A federal judge in Chicago has taken a chainsaw, not a scalpel, to a securities class action targeting Walgreens Boots Alliance and several former executives, cutting the case down to just three alleged misstatements about the company’s VillageMD primary-care venture.
U.S. District Judge Mary M. Rowland ruled that only three challenged remarks about clinic openings and staffing can move forward, while dozens of other alleged misstatements are out. The trimmed-down fight now centers on whether Walgreens’ upbeat public spin on its VillageMD rollout hid serious performance problems inside the pharmacy giant’s primary-care push.
In a memorandum opinion and order, Rowland granted in part and denied in part the defendants’ motion to dismiss, holding that the complaint survives only as to statements numbered 47, 48, and 68 and tossing the rest. She also removed two defendants from the case without prejudice and set a Jan. 15 status hearing to map out discovery, according to Justia.
The three surviving statements all deal with how Walgreens publicly described the pace of VillageMD clinic openings and labor conditions around those sites. The opinion highlights remarks from executives describing the rollout as “doubling down” and an exchange in which an executive responded, “Yes, I think we should be” on track to open 1,000 clinics by 2027. Rowland said plaintiffs have plausibly alleged that these comments could have been false or misleading when made, according to Justia.
Background: VillageMD Bet and the Pullback
Walgreens went all in on VillageMD on Oct. 14, 2021, announcing another $5.2 billion investment and pitching the deal as rocket fuel for hundreds of co-located primary-care practices, with a goal of roughly 1,000 clinics by 2027, according to a press release from Walgreens Boots Alliance.
The story later turned sour. Walgreens recorded multibillion-dollar writedowns tied to VillageMD, Reuters reported. In a June 27, 2024 interview, CEO Tim Wentworth said Walgreens would reduce its stake in the venture, a shift that sent shares sharply lower, as reported by CNN.
Why Shareholders Sued
Investors allege Walgreens and certain executives kept calling VillageMD a growth engine even as internal metrics showed many co-located clinics underperforming. The original complaint cited more than 80 allegedly misleading statements from 2021 through 2024, Bloomberg Law reported.
According to plaintiffs, those statements ran the gamut from confident clinic-opening milestones to assurances that labor “headwinds” at VillageMD would not derail the rollout. After Rowland’s ruling, those allegations largely fall away, leaving the case centered on the small handful of comments about clinic targets and staffing that survived dismissal.
Discovery and Next Steps
Rowland gave shareholders permission to amend their complaint and ordered both sides back to court on Jan. 15 for a status hearing that will address discovery and where the litigation goes from here, according to Crain's Chicago Business.
The order also narrowed which executives remain on the hook as defendants. For now, the three challenged statements sit squarely in the crosshairs for document requests and potential depositions once discovery begins.
Legal Implications
With almost the entire complaint dismissed, the case now turns into a much tighter battle over whether those three surviving statements clear the scienter and falsity hurdles under Section 10(b) and Rule 10b-5, and whether any control-person claims can hang on.
Bloomberg Law notes that Rowland’s ruling raises the evidentiary stakes at the pleadings stage and positions discovery as the main battlefield. Internal metrics, emails and board materials will likely dictate whether shareholders can prove the required state of mind behind those upbeat public remarks.
Investors, defense lawyers and plenty of Wall Street onlookers will be watching the Jan. 15 hearing to see whether the case expands again or quietly fizzles once documents and deposition testimony start to surface. Walgreens did not respond to a request for comment, Crain's Chicago Business reported.
