A federal appeals court on Friday revived a consolidated class action accusing natural-foods company Hain Celestial Group of misleading investors for three years by touting the high demand for its products while concealing that it was propping up its sales figures by “channel stuffing” - offering generous incentives and return policies to get distributors to order excess inventory.
part of a ruling by then-Senior U.S. District Judge Arthur Spatt in Long Island, who granted the motion by Hain’s attorneys at DLA Piper to dismiss the entire action in April 2020. Spatt ruled that channel stuffing was not inherently fraudulent, and therefore, Hain Celestial had no duty to disclose it.
The three consolidated lawsuits were filed in August 2016, days after Hain disclosed it was “opening an internal investigation into whether it had properly accounted for the revenue” associated with concessions to the distributors. The SEC investigation concluded in 2018 without any charges of fraud, and with no monetary penalties. Hain settled the SEC’s charges of accounting and internal-control violations by agreeing to change its procedures, but without admitting liability.
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