Holland v. RiteAid Corp.

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

DAVID HOLLAND and CIVIL ACTION

HAROLD SETLIFF,

Plaintiffs,

v.

NO. 23-2962

JOHN T. STANDLEY,

DARREN KARST,

HEYWARD DONIGAN,

MATTHEW C. SCHROEDER,

JAMES PETERS,

JOCELYN KONRAD and

ELIZABETH BURR,

Defendants.

HODGE, J. August 21, 2025

MEMORANDUM

Lead Plaintiff Jennifer DaSilva1 (“Plaintiff”) brings this class-action lawsuit individually

and on behalf of all others similarly situated against Rite Aid Corporation,2 John T. Standley,

Darren Karst, Heyward Donigan, Matthew Schroeder, James Peters, Jocelyn Konrad, and

Elizabeth Burr for violations of the Securities Exchange Act of 1934 (“Exchange Act”). Heyward

Donigan was the Chief Executive Officer (“CEO”) of Rite Aid Corporation (“Company”) from

August 12, 2019 until January 9, 2023. Matt Schroeder has been the Company’s Executive Vice

President and Chief Financial Officer (“CFO”) since March 2019. James Peters served as the

Company’s Chief Operating Officer (“COO”) from October 3, 2019 until March 8, 2022. Jocelyn

Konrad served as Executive Vice President/Chief Pharmacy Officer (“VP/CPO”) from October

2019 through March 2022. John Standley served as CEO from June 2010 until August 2019.

1 Jennifer DaSilva was appointed as Lead Plaintiff by Order on June 22, 2023. (ECF No. 27.)

2 Plaintiff filed a notice of voluntary dismissal of all claims against Rite Aid Corporation (“Company”) on

May 16, 2024, following the resolution in a Bankruptcy action, In re Rite Aid Corp., et al., No. 3:23-bk-18993 (Bankr.

D. N.J.). (ECF No. 59.)

Darren Karst joined the Company as CFO and Executive Vice President in August 2014 and took

on the additional role of Chief Administrative Officer (“CAO”) in September 2015. Karst left Rite

Aid in May of 2019. Elizabeth Burr currently serves as the Interim CEO of the Company and has

been on the Board of Directors since 2019. Collectively, these remaining individual Defendants

shall be referred to as “ Defendants”.

Plaintiff alleges that the Defendants engaged in conduct in violation of the Exchange Act

between April 26, 2018 and August 25, 2023 (“Class Period”). (ECF No. 40 ¶ 1.) Specifically,

Plaintiffs bring claims against Defendants for violations of Section 10(b) and Rule 10b-5 of the

Exchange Act (Count I), along with a violation of Section 20(a) of the Exchange Act (Count II).

Defendants have filed a Motion to Dismiss the Amended Class Action Complaint (“Motion”).

(ECF No. 64.) Lead Plaintiff opposes the Motion. (ECF No. 66.)

After having considered the arguments of the parties in their briefings and oral argument,

the Court grants the Defendant’s Motion to Dismiss. The basis for the Court’s determination is as

follows.

I. FACTUAL BACKGROUND3

Rite Aid was founded in 1962 as a local health and beauty store. (ECF No. 40 ¶ 34.) At the

time of the filing of the Amended Class Action Complaint, Rite Aid owned and operated over

2,300 retail drug stores across 17 states. (Id.) Rite Aid has two business segments, Retail Pharmacy

and “Pharmacy Services.”4 (ECF No. 40 ¶ 35.) “The Retail Pharmacy segment includes both

prescription pharmacy and front-end retail products, like greeting cards, personal care items, and

3 The Court adopts the pagination supplied by the CM/ECF docketing system.

4 Rite Aid has a “Pharmacy Benefits Manager” segment called Elixir that offers Pharmacy Services. (ECF No.

40 ¶¶ 34, 35.) This Court has already issued a holding in the litigation concerning Elixir. See generally In re Rite Aid

Sec. Litig., 2025 WL 968306 (E.D. Pa. March 31, 2025) (dismissing action with prejudice). The present cause of

action is separate and apart from that matter.

foods and beverages. Within retail pharmacy, prescription drugs generate the majority of sales.”

(ECF No. 40 ¶ 36.) Plaintiff alleges that in 2023, prescription drug sales accounted for over

seventy-one percent (71%) of total sales of the Company. (Id.)

Plaintiff alleges that for much of the past three decades, Rite Aid has been “massively

overleveraged due to a series of ill-fitted, debt-financed acquisitions.” (ECF No. 40 ¶ 38.) By

March of 2007, this resulted in around $3.1 billion of outstanding indebtedness. (ECF No. 40 ¶

39.) This increased to over $5 billion after another acquisition. (ECF No. 40 ¶ 39.) During the

Class Period, Plaintiff alleges that Defendants continually acknowledged this debt burden and

recognized the need to increase revenue to reduce the Company’s leverage ratio. (ECF No. 40 ¶

40.)

The Court notes that while Plaintiff includes a plethora of factual background in their

Amended Complaint, many of these facts are not relevant to the Court reaching a decision on the

issue before it. Relevant to the Court are those allegations for which Plaintiff pleads loss causation,

a necessary requirement for pursuing any claim under the Exchange Act. Plaintiff pleads loss

causation, a necessary element of a securities claim, for only four groups of corrective disclosures.5

Therefore, for those groups of corrective disclosures where the necessary element of loss causation

has not been pled, the Court cannot and does not contemplate the issue. The Court will therefore

only address the facts from this relevant period and related to those statements made in those four

groups of disclosures. These “corrective disclosures” relate to two operative theories of liability:

(1) Opioid Litigation and (2) RxEvolution. The Court fashions its opinion addressing those two

theories of liability.

5 These “corrective disclosures” are those issued on (1) March 30, 2022; (2) September 29, 2022 and December

21, 2022; (3) March 13, 2023; and (4) August 25, 2023. (ECF No. 66, at 52-57.) The Court notes that these “corrective

disclosures,” as the Plaintiff puts it, are not disclosures made in accordance with any SEC rule, rather they include

other sources of information revealed to investors through means other than SEC disclosures.

i. Opioid Litigation

Plaintiff alleges that “[i]n an effort to bolster prescription revenue, from at least 2015 to

2019, Rite Aid systematically, improperly, and knowingly filled unnecessary prescriptions for

dangerous and addictive substances in violation of U.S. law and at extreme costs to public health

and human lives.” (ECF No. 40 ¶ 50.) This culminated in the Department of Justice (“DOJ”)

intervening in a whistleblower lawsuit brought under the False Claims Act (“FCA”) against the

Company and filing a Complaint (“DOJ Complaint”).6 (Id.) Since 2000, the opioid crisis has

resulted in more than 500,000 overdoses and has resulted in a high death rate amongst individuals

aged 25 to 34. (ECF No. 40 ¶ 52.) Plaintiff alleges that the inappropriate dispensing of opioids was

used to boost Rite Aid profits, resulting in exposure for litigation liability, impacting the financials

of the Company. (See generally ECF No. 40.) Plaintiff alleges that Defendants knew, throughout

the Class Period, that Rite Aid pharmacists were “systematically dispensing controlled

substances.” (ECF No. 40 ¶ 57.)

a. Background

Rite Aid has an internal department known as its “Regulatory Affairs Department” which

was responsible for ensuring Rite Aid’s compliance with federal and state laws. (ECF No. 40 ¶

58.) Rite Aid, in order to monitor opioid prescriptions, used the High Alert Review Protocol

(“HARP”).7 (ECF No. 40 ¶ 61.) In order to comply with step 6 of HARP, Rite Aid had internal

policies requiring its pharmacies to “submit tickets” through the Retail Automated Customer

Service (“RACS”) reporting system. (ECF No. 66, at 13.) Plaintiff alleges that from February 2013

6 The Court notes that Plaintiff mentions several facts from the DOJ complaint as allegations of truth. The

Plaintiff admits that the basis for the present action “largely” relies on those allegations in the DOJ Complaint. (ECF

No. 78, at 78:11–23.) However, the Court notes that the allegations by the DOJ are just that—allegations. The Court

views them as such.

7 The HARP review process consisted of six steps: (1) review prescription, (2) validate prescription, (3)

validate prescriber, (4) validate patient, (5) dispense or not dispense, and (6) report suspicious activity. (ECF No. 40

¶ 61.)

through February 2018, Rite Aid only assigned a single Regulatory Affairs officer to review8 all

the tickets for Rite Aid pharmacies nationwide. (ECF No. 40 ¶ 65.) If the analyst felt as if the ticket

should be elevated, it went to a supervisor, Janet Hart,9 who had three options: “(1) unilaterally

end the review, (2) direct the analyst to re-run the dispensing data in six months, or (3) present the

file to a three-person committee of Rite Aid employees (the Review Committee), which included

Hart, to determine what, if any, course of action to take on that prescriber.” (ECF No. 40 ¶ 67.)

b. Alleged Improper Distribution

Plaintiff alleges that Defendants knew, or should have known, that Rite Aid’s pharmacies

were filling suspicious and unlawful prescriptions for controlled substances. (ECF No. 40 ¶ 68.)

Plaintiff alleges, using confidential witnesses and the DOJ Complaint as support, that Rite Aid

ignored thousands of tickets documenting suspicious controlled substance prescriptions

constituting “red flags.” (ECF No. 40 ¶ 69.)

As a result of these allegedly illegal prescription practices, Plaintiff asserts that, throughout

the Class Period, Defendants concealed evidence demonstrating that Rite Aid had significant legal

and regulatory exposure. (ECF No. 40 ¶ 87.) Plaintiff alleges that Rite Aid faced multiple lawsuits

and regulatory actions related to their unlawful dispensing of opioid prescriptions as early as

2012.10 (ECF No. 40 ¶ 92.) On October 26, 2017, then-President Trump declared the opioid crisis

8 “When the Regulatory Affairs analyst actually did review the ticket, the analyst was supposed to consider:

(1) Rite Aid’s dispensing data for the prescriber; (2) information about the prescriber, including whether the prescriber

had a valid DEA registration number and any history of disciplinary action; (3) internet research on the prescriber and

the prescriber’s office; and (4) in and after December 2013, dispensing data that Rite Aid purchased from a commercial

entity comprising approximately ninety percent of all retail pharmacies in the country.” (ECF No. 40 ¶ 66.)

9 Janet Hart was the Director of Government Affairs. (ECF No. 40 ¶ 67.)

10 Plaintiff alleges that as early as April 2012, the Drug Enforcement Agency (“DEA”) sent the Company an

administrative subpoena requesting information about the sales of pseudoephedrine products. (ECF No. 40 ¶ 92.) In

2012, the U.S. Attorney’s Office (“USAO”) for the Northern District of New York issued a subpoena to Rite Aid in

connection with investigation of possible civil violations of the Combat Methamphetamine Epidemic Act of 2005.

(Id.) In June 2013, the USAO for the Eastern District of California served Rite Aid a Civil Investigation Demand

regarding the Company’s drug review process and dispensing of drugs categorized as “Code 1” by the State of

California. (Id.)

a “public health emergency.” (ECF No. 40 ¶ 93.) In 2017, Rite Aid was named a defendant in a

multi-district litigation (“MDL”) on opiates in the Northern District of Ohio. In re National

Prescription Opiate Litig., 17-MD-2804 (J.P.M.L. Dec. 12, 2017). At the October 30, 2018 annual

meeting of Rite Aid shareholders, the shareholders voted to require the independent directors of

Rite Aid’s Board to “disclose in a report to be provided to investors by October 1, 2019, what

governance measures they had taken since 2012 to more effectively monitor and manage financial

and reputational risks related to the opioid crisis.” (ECF No. 40 ¶ 96.) Plaintiff alleges that

Defendants should have known the “significant liability likely to arise [from Rite Aid’s improper

distribution of controlled substances throughout the Class Period].” (ECF No. 40 ¶ 97.) Rite Aid

cooperated with the federal government’s investigations into the Company and produced relevant

documentation throughout the Class Period. (ECF No. 40 ¶ 98.)

c. Opioid Settlements

In March of 2022, peer pharmacies started announcing opioid settlements.11 (ECF No. 40

¶ 100.) Plaintiff alleges that this should have revealed the extent of Rite Aid’s litigation exposure

since Rite Aid, like CVS, was amongst the top 10 largest distributors of opioids in the United

States between 2006 and 2012. (Id.) After this news was revealed, Rite Aid stock prices fell from

$10.26 to $9.36, reflecting an 8.77% drop.12 (ECF No. 40 ¶ 320.) Following the CVS settlement,

Rite Aid disclosed in its 2022 10-K13 filed on April 25, 2022, that the Company had adjusted its

11 In March of 2022, CVS announced a $484 million settlement with the state of Florida related to opioid

prescriptions at its pharmacies. (ECF No. 40 ¶ 100.) On November 2, 2022, CVS and Walgreens agreed to pay $5

billion each to settle lawsuits nationwide relating to prescription opioids. (Id.)

12 The Court notes that when stock prices “drop”, this encompasses the time period from the closing of a

particular trading day to the opening on the next trading day.

13 A 10-K is an annual report that companies submit to the SEC in compliance with the Exchange Act. See

General Instructions, Securities and Exchange Commission, https://www.sec.gov/files/form10-k.pdf (last visited July

31, 2025).

risk disclosures to include that substantial damages were sought in connection with the opioid

litigation. (ECF No. 40 ¶ 103.)

On March 13, 2023, the DOJ intervened in the MDL and filed a complaint against Rite Aid

alleging that “Rite Aid failed to implement effective controls to prevent illegal and improper

dispending [sic] of opioids, or to otherwise detect diversion and abuse of controlled substances

and committed violations of the Controlled Substances Act and the False Claims Act in connection

with Rite Aid’s systematic dispensing of controlled substances.” (ECF No. 40 ¶ 105.) On this

news, Rite Aid stock fell from $3.28 to $2.66, reflecting a 18.9% drop. (ECF No. 40 ¶ 251.)

ii. RxEvolution

Plaintiff alleges that after facing negative publicity for its role in the opioid crisis and an

enormous debt load, Rite Aid pivoted in 2019 to develop a strategic plan called “RxEvolution”

(ECF No. 40 ¶ 112.)

a. Background

This new “RxEvolution” plan included the following:

As outlined, the plan had three prongs: (1) growing Rite Aid’s PBM, Elixir, into

the dominant midmarket PBM; (2) shifting to a pharmacist-centric approach,

wherein pharmacists would regularly come out from behind the counter to engage

with consumers and act as consumer advocates; and, most significantly, (3)

growing retail. In particular, the plan aimed to appeal to a target consumer base of

millennial and Gex-X women by creating an integrated and holistic pharmacy

experience that offered direct contact with pharmacists and pushed “natural” and

organic supplements and treatments in addition to traditional pharmaceuticals.

(ECF No. 40 ¶ 114.) “Prescription scripts” were allegedly the key part of the RxEvolution plan.

(ECF No. 40 ¶ 115.) In a June 24, 2021 earnings call, then-CEO Defendant Donigan emphasized

the importance of growing scripts and making it a priority. (Id.)

The retail component of the RxEvolution plan was unveiled during the March 16, 2020

Analyst Day Call and had several components. (ECF No. 40 ¶ 116.) First, was a transition to

“Stores of the Future” which included a remodel to meet customers’ personal needs. (Id.) The

stated goal for 2021 was to introduce 75 of these stores. (Id.) The second initiative included

repositioning pharmacists to the “front and center” as “chief whole being health advocates.” (Id.)

This initiative also included a new product lineup of “better for you” products. (ECF No. 40 ¶

117.) Plaintiff alleges that Rite Aid promised investors “more than a [sic] just new logo, touting

that ‘it’s truly a transformation deep to our core, not a superficial one.’” (ECF No. 40 ¶ 118.)

Plaintiff stated that the initiative turned out to be just a new logo and new signage. (Id.) Third,

Plaintiff alleges that RxEvolution was supposed to place a greater emphasis on telehealth resulting

in the installation of “wellness rooms” in Rite Aid stores for customers to engaged in digital

wellness. (ECF No. 40 ¶ 128.)

b. COVID-19 Pandemic

Unexpectedly, the announcement of the RxEvolution strategy coincided with the COVID-

19 outbreak, which was announced on March 11, 2020 by the World Health Organization

(“WHO”). (ECF No. 40 ¶ 119.) Plaintiff alleges that during the pandemic, the Defendants began

diverting Company resources away from the RxEvolution projects and into COVID-19 relief

efforts such as COVID-19 testing and vaccine administration. (Id.) Confidential Witness 1

(“CW1”) was hired as a project manager for the “Stores of the Future” project and alleged that the

initial estimated budget for the transformation was $8 million per store. (ECF No. 40 ¶ 121.) CW1

then stated that around September 2020, the budget was reduced to $1 million per store and then

further dropped to $0.7 million per store. (ECF No. 40 ¶ 122.) CW1 also alleges that much of the

team hired along with them to develop the Stores of the Future were reassigned to the COVID-19

vaccine project. (Id.) Confidential Witness 2 (“CW2”) stated that the rebranding was “utter chaos”

and that they felt as if “there was no plan in place.” (ECF No. 40 ¶ 120.)

Plaintiff alleges that because of the diversion of resources, the scope of the Stores of the

Future was dramatically reduced. (ECF No. 40 ¶ 124.) After the pandemic, the target goal for

Stores of the Future was cut from 75 stores to 50 and then to 10. (Id.) The Company piloted its

first three Stores of the Future in November 2020. (ECF No. 40 ¶ 125.) By November 2021,

Plaintiff alleges that only five or fewer stores were opened. (Id.) Furthermore, CW1 stated that as

a result of COVID-19, patients were not using telehealth services in the dedicated rooms in the

pharmacies, instead opting for Zoom and other online telehealth services from their home. (ECF

No. 40 ¶ 129.)

During the COVID-19 pandemic, Plaintiff alleges that the revenue from COVID-19 tests

and vaccines masked Rite Aid’s declining financial performance. (ECF No. 40 ¶ 139.) In fact,

shortly after the COVID pandemic was declared, in six quarters in 2020 and 2021, Rite Aid’s

EBIT14 exceeded its interest expense. (ECF No. 40 ¶ 140.) This financial success continued based

on revenue generated from testing and vaccines as the pandemic progressed. (ECF No. 40 ¶ 140–

49.)

c. Post-Pandemic

After the pandemic subsided, however, the Company experienced a large decrease in

revenue, primarily due to the decline in vaccines issued and reduced interest in booster shots. (ECF

No. 40 ¶ 155.) Plaintiff alleges that Defendants represented to investors that Company revenue

would be sustained post-pandemic, but did not implement changes pursuant to the RxEvolution

initiative to offset the decline in COVID-19 related revenues. (ECF No. 40 ¶ 150–58.)

14 “EBIT” refers to earnings before interest and taxes. (ECF No. 40 ¶ 4.)

In 2022, Plaintiff alleges that Rite Aid executives made several statements reassuring

investors about the continued presence of COVID and that the RxEvolution plan was progressing

successfully. (ECF No. 40 ¶ 161–62.) Some of these statements are included below, such as:

COVID vaccines are not a onetime thing for us as a company… COVID vaccines

will be a permanent, I think, weapon in our arsenal. I think it is very fair to assume

that these vaccines, just like flu shots, just like Shingrix, just like pneumonia, are

here to stay and a permanent part of our arsenal. So I think it’s one of the benefits

of COVID.

Heyward Donigan, Q1 2022 Earnings Call (June 24, 2021). (Id.)

I really, really strongly believe is there’s no ex COVID. I don’t think there’s any

time in the next 3 to 4 years if we’re lucky that there is no COVID. And I think

COVID testing is here to stay as well. . . . I don’t think we see a world without

COVID vaccines.…I think that they’re very likely to forever in our lifetime us to

be happening once or twice a year…”

Heyward Donigan, Investor Call15 (December 21, 2021). (Id.)

Donigan also stated that “[o]ur RxEvolution strategy is showing promising results and I’m

encouraged that we’re not only exceeding expectations, but also demonstrating that our strategy is

gaining momentum.” (ECF No. 40 ¶ 162.) Plaintiff alleges that Rite Aid’s earnings projections

falsely presumed that revenue would continue at COVID-19 levels post-pandemic even though

Defendants knew internally that such revenues were continuing to decline. (ECF No. 40 ¶ 163.)

On September 29, 2022, Rite Aid announced their Q2 financial results which revealed a

“shock[ing]” loss resulting from “a decline in COVID testing and vaccine revenue.” (ECF No. 40

¶ 245.) After this announcement, Rite Aid’s stock price fell from $7.03 to $5.06 or 28.02%. (ECF

No. 40 ¶ 246.)

On December 21, 2022, Rite Aid announced their Q3 2022 financial results which were,

as Plaintiff alleges, “dismal.” (ECF No. 40 ¶ 247.) Again, this loss was attributed to a decline in

15 Plaintiff does not specify in what context that this statement was made aside from the fact that it was made

to investors. (ECF No. 40 ¶ 161.)

COVID testing and vaccine revenue. (Id.) After this announcement, Rite Aid’s stock price fell

from $4.41 to $3.65 or 17.23%. (ECF No. 40 ¶ 248.)

On August 25, 2023, it was revealed through a Wall Street Journal article titled “Rite Aid

Prepares Bankruptcy That Would Halt Opioid Lawsuits” that the Company was preparing to file

Chapter 11 bankruptcy due to the impact of opioid lawsuits on its financial position. (ECF No. 40

¶ 252.) After this news, Rite Aid stock fell from $1.44 to $0.71, reflecting a 50.69% drop. (ECF

No. 40 ¶ 253.)

II. LEGAL STANDARD

To survive a Rule 12(b)(6) motion, “a complaint must contain sufficient factual matter,

accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 566 U.S.

662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is

plausible when the plaintiff pleads “factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.” Id.

In deciding whether a complaint fails to state a claim upon which relief can be granted, the

court is required to accept as true all factual allegations in the complaint as well as all reasonable

inferences that can be drawn from the complaint. Jordan v. Fox Rothschild, O’Brien & Frankel,

Inc., 20 F.3d 1250, 1261 (3d Cir. 1994). These allegations and inferences are to be construed in

the light most favorable to the plaintiff. Id. But, the court “need not credit a complaint’s bald

assertions or legal conclusions when deciding a motion to dismiss.” Morse v. Lower Merion Sch.

Dist., 132 F.3d 902, 906 (3d Cir. 1997). Plaintiffs cannot prove facts they have not alleged. Assoc.

Gen. Contractors of Cal. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). Thus, “a

pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of

action will not do.” Iqbal, 556 U.S. at 678. Rather, a complaint must recite factual allegations

enough to raise the plaintiff's claimed right to relief beyond the level of mere speculation. Id.

However, as compared to a standard Rule 12(b)(6) motion to dismiss, a complaint in a

securities litigation must plead more than just “whether, under any reasonable reading of the

complaint, the plaintiff may be entitled to relief.” Inst. Inv. Grp. v. Avaya, Inc., 564 F.3d 242, 252

(3d Cir. 2009). A plaintiff in a securities case must satisfy the heightened pleading requirements

of the Private Securities Litigation Reform Act (“PSLRA”).16 See 15 U.S.C. §§ 78u–4 et seq. The

PSLRA provides two pleading requirements, both of which must be met to survive a motion to

dismiss. Id. First, a complaint “must specify each misleading statement, why the statement was

misleading, and, if an allegation is made on information and belief, all facts supporting that belief

with particularity.” Avaya, 564 F.3d 242 at 252–53 (citing Winer Fam. Trust v. Queen, 503 F.3d

319, 326 (3d Cir. 2007)); 15 U.S.C. § 78u–4(b)(1). Second, the complaint must, “with respect to

each act or omission alleged to violate this chapter, state with particularity facts giving rise to a

strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u–4(b)(2).

This is an exacting pleading standard for state of mind, also known as “scienter.” Avaya, 564 F.3d

242 at 252–53 (citing Tellabs, 551 U.S. 308, 320). If a plaintiff fails to meet this heightened

pleading requirement under the PSLRA, the complaint must be dismissed.

III. DISCUSSION

Plaintiffs bring claims against Defendants for violations of Section 10(b) and Rule 10b-5

of the Exchange Act (Count I), along with violations of Section 20(a) of the Exchange Act (Count

II).

16 The Court notes that the PSLRA has replaced Rule 9(b) as the pleading standard governing private securities

class actions. See Inst. Invs. Grp. v. Avaya, Inc., 564 F.3d 242, 253 (citing Tellabs, Inc. v. Makor Issues & Rights,

Ltd., 551 U.S. 308, 319 (2007)). However, the particularity requirement of Rule 9(b) is comparable and effectively

subsumed by the PSLRA. Id.

A. Section 10(b) and Rule 10b-5

Plaintiffs bring claims against Defendants under Section 10(b) and Rule 10b-5 of the

Exchange Act, which prohibits fraud in connection with the sale or purchase of a security. 15

U.S.C. § 78j(b); 17 C.F.R. § 240.10b–5(b). To state a claim under these Sections, Plaintiff must

establish “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a

connection between the misrepresentation or omission and the purchase or sale of a security; (4)

reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.”

Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 37–38 (2011).

Defendants argue that Plaintiffs fails to (1) allege any false or misleading statement or

omission; (2) plead facts giving rise to a strong inference of scienter; and (3) plead loss causation

as it related to the opioid theory and the RxEvolution theory of liability. (ECF No. 64-3, at 25, 40.)

The Court need not, and therefore does not, address scienter because falsity and loss causation are

dispositive in the present case.

i. False/Misleading Statements

A statement is actionable under securities laws if it “(i) was not sincerely believed when

made; (ii) contains an expressly embedded, untrue factual assertion; or (iii) reasonably implies

untrue facts and omits appropriate qualifying language.” Dang v. Amarin Corp. PLC, 750 F. Supp.

3d 431, 459 (D. N.J. 2024) (citing City of Warren Police & Fire Ret. Sys. v. Prudential Fin., Inc.,

70 F.4th 668, 686 (3d Cir. 2023)). The PSLRA does, however, provide a “safe harbor” provision

for forward-looking statements. Id.; 15 U.S.C. § 78u-5(c). Alleged misrepresentations are not

actionable if the statements “are (1) identified as [forward-looking], and accompanied by

meaningful cautionary statements; or (2) immaterial; or (3) made without actual knowledge that

the statement was false or misleading.” Id. (citing In re Aetna, Inc. Sec. Litig., 617 F.3d 272, 278

(3d Cir. 2010)); 15 U.S.C. § 78u-5(c). Finally, the Court “must distinguish material representations

from statements that ‘constitute no more than puffery and are understood by reasonable investors

as such.’” Id. (citing In re Newell Brands, Inc. Sec. Litig., 837 F. App’x 869, 874 (3d Cir. 2020)).

a. Opioid Theory

Plaintiff contends that three large groups of statements were false or misleading as they

related to the opioid litigation. The first are the statements made in Rite Aid’s SEC filings, which

Plaintiff contends failed to adequately disclose the risk of legal liability as it related to potential

and/or active opioid litigation. (ECF No. 66, at 21–23.) The second group are statements made

regarding compliance with regulations in the relevant SEC filings, which Plaintiff alleges were

misrepresented by Defendants. (ECF No. 66, at 23–24.) Finally, there are those statements made

during an investor call that “touted” Rite Aid’s internal procedures for dispensing controlled

substances. (ECF No. 66, at 25–27.)

Defendants argue that the challenged statements are not false or misleading because the

risk contingencies of pending litigation were adequately disclosed with the amount of knowledge

that was available to the Company at the time. (ECF No. 64-3, at 26, 30.) Defendants also argue

that securities laws do not require a Company to accuse itself of wrongdoing, therefore making the

disclosures accurate and in compliance with the relevant regulations. (ECF No. 64-3, at 27–28.)

Defendants also argue that any statements about the Company’s compliance with regulations or

its internal procedures were not false, nor can Plaintiff show that they were. (ECF No. 64-3, at 32.)

SEC Filing Statements

The Court will first address the SEC filings17 (Form 10-Ks) and the alleged misstatements

therein. Plaintiff argues that the 2018 and 2019 Form 10-Ks do not adequately disclose the risk

17 There are several documents that are attached to both the Plaintiff and Defendants’ pleadings in the present

case. (ECF Nos. 64-4, 64-5, 64-6, 64-7, 64-8, 64-10, 64-11, 66-1, 72-1, 72-2, 72-3, 72-3, 72-4, 72-5.) Neither party

associated with legal proceedings. Plaintiff argues that the statement: “the Company’s

management does not believe the outcome of any of these legal matters will be material” is

misleading. (ECF No. 72-1, at 13; ECF No. 72-2, at 8, 14.) However, the Court notes that this

statement is taken out of context and a reasonable reader of the 10-Ks would not necessarily

interpret the statements in the same way Plaintiff has. See Omnicare, Inc. v. Laborers Dist. Council

Const. Indus. Pension Fund., 575 U.S. 175, 190 (2015) (“The reasonable investor understands a

statement of opinion in its full context.”). The 2018 10-K makes several disclosures related to

“Legal Matters and Regulatory Proceedings.” (ECF No 72-1, at 8.) The Disclosure states that

“[t]he Company is involved in legal proceedings and is subject to investigations, inspections,

claims, audits, inquiries, and similar actions by governmental authorities arising in the ordinary

course of its business.” (Id.) The Disclosure then goes in depth with all of these active matters and

details about them. (ECF No. 72-1, at 8–13.) At the end of each of these matters, the Company

then discloses what they expect the impact of the litigation may be, if any. For example, the

Company says, for an unrelated suit, that “[a]t this stage of the proceedings, the Company is not

able to either predict the outcome of this lawsuit or estimate a potential range of loss with respect

to the lawsuit and is vigorously defending this lawsuit.” (ECF No. 72-1, at 11.) For another suit,

the Company says “[w]hile the Company’s management cannot predict the outcome of these

has opposed the Court judicially noticing the exhibits. The Court holds that they are hereby judicially noticed and may

be considered. When “decid[ing] a motion to dismiss, courts generally consider only the allegations contained in the

complaint, exhibits attached to the complaint and matters of public record.” Schmidt v. Skolas, 770 F.3d 241, 249 (3d

Cir. 2014) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993)).

However, an exception to the general rule holds that when a document attached to a motion to dismiss is integral or

explicitly relied upon in the complaint, the document can be considered without converting the motion into one for

summary judgment. Id. The purpose of the rule against inclusion of documents is lack of notice to a plaintiff. Id.

Where a plaintiff has actual notice and has relied on those documents in framing the complaint, that concern is

dissipated. Id. “It is not unfair to hold a plaintiff accountable for the contents of documents it must have used in

framing its complaint, nor should a plaintiff be able to evade accountability for such documents simply by not attaching

them to [their] complaint.” Id. at 250. The Court holds that all documents attached, by virtue of consent by both parties

and by their substance, are considered integral or explicitly replied upon in the Amended Complaint.

matters, it is possible that the Company’s results of operations or cash flows could be materially

affected by an unfavorable resolution.” (Id.) The 2018 10-K then proceeds to disclose the pending

MDL and the Company states “The Company is vigorously defending all such matters.” (ECF No.

72-1, at 13.) Afterwards, there is what Defendants call a “catchall” paragraph which states:

In addition to the above described matters, the Company is subject from time to

time to various claims and lawsuits and governmental investigations arising in the

ordinary course of business. While the Company's management cannot predict the

outcome of any of the claims, the Company's management does not believe that the

outcome of any of these legal matters will be material to the Company's

consolidated financial position. It is possible, however, that the Company's results

of operations or cash flows could be materially affected by an unfavorable

resolution of pending litigation or contingencies.

(Id.) Plaintiff argues that this provision refers to the active MDL, conveniently omitting the first

two sentences of the “catchall provision”. The Court finds that this provision is a catchall provision

and not referring to the MDL litigation above. Looking at the surrounding context, the Company

discloses its “opinion” on each of the active matters. As stated above, Rite Aid disclosed that,

regarding a previous suit, “it is possible that the Company’s results of operations or cash flows

could be materially affected by an unfavorable resolution.” The pattern of the 10-K clearly reveals

that each paragraph addressing each active legal matter offers the Company’s opinion with the last

paragraph simply being a “catchall” clause, referring to matters “in addition to the above.” (Id.)

(emphasis added).

The same pattern of disclosures appears in the 2019 Form 10-K. (ECF No. 72-2.) The 2020

10-K, while incorporating a slightly different structure, states essentially the same thing in the

same manner. (See ECF No. 72-3.) The 2021 Form 10-K continues to include meaningful

cautionary language and removes the catchall provision. (ECF No. 72-4.) In the 2021 Form 10K,

the Company states that “[a]t this stage of the proceeding, the Company is not able to predict the

outcome of the opioid-related lawsuits or estimate a potential range of loss regarding the lawsuits,

and is defending itself against all relevant claims.” (Id.) According to Rite Aid, once the impact

on the Company became more clear, following CVS’s settlement, Rite Aid disclosed, in their 2022

Form 10-K that “substantial damages are sought from the Company in virtually all of these

matters.” (ECF No. 72-5.)

“The reasonable investor understands a statement of opinion in its full context.” Omnicare,

575 U.S. at 190. An investor, like the Court, would and must read the 10-Ks with its full context,

and, in doing so, would see that the catchall clause was referring to “various claims and lawsuits

and governmental investigations arising in the ordinary course of business” separate and apart

from the disclosures of the specific pending litigations. For this reason, the Court holds the

statements in the 10-Ks regarding opioid disclosure are not actionable because they are not false

or misleading. See Dang v. Amarin Corp. PLC, 750 F. Supp. 3d 431, 459 (D. N.J. 2024) (“A

statement or omission of fact is material if there is ‘a substantial likelihood that the disclosure of

the omitted fact would have been viewed by the reasonable investor as having significantly altered

the ‘total mix’ of information made available.’”) (quoting Basic Inc. v. Levinson, 485 U.S. 224,

231–32 (1988)).

Even if the Court were to determine that this statement referred to the pending MDL,

“statements of opinion [] are inactionable under the Omnicare standard.” Allegheny Cnty. Emp.

Ret. Sys. v. Energy Transfer LP, 532 F. Supp. 3d 189, 225 (E.D. Pa. 2021). Allegheny County

contemplated statements of opinion that are similar to those in the present case. The plaintiff in

Allegheny County claimed, with regard to ongoing investigations or litigation, that they are

“confident that [they] have not acted to violate any criminal laws” and that they have “not engaged

in any form of criminal activity.” Id. The Supreme Court has held that even though an opinion on

the outcome of a litigation or the legality of a company’s actions may turn out to be wrong, it is

not actionable under the PSLRA. Id. (citing Omnicare, 575 U.S. at 188). Rite Aid repeatedly in

their 10-Ks acknowledged that their opinions of the litigations before them were beliefs or

opinions, not statements of facts.18 These statements were consistently accompanied by

meaningful cautionary language throughout that “the Company is not able to predict the outcome

of these matters.” (ECF No. 72-1, at 11, 13; ECF No. 72-2, at 8, 14; ECF No. 72-3, at 11; ECF No.

72-4, at 8, 10.)

Furthermore, Plaintiff’s arguments that the aforementioned risk had already transpired is

unavailing. At the time of the 2018 through 2021 Form 10-Ks, there had not been any settlements

in the ongoing MDL nor any comparable metric to evaluate exposure. Lawsuits can transpire in

many ways, often leading to unpredictable results and at unpredictable times. Forecasting

outcomes and when those outcomes will manifest themselves is difficult, if not impossible to state,

to say the least. Furthermore, to the extent Plaintiff argues that the risks of litigation had already

transpired because the Defendants “knew” that they were distributing illegal prescriptions, “the

securities laws do not ‘require a company to accuse itself of wrongdoing.’” SLF Holdings, LLC v.

Uniti Fiber Holdings, Inc., 499 F. Supp. 3d 49, 67 n.8 (D. Del. 2020), aff’d, 2022 WL 3442353

(3d Cir. Aug. 17, 2022); see also In re Galena Biopharma, Inc. Sec. Litig., 2019 WL 5957859, at

*10 (D. N.J. Nov. 12, 2019); City of Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752

F.3d 173, 184 (2d Cir. 2014) (“‘[D]isclosure is not a rite of confession,’ and companies do not

have a duty to disclose uncharged, unadjudicated wrongdoing.”). Rite Aid is not required to

disclose an “uncharged, unadjudicated wrongdoing in connection with its statements regarding its

18 Examples of the statements include: “the Company’s management does not believe that the outcome of these

legal matters will be material to the Company’s consolidated financial position.” (ECF No. 72-1, at 13 (emphasis

added).)

compliance with governing laws and regulations.” Halman Aldubi Provident & Pension Funds

Ltd. v. Teva Pharms. Indus. Ltd., 2022 WL 889158, at *12 (E.D. Pa. March 25, 2022).

This principle is also applicable to Plaintiff’s other arguments regarding the Company’s

compliance with regulations. Plaintiff claims that the Company’s statements, such as

“noncompliance with applicable regulations could result in the imposition of civil and criminal

penalties that could adversely affect the continued operation of our business” and “errors in the

dispensing and packaging of pharmaceuticals could lead to serious injury or death” are false

because those risks had already materialized. Again, a Company is not required to accuse

themselves of unadjudicated wrongdoing. The statements about the possible risks of

noncompliance are not false, in fact, quite the contrary, they are true statements. Plaintiff does not

dispute that noncompliance could affect business or that errors could lead to serious injury. These

statements are neither false or misleading. For these reasons, the Company’s statements regarding

compliance with regulations are not actionable.

Investor Meeting Statements

The next group of statements that Plaintiff alleges are materially false are those made by

Defendant Konrad on May 15, 2018 during an investor meeting.

On May 15, 2018, Defendant Konrad falsely touted Rite Aid’s efforts to combat

the opioid crisis by claiming that Rite Aid had policies and procedures in place “to

ensure every prescription is filled accurately[,]” and had “implemented a red flag

process to validate controlled substance prescription, ensuring they are for

legitimate medical needs.” Konrad further touted that Rite Aid’s “proprietary

dispensing system known as next-gen is paramount to our commitment to patient

safety and supports all of our key initiatives[,]” and assured investors that the Red

Flag Process “ensures the prescription is valid and legitimate[.]”

(ECF No. 66, at 25.) Again, Plaintiff has failed to show how these statements were false or

misleading. There were, in fact, policies and procedures in place to ensure that prescriptions are

filled accurately and that there was a red flag process. This is detailed extensively in the Amended

Complaint and is undisputed by Plaintiff. (ECF No. 40 ¶¶ 61–67.) Defendant Konrad made no

statement on the efficacy of the procedures which would make the statement false. Furthermore,

the statements could also constitute puffery. “Puffery is an exaggeration or overstatement

expressed in broad, vague, and commendatory language.” Castrol, Inc. v. Pennzoil Co., 987 F.2d

939, 945 (3d Cir. 1993). Discussing how the company’s dispensing system is “paramount to [Rite

Aid’s] commitment to patient safety” would fall into this category of puffery. See infra note 18.

There is no truth value to this statement aside from the fact that the internal policies and procedures

exist, which Plaintiff does not dispute.

For the reasons stated above, the statements related to the Opioid theory are not false or

misleading. Therefore, they are dismissed as a matter of law as Plaintiff has failed to meet the

pleading requirement of the PSLRA.

b. RxEvolution Theory

Plaintiff alleges twenty (20) statements made by various individuals that are false or

misleading as they relate to the RxEvolution theory. The Court will enumerate them here and

address them individually for clarity. The Court will highlight the relevant portions of the transcript

as the Plaintiff did. (See generally ECF No. 66-1.) However, at the outset, the Court notes that

none of the below statements were made by Defendant Standley, Karst, or Burr. As a result, any

claims against those three individual Defendants are dismissed.

Statement 1

We’re aggressively accelerating the key initiatives that will drive our

transformation through the RxEvolution strategy, which focuses on becoming

a dominant mid-market PBM, unlocking the value of our pharmacists and

revitalizing our retail and digital experiences. And finally, we’re focused on

continuing to drive the operational excellence needed to achieve strong results

and position our company for future long-term sustainable growth…Overall,

the fundamentals of our business are strong . . . we haven’t missed a beat in

bringing our strategy to life . . .

Heyward Donigan, Q2 2021 Earnings Call (September 24, 2020). (ECF No. 66-1, at 38.)

“Puffery is an exaggeration or overstatement expressed in broad, vague, and

commendatory language.” Castrol, Inc. v. Pennzoil Co., 987 F.2d 939, 945 (3d Cir. 1993). The

statements regarding “accelerating key initiatives” and “focus[ing] on continuing to drive the

operational excellence needed to achieve strong results” are terms that carry no actual meaning,

constituting puffery within the direct sense of the term. See In re Mylan N.V. Sec. Litig., 2023 WL

3539371, at *11 (W.D. Pa. May 18, 2023) (holding that statements such as (1) “commitment” to

“maintaining the highest quality manufacturing standards at its facilities around the world”, (2)

being “best positioned to take [its] entire product portfolio across the globe”, (3) its ability to

“leverage” its platform and portfolio, and (4) “celebrating” or expressing “excitement” about “the

credibility of [defendant’s] science, our portfolio, our ability, our operational excellence, the

ability to manufacture high-quality, high-volume products around the globe” were puffery).

Adjective-laden statements are too vague to be verified and are therefore inactionable. Id. “A

reasonable investor would not put stock in these corporate platitudes.” Id. These types of

statements are in line with what other courts have deemed to be puffery.19

19 See, e.g., id.; Key Equity Inv., Inc. v. Sel-Leb Mktg., Inc., 246 F. App’x 780, 785–86 (3d Cir. 2007) (holding

that statements about “strong revenue and earnings growth” were puffery and did not give rise to liability under Section

10(b)); Inst. Invs. Grp. v. Avaya, Inc., 564 F.3d 242, 255 (3d Cir. 2009) (holding that assertions of current fact, when

too vague, are inactionable); In re PayPal Holdings Inc. Sec. Litig., 2025 WL 325603, at *21 (D. N.J. Jan. 29, 2025)

(holding that statements of “strong growth” are inactionable as statements of opinion or puffery); In re Nice Sys., Ltd.

Furthermore, to the extent that this statement refers to expected results or future

expectations, they would be “forward looking statements” that are protected by PSLRA’s safe

harbor provision. Alleged misrepresentations are not actionable if the statements “are (1) identified

as [forward-looking], and accompanied by meaningful cautionary statements; or (2) immaterial;

or (3) made without actual knowledge that the statement was false or misleading.” Dang v. Amarin

Corp. PLC, 750 F. Supp. 3d 431, 459 (D. N.J. 2024) (citing In re Aetna, Inc. Sec. Litig., 617 F.3d

272, 278 (3d Cir. 2010)); 15 U.S.C. § 78u-5(c). As Defendants state, all earnings calls began with

a disclosure:

[T]oday’s conference call includes certain forward-looking statements. These

forward-looking statements are presented in the context of certain risks and

uncertainties that can cause actual results to differ. These risks and uncertainties are

described in our press release in Item 1A of our most recent annual report on Form

10-K and in other documents that we file or furnish to the SEC.

(ECF No. 64-3, at 19.) This cautionary language also included specific disclaimers that COVID-

19 could have a material impact on various Rite Aid operations in addition to Rite Aid’s ability to

implement their new business strategy, specifically mentioning RxEvolution. (See ECF No. 64-7,

at 24–25, 43, 75–76, 89, 112–13, 124, 142–43, 152; ECF No. 64-8, at 7–8, 20, 38–39, 51, 67, 74,

90, 94.) While the broad cautionary language provided at the start of all earnings calls may be “too

blanket or vague to constitute meaningful cautionary language,” the Court need not reach that issue

because there was more specific cautionary language which addressed COVID-19 and

Sec. Litig., 135 F. Supp. 2d 551, 580 (holding that statements predicting “another year of continuous growth” is

nothing more than mere puffery); Kovalev v. Lidl US LLC, 647 F. Supp. 3d 319, 343 (E.D. Pa. 2022) (holding that

“New and Improved” and “High Quality” are examples of puffery); Painaway Austl. Pty Ltd. ACN 151 146 977 v.

MaxRelief USA, Inc., 2022 WL 1028024, at *3–4 (E.D. Pa. April 6, 2022) (holding that “Australia’s #1” is puffery);

Travelers Indem. Co. v. Cephalon, Inc., 32 F. Supp. 3d 538, 553 (“aggressive positive marketing” does not

automatically equate to actionable statements.); Percoco v. Deckers Outdoor Corp., 2013 WL 3584370, at *3 (D. Del.

July 8, 2013) (holding that general or vague statements of intention or optimism are puffery); Hall v. Johnson &

Johnson, 2019 WL 7207491, at *24 (D. N.J. Dec. 27, 2019) (holding that “embraced transparency” and “caring

unconditionally for others” and “great strides” were terms of puffery and not actionable under securities laws). The

Court holds the same here.

RxEvolution directly. Id.; see Ortiz v. Canopy Growth Corp., 537 F. Supp. 3d. 621, 644 (D. N.J.

2021) (holding that general cautionary language accompanied by more specific cautionary

statements tailored to the risk at issue would be sufficient to invoke safe harbor as to those

statements which looked to the future); In re Egalet Corp. Sec. Litig., 340 F. Supp. 3d 479, 503–

05 (E.D. Pa. 2018) (same), Avaya, 564 F.3d at 257 (same).

Statement 2

Much important work lies ahead of us. We know that. But I am energized by the

progress we’re making as we aggressively implement the RxEvolution strategy

and work together to become a growing, differentiated and thriving organization. .

. . Before I turn it over, I’d just like to say that we are moving swiftly and

confidently to execute our plan and build a whole new Rite Aid by relaunching

our brand, overhauling our stores and merchandise, building our Stores of the

Future, and evolving the role the pharmacist plays as a community health

provider and connector.

Jim Peters, Q2 2021 Earnings Call (September 24, 2020). (ECF No. 66-1, at 41.)

The same analysis for Statement 1 applies here, the statements made by Jim Peters

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would similarly be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 3

Our increase in Retail Pharmacy segment revenue was driven by an increase

in same-store sales of 3.5%.

Matthew Schroeder, Q2 2021 Earnings Call (September 24, 2020). (ECF No. 66-1, at 44.)

Plaintiff argues that this statement is false and misleading because the statement “failed to

disclose” that the increased revenues were due to COVID-19. (Id.) The general rule in the case of

an omission of a material fact is that “silence, absent a duty to disclose, is not misleading under

Rule 10b-5.” United States v. Yeaman, 987 F. Supp. 373, 378 (E.D. Pa. 1997) (citing United States

Sec. Exch. Comm’n v. Fehn, 97 F.3d 1276, 1289 (9th Cir. 1996)). Plaintiff has not alleged any

statute that would create a duty to disclose that the increased revenues were due to COVID-19, in

this context. Furthermore, this statement does not give the reason for the increase in same-store

sales, only that it was increasing. Plaintiff only makes a conclusory statement that the statement

was false without providing any substantive allegations to support that proposition. For that reason,

this statement is not actionable.

To the extent that Plaintiff argues this statement is incomplete, incomplete statements are

only actionable if they are “so incomplete as to mislead investors.” The Winer Fam, Trust v. Queen,

2004 WL 2203709, at *7 (E.D. Pa Sept. 27, 2004) (holding that disclosing a large investment

partnership to investors without discussing a previous unprofitable relationship with that same

partner was misleading). There is only a duty to disclose a certain fact “when necessary to make

statements made, in light of the circumstances under which they were made, not misleading.”

Strougo v. Lannett Co., Inc., 2019 WL 1172992, at *13 (E.D. Pa. Mar. 13, 2019) (citing Williams

v. Globus Med., Inc., 869 F.3d 235, 241 (3d Cir. 2017)). “Even with respect to information that a

reasonable investor might consider material, companies can control what they have to disclose

under these provisions by controlling what they say to the market.” Matrixx Initiatives, Inc. v.

Siracusano, 563 U.S. 27, 45 (2011). The Court is not persuaded that this statement is incomplete.

This statement was discussed on an earnings call, strictly talking about numbers, and not

discussing any context around the numbers.

Statement 4

I’m excited to give you an exclusive sneak peek at some elements of our full brand

relaunch which we roll out across all our markets in just a couple of weeks, a

brand launch that involves far more than a new logo but one with substance

and impact that involves every step of the consumer journey, both digitally

and in store. . . . We’re unlocking their potential for that perfect fusion where

traditional therapies meet alternative remedies and being the whole health advocate

for every single customer that comes into the pharmacy. Our pharmacists are

embracing this new role. They love the fact that they’re engaging in a way they

envision when they actually chose to become a pharmacist. . . . We’re cleaning

and refreshing all our store exteriors with our new logo, signage and digital pylons

and we’ll soon be formally launching our new brand with the surround sound

messaging on the perfect fusion between traditional and alternative remedies.

As the customer shops the front, end they’ll soon notice our merchandise overall,

and it is an overhaul, with visually impactful messaging emphasizing the better for

you products our consumers want, not the traditional mass items we’ve been

incentivized by vendors to promote. . . .We’re thrilled to be grand opening our

very first Stores of the Future this month within weeks with many more to

come as we continue to redefine the Rite Aid experience across our retail

footprint. . . .With an updated blue mortar and pestle to reinforce our pharmacy

core and replacing the old, tired red with green leaves to represent our embrace of

holistic alternative remedies, our new logo better represents the new Rite Aid in

what we stand for to be clear. Our efforts obviously go well beyond a new logo

you just saw. Our branding is more than a symbol. It’s a redefinition of

purpose, a revitalization of a business….

Jim Peters, “A New Day at Rite Aid” YouTube Presentation (October 28, 2020). (ECF No. 66-1,

at 47.)

The same analysis for Statement 1 applies here, the statements made by Jim Peters

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 5

We’re making our pharmacists even more accessible than they have been in the

past and they will be front and center in every one of our pharmacies in the

Stores of the Future. . . .We’re allowing our pharmacists and freeing up their

time through lean initiatives and, I will tell you, speaking to our pharmacists,

they are so excited that for the first time in retail pharmacy that we are empowering

them to do exactly what they’ve always wanted to do. They love being in front

of the customers they love that we actually physically put them there and we’re

creating the space around them to support them so that they can interact more with

their customers through every interaction that they have. The Store of the Future

definitely is a completely different experience than any other retail pharmacy in the

market.

Jocelyn Konrad, “A New Day at Rite Aid” YouTube Presentation (October 28, 2020). (ECF No.

66-1, at 50.)

The same analysis for Statement 1 applies here, the statements made by Jocelyn Konrad

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 6

We’re really pleased with the results for the quarter. We continue to grow our

business and achieve major milestones in our transformation through the

RxEvolution strategy, all the while demonstrating the essential role we play in our

communities during this unprecedented global pandemic. . . . So as a team, we’re

accelerating the key initiatives that will drive our transformation through the

RxEvolution strategy, which focuses on establishing Elixir as a clearly

differentiated market leader in managing pharmacy spend and total cost of care for

health plan and employer clients as well as omnichannel member engagement to

drive better health outcome. And in retail, we’re unlocking the value of our

pharmacists and revitalizing our retail and digital experiences. And we’ll

continue working together to deliver the operational excellence needed to

achieve strong results as we generate free cash flow, reduce our debt and

improve our leverage ratio.

Heyward Donigan, Q3 2021 Earnings Call (December 17, 2020). (ECF No. 66-1, at 52.)

The same analysis for Statement 1 applies here, the statements made by Heyward Donigan

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 7

Customer feedback to our pilot stores has been outstanding, and we are pleased

with the early initial results, both in terms of sales and margin performance.

We plan to roll out our next wave of pilot store in Q4. More broadly, we will

continue to upgrade our entire fleet using an analytical approach that guides the

type of investment, the level of investment and the timing of investment on a

market-by-market and store-by-store basis.

Jim Peters, Q3 2021 Earnings Call (December 17, 2020). (ECF No. 66-1, at 55.)

The same analysis for Statement 1 applies here, the statements made by Jim Peters

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 8

It was also a year in which our RxEvolution strategy was not only validated, but

proven essential. I’m really eager to share more on how our strategy came to life

throughout the year. *** Just over a year ago at our Analyst Day, we told you we

would be a demonstrably different company within the next year. And we have

delivered on that promise, making substantial changes to position us for

profitable growth…We opened our first three flagship store remodels, and we

continue to be pleased with both the sales and margin performance in these stores.

*** Despite the short-term challenges, our teams are clear on what needs to be

done: Win today and in the future by creating real health care value, improving the

consumer engagement and transforming our work to improve financial

performance. With these initiatives well underway, we’re accelerating our

actions toward a more nimble, efficient and effective Rite Aid. We have and

will continue to effectively manage through this crisis while positioning our

business for current and long-term success.

Heyward Donigan, Q4 2021 Earnings Call (April 15, 2021). (ECF No. 66-1, at 57.)

The same analysis for Statement 1 applies here, the statements made by Heyward Donigan

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 9

We’re just one year into our RxEvolution transformation and this year has shown

signs of real progress and validation of our strategy. And we are encouraged

that we are focused on the right opportunities looking ahead.

Jim Peters, Q4 2021 Earnings Call (April 15, 2021). (ECF No. 66-1, at 60.)

The same analysis for Statement 1 applies here, the statements made by Jim Peters

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 10

Everything is on track. I mean, I think that’s one of the most remarkable things

that I even kind of reflect on and can’t believe is that we have executed on every

strategic initiative that we set ourselves up for back at Analyst Day over a year

ago. *** So I think there is a lot of noise in the pandemic. But the fact that we’ve

been able to do all of that in addition to launching COVID testing, keeping our

store clean, protecting our associates and our customers and getting people

vaccinated, it’s been quite a year. And so we remain committed to everything

that we had set out to do.

Heyward Donigan, Q4 2021 Earnings Call (April 15, 2021). (ECF No. 66-1, at 62.)

There are multiple portions of this statement that need to be analyzed separately. There are

three main categories of statement contained here. The first group includes the statements:

“everything is on track” and “we have executed on every strategic initiative that we set ourselves

up for back at Analyst Day over a year ago.” The second group is the statement “we’ve been able

to do all of that.” The last group is the statement “we remain committed to everything we had set

out to do.”

The second and third groups of statements are mere puffery. The language contained within

the statements don’t correlate to any quantifiable metric or result. The same analysis for Statement

1 applies here, the statements made by Heyward Donigan constitute no more than puffery. See

supra note 19. To the extent that this call mentions forward looking statements, they would like

wise be safeguarded by the safe-harbor provision of the PSLRA, as explained above.

The first group of statements, however, is less of a clear story. “A mixed present/future

statement is not entitled to the safe harbor with respect to the part of the statement that refers to

the present.” Inst. Invs. Grp. v. Avaya, Inc., 564 F.3d 242, 255 (3d Cir. 2009) (citation omitted).

However, as in Avaya, the “assertions of current fact are too vague to be actionable.” Id. The

statements made by Heyward Donigan do not justify any financial projections or any particular

metric. As a result, the statements by Donigan are inactionable. Nonetheless, even if the Court

were to conclude that the statement was actionable, loss causation is not met, as analyzed below,

and therefore the claims are dismissed regardless.

Statements 11 and 12

In addition, this quarter, we opened seven new flagship stores, four of which

opened in Boise, Idaho, and three in the Virginia Beach, Virginia market. This

brings us up to 10 flagship stores opened, and Jim will share more on what we’re

seeing and learning in this important work as it progresses

Heyward Donigan, Q1 2021 Earnings Call (June 24, 2021). (ECF No. 66-1, at 65.)

As Heyward mentioned earlier, we opened seven new flagship pilot stores this

quarter, bringing us to 10 total stores open.

Jim Peters, Q1 2021 Earnings Call (June 24, 2021). (ECF No. 66-1, at 67.)

Plaintiff does not make a single allegation nor provide any argument that these statements

were false. Plaintiff does not dispute that seven new flagship stores were opened, bringing the

total to 10. This statement is therefore not actionable.

Statement 13

Yes. Well, I mean that is the ultimate dilemma of taking over a company in the

situation with this amount of debt. And so, I think we are a company that is very

much in need of demonstrating organic growth. And I think had -- we have some

early indicators of showing that we can do that even in the middle of a

pandemic. . . . If you look at our inventory turns and if you look at our recent results

ex-OTC and acute, you can see, what I will call, rays of hope that our underlying

business is improving. . . . So, as we look at it and as we model this out, we have

to just take that into consideration and look at the business ex all of those factors

and what a rebound would look like plus increase. We have taken market shares,

so we have shown that on the front end, we can take market share. At the end

of the day, what we’ve said, I think repeatedly, is we have to grow scripts, that is

our number one priority is growing scripts. . . . And the other thing I would say is

COVID vaccines are not a one-time thing for us as a company. COVID

vaccines, whether there is a booster shot this year or next year, we’re living

with COVID. We’re living with -- COVID vaccines will be a permanent, I

think, weapon in our arsenal.

Heyward Donigan, Q1 2022 Earnings Call (June 24, 2021). (ECF No. 66-1, at 69.)

The same analysis for Statement 1 applies here, the statements made by Heyward Donigan

constitute no more than puffery. See supra note 19. Furthermore, Plaintiff never alleges that the

COVID vaccine was not a permanent “weapon in [Rite Aid’s] arsenal.” There is no allegation that

Rite Aid stopped offering COVID vaccines, which would be the only fact that would make this

statement false or misleading. To the extent that this call mentions forward looking statements,

they would like wise be safeguarded by the safe-harbor provision of the PSLRA, as explained

above.

Statement 14

We’re almost three times in terms of our inventory terms which are up 8% and

that’s really a reflection on how strong our merchandise mix is as well as our

better for you organic product offerings which are more on trend targeting

our new customer which is the female from age 25 to 49. She’s really coming into

buy things for her kids and things for herself and things for her parents. So we’re

pretty excited because we really are starting to see the results and the traction

that we were hoping for.

Heyward Donigan, CNBC Interview (June 24, 2021). (ECF No. 66-1, at 73.)

The same analysis for Statement 1 applies here, the statements made by Heyward Donigan

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 15

Since launching our strategy last March, our organization is executing a clear

plan to build top-line momentum with an intense focus on improving our

profitability. We have transformed our business to be more relevant to our

target growth consumer and more efficient in how we operate, while making

investments necessary to drive the long-term health of our business. The

progress on our RxEvolution strategy validates our belief that, as the trusted

everyday care connector, Rite Aid will drive lower healthcare costs through

better coordination, stronger engagement, and personalized services that help

our customers achieve whole health for life.

Matthew Schroeder, 8-K (September 23, 2021). (ECF No. 66-1, at 76.)

The same analysis for Statement 1 applies here, the statements made by Matthew Schroeder

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 16

Before digging into the results, I want to spend a moment on the big picture. Our

RxEvolution strategy is showing promising results and I’m encouraged that we’re

not only exceeding expectations, but also demonstrating that our strategy is

gaining momentum. We all know the important role pharmacists play in the health

of the communities we serve. Never has that been more obvious than during a

pandemic. We’re also seeing our retail and digital evolution drive new growth

and demonstrate a new Rite Aid for our retail customers.¶230. As for the second

quarter, we grew our revenues 2.2% to $6.1 billion, including a 6.5% increase in

our retail segment. And we improved our inventory turns by 7%. Continuing our

strong trend in inventory turns from prior quarters demonstrating that people

are really liking our new merchandise.

Heyward Donigan, Q2 2022 Earnings Call (September 23, 2021). (ECF No. 66-1, at 79.)

The same analysis for Statement 1 applies here, the statements made by Heyward Donigan

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 17

I’m pleased with our third quarter performance as we grew our revenue and

increased adjusted EBITDA by nearly 13%. … As we move forward, we are

unleashing the next evolution of our strategy, and we are laser-focused on an

evolved view of the pharmacy of the future. What that really means is a pharmacy

business that’s not limited to what we usually think about, a traditional in-store

definition of pharmacy. Rather, our efforts, and we’ve been talking about this

for a couple of years, are centered on an expanded view of pharmacy and what

we’ve been calling internally our omnipharmacy strategy. That is our

RxEvolution is driving our transition from a company with numerous loosely

tied pharmacy parts to an omnipharmacy business whose value and relevance

as a whole is far greater than the sum of its individual parts.

Heyward Donigan, Q3 2022 Earnings Call (December 21, 2021). (ECF No. 66-1, at 82.)

The same analysis for Statement 1 applies here, the statements made by Heyward Donigan

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 18

We recognize the headwind that the expected reduction in COVID-related benefits

is to fiscal 2023. We expect benefits from several areas to offset this gap,

including: cost reductions from our store closure program, which we expect to

contribute benefits in excess of the $25 million run rate benefit that we will get

from the 63 closures already approved; improvements in front-end margin from

the launch of a new loyalty program and expansion of our own brands;

improved PBM margins from our new rebate aggregation agreement; progression

toward more normalized levels of acute script activity in the pharmacy; and

operating expense efficiencies from further back office consolidation in our retail

and pharmacy businesses and continuing to leverage lean.

Matthew Schroeder, Q3 2022 Earnings Call (December 21, 2021). (ECF No. 66-1, at 85.)

The same analysis for Statement 1 applies here, the statements made by Matthew Schroeder

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

Statement 19

We expect to see continued growth in comp sales and script growth in our core

business after excluding the impact of COVID.

Matthew Schroeder, Q4 2022 Earnings Call (April 14, 2022). (ECF No. 66-1, at 88.)

To the extent that this call mentions forward looking statements, they would be safeguarded

by the safe-harbor provision of the PSLRA, as explained above.

Statement 20

We are -- we’ve shown that we can grow our scripts, even cycling the significant

benefit we got from vaccines last year. So our core scripts are up. And that’s

just the beginning.

Heyward Donigan, Q1 2023 Earnings Call (June 23, 2022). (ECF No. 66-1, at 91.)

The same analysis for Statement 1 applies here, the statements made by Heyward Donigan

constitute no more than puffery. See supra note 19. To the extent that this call mentions forward

looking statements, they would like wise be safeguarded by the safe-harbor provision of the

PSLRA, as explained above.

For the reasons stated above, Plaintiff has failed to plead any false or misleading material

statements to the heightened standard required by the PSLRA. For this reason, the Court will grant

the Motion to Dismiss.

ii. Loss Causation

Despite the Court holding that no statements alleged in the present case are actionable, the

Court will nonetheless discuss loss causation because it would also be dispositive in this case. In

determining loss causation, the Court asks, “whether the misrepresentation or omission

proximately caused the economic loss.” McCabe v. Ernst & Young, LLP, 494 F.3d 418, 426 (3d

Cir. 2007). In other words, a plaintiff must show that “the revelation of [the alleged]

misrepresentation or omission was a substantial factor in causing a decline in the security’s price,

thus creating an actual economic loss for the plaintiff.” Id. at 425–26 (emphasis added). Loss

causation focuses on “whether the defendant should be held responsible as a matter of public policy

for the losses suffered by the plaintiff.” Id. at 425. It is not enough for a plaintiff to show that the

price of a security was artificially inflated at the time of purchase because of a defendant’s

misrepresentations. In re DVI, Inc. Sec. Litig., 2010 WL 3522090, at *5 (E.D. Pa. Sept. 3, 2010).

Rather, a plaintiff must show that “the share price fell significantly after the truth became known.”

Id. at *5 (citing Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 347 (2005)).

a. Opioid Theory

Plaintiff alleges three key dates as they relate to the loss suffered as a result of the alleged

Opioid misstatements. The first “corrective disclosure” was March 30, 2022 where CVS, a

different pharmacy, announced a $484 million settlement with the State of Florida to settle claims

related to unlawful opioid prescriptions dispensed by its pharmacies.

The second “corrective disclosure” was when the DOJ announced the filing of the DOJ

complaint against Rite Aid on March 13, 2023, alleging that Rite Aid repeatedly and knowingly

filed unlawful prescriptions for controlled substances.

The third “corrective disclosure” was when the Wall Street Journal published an article on

August 25, 2023, that Rite Aid was rumored to be considering bankruptcy to alleviate its debt

obligation and opioid litigation impact. The Court will look at these three dates separately in

evaluating loss causation.

First, turning to the CVS settlement news, it is unclear how this is a corrective disclosure.

It is unclear how Rite Aid would be responsible, as a matter of public policy, for a settlement that

was reached with a different pharmaceutical company. No common facts were “revealed” during

this “corrective disclosure”. Likewise, no falsity or omission was “corrected” by this

announcement as nothing about Rite Aid was said on this day. Moreover, no “truth” about Rite

Aid became known on this day. For this reason, the March 30, 2022 CVS Settlement is not

adequate to prove loss causation, despite the fact that Rite Aid’s stock did, in fact, drop on this

day. It is not sufficiently correlated with Rite Aid specifically nor related to any previous

restatement.

Looking to the March 13, 2023 DOJ complaint, the Court reaches the same conclusion.

The DOJ complaint is a set of allegations, not adjudicated facts, as to the conduct of Rite Aid.

While Rite Aid had disclosed the DOJ investigation as early as 2018, allegations by the DOJ do

not amount to any uncovering of fact that would “make the truth known” as required to show loss

causation. The DOJ Complaint was nothing more, at that time, than allegations and hence, cannot

be taken as truth.

Lastly, the Court will consider the Wall Street Journal article which Plaintiff argues is a

“corrective disclosure.” Plaintiff makes no allegations that Rite Aid hid any intentions to declare

bankruptcy nor that it made false and/or misleading statements related to bankruptcy. Furthermore,

at the time this article was released, Rite Aid had contemplated the possibility of “significant

damages” in their 2022 Form10-K. The Court agrees with Defendants recitation that “The fact that

Rite Aid was considering bankruptcy in 2023 reveals nothing about the falsity of the Opioid

Challenged Statements made in 2018-2022. It identifies no specific penalties or losses tied to

opioids, nor does it suggest that they existed and were known by Rite Aid at the time of the Opioid

Challenged Statements.” (ECF No. 64-3, at 39.)20

Thus, in addition to Plaintiff failing to plead any false or misleading statements that are

actionable under the PSLRA, Plaintiff also fails to establish loss causation as it relates to those

statements.

b. RxEvolution Theory

Plaintiff alleges two key dates as they relate to the loss suffered as a result of the alleged

RxEvolution misstatements: the September 29, 2022 press release and earnings call and the

December 21, 2022 press release and earnings call.

20 The Court does take notice that Lead Plaintiff sold all of her stock in the Company prior to the August 25,

2023 publication. (ECF No. 40-1, at 2.) The Court need not and does not reach any determination on whether or not

that is dispositive of the present issue since the failure to satisfy the other pleading requirements of the PSLRA are

dispositive.

“Earnings statements do not, on their own, constitute ‘corrective disclosures,’ when they

do not specifically relate to—or correct—the alleged misrepresentations.” Halman, 2022 WL

889158, at *18 (collecting cases). While Plaintiff argues that the aforementioned press releases

and earnings calls announced losses because “RxEvolution was not generated revenues” as

expected, this does not amount to a correction of previous statements. Rite Aid, in these calls,

never revealed that there were fraudulent misrepresentations similar to those cases that Plaintiff

cites in support of their argument. See In re Urban Outfitters, Inc. Sec. Litig., 103 F. Supp. 3d 635,

656 (E.D. Pa. 2015). In Urban Outfitters, defendants filed a financial statement which revealed

misrepresentation of sales trends. Id. In the present case, Plaintiff is not alleging any financial

statements revealed anything, only relying on earnings calls and press releases. Furthermore, these

calls and press releases do not correct any alleged previous misstatements. They only reveal the

poor financial situation that Rite Aid was in—a fact known to investors for the past “three

decades.” (See ECF No. 40 ¶ 38 (“For close to three decades, Rite Aid has been massively

overleveraged due to a series of ill-fated, debt-financed acquisitions.”).)

For these reasons, the Plaintiff has failed to adequately plead loss causation as to their

RxEvolution theory and those claims are dismissed.

B. Section 20(a)

Plaintiff also brings claims against the Defendants under Section 20(a) of the Exchange

Act, which imposes joint and several liability upon one who controls a violator of Section 10(b).

In re Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256, 284 (3d Cir. 2006); 15 U.S.C. § 78t(a).

In order to succeed on a claim under Section 20(a), a plaintiff must successfully plead a primary

violation of Section 10(b) of the Exchange Act. Id.; In re Radian Sec. Litig., 612 F. Supp. 2d 594,

622 (E.D. Pa. 2009). Because the Court has determined that Plaintiff fails to plead a primary

violation of Section 10(b), his Section 20(a) claim fails as well. Anderson v. Stonemore Partners,

L.P., 296 F. Supp. 3d 693, 704 (E.D. Pa. 2017).

IV. CONCLUSION

For the aforementioned reasons, Plaintiff has failed to satisfy the heightened pleading

standard under the PSLRA as the Amended Complaint fails to adequately plead falsity as to any

alleged misstatement by Defendants along with loss causation. As a result, the Court grants the

Motion to Dismiss.

BY THE COURT:

/s/ Hon. Kelley B. Hodge

HODGE, KELLEY B., J.