern of conduct can support an inference that the corporate 

fiduciaries were put on notice that the corporation was violating the law or otherwise 

headed for a corporate trauma, but did nothing in response. Here too, any formal record of 

a decision is not likely to exist, nor will there be admissions to that effect. Yet an external 

observer may be able to draw an inference that the corporate fiduciaries willfully turned a 

blind eye to the evidence and hence consciously decided to do nothing. That inference is 

the foundation for a Red-Flags Claim.

In its weakest actionable version, the pattern of conduct can support an inference 

that corporate fiduciaries became aware of a risk that the corporation was violating the law 

or otherwise heading toward a corporate trauma, yet did nothing. Once again, there is 

unlikely to be any formal record of a decision not to create a system to monitor the risk, 

nor any confessions or admissions. Yet an observer may be able to infer that the fiduciaries 

21 See generally Diamantis, Mihailis, How To Read a Corporation’s Mind (October 

2022). U Iowa Legal Studies Research Paper No. 2022-32, Forthcoming, The Culpable 

Corporate Mind (Elise Bant ed., 2022), available at SSRN: 

https://ssrn.com/abstract=4155933 or http://dx.doi.org/10.2139/ssrn.4155933
47

consciously decided not to set up a monitoring system that would generate information 

pertinent to that risk in the ordinary course of business. That inference is the foundation for 

an Information-Systems Claim. 

A Massey Claim, a Red-Flags Claim, or an Information-Systems Claim thus each 

depend on the court being able to draw an inference of a conscious decision. In a Massey 

Claim, it will be a conscious decision to act. In a Red-Flags Claim or an InformationSystems Claim, it will be a conscious decision not to act. Once that conscious decision is 

made, the situation continues until the fiduciaries fix it. The fiduciaries could take remedial 

action at any time, and so the failure to take remedial action is ongoing. 

Because of the similarities among the three claims, the same principles for 

determining claim accrual logically apply to all three claims. In Collis, the court held that 

the separate accrual approach should apply to a Red-Flags Claim. 287 A.3d at 1205. The 

court also reasoned that at a minimum, the separate accrual approach should apply to a 

Massey Claim, with the possibility that because of the seriousness of a conscious decision 

to violate the law, the continuing wrong doctrine could apply. Id. at 1207.

The Information-Systems Claim is a close relative of the Red-Flags Claim and the 

Massey Claim, so the separate accrual approach should apply. As between the two, the 

Information-Systems Claim is more closely related to a Red-Flags Claim, because in both 

cases the court infers a conscious decision not to act, rather than the conscious decision to 

act. While it may be possible that the continuing wrong approach could govern a Massey 
48

Claim because of the greater opprobrium associated with a conscious decision to violate 

the law, the same is not true for an Information-Systems Claim. As with a Red-Flags Claim, 

the separate accrual approach should apply to an Information-Systems Claim. 

Both as a matter of independent analysis and for consistency with the Red-Flags 

Claim and the Massey Claim, this decision concludes that the separate accrual approach is 

the proper method for determining when an Information-Systems Claim has accrued. As 

in Collis, it is unnecessary in this case to choose between the separate accrual approach 

and the continuing wrong approach for the Massey Claim. As a result, this decision uses 

the separate accrual method for all of the claims in the case. 

B. Determining The Lookback Date

To apply the separate accrual method, the court must determine a lookback date to 

use when measuring the actionable period. The presumptive lookback date is when the 

plaintiff filed suit. This case was filed on September 27, 2021. 

In a derivative action where the plaintiff sought books and records before filing suit, 

the court can calculate the actionable period using an earlier date tied to the plaintiff’s 

exercise of its informational rights. See Collis, 287 A.3d at 1208–11 (collecting 

authorities). One option is to use the date when the plaintiff filed a Section 220 enforcement 

action, but “a rule that turned on the filing of a Section 220 enforcement action would 

incentivize the filing of more enforcement actions (which the court does not need), simply 

to secure a tolling benefit.” Id. at 1211. Such a rule also would undermine this court’s 

efforts to promote extra-judicial resolution of books-and-records disputes. Id. Such a rule 
49

also fails to address situations where, as here, the plaintiffs made a demand on one date, 

then each pursued separate enforcement actions.

A stockholder therefore should receive credit for serving a demand and 

obtaining books and records without the need for an enforcement action. But 

that does not mean that simply sending a demand will yield a benefit in every 

case. The stockholder plaintiff must pursue the demand diligently to gain a 

benefit. That does not mean pressuring the defendant corporation 

relentlessly, and it does not mean always filing an enforcement action, but it 

also should not involve months-long periods of stockholder-side inactivity. 

The process should move forward with deliberate speed.

Id. (citation omitted).

In this case, two of the three plaintiffs sent a demand on May 4, 2020, which 

Walmart rejected in its entirety. A third plaintiff sent a demand on July 2, 2020. After 

efforts to negotiate were unsuccessful, two of the three plaintiffs filed enforcement actions

on June 17, 2020. The third filed its enforcement action on August 21, 2020. By final order 

dated October 29, 2020, the court required Walmart to produce various categories of 

documents. See Police & Fire Ret. Sys. of City of Detroit v. Walmart Inc., 2020 WL 

6379117, at *1 (Del. Ch. Oct. 29, 2020) (ORDER).

Walmart completed its production on January 27, 2021. The plaintiffs contended 

that the production was incomplete and challenged Walmart’s privilege log. After further 

negotiations, Walmart produced a revised privilege log on April 9, 2021, and a 

supplemental production on April 12, 2021. 

After reviewing and evaluating the information they obtained, the plaintiffs decided 

to file suit. They filed their initial complaint on September 27, 2021, five months later. The 
50

complaint was thorough and evidenced considerable effort. It spanned 132 pages and 

contained 316 numbered paragraphs. It was not a pastiche of prolix invective, but rather a 

detailed effort to assert viable derivative claims. 

The pace at which the plaintiffs proceeded is consistent with a steady and diligent 

effort to use Section 220. A rush to file a lawsuit is neither desirable nor expected. The 

court therefore will use the date of the Section 220 demands as the lookback date.

Because the plaintiffs sent their demands on two separate dates, there are two 

possible lookback dates: May 4, 2020 and July 2, 2020. Using the later date could create a 

disincentive for plaintiffs to work together and coordinate their actions. In a situation where 

there is a substantial gap between the demands, the earlier stockholder may not want to 

coordinate with the later filer because of the risk that the earlier filer would lose the tolling 

benefit. Using the later date has the benefit of avoiding that problem and encouraging 

coordination, which reduces the burden on responding corporations and the courts. But 

using the earlier date also creates a risk of a rush to serve Section 220 demands. 

As with the question of whether to use an earlier lookback date than the filing of the 

complaint, which earlier date to use will depend on the facts and circumstances. A brightline rule is likely undesirable. In this case, the demands were sent in rapid succession, and 

the choice between the dates has no effect on the timeliness analysis, so this decision uses 

a lookback date of May 4, 2020 for convenience. 
51

C. Measuring The Actionable Period

The next step in the separate accrual approach is to use the statute of limitations for 

a closely analogous legal claim to measure the actionable period by working backward 

from the lookback date. For a claim for breach of fiduciary duty, the analogous statute of 

limitations is three years. 10 Del. C. § 8106. Measuring back from the lookback date of 

May 4, 2020, means that the actionable period for this case started on May 4, 2017. 

D. Determining Whether Any Of The Ongoing Conduct Took Place During The 

Actionable Period

The third step under the separate accrual approach is to determine whether any of 

the ongoing conduct that gives rise to the plaintiffs’ claim took place during the actionable 

period. If yes, then the claim is timely. If no, then the court must consider any tolling 

doctrines that the plaintiffs have raised. 

1. The Pharmacy Issues

The first category of claims involves the Pharmacy Issues. The actionable period 

stretches back to May 4, 2017. Walmart acted as an operator of retail pharmacies 

throughout the actionable period and continued to do so after suit was filed. In August 

2022, a federal judge entered an injunction order requiring Walmart to remediate deficient 

controls and reporting systems. In November 2022, Walmart agreed to a settlement that 

involved a payment of $3.1 billion, plus the implementation of extensive procedures and 

controls. It is therefore reasonable to infer that the Pharmacy Issues extended throughout 

the actionable period. The plaintiffs’ claims based on the Pharmacy Issues are timely.
52

2. The Distributor Issues

The second category of claims involves the Distributor Issues. Once again, the 

actionable period stretches back to May 4, 2017. Walmart management made the decision 

to stop acting as an opioid distributor in November 2017 and completed its exit from the 

business in April 2018. That level of overlap is sufficient to make the plaintiffs’ claims 

based on the Distributor Issues timely. 

Because of the limited amount of conduct included in the actionable period, it bears 

emphasizing that conduct before the actionable period is not actionable. See Collis, 287 

A.3d at 1180. Evidence from earlier periods may be relevant and discoverable, but conduct 

that took place before the actionable period cannot support liability. A plaintiff can invoke 

tolling doctrines to extend the actionable period and bring more conduct within its scope, 

but that issue need not be addressed at the pleading stage. For purposes of the defendants’

timeliness defense, some overlap between the ongoing conduct and the actionable period 

is sufficient. 

3. The DEA Settlement Issues

The third category of claims involves the DEA Settlement Issues. The DEA 

Settlement was in effect from March 11, 2011 to March 11, 2015. The actionable period 

only extends back to May 4, 2017. The plaintiffs’ claims are therefore presumptively 

untimely. The plaintiffs, however, have invoked three tolling doctrines: equitable tolling, 

inherently unknowable injury, and fraudulent concealment. This decision need only 

consider equitable tolling. Considering that doctrine also implicates the question of inquiry 
53

notice, because “[i]f the ongoing conduct has stopped and a plaintiff has invoked a tolling 

doctrine to save an otherwise untimely lawsuit, inquiry notice operates the same way as in 

a discrete act system and may prevent the plaintiff from relying on a tolling doctrine to 

make the claim timely.” Collis, 287 A.3d at 1213.

a. Equitable Tolling

“[T]he doctrine of equitable tolling stops the statute from running while a plaintiff 

has reasonably relied upon the competence and good faith of a fiduciary.” In re Tyson 

Foods, Inc. Consol. S’holder Litig., 919 A.2d 563, 585 (Del. Ch. 2007)). “The obvious 

purpose of the equitable tolling doctrine is to ensure that fiduciaries cannot use their own 

success at concealing their misconduct as a method of immunizing themselves from 

accountability for their wrongdoing.” AIG, 965 A.2d at 813. 

The defendants argue that equitable tolling only applies to self-dealing claims and 

is therefore unavailable. As this court discussed in Collis, limiting equitable tolling to one 

subspecies of loyalty violation—self-dealing—does not accurately reflect Delaware case 

law. Collis, 287 A.3d at 1218–20. The duty of loyalty is the core fiduciary principle, and 

when fiduciaries act disloyally or in bad faith, equitable tolling should still apply. Id. at 

1219. Applied in this manner, the doctrine of equitable tolling resembles a similar tolling 

doctrine that permits a plaintiff to rely in blameless ignorance on the silence of 

professionals, where tolling is not artificially limited to self-dealing. See Hillblom v. Wilm.

Tr. Co., 2022 WL 17428978, at *11 (Del. Ch. Dec. 6, 2022). For equitable tolling, 

stockholders are relying on the silence of their professional fiduciaries. 
54

The plaintiffs’ claims invoke the duty of loyalty. The Information-Systems Claim 

and the Red-Flags Claim require an inference that the corporate fiduciaries consciously 

decided in bad faith that they would not take action to establish an information system or 

respond to red flags. The Massey Claim requires an inference that the corporate fiduciaries 

consciously decided in bad faith not to comply with the law, likely because of the cost of 

compliance and its impact on profits. Because each claim implicates the duty of loyalty, 

equitable tolling is available for all three. 

The defendants never disclosed the existence of the DEA Settlement or their failure 

to fulfill its obligations. Equitable tolling consequently applies until the point of inquiry 

notice.

Applying the doctrine of equitable tolling is all the more warranted because the 

defendant fiduciaries reassured Walmart’s stockholders that they were complying with 

their legal obligations. For example, in April 2013, while the DEA Settlement was in effect 

and the directors and officers were failing to meet its obligations, Walmart disclosed in its 

proxy statement that “Board committees, which meet regularly and report to the full Board, 

play active roles in fulfilling the risk oversight function.”

22 In March 2014, the start of the 

last year of the DEA Settlement, Walmart publicly stated that it was “[c]reating a diversion 

analytics tool to deter, detect and remedy attempts at pharmaceutical diversion in U.S. 

22 Wal-Mart Stores, Inc., Global Compliance Report on Fiscal Year 2014 (Mar. 14, 

2014).
55

Walmart and Sam’s Club pharmacies.”

23 In April 2015, just after the DEA Settlement

expired, Walmart disclosed that, “management reported regularly to the Audit Committee 

regarding ongoing enhancements to our global compliance program and progress in 

implementing these objectives. At the end of fiscal 2015, the Audit Committee determined 

that, in its qualitative judgment, adequate progress had been achieved in implementing 

these objectives.”

24 Similar disclosures appeared in Walmart’s proxy statements for 2016, 

2017, and 2018.

25

More reassuring disclosures appeared in a press release from May 2018:

In an effort to continue to be part of the solution to our nation’s opioid 

epidemic, Walmart is introducing new policies, programs and tools aimed at 

curbing opioid misuse and abuse. These initiatives apply to all Walmart and 

23 Compl. ¶ 352; Dkt. 40 at 51; accord Wal-Mart Stores, Inc., Definitive Additional 

Materials (Schedule 14A), at 9 (Apr. 23, 2014). 

24 Wal-Mart Stores, Inc., Definitive Proxy Statement (Schedule 14A), at 53 (Apr. 

22, 2015).

25 See Wal-Mart Stores, Inc., Definitive Proxy Statement (Schedule 14A), at 49–50 

(Apr. 20, 2016) (“[O]ver the past few years, our company has made significant 

improvements to our ethics and compliance program around the world. To further 

emphasize our commitment to ethics and compliance, in early fiscal 2016, our company’s 

senior leadership again developed a timetable for implementing further enhancements to 

our global ethics and compliance program on a prioritized basis. These objectives covered 

such subject matters as . . . health and wellness compliance . . . These objectives sought to 

enhance key elements of a corporate ethics and compliance program, including but not 

limited to developing and implementing enhanced compliance protocols and procedures, 

hiring and training of key compliance personnel, monitoring and assessment of various 

elements of the program, internal communications, and access to information.”); Wal-Mart 

Stores, Inc., Definitive Proxy Statement (Schedule 14A), at 60 (Apr. 20, 2017) (same); 

Walmart Inc., Definitive Proxy Statement (Schedule 14A), at 51 (Apr. 20, 2018) (same).
56

Sam’s Club pharmacies and pharmacists in the United States and Puerto 

Rico.

. . .

Further, by the end of August 2018 . . . [i]n states that allow access, the 

company’s pharmacists will have access to and use the controlled substance 

tracking tool, NarxCare. NarxCare is a tool that helps pharmacists make 

dispensing decisions and provides pharmacists with the real-time interstate 

visibility that currently exists.

Ex. H. 

In contrast to these disclosures, the complaint alleges facts and points to internal 

documents that support an inference that Walmart failed to comply with the DEA 

Settlement. See Compl. ¶¶ 191, 211–214, 352. The complaint’s factual allegations support 

an inference that while the DEA Settlement was in effect, Walmart’s policies and 

operations hindered the ability of its pharmacists to track suspicious prescriptions and 

thwarted pharmacists’ access to refusal-to-fill information. Id. ¶¶ 251–255. 

It is reasonable to infer that Walmart’s disclosures reassured stockholders, put them 

off the scent of wrongdoing, and reinforced their confidence in their fiduciaries. Because 

equitable tolling is available, laches based on the presumptive three-year statute of 

limitations does not apply. 

b. Inquiry Notice

The availability of a tolling doctrine does not end the analysis, because inquiry 

notice universally limits tolling. A plaintiff must sue within a reasonable time after the 

plaintiff “was objectively aware, or should have been aware, of facts giving rise to the 
57

wrong.” Tyson Foods, 919 A.2d at 585. “Even where a defendant uses every fraudulent 

device at its disposal to mislead a victim or obfuscate the truth, no sanctuary from the 

statute will be offered to the dilatory plaintiff who was not or should not have been fooled.”

Id. Once the plaintiff is aware of the injury, or should have discovered it in the exercise of 

reasonable diligence, then the period for bringing a claim starts to run. See Dean Witter, 

1998 WL 442456, at *6. Under a separate accrual system, if the ongoing conduct has 

stopped, then inquiry notice may prevent a plaintiff from invoking a tolling doctrine to save 

an otherwise untimely lawsuit. 

After a plaintiff is on inquiry notice, the plaintiff must sue within a reasonable time.

Inquiry notice does not require full knowledge of the material facts; rather, 

plaintiffs are on inquiry notice when they have sufficient knowledge to raise 

their suspicions to the point where persons of ordinary intelligence and 

prudence would commence an investigation that, if pursued would lead to 

the discovery of the injury.

Pomeranz v. Museum P’rs, L.P., 2005 WL 217039, at *3 (Del. Ch. Jan. 24, 2005). “Inquiry 

notice does not require a plaintiff to have actual knowledge of a wrong, but simply an 

objective awareness of the facts giving rise to the wrong—that is, a plaintiff is put on 

inquiry notice when he gains possession of facts sufficient to make him suspicious, or that 

ought to make him suspicious.” Sunrise Ventures, LLC v. Rehoboth Canal Ventures, LLC, 

2010 WL 363845, at *7 (Del. Ch. Jan. 27, 2010) (cleaned up). When a plaintiff has relied 

upon a fiduciary’s statements, then inquiry notice does not arise unless the plaintiff had 

some reason to suspect that the fiduciary’s statements were inaccurate. Tyson Foods, 919 

A.2d at 600.
58

As with the application of timeliness defenses more generally, the issue of inquiry 

notice may not be suitable for resolution on a motion to dismiss. “[T]he question of inquiry 

notice is factually-intensive [sic] and case-specific.” Bredberg v. Boston Sci. Corp., 2021 

WL 2816897, at *5 (Del. Super. Ct. July 2, 2021). In some cases, it may be possible to 

determine at the pleading stage that a plaintiff was on inquiry notice; in others, that 

determination must await further developments. Id.

The defendants argue that the plaintiffs were on inquiry notice in 2017 after the 

filing of the bellwether complaints in the Opioid MDL. It is fair to infer that the complaints 

in the Opioid MDL put stockholders on notice of problems with Walmart’s compliance 

with the Controlled Substances Act. But the extent to which the Opioid MDL put 

stockholders on notice of Walmart’s years of non-compliance with the DEA Settlement is 

not clear from the face of the complaint. Failing to comply with a regulatory statute like 

the Controlled Substances Act is a problem. Failing to comply with the specific obligations 

in a settlement agreement between a company and its principal regulator is a bigger 

problem. Inquiry notice about the former need not result in inquiry notice about the latter.

The two complaints in the Opioid MDL that the defendants cite do not contain 

references to the DEA Settlement. The Cabell County Commission filed the first complaint 

in March 2017 in the U.S. District Court for the Southern District of West Virginia against 

Walmart in its capacity as a distributor and against other distributors, collectively referred 

to as the “Distributor Defendants.” Ex. 57. The Cabell County complaint alleged that 
59

Walmart failed to meet its obligations as a distributor to “maintain effective controls 

against diversion of prescription opiates” and “monitor, detect, investigate, refuse and 

report suspicious orders of prescription opiates.” Id. ¶¶ 81, 87. The Cabell County 

complaint identified orders to show cause that the DEA issued against AmerisourceBergen 

and Cardinal Health, and settlement agreements between the DEA and McKesson and 

Cardinal Health. The complaint did not identify the 2007 order to show cause against 

Walmart or the 2011 DEA Settlement. That is not surprising. The order to show cause and 

the DEA Settlement addressed Walmart’s obligations as a dispenser, not a distributor, and 

Walmart had never disclosed the existence of the DEA Settlement. 

The Cherokee Nation filed the second complaint in April 2017 in the District Court

of the Cherokee Nation against three “Distributor Defendants”—McKesson, Cardinal 

Health, and AmerisourceBergen—and three “Pharmacy Defendants”—CVS, Walgreens, 

and Walmart. Ex. 58 ¶¶ 12–17. The complaint alleged that the Pharmacy Defendants 

“engaged in improper dispensing practices” and “participated in nuisance-causing 

activities,” including “failing to implement effective controls and procedures in their 

supply chains to guard against theft, diversion and misuse of controlled substances” and 

“failing to adequately design and operate a system to detect, halt and report suspicious 

orders of controlled substances.” Id. ¶¶ 177–181. In its Walmart-specific allegations, the 

complaint alleged: 

Walmart has had two orders entered against it and its employees. In January 

of 2015, Walmart was cited for “failing to have a pharmacy manager who 
60

established and maintained effective controls against the diversion of 

prescription drugs and failing to have a pharmacy manager who supervises 

employees as they related to the practice of pharmacy.” Notably, this 

particular Walmart is not only within the Cherokee Nation, but is also 

number eight on the top-ten list of opioid dispensing pharmacies in 

Oklahoma. Then, on June 15, 2016, a pharmacy technician employed by 

Walmart in Broken Arrow, Oklahoma had an order entered against her and 

her license revoked stemming from diversion of prescription opioids.

Id. ¶ 160. The complaint did not identify the 2007 order to show cause against Walmart or 

the 2011 DEA Settlement, even though the complaint extended to Walmart’s activities as 

a dispenser. 

The allegations in these complaints do not contain anything that would have put 

stockholders on the trail of the DEA Settlement. The allegations in the complaints also did 

not contain allegations about board-level compliance and oversight. It is not clear at this 

stage of the case that the complaints that the defendants have cited from the Opioid MDL 

constituted inquiry notice for claims relating to the DEA Settlement Issues.

Inquiry notice also requires the court to have confidence that the plaintiff could have 

discovered the claim if the plaintiff had caught the scent. 

Determining when a stockholder plaintiff is on inquiry notice for a claim that 

otherwise would survive a motion to dismiss therefore involves a two-step 

analysis. First, sufficient information must be available to arouse a 

reasonable stockholder's suspicions. Second, the reasonable stockholder 

must be able to commence an investigation and discover the facts necessary 

to plead the claim and survive the motion to dismiss. If the stockholder could 

not obtain the information necessary to file a viable complaint, then the 

stockholder could continue to rely reasonably on the competence and good 

faith of the fiduciary, and equitable tolling would continue to apply.

In re Primedia, Inc. S’holders Litig., 2013 WL 6797114, at *12 (Del. Ch. Dec. 20, 2013).
61

It is not clear at this stage of the case whether the plaintiffs could have obtained 

information about the DEA Settlement if they had served demands for books and records 

in 2017 that did not identify the DEA Settlement specifically. To obtain the DEA 

Settlement, the plaintiffs would have had to request records going back six years, which is 

a time period that respondents often resist. Courts are aware of the burden that books and 

records requests can impose on a responding corporation, and it is not clear that a court 

would have gone beyond five years without a good reason for doing so. 

The court cannot determine from the face of the complaint whether the plaintiffs 

were on inquiry notice before the publication of the Pro Publica article in March 2020. At 

this stage of the case, it appears that equitable tolling is available for the DEA Settlement 

Issues until March 2020, which means that the plaintiffs have advanced timely claims. At 

a later stage of the case, it may become apparent that the plaintiffs were on inquiry notice 

at an earlier date. At present, the defendants cannot rely on inquiry notice to render the 

plaintiffs’ claims untimely.

E. Prejudice To The Defendants

A second dimension of the laches analysis is prejudice to the defendants. “Laches 

is fundamentally concerned with the prevention of inequity in permitting a claim to be 

enforced. Inequity for this purpose arises where there occurs some change in the condition 

or relation of the parties or the property involved in the pending lawsuit.” Donald J. Wolfe, 

Jr. & Michael A. Pittenger, Corporate & Commercial Practice in the Delaware Court of 

Chancery § 15.07[c][4], at 15-18 (2021). The defendants have not pointed to any prejudice 
62

that could render the plaintiffs’ suit untimely. They made a straightforward statute of 

limitations argument, which this decision has rejected.

If anything, now is the appropriate time to litigate the case. In November 2022, 

Walmart announced that it had agreed to a $3.1 billion settlement. The bulk of the harm to 

Walmart has now been quantified, and the time has come to consider whether grounds exist 

to shift responsibility for the harm to the individuals who made decisions on its behalf.

F. Other Equitable Considerations

When conducting a laches analysis, a court may take into account “unusual 

conditions or extraordinary circumstances.”

26 There are none in this case. 

III. CONCLUSION

To the extent that the defendants have moved to dismiss the plaintiffs’ claims on the 

grounds of untimeliness, their motion is denied.

26 Levey v. Brownstone Asset Mgmt., LP, 76 A.3d 764, 770; accord 

IAC/InterActiveCorp. v. O’Brien, 26 A.3d 174, 178 (Del. 2011) (same); Wright v. Scotton, 

121 A. 69, 73 (Del. 1923) (“[I]f unusual conditions or extraordinary circumstances make 

it inequitable to allow the prosecution of a suit after a briefer, or to forbid its maintenance 

after a longer period than that fixed by the statute [a court] will determine the extraordinary 

case in accordance with the equities which condition it.”).