Petition for Writ of Certiorari — The Hain Celestial Group, Inc., et al., Petitioners v. Salamon Gimpel, et al.

Supreme Court briefMay 1, 2026

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No. 25IN THE

Supreme Court of the United States

THE HAIN CELESTIAL GROUP, INC., IRWIN D. SIMON,

PASQUALE CONTE, JOHN CARROLL, AND

STEPHEN J. SMITH,

Petitioners,

SALAMON GIMPEL, AND ROSEWOOD FUNERAL HOME,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Second Circuit

PETITION FOR A WRIT OF CERTIORARI

JOHN M. HILLEBRECHT

MARC A. SILVERMAN

STEVEN M. ROSATO

DLA PIPER LLP (US)

1251 Avenue of the

Americas

New York, NY 10020

(212) 335-4500

ELIZABETH B. PRELOGAR

Counsel of Record

DEV P. RANJAN

COOLEY LLP

1299 Pennsylvania Ave., NW

Suite 700

Washington, DC 20004

(202) 842-7800

eprelogar@cooley.com

PATRICK E. GIBBS

COOLEY LLP

3175 Hanover Street

Palo Alto, CA 94304

(650) 843-5000

PATRICK J. HAYDEN

COOLEY LLP

55 Hudson Yards

New York, NY 10001

(212) 479-6000

Counsel for Petitioners

QUESTIONS PRESENTED

The Private Securities Litigation Reform Act of

1995 (PSLRA) requires securities-fraud plaintiffs to

“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)(A). Under the

PSLRA’s heightened pleading standards, “an

inference of scienter must be more than merely

plausible or reasonable—it must be cogent and at least

as compelling as any opposing inference of

nonfraudulent intent.” Tellabs, Inc. v. Makor Issues &

Rights, Ltd., 551 U.S. 308, 314 (2007). The circuits

are sharply divided on two frequently recurring

questions of law concerning the PSLRA’s standard for

pleading scienter.

The questions presented are:

1. Whether a plaintiff may plead scienter based on

the “core operations doctrine,” under which the

alleged significance of an issue supports an

inference that defendants must have known

about it.

2. Whether a plaintiff may plead scienter by

alleging that executives generally receive

information

through

routine

corporate

communications, such as internal reports or

customer calls, without specifying the contents

of those communications.

PARTIES TO THE PROCEEDING

Petitioners in this Court are The Hain Celestial

Group, Inc., John Carroll, Pasquale Conte, Irwin D.

Simon, and Stephen J. Smith.

Respondents are Salamon Gimpel and Rosewood

Funeral Home.

iii

CORPORATE DISCLOSURE STATEMENT

Petitioner The Hain Celestial Group, Inc.

(NASDAQ: HAIN) has no parent corporation and no

publicly held company owns ten percent or more of its

stock.

RELATED PROCEEDINGS

United States Court of Appeals for the Second Circuit:

Gimpel v. Hain Celestial Group, Inc., No. 23-7612

(Sept. 29, 2025) (reported at 156 F.4th 121).

United States District Court for the Eastern District

of New York:

Gimpel

Hain

Celestial

Group,

Inc.,

No. 16-cv-4581 (JS) (LGD) (Sept. 29, 2023)

(unreported).

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ......................................... i

PARTIES TO THE PROCEEDING ............................ ii

CORPORATE DISCLOSURE STATEMENT ............ iii

RELATED PROCEEDINGS....................................... iv

TABLE OF CONTENTS.............................................. v

TABLE OF AUTHORITIES ..................................... viii

PETITION FOR A WRIT OF CERTIORARI .............. 1

OPINIONS BELOW .................................................... 1

JURISDICTION........................................................... 2

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED .................................... 2

INTRODUCTION ........................................................ 2

STATEMENT OF THE CASE..................................... 5

A. Legal Background ........................................... 5

B. Factual Background ........................................ 7

C. Judicial Proceedings........................................ 8

REASONS FOR GRANTING THE PETITION ........ 11

I. The Second Circuit’s Adoption of the Core

Operations Doctrine Deepens a Circuit Split

and Conflicts with the PSLRA. ............................ 12

A. The Circuits Are Divided on Whether the

Core Operations Doctrine Provides a

Basis for Pleading Scienter Under the

PSLRA. .......................................................... 13

TABLE OF CONTENTS

(CONTINUED)

Page

B. The Second Circuit’s Core Operations

Holding Is Wrong. ......................................... 20

II. The Second Circuit’s Scienter Ruling on

Executives’ Receipt of Corporate Information

Deepens a Circuit Split. ....................................... 24

A. Most Circuits Hold That Generalized

Allegations of Corporate

Communications Provide No Basis for

Pleading Scienter. ......................................... 24

B. The Second Circuit’s Analysis Is Wrong. ..... 29

III.This Case Presents an Excellent Vehicle to

Review These Exceptionally Important

Issues. ................................................................... 32

CONCLUSION .......................................................... 36

APPENDICES

Appendix A: Opinion, Salamon Gimpel v. Hain

Celestial Grp., Inc., No. 23-7612 (2d Cir.

Sept. 29, 2025) ...................................................... 1a

Appendix B: Order Adopting Report &

Recommendation, In re The Hain Celestial

Group Inc. Securities Litigation,

No. 2:16-cv-4581 (E.D.N.Y. Sept. 29, 2023) ....... 54a

Appendix C: Report & Recommendation,

In re The Hain Celestial Group Inc.

Securities Litigation, No. 2:16-cv-4581

(E.D.N.Y. Nov. 4, 2022) .................................... 106a

vii

TABLE OF CONTENTS

(CONTINUED)

Page

Appendix D: Order Denying Rehearing,

Salamon Gimpel v. Hain Celestial Grp., Inc.,

No. 23-7612 (2d Cir. Dec. 2, 2025) ................... 196a

Appendix E: 15 U.S.C. § 78u-4(b)......................... 198a

Appendix F: Fed. R. Civ. P. 9(b) ........................... 202a

viii

TABLE OF AUTHORITIES

Page(s)

Cases

Anderson v. Spirit Aerosystems Holdings, Inc.,

827 F.3d 1229 (10th Cir. 2016) ............................ 15

Cal. Pub. Emps.’ Ret. Sys. v. Chubb Corp.,

394 F.3d 126 (3d Cir. 2004) ............................ 27, 29

Constr. Indus. & Laborers Joint Pension Tr.

v. Carbonite, Inc.,

22 F.4th 1 (1st Cir. 2021) ............................... 17, 21

Constr. Laborers Pension Tr. of Greater St.

Louis v. Funko Inc.,

166 F.4th 805 (9th Cir. 2026) ......................... 19, 21

Cornelia I. Crowell GST Trust v. Possis

Medical, Inc.,

519 F.3d 778 (8th Cir. 2008) ........................... 16-17

Cosmas v. Hassett,

886 F.2d 8 (2d Cir. 1989) ...................................... 12

DiLeo v. Ernest & Young,

901 F.2d 624 (7th Cir. 1990) ................................ 29

Dura Pharms., Inc. v. Broudo,

544 U.S. 336 (2005) ................................. 4-5, 32, 34

E. Ohman J:or Fonder AB v. NVIDIA Corp.,

81 F.4th 918 (9th Cir. 2023) ................................. 28

Elam v. Neidorff,

544 F.3d 921 (8th Cir. 2008) ................................ 16

Ernst & Ernst v. Hochfelder,

425 U.S. 185 (1976) ................................................ 5

Frederick v. Mechel OAO,

475 F. App’x 353 (2d Cir. 2012) ........................... 12

TABLE OF AUTHORITIES

(CONTINUED)

Page(s)

Garfield v. NDC Health Corp.,

466 F.3d 1255 (11th Cir. 2006) ....................... 26-27

Glaser v. The9, Ltd.,

772 F. Supp. 2d 573 (S.D.N.Y. 2011) ................... 22

Hensley v. IEC Elecs. Corp.,

2014 WL 4473373 (S.D.N.Y. Sept. 11,

2014)...................................................................... 22

Ind. Elec. Workers’ Pension Tr. Fund IBEW

v. Shaw Grp., Inc.,

537 F.3d 527 (5th Cir. 2008) ................................ 25

Institutional Invs. Grp. v. Avaya, Inc.,

564 F.3d 242 (3d Cir. 2009) ............................ 18, 21

KBC Asset Mgmt. NV v. DXC Tech. Co.,

19 F.4th 601 (4th Cir. 2021) ................................. 14

Matrixx Initiatives, Inc. v. Siracusano,

563 U.S. 27 (2011) ............................................ 4, 34

Meitav Dash Provident Funds & Pension

Ltd. v. Spirit AeroSystems Holdings, Inc.,

79 F.4th 1209 (10th Cir. 2023) ....................... 15, 26

Merrill Lynch, Pierce, Fenner & Smith Inc.

v. Dabit,

547 U.S. 71 (2006) ................................... 4, 6, 32-33

Mizzaro v. Home Depot, Inc.,

544 F.3d 1230 (11th Cir. 2008) ................. 15-16, 20

NVIDIA Corp. v. E. Ohman J:or Fonder AB,

144 S. Ct. 2655 (2024) .......................................... 31

NVIDIA Corp. v. E. Ohman J:or Fonder AB,

604 U.S. 20 (2024) ................................................ 28

TABLE OF AUTHORITIES

(CONTINUED)

Page(s)

Okla. Firefighters Pension & Ret. Sys. v. Six

Flags Ent. Corp.,

58 F.4th 195 (5th Cir. 2023) ...................... 18-19, 21

Phillips v. Sci.-Atlanta, Inc.,

374 F.3d 1015 (11th Cir. 2004) ............................ 23

Pittman v. Unum Grp.,

861 F. App’x 51 (6th Cir. 2021) ............................ 14

In re Renewable Energy Grp. Sec. Litig.,

2022 WL 14206678 (2d Cir. Oct. 25, 2022) .......... 12

Pub. Emps.’ Ret. Ass’n of Colo. v. Deloitte &

Touche LLP,

551 F.3d 305 (4th Cir. 2009) ................................ 32

In re Rockwell Med., Inc. Sec. Litig.,

2018 WL 1725553 (S.D.N.Y. Mar. 30,

2018)...................................................................... 22

San Antonio Fire & Police Pension Fund v.

Syneos Health Inc.,

75 F.4th 232 (4th Cir. 2023) ........................... 14, 25

Stevens v. InPhonic, Inc.,

662 F. Supp. 2d 105 (D.D.C. 2009) ...................... 17

In re Stone & Webster, Inc. Sec. Litig.,

414 F.3d 187 (1st Cir. 2005) ............................ 27-28

Superintendent of Ins. v. Bankers Life & Cas. Co.,

404 U.S. 6 (1971) .................................................... 5

Teamsters Loc. 237 Welfare Fund v.

ServiceMaster Glob. Holdings, Inc.,

83 F.4th 514 (6th Cir. 2023) ................ 13-14, 20, 26

TABLE OF AUTHORITIES

(CONTINUED)

Page(s)

Tellabs, Inc. v. Makor Issues & Rights, Ltd.,

551 U.S. 308 (2007) .......... 5-7, 11, 21, 23, 25, 30-34

Touche Ross & Co. v. Redington,

442 U.S. 560 (1979) ................................................ 5

United States v. Naftalin,

441 U.S. 768 (1979) .............................................. 30

In re Wachovia Equity Sec. Litig.,

753 F. Supp. 2d 326 (S.D.N.Y. 2011) ................... 22

Statutes & Regulations

Private Securities Litigation Reform Act of 1995

15 U.S.C. § 78u-4(b)................................................ 2

15 U.S.C. § 78u-4(b)(2) ......................................... 23

15 U.S.C. § 78u-4(b)(2)(A) ................ 2, 6, 11, 13, 21

28 U.S.C. § 1254(1) ...................................................... 2

Securities Exchange Act of 1934

15 U.S.C. § 78j(b) .................................................... 5

17 C.F.R. § 240.10b-5(b) .............................................. 5

Other Authorities

Edward Flores & Svetlana Starykh, Recent

Trends in Securities Class Action

Litigation: 2025 Full-Year Review (2026)............ 34

Fed. R. Civ. P. 9(b) ................................................... 2, 6

Richard A. Booth, Deconstructing Scienter,

16 Va. L. & Bus. Rev. 1 (2021) ............................. 33

S. Rep. No. 104-98 (1995) ...................................... 6, 33

IN THE

Supreme Court of the United States

No. 25THE HAIN CELESTIAL GROUP, INC., IRWIN D. SIMON,

PASQUALE CONTE, JOHN CARROLL, AND

STEPHEN J. SMITH,

Petitioners,

SALAMON GIMPEL; ROSEWOOD FUNERAL HOME,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Second Circuit

PETITION FOR A WRIT OF CERTIORARI

Petitioners The Hain Celestial Group, Inc., John

Carroll, Pasquale Conte, Irwin D. Simon, and Stephen

J. Smith respectfully petition for a writ of certiorari to

review the judgment of the United States Court of

Appeals for the Second Circuit in this case.

OPINIONS BELOW

The Second Circuit’s opinion (Pet. App. 1a-53a) is

reported at 156 F.4th 121. The Second Circuit’s order

denying rehearing (Pet. App. 196a-97a) is not

reported.

JURISDICTION

The Second Circuit entered judgment on

September 29, 2025. Pet. App. la-53a. The court

denied rehearing on December 2, 2025. Id. at 196a97a. On February 25, 2026, Justice Sotomayor

extended the time within which to file a petition for a

writ of certiorari to and including May 1, 2026. This

Court has jurisdiction under 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The relevant provision of the Private Securities

Litigation Reform Act of 1995, 15 U.S.C. § 78u-4(b), is

reproduced at Pet. App. 198a-201a. Federal Rule of

Civil Procedure 9(b) is reproduced at Pet. App. 202a.

INTRODUCTION

This case presents critically important questions

regarding the standards for pleading scienter under

the Private Securities Litigation Reform Act of 1995

(PSLRA). The PSLRA requires securities-fraud

plaintiffs to “state with particularity facts giving rise

to a strong inference” that each defendant “acted with

the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A).

But the courts of appeals disagree on how to apply this

heightened standard in two recurring contexts. In this

case, the Second Circuit—home to more securities

cases than any other circuit—deepened both splits,

warranting this Court’s review.

First, the circuits are now divided five-to-five on

whether the so-called “core operations doctrine,” under

which the sheer importance of an issue supports an

inference that executives would have known about it,

provides a basis for pleading scienter under the

PSLRA. Five circuits have correctly declined to adopt

the doctrine, recognizing that a generalized claim of an

issue’s importance lacks “particularity,” and that

speculation about what an executive would have

known cannot create a “strong inference” of fraudulent

intent. In sharp contrast, five other circuits (now

including the Second Circuit) have accepted the

doctrine in some form—but even they have failed to

reach consensus on when to apply it. For years, the

Second Circuit expressly declined to take sides, but it

abruptly decided to adopt the doctrine in this case—

inferring scienter from the alleged “importance” of an

issue, even though that issue threw off petitioners’ net

sales by just 2.4 percent. The core operations doctrine

has no place in the scienter analysis under the PSLRA,

and the Second Circuit’s decision to adopt it deepens a

split this Court should resolve.

Second, the courts of appeals disagree about

whether allegations that executives generally accessed

information

through

routine

corporate

communications, such as internal reports or customer

calls, support an inference of scienter, absent any

specific allegations about what those communications

conveyed. Six circuits correctly reject this pleading

strategy, recognizing that without allegations about

the information an executive received, there is no basis

to infer he knew anything other than what he told the

public. But three circuits—now including the Second

Circuit—allow an inference of scienter from such

generic allegations. The Second Circuit’s analysis was

especially stark in this case: allegations that some

executives received “weekly reports” about sales and

that one “called the general manager of a customer,”

with no details to fill in the blanks, supported an

inference that executives had “actual knowledge” that

their statements were false. Pet. App. 42a-43a. This

mature circuit split, too, warrants the Court’s

intervention.

These questions are exceptionally important.

Congress enacted the PSLRA and required heightened

pleading of scienter because securities-fraud plaintiffs

were bringing strike suits that “injure[d] the entire

U.S. economy.” Merrill Lynch, Pierce, Fenner & Smith

Inc. v. Dabit, 547 U.S. 71, 81 (2006) (quoting H.R.

Conf. Rep. No. 104-369, at 31 (1995)). This case invites

the same harm: left standing, the Second Circuit’s

opinion would allow plaintiffs to deploy similar

allegations—claiming an issue is important and

addressed in routine corporate communications—to

evade the PSLRA’s pleading requirements in virtually

any securities-fraud case. And with the Second Circuit

now joining the minority of circuits on both issues,

most securities-fraud defendants nationwide will be

left to defend themselves under lenient standards the

PSLRA forbids.

This case also provides an excellent vehicle to

resolve both questions: both were squarely decided,

and the scienter determination cannot stand without

these allegations. This Court has not hesitated to

grant review to resolve circuit splits regarding the

application of the PSLRA to frequently recurring

allegations—even splits far less pronounced than

those presented here. See, e.g., Matrixx Initiatives,

Inc. v. Siracusano, 563 U.S. 27, 30-31 (2011) (resolving

3-1 circuit split); Dura Pharms., Inc. v. Broudo, 544

U.S. 336, 338, 340 (2005) (resolving 4-1 circuit split).

The petition should be granted.

STATEMENT OF THE CASE

A. Legal Background

1. Section 10(b) of the Securities Exchange Act of

1934, as implemented through SEC Rule 10b-5, makes

it unlawful to “make any untrue statement of a

material fact or to omit to state a material fact

necessary in order to make the statements made, in

the light of the circumstances under which they were

made, not misleading.” 17 C.F.R. § 240.10b-5(b); see

15 U.S.C. § 78j(b). Although Section 10(b) “does not by

its terms create an express civil remedy for its

violation,” Ernst & Ernst v. Hochfelder, 425 U.S. 185,

196 (1976), this Court has “acquiesced” to decisions of

lower courts reading a private right of action into the

statute, Touche Ross & Co. v. Redington, 442 U.S. 560,

577 n.19 (1979); see Superintendent of Ins. v. Bankers

Life & Cas. Co., 404 U.S. 6, 13 n.9 (1971).

To prove a Section 10(b) violation, a plaintiff must

establish that the defendant made a material

misrepresentation or omission with scienter—“a

mental state embracing intent to deceive, manipulate,

or defraud.” Ernst & Ernst, 425 U.S. at 193 n.12. A

plaintiff must also show that the material

misrepresentation or omission was made in connection

with the purchase or sale of a security, and a private

plaintiff must show that she relied on the defendant’s

misrepresentation and suffered economic loss as a

result. See Dura Pharms., Inc. v. Broudo, 544 U.S.

336, 341-42 (2005).

2. In 1995, Congress enacted the PSLRA “[a]s a

check against abusive litigation by private parties.”

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.

308, 313 (2007). In enacting the PSLRA, Congress

determined that practices such as “nuisance filings,”

“targeting of deep-pocket defendants,” “vexatious

discovery requests,” and “extortionate settlements”

were being used to “injure[] the entire U.S. economy.”

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit,

547 U.S. 71, 81-82 (2006) (citation omitted); see, e.g., S.

Rep. No. 104-98, at 8, 10-11 (1995) (noting that

plaintiffs’ attorneys would “race to the courthouse”

after only “minimal time preparing complaints,” often

based on no more than a stock-price drop or “a failed

product development project”). The PSLRA thus

provided “control measures” to ensure that “[p]rivate

securities fraud actions” are not “employed abusively

to impose substantial costs on companies and

individuals whose conduct conforms to the law.”

Tellabs, 551 U.S. at 313.

To achieve that end, the PSLRA imposes

“[e]xacting pleading requirements” for private

securities-fraud claims, Tellabs, 551 U.S. at 313, and

the

statute

creates

particularly

stringent

requirements to plead scienter. In a typical fraud

action, a plaintiff must “state with particularity the

circumstances constituting fraud,” but the defendant’s

state of “mind may be alleged generally.” Fed. R. Civ.

P. 9(b).

But the PSLRA imposes a uniquely

demanding standard for pleading scienter, requiring

private plaintiffs to “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)(A).

To meet the PSLRA’s standard for pleading

scienter, it is not enough “that a reasonable factfinder

plausibly could infer from the complaint’s allegations

the requisite state of mind.” Tellabs, 551 U.S. at 314.

Rather, “[t]o qualify as ‘strong’” within the meaning of

the PSLRA, “an inference of scienter must be more

than merely plausible or reasonable—it must be

cogent and at least as compelling as any opposing

inference of nonfraudulent intent.” Id. “The ‘strong

inference’ standard unequivocally raised the bar for

pleading scienter.” Id. at 321 (citation omitted)

(alterations omitted).

B. Factual Background

The Hain Celestial Group, Inc. manufactures,

markets, and sells organic, natural, and personal care

products to a variety of distributor customers, who

then sell to consumers. Pet. App. 7a. Plaintiffs allege

that Hain, like many companies, offered some

customers incentives to purchase products well in

advance of selling them to consumers—for example,

cash incentives, discounts, return guarantees, and

extended payment terms. Id. at 7a-8a. Hain typically

reported sales based on when the company shipped

products to distributors, not when those products were

ultimately sold to consumers. See id. at 122a.

According to the complaint, some of Hain’s

distributors “returned . . . excess inventory from the

previous quarter,” making reported revenues appear

inflated. Pet. App. 11a. In early 2016, Hain hired

external auditors, who concluded Hain had

prematurely recognized revenue for sales to certain

distributors, due in part to its use of sales concessions.

See id. at 11a-14a. Hain revised its results for FY

2014, FY 2015, and the first nine months of FY 2016—

announcing it had overstated net sales by 2.1%, 2.9%,

and 1.9%, respectively.

Id. at 14a.

The SEC

investigated and settled charges related to these

practices but declined to impose a civil penalty, noting

that the “vast majority of the products purchased” by

distributors “ultimately sold through” to consumers

and that “[n]one of these types of incentives are

improper.” Id. at 15a (citation omitted).

C. Judicial Proceedings

1. After Hain’s stock price declined, respondents

brought this action on behalf of a purported class of

investors who acquired Hain’s stock from November 5,

2013, through February 10, 2017. Pet. App. 3a-4a.

Respondents asserted claims under Sections 10(b) and

20(a) of the Securities Exchange Act of 1934, naming

Hain and four of its executives as defendants. Id.

Respondents claimed that Hain and its executives

made false or misleading statements about revenue,

compliance with accounting rules, and financial

success, through practices respondents characterize as

“channel-stuffing.” Pet. App. 27a-30a. In attempting

to plead scienter, respondents asserted that a motive

to commit fraud could be inferred from allegations

about stock sales and bonuses for two—but not all—of

the executives named as defendants. Id. at 38a-39a.

Respondents did not allege that any executive had

received any information that conflicted with what the

company disclosed, but claimed that some executives

communicated with various customers and “received

regular reports” about sales. Id. at 42a-45a. Beyond

that, respondents invoked the “core operations

doctrine,” claiming that that the importance of the

company’s sales and inventory levels supported an

inference that executives acted with scienter. Id. at

45a-47a & n.19, 52a.

2. The district court dismissed the operative

complaint. 1 As relevant here, the district court agreed

with a magistrate judge that respondents’ allegations

that executives received “internal reports” were

“generic in nature” and therefore “insufficient to raise

the requisite inference of scienter.” Pet. App. 69a; see

id. at 104a. The district court likewise declined to

apply the “core operations doctrine,” agreeing that

respondents had not provided sufficient “allegations

raising an inference of scienter,” such as “specific

factual allegations linking the Individual Defendants

to the alleged fraud.” Id. at 69a; see id. at 101a-02a.

The court concluded that any inference of scienter was

“far less compelling than an inference of, at most, nonactionable mismanagement and negligence.” Id. at

70a; see id. at 104a.

3. On appeal, the Second Circuit vacated the

judgment, holding that respondents had “adequately

alleged scienter.” Pet. App. 52a. The court first

concluded that two of the individual defendants had

the motive to commit fraud because they sold shares

and received bonuses. Id. at 37a-40a. But the court

recognized that plaintiffs’ other scienter-related

allegations “must still be strong” to raise the requisite

strong inference of scienter and thus survive a motion

to dismiss. Id. at 40a.

From there, the Second Circuit determined that

respondents’ allegations raised the inference that

Hain’s executives “had actual knowledge” that the

disputed statements were false. Pet. App. 42a. The

Second Circuit focused, in large part, on allegations

1 The district court also dismissed the prior complaint, but the

Second Circuit vacated the district court’s order and remanded on

grounds not relevant here. See Pet. App. 5a-6a n.4.

that executives generally received information

through routine communications with customers and

colleagues.

The court pointed, for example, to

allegations that one executive “called the general

manager of a customer” and “dealt directly with

[another customer’s] owner.” Id. at 42a-43a. The court

similarly relied on allegations that two executives

“received weekly reports on sales, inventory, and

guidance targets”—claiming that those allegations

suggested “actual knowledge” that the executives’

statements about sales were misleading. Id. at 44a.

The court did not, however, identify any information

that any report, customer, or other source provided to

Hain’s executives. See id. at 42a-45a, 52a.

The Second Circuit further invoked the core

operations doctrine to infer that executives knew their

statements about sales and inventory were false. Pet.

App. 45a-47a. The Second Circuit acknowledged that

it had not previously “affirmed the validity of the coreoperations doctrine following the passage of the

PSLRA,” id. at 46a n.19 (citation omitted) (alterations

omitted), but it elected to adopt the doctrine in this

case, citing “the importance” of the alleged fraud, id. at

47a. Accord id. at 46a & n.19, 52a. Applying the core

operations doctrine, the court concluded that it could

infer scienter from the fact that the disputed

statements “touched on large swaths of Hain’s U.S.

business and areas of critical import to Hain and its

executives.” Id. at 45a. The court further emphasized

the “size of this alleged fraud” as a basis for inferring

scienter, even though it had only resulted in an

adjustment of Hain’s “net sales by 2.1%, 2.9%, and

1.9%”—figures that the court acknowledged were “not

eye-popping.” Id. at 46a & n.19.

Petitioners sought rehearing, which the Second

Circuit denied without analysis. Pet. App. 196a-97a.

REASONS FOR GRANTING THE PETITION

To survive a motion to dismiss under the PSLRA,

plaintiffs asserting private securities-fraud claims

must “state with particularity facts giving rise to a

strong inference” of scienter.

15 U.S.C. § 78u4(b)(2)(A). This Court should grant certiorari to

resolve two circuit splits regarding the “stricter

demand[s]” the PSLRA’s pleading standards impose.

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.

308, 314 (2007).

First, the courts of appeals disagree about whether

the “core operations doctrine” provides a basis for

pleading scienter under the PSLRA. Five circuits—

the Fourth, Sixth, Eighth, Tenth, and Eleventh—have

declined to adopt the doctrine, holding that the alleged

importance of an issue does not support a “strong

inference” that statements were made with fraudulent

intent. In contrast, five other circuits—the First,

Second, Third, Fifth, and Ninth—have embraced the

core operations doctrine, although they have not

reached any consensus on when the doctrine applies.

Second, the courts of appeals disagree about

whether plaintiffs may raise a “strong inference” of

scienter through allegations that executives generally

receive information through routine corporate

communications, such as reports or calls, without

details about what specific information those

executives obtained. Six circuits—the Third, Fourth,

Fifth, Sixth, Tenth, and Eleventh—do not allow this

approach to pleading scienter, but three circuits—the

First, Second, and Ninth—hold that plaintiffs may

raise a strong inference of scienter through allegations

about the mere existence of corporate communications

with executives.

In this case, the Second Circuit took the wrong

position on both issues, deepening mature circuit

splits and approving of easy-to-replicate pleading

tactics the PSLRA forbids. This Court should grant

review and reverse.

I. The Second Circuit’s Adoption of the Core

Operations Doctrine Deepens a Circuit

Split and Conflicts with the PSLRA.

The courts of appeals are in conflict about whether

the so-called “core operations doctrine” provides a

basis for pleading scienter under the PSLRA. Before

the PSLRA’s enactment, the core operations doctrine

provided an easy path to plead scienter: it allowed an

inference of intent to rest on allegations that an issue

was “a significant part of [a company’s] business.”

Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir. 1989). Since

the PSLRA created heightened standards for pleading

scienter, however, circuits have split on the continuing

validity of the doctrine, with at least five circuits

correctly declining to adopt the core operations

doctrine and five other circuits accepting it.

For years following the PSLRA’s enactment, the

Second Circuit expressly declined to adopt the core

operations doctrine, stating that it had “not clearly

affirmed the validity of this doctrine following the

passage of the PSLRA.” In re Renewable Energy Grp.

Sec. Litig., 2022 WL 14206678, at *3 n.4 (2d Cir. Oct.

25, 2022); see, e.g., Frederick v. Mechel OAO, 475 F.

App’x 353, 356 (2d Cir. 2012) (“[W]e have not yet

expressly addressed whether, and in what form, the

‘core operations’ doctrine survives as a viable theory of

scienter.”). The Second Circuit’s decision to change

course and rely on the doctrine here deepens a conflict

that warrants this Court’s review.

A. The Circuits Are Divided on Whether

the Core Operations Doctrine Provides

a Basis for Pleading Scienter Under

the PSLRA.

1. At least five circuits have declined to adopt the

core operations doctrine as a basis for pleading

scienter under the PSLRA. These circuits have either

rejected the doctrine on the merits or refused to apply

it in every case in which it has been invoked. This

approach makes sense:

the assumption that a

statement must be fraudulent simply because it

concerned a topic of importance to a business is

fundamentally incompatible with the PSLRA’s

requirement that plaintiffs state facts with

“particularity” to raise a “strong inference” that a

defendant acted with the requisite state of mind. 15

U.S.C. § 78u-4(b)(2)(A) (emphasis added).

The Sixth Circuit’s analysis of this issue illustrates

the correct legal rule, holding that “the fact that

executives are intimately familiar with a core

component of their business does little to suggest

fraudulent intent.” Teamsters Loc. 237 Welfare Fund

v. ServiceMaster Glob. Holdings, Inc., 83 F.4th 514,

531 (6th Cir. 2023) (quoting Pittman v. Unum Grp.,

861 F. App’x 51, 55 (6th Cir. 2021)). In ServiceMaster,

for instance, plaintiffs claimed that executives must

have known of an alleged “crisis” and its impact on

their business simply because it concerned a “core”

part of the business, about which executives were

generally “familiar.” Id. at 530-31. But rather than

adopt the core operations doctrine, the Sixth Circuit

held that, “[w]ithout more information about what

the . . . executives knew and when they knew it,”

plaintiffs could not raise the requisite “strong

inference” of scienter under the PSLRA. Id. at 532; see

Pittman, 861 F. App’x at 55 (holding that the “overall

importance” of an issue “is not a scienter-bolstering

fact”).

The Fourth Circuit follows the same approach,

holding that courts “cannot impute factual knowledge

to individuals merely . . . because such knowledge

relates to the business’s core operations.” San Antonio

Fire & Police Pension Fund v. Syneos Health Inc., 75

F.4th 232, 242 (4th Cir. 2023) (citation omitted). In

Syneos Health, plaintiffs claimed that executives

“must have” known of an adverse development related

to a merger with another company simply because the

issue was “an important predictor” of the company’s

“commercial success.” Id. The Fourth Circuit firmly

rejected that reasoning, explaining that the mere fact

that an issue “relates to the business’s core operations”

provides no basis to infer that executives “learned

specifically” that anything they said was untrue. Id.

And since courts “may not stack inference upon

inference to satisfy the § 10(b) pleading standard,” the

Fourth Circuit refuses to find a strong inference of

scienter based on allegations about the mere

“importan[ce]” of an issue. Id. at 242-43 (citation

omitted) (alterations omitted). 2

2 Prior to Syneos Health, the Fourth Circuit had stated that

“core-operations allegations ‘are relevant to the court’s holistic

analysis of scienter.’” KBC Asset Mgmt. NV v. DXC Tech. Co., 19

F.4th 601, 612 (4th Cir. 2021) (quoting Yates v. Mun. Mortg. &

Equity, LLC, 744 F.3d 874, 890 (4th Cir. 2014)). But the Fourth

Circuit has never held that such allegations supported an

inference of scienter—and Syneos Health subsequently clarified

The Tenth Circuit agrees, holding that allegations

about the “significance” of an issue to a company’s

“core operations do little to create an inference of

scienter.” Meitav Dash Provident Funds & Pension

Ltd. v. Spirit AeroSystems Holdings, Inc., 79 F.4th

1209, 1223-24 (10th Cir. 2023). In Spirit Aerosystems,

for example, plaintiffs claimed that executives must

have known their statements about production and

sales were false because the company “obtained most

of its revenue from sales” to the customer at issue and

those issues therefore “involve[d] [the company’s] core

operations.” Id. at 1222-23. The Tenth Circuit

rejected this theory of scienter under the PSLRA,

holding that the alleged “significance” of an issue to a

company’s “core operations” does not “create a

particularized basis to draw a strong inference of [an

executive’s] awareness” that anything disclosed to

investors was misleading. Id. at 1224; 3 see also

Anderson v. Spirit Aerosystems Holdings, Inc., 827

F.3d 1229, 1246 (10th Cir. 2016) (similarly rejecting

“core operations” theory, which provides no “good

reason to believe that the executives knew that the

projects were unlikely to meet forecasts”).

The Eleventh Circuit, for its part, has functionally

rejected the core operations doctrine, albeit without

using the doctrine’s label. In Mizzaro v. Home Depot,

Inc., 544 F.3d 1230 (11th Cir. 2008), for instance,

that courts should not rely on the core operations doctrine to infer

intent under the PSLRA.

Spirit AeroSystems distinguished cases in which plaintiffs

“allege[d] with particularity” that an executive “saw data that

would have alerted him” to the problem, 79 F.4th at 1222 n.4

(citing Ind. Pub. Ret. Sys. v. Pluralsight, Inc., 45 F.4th 1236,

1263-64 (10th Cir. 2022)), recognizing that the core operations

doctrine lacks precisely that “particularity.”

plaintiffs pointed to the “breadth and amount of the

fraud” related to statements about damaged goods to

claim that executives “must have known about it,” even

though plaintiffs cited no facts “suggesting that the

high-ranking defendants knew anything about the

alleged fraud.” Id. at 1250. The Eleventh Circuit

rejected that approach, emphasizing that a scienter

theory premised on the purported significance of an

issue—its “breadth” or “amount”—“does not come close

to accomplishing” plaintiffs’ burden to “at least allege

some facts showing . . . knowledge of the fraud” by

executives. Id. at 1250-51. The Eleventh Circuit

further

emphasized

that

this

Court

has

“unambiguously explained . . . that the ‘strong

inference’ requirement, though not insurmountable, is

difficult to meet,” and allegations of the mere

significance of an issue “do not pass Congress’s

stringent test” under the PSLRA. Id. at 1257.

Finally, while the Eighth Circuit has reserved

judgment on “whether the core operations approach

can be utilized to plead scienter,” Elam v. Neidorff, 544

F.3d 921, 929 (8th Cir. 2008), its precedents all but

refute the doctrine. In Cornelia I. Crowell GST Trust

v. Possis Medical, Inc., 519 F.3d 778 (8th Cir. 2008),

for example, plaintiffs claimed that executives must

have known that a clinical trial was going more poorly

than they told the public because of “the overarching

importance of the . . . study,” which was allegedly

“vital to the company’s future.” Id. at 783. But the

Eighth Circuit rejected this theory, holding that the

mere “importance of [an issue] to [a defendant] does

little to establish scienter.” Id. at 783. Like other

circuits, the Eighth Circuit refuses to leap from

allegations of an issue’s “importance” to the conclusion

that

“executives

were

aware

of . . . negative

[information] prior to making statements.” Id. 4

2. In contrast to this approach, five other circuits

have adopted the core operations doctrine—allowing

plaintiffs to clear the PSLRA’s bar for pleading

scienter through allegations that a disputed statement

concerns an issue of importance. But while these

courts agree on the bottom line that the core

operations doctrine can factor into the scienter

analysis, they have disagreed on the circumstances

that may properly trigger the doctrine’s application.

In the First Circuit, the core operations doctrine

allows plaintiffs to plead scienter through allegations

that an issue is “important” to the business. Constr.

Indus. & Laborers Joint Pension Tr. v. Carbonite, Inc.,

22 F.4th 1, 9 (1st Cir. 2021). In Carbonite, for instance,

plaintiffs claimed that executives “must have known”

that a new product was not functioning properly,

contrary to their public statements, because of the

“product’s professed importance to the company.” Id.

The First Circuit accepted the doctrine, finding a

strong inference of scienter because plaintiffs had

alleged “facts showing that [the product] was viewed

by [the company] as an important product”—even

though it was only one of the company’s “many

offerings” and did not have an “outsized impact on [its]

revenue projections.” Id.

The D.C. Circuit also has not adopted the core operations

doctrine, and district courts within the circuit have expressed

skepticism about its applicability. See Stevens v. InPhonic, Inc.,

662 F. Supp. 2d 105, 121 n.8 (D.D.C. 2009) (“[T]his ‘exceedingly

rare[ly]’ used doctrine has not been recognized by this Circuit and

the Court declines to recognize it here.” (citation omitted)).

The Third Circuit has adopted the core operations

doctrine as well, allowing plaintiffs to plead scienter

through allegations about the sheer “importance” or

“centrality” of an issue. Institutional Invs. Grp. v.

Avaya, Inc., 564 F.3d 242, 272 (3d Cir. 2009). In

Avaya, plaintiffs invoked the “core operations

inference” to claim that executives knew their

statements about financial performance and pricing

pressure were misleading. Id. at 268. The Third

Circuit accepted this approach, finding that “the

importance to the ‘[company’s] story’ of maintaining

margins” supported “a strong inference that [an

executive] either knew at the time that his statements

were false” or was “reckless” in disregarding the

“obvious risk of misleading the public.” Id. (emphasis

added).

The Fifth Circuit has also accepted the core

operations doctrine, which it applies in “special

circumstances” under a circuit-specific multifactor

test. Okla. Firefighters Pension & Ret. Sys. v. Six

Flags Ent. Corp., 58 F.4th 195, 219 (5th Cir. 2023).

Specifically, the Fifth Circuit applies the core

operations doctrine after considering (i) “the

company’s size,” (ii) whether the statement is “critical”

to the company’s “vitality,” (iii) whether the

misrepresented information is “readily apparent,” and

(iv) whether “the defendant’s statements were

internally inconsistent.”

Id. (citation omitted).

Applying this standard in Six Flags, the Fifth Circuit

held that the core operations doctrine applied because

plaintiffs had alleged that the development of new

amusement parks were “important to Six Flags’

success” and “an important aspect of future growth

prospects”—even though this development was “not

critical to Six Flags’ survival.” Id. Allegations like

these, under the Fifth Circuit’s test, are enough to

support a “cogent” and “compelling” inference of

scienter. Id. (citation omitted).

Finally, the Ninth Circuit has also adopted the core

operations doctrine, which it applies under a different

standard unique to that circuit. See Constr. Laborers

Pension Tr. of Greater St. Louis v. Funko Inc., 166

F.4th 805, 831 (9th Cir. 2026). In the Ninth Circuit,

the doctrine applies when plaintiffs’ allegations

“suggest that the defendants had actual access to the

disputed information” or “in rare circumstances when

the allegations are not particularized, but the nature

of the relevant fact is of such prominence that it would

be absurd to suggest that management was without

knowledge of the matter.” Id. (citation omitted)

(alterations omitted). The Ninth Circuit’s standard is

a permissive one: it allows plaintiffs to plead scienter

through allegations that, for instance, an issue is

“critical to [a company’s] business operations,” “key to

its ability to manage its inventory effectively,” and

viewed as “integral to its success as a business.” Id. at

831-32.

In this case, after decades of expressly declining to

address whether the core operations doctrine may

apply under the PSLRA, the Second Circuit embraced

the doctrine for the first time in a precedential opinion.

The court held that respondents had raised a strong

inference that Hain’s executives knew their

statements about sales and inventory levels were false

based on allegations about “the size of the alleged

fraud” and “its importance to Hain’s operations,” as

well as allegations that “the alleged fraud touched on

large swaths of Hain’s U.S. business and areas of

critical import to Hain and its executives.” Pet. App.

45a-47a & n.19; accord id. at 52a. The Second Circuit

concluded these allegations supported a “strong

inference” of scienter even though the alleged

misstatements prompted Hain to adjust its net sales

by just 2.1%, 2.9%, and 1.9%—figures that the court

acknowledged were “not eye-popping.” Id. at 46a. In

the Second Circuit’s view, “it would strain credulity to

conclude” that executives were not aware of

information resulting in those adjustments. Id. at 47a.

In at least five circuits, this attempt to deploy the

core operations doctrine would fail as a matter of law.

In those circuits, allegations about the “breadth and

amount of the fraud,” Mizzaro, 544 F.3d at 1250, or

claims that the disputed statements concerned an

issue of “importance” or a “core component of [Hain’s]

business” could not contribute to finding a “strong

inference” of scienter, ServiceMaster, 83 F.4th at 531

(citation omitted). The Second Circuit’s adoption of

the core operations doctrine here thus deepens an

established circuit split, which this Court should

resolve.

B. The Second Circuit’s Core Operations

Holding Is Wrong.

Five circuit courts have declined to adopt the core

operations doctrine for good reason: it defies the

PSLRA’s stringent pleading requirements. Under the

core operations doctrine, a plaintiff may support a

“strong inference” of scienter through garden-variety

allegations that any issue is “important” or

“significant” to a business, coupled with speculation

that executives therefore would have known about it.

Pet. App. 45a-47a & n.19, 52a. The PSLRA prohibits

such speculation, and the Second Circuit was wrong to

endorse the core operations doctrine here.

To “curb frivolous, lawyer-driven litigation” and to

ensure fairness to defendants, the PSLRA establishes

“[e]xacting pleading requirements” in private

securities-fraud cases. Tellabs, 551 U.S. at 322. The

PSLRA requires a complaint to “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)(A) (emphasis added). That is

a “stricter demand,” under which an inference of

scienter must be “cogent and at least as compelling as

any opposing inference of nonfraudulent intent”—and

“omissions and ambiguities count against inferring

scienter.” Tellabs, 551 U.S. at 314, 326.

The core operations doctrine is fundamentally at

odds with these pleading requirements. Instead of

demanding “particularity,” the core operations

doctrine invites generality:

under the doctrine,

allegations that a statement concerned an issue

viewed as “important,” Carbonite, 22 F.4th at 9,

“critical,” Funko, 166 F.4th at 831, or “central[],”

Avaya, 564 F.3d at 272, support an inference that the

statement is fraudulent. And instead of requiring

allegations that give rise to a “strong inference” of

fraudulent intent, the core operations doctrine is

grounded in speculation: under the doctrine, courts

infer that an executive “would have,” Carbonite, 22

F.4th at 9; Six Flags, 58 F.4th at 219, or “must have,”

Funko, 166 F.4th at 831, known a statement was

misleading based on allegations that the subject

mattered to the company. Those inferential leaps,

through allegations devoid of specificity, are exactly

what the PSLRA is designed to forbid. See Tellabs, 551

U.S. at 334 (Alito, J., concurring) (“[F]acts not stated

with the requisite particularity cannot be considered

in determining whether the strong-inference test is

met.”).

That explains why, before this case, district court

judges within the Second Circuit had routinely

expressed doubts about whether the core operations

doctrine survived the PSLRA’s enactment. As thenDistrict-Court Judge Sullivan explained, “the plain

language of the PSLRA, which requires facts

supporting the scienter inference to be ‘state[d] with

particularity,’ would seem to limit the force of general

allegations about core company operations.” In re

Wachovia Equity Sec. Litig., 753 F. Supp. 2d 326, 353

(S.D.N.Y. 2011) (quoting 15 U.S.C. § 78u-4(b)(1)).

Judge Furman likewise emphasized his “considerable

doubt whether the core operations doctrine survived

enactment of the PSLRA.” Hensley v. IEC Elecs. Corp.,

2014 WL 4473373, at *5 (S.D.N.Y. Sept. 11, 2014)

(Furman, J.); see also, e.g., In re Rockwell Med., Inc.

Sec. Litig., 2018 WL 1725553, at *14 (S.D.N.Y. Mar.

30, 2018) (Sullivan, J.) (explaining that the PSLRA

“significantly limited the salience of the core

operations doctrine”); Glaser v. The9, Ltd., 772 F.

Supp. 2d 573, 596 n.17 (S.D.N.Y. 2011) (Holwell, J.)

(“It is questionable whether the ‘core operations’

doctrine has survived the PSLRA at all.”).

That skepticism was well-founded, and this case

aptly illustrates the problems the core operations

doctrine invites. The Second Circuit relied on the core

operations doctrine to infer scienter because sales and

inventory levels are issues of “importance” and

“critical import” to Hain, but that much could be said

of virtually any company. Pet. App. 45a-46a. And the

court repeatedly emphasized “the size,” “the

importance,” and the “significance” of the alleged fraud

to Hain’s operations—even though the alleged

misstatements amounted to just 2.4 percent of Hain’s

overall net sales during the relevant time period. Id.

at 46a-47a, 52a. If that is enough to invoke the core

operations doctrine, it is difficult to imagine a case in

which plaintiffs would not be able to invoke the

doctrine as a shortcut to pleading scienter.

To make matters worse, the core operations

doctrine also conflicts with other fundamental

principles of pleading scienter under the PSLRA. The

statute requires plaintiffs to plead scienter with

particularity as to “the defendant” and “each act or

omission” alleged to violate the law. 15 U.S.C. § 78u4(b)(2). As the Eleventh Circuit has explained, that

language mandates that “scienter must be found with

respect to each defendant and with respect to each

alleged violation.” Phillips v. Sci.-Atlanta, Inc., 374

F.3d 1015, 1017-18 (11th Cir. 2004) (emphases added);

cf. Tellabs, 551 U.S. at 326 n.6 (noting “disagreement

among the [c]ircuits” on related questions about

“group pleading” under the PSLRA). But the core

operations doctrine inverts that requirement:

inferring scienter from an issue’s general “importance”

to a business presumes shared knowledge across all

defendants, rather than pleading particularized facts

as to each one. And this case proves the point: the

doctrine permitted respondents to establish scienter

as to some defendants against whom they alleged

little, if any, defendant-specific knowledge at all. See

Pet. App. 37a-40a (identifying no motive allegations as

to Conte and Smith); see also id. at 42a-47a, 51a-52a.

Ultimately, the PSLRA forecloses the core

operations doctrine, and the Second Circuit was wrong

to join the circuits adopting it as a valid basis to plead

scienter. The Second Circuit’s decision deepens a

stark conflict among the circuits, which this Court

should resolve.

II. The Second Circuit’s Scienter Ruling on

Executives’ Receipt of Corporate

Information Deepens a Circuit Split.

The Second Circuit’s scienter ruling conflicted with

the decisions of other circuits in a second way: the

court held that generalized allegations that executives

receive routine corporate communications—without

any detail about what information was conveyed—

support a strong inference of scienter under the

PSLRA. Six circuits have rejected this approach,

recognizing that allegations that an executive simply

received a report or placed a call says nothing with

“particularity” about what he learned, and therefore

cannot support a “strong inference” that he knew his

statements were misleading. The Second Circuit’s

decision to join a minority of circuits allowing this

approach deepens a circuit split and warrants this

Court’s review.

A. Most Circuits Hold That Generalized

Allegations of Corporate

Communications Provide No Basis for

Pleading Scienter.

1. Six circuits hold that securities-fraud plaintiffs

may not plead scienter based on the mere existence of

routine corporate communications, such as sales

reports and customer calls. That rule comports with

the PSLRA:

absent allegations about what an

executive learned through any communication, there

is no basis to infer he knew anything other than what

he later told the public—and an allegation equally

consistent with “nonfraudulent intent” cannot give

rise to a “strong inference” of scienter. Tellabs, 551

U.S. at 313.

The Fourth Circuit’s recent decision in San Antonio

Fire & Police Pension Fund v. Syneos Health Inc., 75

F.4th 232 (4th Cir. 2023), again illustrates the

majority approach. There, plaintiffs asserted that the

defendants “must have” known statements about a

merger were false because they “held a series of

meetings at which they generally discussed the

commercial aspects of [the company’s] business.” Id.

at 242. The Fourth Circuit flatly rejected that

approach, holding that the fact that “these due

diligence meetings” occurred “does not support the

inference that [executives] learned any specific

information”—much less specific information that

would render their statements misleading.

Id.

(emphasis added). As the Fourth Circuit explained, a

bald claim about what executives “should have known”

by attending meetings “merely argues that [they

acted] negligently”—not fraudulently. Id.

The Fifth Circuit agrees. In Indiana Electrical

Workers’ Pension Trust Fund IBEW v. Shaw Group,

Inc., 537 F.3d 527 (5th Cir. 2008), the Fifth Circuit

held that plaintiffs could not raise a strong inference

of scienter through generic allegations about

executives’ “receipt of monthly reports . . . discussed at

meetings,” as “the complaint d[id] not . . . allege that

the reports or the meetings included information at

odds with [the defendant’s] public statements.” Id. at

540. Absent such detail, allegations like those “d[id]

not substantiate an inference that [executives] knew

they contained false information, nor d[id] the mere

fact that they received the reports imply that they

knew of any inaccuracy.” Id.

The Sixth Circuit has followed the same approach,

holding that “mere attendance at meetings where the

[issue] was discussed does little to establish . . . a

strong inference of scienter.” Teamsters Loc. 237

Welfare Fund v. ServiceMaster Glob. Holdings, Inc., 83

F.4th 514, 531 (6th Cir. 2023). In ServiceMaster,

plaintiffs claimed that executives knew of the crisis

undermining their public statements because “issues

relating to the . . . crisis were discussed amongst [the

company’s] executives.” Id. at 531. But without “any

detail about exactly what was discussed, whether or

not the extent of the problem or liability for possible

claims were discussed, [and] whether the possible

impact on [the company’s] financial results was

raised,” the Sixth Circuit held that such barebones

allegations about executives “discuss[ing]” an issue did

not suggest scienter. Id.

The Tenth Circuit follows the same rule, holding

that “it’s not enough for the plaintiffs to allege

briefings to a speaker on the underlying data or the

speaker’s access to internal reports.” Meitav Dash

Provident Funds & Pension Ltd. v. Spirit AeroSystems

Holdings, Inc., 79 F.4th 1209, 1216 (10th Cir. 2023).

Instead, plaintiffs must allege with “particularity”

what the executives actually “knew when they made

the public disclosures.” Id. at 1217. Thus, without

“particularized allegations about the contents” of any

reports or “particularized allegations that anyone told”

executives anything in meetings, such allegations fail

as a matter of law to support an inference of scienter.

Id. at 1220-21.

The Eleventh Circuit has taken the same approach

in circumstances strikingly similar to those presented

here. In Garfield v. NDC Health Corp., 466 F.3d 1255

(11th Cir. 2006), plaintiffs accused defendants of a

channel-stuffing scheme and attempted to plead

scienter through allegations that executives “attended

monthly operations meetings” at which “every aspect

of the . . . business was discussed in detail, including

the aggressive channel stuffing.” Id. at 1264. But

without any allegations about “what was said at the

meeting[s],” the Eleventh Circuit held that plaintiffs

had failed to provide the “requisite particularity,” as a

“general allegation that [executives] promoted channel

stuffing at a series of meetings does not establish

scienter.” Id. at 1265.

Finally, the Third Circuit has likewise held that

the PSLRA requires specificity when a plaintiff seeks

to raise a strong inference of scienter through

allegations about information executives receive.

Thus, for example, a “barebones sketch of [an] internal

memo,” without allegations about its content—such as

“what data its conclusions were based upon”—“utterly

fails to meet [the PSLRA’s] standard in any respect.”

Cal. Pub. Emps.’ Ret. Sys. v. Chubb Corp., 394 F.3d

126, 147-48 (3d Cir. 2004).

2. By contrast, the First, Second, and Ninth

Circuits follow a different rule. In these circuits,

plaintiffs may satisfy the PSLRA’s scienter standards

through generic allegations that executives received

information through sources like calls and reports,

paired with speculation that this information “would

have” conflicted with what executives told investors.

The First Circuit took this approach first in In re

Stone & Webster, Inc. Securities Litigation, 414 F.3d

187 (1st Cir. 2005), which involved claims that a

company had concealed its deteriorating financial

condition as it headed for bankruptcy. Id. at 192, 196.

Plaintiffs’ scienter theory hinged on allegations that

executives had “received calls from vendors” and

received “comprehensive internal financial reports.”

Id. at 210-11. The First Circuit explained that “the

contents of the reports [were] not described,” but

proceeded to hold that the court could “fairly infer that

they described” the company’s financial condition,

which “would have been reflected in those internal

reports [as] becoming desperate.” Id. at 211 (emphasis

added).

Thus, from allegations that executives

generally “received calls” and “financial reports,” the

First Circuit piled on the inferences to hold that

plaintiffs had raised a strong inference that executives

knew their statements were false.

The Ninth Circuit has adopted a similar approach.

In E. Ohman J:or Fonder AB v. NVIDIA Corp., 81

F.4th 918 (9th Cir. 2023), which this Court agreed to

review before dismissing the writ as improvidently

granted, plaintiffs asserted that an executive knew the

company had sold more of its products to

cryptocurrency miners than it had disclosed because

the executive “had detailed sale[s] reports prepared,”

“closely monitored sales,” and “reviewed everybody’s

sales data in detail at . . . meetings.” Id. at 939-40.

The dissent argued that plaintiffs did not “allege with

particularity the contents of any contemporaneous

report that directly contradicts [the] challenged

statements,” id. at 955 (Sanchez, J., dissenting), but

the majority found the allegations sufficient to

presume that the “sales data at the time would have

shown” data conflicting with the company’s public

statements, id. at 940 (majority op.). Since this Court

dismissed the writ in NVIDIA, the question remains

unresolved in the Ninth Circuit. See 604 U.S. 20

(2024); infra at 31 (discussing vehicle issues with

NVIDIA).

The Second Circuit opted to follow the minority

approach here. The court held, for instance, that the

fact that two executives “received weekly reports on

sales, inventory, and guidance targets” was enough to

“suggest actual knowledge” that the company’s

statements were misleading. Pet. App. 44a. The court

similarly inferred scienter from an allegation that

another executive “called the general manager of a

customer” and “dealt directly with [a customer’s]

owner on the concessions and revenue.” Id. at 42a-43a.

But there is not a single allegation of what information

any “weekly report” or customer provided. In the

majority of circuits to have considered the issue, these

allegations would not allow a plaintiff to satisfy the

PSLRA’s standards for pleading scienter. The Second

Circuit’s contrary conclusion deepens a mature circuit

split that this Court should resolve.

B. The Second Circuit’s Analysis Is

Wrong.

The Second Circuit’s decision to adopt the minority

view of allegations about routine corporate

communications is both flawed and important. The

PSLRA’s twin demands that plaintiffs allege all facts

supporting scienter with “particularity” and raise a

“strong inference” of scienter refute the Second

Circuit’s position.

Requiring “particularity” means demanding that

plaintiffs allege “the who, what, when, where, and

how.” DiLeo v. Ernest & Young, 901 F.2d 624, 627 (7th

Cir. 1990) (Easterbrook, J.).

This requirement

“imposes another layer of factual particularity to

allegations of securities fraud.” Chubb, 394 F.3d at

144 (citation omitted).

And under the “strong

inference” standard, “omissions and ambiguities count

against inferring scienter.” Tellabs, 551 U.S. at 326.

These requirements for pleading scienter simply

cannot be satisfied by claiming that executives

generally receive information the way all executives

do—through calls and reports.

This case presents a particularly stark example of

the problems the minority position creates. The

communications the Second Circuit identified in

inferring “actual knowledge” are as mundane as they

come—two executives received “weekly reports on

sales, inventory, and guidance targets,” and one

“called the general manager of a customer” and “dealt

directly” with another customer. Pet. App. 42a-44a.

From that, the court simply presumed that

information shared through reports or calls would

have conflicted with what was disclosed to the public.

But since virtually every executive receives reports

and makes calls, allegations like these would support

an inference of scienter in virtually every case.

And if accepted, the Second Circuit’s position would

result in consequences at odds with the core objectives

of the securities laws. The securities laws are broadly

designed to “achieve a high standard of business

ethics,” United States v. Naftalin, 441 U.S. 768, 775

(1979) (citation omitted), including through sound

business practices like internal reporting that ensure

executives have the information they need before they

speak to investors. But if simply receiving regular

reports or speaking to customers itself weighs in favor

of inferring fraudulent intent, companies would be

effectively penalized for engaging in such basic

oversight of their businesses—exactly the opposite of

what the securities laws are designed to do.

This Court’s decision to grant review on a similar

question in NVIDIA two Terms ago underscores the

urgency of addressing the question presented. See

NVIDIA Corp. v. E. Ohman J:or Fonder AB, 144 S. Ct.

2655 (2024) (granting writ as to “[w]hether plaintiffs

seeking to allege scienter under the PSLRA based on

allegations about internal company documents must

plead with particularity the contents of those

documents”). The Court appreciated the importance of

this issue in granting the writ, and the United States

agreed as amicus curiae that the minority position on

this question is wrong as a matter of law. See Br. of

United States as Amicus Curiae at 22, NVIDIA Corp.

v. E. Ohman J:or Fonder AB, No. 23-970 (U.S. Oct. 2,

2024) (“[W]hen a securities-fraud plaintiff seeks to

plead scienter by alleging that a company’s public

statements were inconsistent with information

contained in the company’s files, the complaint must

set forth particularized factual bases for its assertions

about what those files contained.”). The government

argued, however, that NVIDIA did not implicate this

legal question—and so was an inappropriate vehicle

for resolving it—because the plaintiffs had, in fact,

alleged “numerous details about the contents” of

company records and meetings. Id. at 23. But no such

“details” exist here; the allegations of “reports” and

“call[s]” in this case are devoid of any particularized

information. See Pet. App. 42a-44a. This case thus

squarely implicates the circuit split this Court

previously recognized warrants review.

The PSLRA forecloses any inference of fraudulent

intent from allegations that executives simply receive

information through communications channels all

companies use. The Second Circuit was wrong to join

the minority of circuits that allow this approach, and

this Court should grant review and reverse.

III.

This Case Presents an Excellent

Vehicle to Review These Exceptionally

Important Issues.

1. The questions presented are exceptionally

important, and this Court’s review is urgently

required to restore the PSLRA’s “exacting”

requirements for pleading scienter in private

securities-fraud cases.

Congress enacted the PSLRA “[a]s a check against

abusive litigation by private parties” that “impos[ed]

substantial costs on companies and individuals whose

conduct conforms to the law.” Tellabs, 551 U.S. at 313.

Among the “perceived abuses” were “nuisance filings,

targeting of deep-pocket defendants, vexatious

discovery requests, and ‘manipulation by class action

lawyers.’” Merrill Lynch, Pierce, Fenner & Smith Inc.

v. Dabit, 547 U.S. 71, 81 (2006) (quoting H.R. Rep. No.

104-369, at 31 (1995)); see also Tellabs, 551 U.S. at

320. As Congress recognized, private securities-fraud

litigation had for too long been marked by “‘the routine

filing of lawsuits’” alleging securities fraud “‘with only

[a] faint hope that the discovery process might lead

eventually to some plausible cause of action.’” Dura

Pharms., Inc. v. Broudo, 544 U.S. 336, 347 (2005)

(quoting H.R. Rep. No. 104-369, at 31). The PSLRA’s

heightened pleading requirements were thus

“designed to discourage private securities actions

lacking merit” and to prevent “fishing expeditions

brought in the dim hope of discovering a fraud.” Pub.

Emps.’ Ret. Ass’n of Colo. v. Deloitte & Touche LLP,

551 F.3d 305, 311 (4th Cir. 2009) (Wilkinson, J.).

Left standing, the Second Circuit’s opinion supplies

ready-made tools to evade the PSLRA’s requirements

for pleading scienter in future cases. Under the core

operations doctrine, securities-fraud plaintiffs may

plead scienter through allegations that a disputed

statement concerned an issue of general “significance”

or “importance”—even one that threw off a company’s

sales figures by just a percentage point or two. Pet.

App. 52a. Plaintiffs may likewise deploy allegations

that executives engaged in customary communications

like receiving sales reports or calling customers,

without providing specific details of what was

communicated, to overcome the PSLRA’s standards for

pleading scienter. Because this pleading strategy

would be easy to replicate in virtually any case, it

would defeat the PSLRA’s core objective of ferreting

out meritless securities fraud suits used “to injure the

entire U.S. economy.” Merrill Lynch, 547 U.S. at 81

(quoting H.R. Rep. No. 104-369, at 31); see S. Rep. No.

104-98, at 8 (1995) (“A complaint alleging violations of

the Federal securities laws is easy to craft and can be

filed with little or no due diligence.”).

Scienter, in particular, is a defining feature of the

PSLRA’s scheme, and the Second Circuit’s opinion

confirms that this element warrants the Court’s

attention. Through the PSLRA, “Congress chose to

focus on the element of scienter as a way to separate

the meritorious wheat from the dismissible chaff.”

Richard A. Booth, Deconstructing Scienter, 16 Va. L. &

Bus. Rev. 1, 27 (2021). But since Tellabs was decided

nearly two decades ago, several circuits have steadily

loosened the scienter standard this Court described as

an “[e]xacting” one by relying on the core operations

doctrine or routine corporate communications to plead

scienter. Tellabs, 551 U.S. at 313. The lower courts

plainly disagree with one another about what counts

and what doesn’t in assessing scienter under the

PSLRA—but the question whether a securities-fraud

case can proceed should not depend on the

happenstance of geography.

It is especially significant that the Second Circuit

has now embraced the minority position on both issues

in this case, particularly after years of avoiding any

adoption of the core operations doctrine. See supra at

12 (collecting cases). The Second Circuit has long been

a leading circuit on securities law: it is home to the

most private securities cases of any circuit, and

together with the Ninth Circuit, it accounts for the

majority of all securities cases in the nation. See

Edward Flores & Svetlana Starykh, Recent Trends in

Securities Class Action Litigation: 2025 Full-Year

Review 5 & fig. 4 (2026), https://perma.cc/B5WP-ZTFL.

As a result, these increasingly permissive standards

will now govern most securities-fraud cases

nationwide.

This Court has not hesitated to grant review when,

as here, the circuits disagree over the PSLRA’s legal

standards and application to frequently recurring

allegations. See, e.g., Matrixx Initiatives, Inc. v.

Siracusano, 563 U.S. 27, 30 (2011) (reviewing question

of “whether a plaintiff can state a claim for securities

fraud . . . based on a pharmaceutical company’s failure

to disclose reports of adverse events . . . if the reports

do not disclose a statistically significant number of

adverse events”); Pet. at 7-10, Matrixx, No. 09-1156

(U.S. Mar. 23, 2010) (describing 3-1 circuit split on the

question); Tellabs, 551 U.S. at 322 (reviewing Seventh

Circuit’s application of “strong inference” standard in

light of “diverge[nce]” among the circuits); Dura

Pharms., 544 U.S. at 338, 340 (reviewing Ninth

Circuit’s adoption of specific “loss causation” theory

under the PSLRA, which “differ[ed] from those of other

Circuits” in a 4-1 circuit split). The Court should

likewise grant review here: the 5-5 and 6-3 splits in

this case are especially deep and involve two of the

most common approaches to pleading scienter in

securities-fraud cases.

2. This case provides an excellent vehicle to resolve

both questions presented. On each issue, this case

deepens clear splits. And while every securities-fraud

case involves a mix of allegations offered to plead

scienter, like the allegations purportedly showing

motive in this case, see Pet. App. 37a-40a, the Second

Circuit here expressly held that it could infer scienter

only if other allegations—such as those about the core

operations doctrine and corporate communications—

were “strong.” Id. at 40a. These holdings played a

particularly outsized role in the Second Circuit’s

analysis because the court identified few, if any, other

allegations supporting the scienter of two of the four

individual

defendants—and

none

whatsoever

regarding their motive. See id. at 37a-42a.

This case also provides the Court a particularly

clean illustration of both questions presented. As to

core operations, the Second Circuit expressly invoked

the doctrine and was clear about the doctrinal move it

made—noting that it had not previously “affirmed the

validity” of the doctrine “following the passage of the

PSLRA.” Pet. App. 46a n.19 (citation omitted). But

the court nevertheless determined that the “size,”

“importance,” and “significance” of the alleged fraud

supported the doctrine’s application. Id. at 45a-47a,

52a. And as to executives’ receipt of corporate

information, the Second Circuit pointed to “weekly

reports” and “call[s]” to a customer, without any

allegations

about

the

contents

those

communications. Id. at 43a-44a. These allegations

are clearly deficient—and the Court should grant

review to say so.

CONCLUSION

The Court should grant the petition for a writ of

certiorari.

Respectfully submitted,

JOHN M. HILLEBRECHT

MARC A. SILVERMAN

STEVEN M. ROSATO

DLA PIPER LLP (US)

1251 Avenue of the

Americas

New York, NY 10020

(212) 335-4500

ELIZABETH B. PRELOGAR

Counsel of Record

DEV P. RANJAN

COOLEY LLP

1299 Pennsylvania Ave., NW

Suite 700

Washington, DC 20004

(202) 842-7800

eprelogar@cooley.com

PATRICK E. GIBBS

COOLEY LLP

3175 Hanover Street

Palo Alto, CA 94304

(650) 843-5000

PATRICK J. HAYDEN

COOLEY LLP

55 Hudson Yards

New York, NY 10001

(212) 479-6000

Counsel for Petitioners

May 1, 2026

APPENDIX

TABLE OF CONTENTS

Page

APPENDIX A: Opinion, Salamon Gimpel v.

The Hain Celestial Group. Inc., No. 23-7612

(2d Cir. Sept. 29, 2025)......................................... 1a

APPENDIX B: Order Adopting Report &

Recommendation, In re The Hain Celestial

Group Inc. Securities Litigation,

No. 2:16-cv-4581 (E.D.N.Y. Sept. 29, 2023) ....... 54a

APPENDIX C: Report & Recommendation,

In re The Hain Celestial Group Inc.

Securities Litigation, No. 2:16-cv-4581

(E.D.N.Y. Nov. 4, 2022) .................................... 106a

APPENDIX D: Order Denying Rehearing,

Salamon Gimpel v. The Hain Celestial

Group, Inc., No. 23-7612 (2d Cir. Dec. 2,

2025).................................................................. 196a

APPENDIX E: 15 U.S.C. § 78u-4(b) ..................... 198a

APPENDIX F: Fed. R. Civ. P. 9(b) ....................... 202a

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term, 2024

(Argued: December 5, 2024

Decided: September 29, 2025)

————

Docket No. 23-7612

————

SALAMON GIMPEL, ROSEWOOD FUNERAL HOME,

Lead Plaintiffs–Appellants,

JAMES SPADOLA, RODNEY LYNN,

Consolidated Plaintiffs,

BRADLEY D. FLORA, Individually and on behalf of all

others similarly situated,

Plaintiff,

THE HAIN CELESTIAL GROUP, INC., IRWIN D. SIMON,

PASQUALE CONTE, JOHN CARROLL, STEPHEN J. SMITH,

Defendants–Appellees.

————

Before: SACK, NARDINI, AND LEE, Circuit Judges.

Lead Plaintiffs-Appellants Salamon Gimpel and

Rosewood Funeral Home (the “Plaintiffs”) appeal

from a Rule 12(b)(6) dismissal of their complaint

against Defendants-Appellees The Hain Celestial

Group, Inc. (“Hain”), and Irwin D. Simon, Pasquale

Conte, John Carroll, and Stephen J. Smith (the

“Individual Defendants,” and together with Hain, the

“Defendants”) by the United States District Court for

the Eastern District of New York (Joanna Seybert,

Judge). The Plaintiffs brought a securities-fraud

class action pursuant to Sections 10(b) and 20(a) of

the Securities Exchange Act of 1934 (the “Exchange

Act”), 15 U.S.C. §§ 78j(b), 78t(a), and Rule 10b-5, 17

C.F.R. § 240.10b–5. They alleged that, in order to

meet Wall Street revenue projection numbers, the

Defendants engaged in “channel-stuffing” practices,

offering Hain’s distributors valuable concessions at

the end of each quarter to take more product than

they could sell without adequately disclosing the

practice or accounting for its financial implications to

investors. In dismissing the Plaintiffs’ complaint, the

district court concluded that the Plaintiffs had failed

to adequately allege scienter, the wrongful state of

mind, of the Defendants.

For the reasons that follow, we conclude that

the Plaintiffs have adequately alleged that the

Defendants made actionable misstatements and did

so with scienter. Moreover, we conclude that the

Plaintiffs have adequately alleged loss causation and

control-person liability. We therefore

VACATE the district court’s judgment and

REMAND for further proceedings consistent with

this opinion.

CHRISTINE M. FOX (Carol C. Villegas,

James M. Fee, Matthew J. Grier,

Labaton Keller Sucharow LLP, New

York, NY, on the brief); (Robert V.

Prongay,

Leanne

Heine

Solish,

Jonathan M. Rotter, Glancy Prongay &

Murray LLP, Los Angeles, CA, on the

brief); (Brian Schall, The Schall Law

Firm, Los Angeles, CA, on the brief),

for Lead Plaintiffs-Appellants Rosewood

Funeral Home and Salamon Gimpel;

JOHN M. HILLEBRECHT (Marc A.

Silverman, on the brief), DLA Piper LLP

(US), New York, NY, for DefendantsAppellees.

SACK, Circuit Judge:

Lead Plaintiffs-Appellants Salamon Gimpel and

Rosewood Funeral Home 1 (collectively, the “Plaintiffs”) appeal from the dismissal of their securitiesfraud class action brought against DefendantsAppellees The Hain Celestial Group, Inc. (“Hain”)

and four of its present or former officers, Irwin

Simon, Pasquale Conte, John Carroll, and Stephen

Smith (the “Individual Defendants,” and together

with Hain, the “Defendants”). 2 On behalf of a

Co-Lead Plaintiff Rosewood Funeral Home is a funeral

home in the Houston, Texas area that purchased Hain Celestial

Group, Inc. (“Hain”) call options during the Class Period and

suffered approximately $1,548,333 in losses. Co-Lead Plaintiff

Salamon Gimpel purchased Hain common stock and suffered

approximately $822,519 in losses during the Class Period.

Defendant Simon founded Hain and served as its President,

Chief Executive Officer (“CEO”), and Chairman of the Board

until June 2018. Defendant Conte served as Treasurer and Vice

President from July 2009 to October 2014, Senior Vice President

of Finance from October 2014 to September 2015, and Chief

Financial Officer (“CFO”) and Executive Vice President of

Finance from September 2015 to June 2017 (as successor to

Smith). Defendant Carroll was Hain’s Executive Vice President

and CEO for Hain Celestial North America from February 2015

to March 6, 2017, and has been the Executive Vice President for

Global Brands, Categories, and New Business Ventures since

March 6, 2017. Defendant Smith preceded Conte as Hain’s CFO

and Executive Vice President from September 3, 2013, to

September 30, 2015.

putative class of investors who purchased or otherwise acquired Hain’s publicly traded common stock

from November 5, 2013, through February 10, 2017

(the “Class Period”), the Plaintiffs asserted claims

under Sections 10(b) and 20(a) of the Securities

Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C.

§§ 78j(b), 78t(a), and Rule 10b-5, 17 C.F.R. § 240.10b–

5, in their operative, Second Amended Complaint (the

“Complaint”).

The gravamen of the Complaint is that Hain, a

leading marketer, manufacturer, and seller of organic

and natural food and personal care products, engaged

in a so-called “channel-stuffing” scheme: Faced with

flagging demand for its products and pressure to

meet Wall Street analysts’ financial forecasts for the

company, Hain offered its distributors significant

concessions to accept more product than they needed

at the end of each fiscal quarter. However, by stuffing

its distributors to the gills, Hain allegedly robbed

Peter to pay Paul, cannibalizing future revenues to

make present sales look more impressive. After

distributors would no longer accept inventory and

Hain’s practices precipitated internal strife and an

independent audit, the Securities and Exchange

Commission (the “SEC”) launched an investigation.

Eventually, Hain restated its financial numbers,

conceded that it lacked adequate internal controls to

account for its practices and improperly recognized

revenue, and settled with the SEC, which declined to

bring charges. Hain’s reported sales figures

plummeted. The Plaintiffs brought suit in the

Eastern District of New York.

Channel stuffing is not necessarily illegal, but it

may give rise to liability under the Exchange Act

when a company engages in the practice to deceive

investors. Here, the Plaintiffs allege that the Defendants made false statements to investors about, among

other things, their financial results, the existence of

adequate internal controls, and their compliance with

Generally Accepted Accounting Principles (“GAAP”);

they allege further that the Defendants made misleading statements by attributing Hain’s financial

success to consumer demand and by downplaying

concerns about inventory levels without disclosing

their reliance on channel stuffing. And, according to

the Plaintiffs, the Defendants made these false and

misleading statements with a wrongful state of mind,

i.e., scienter, defined here as the “defendant’s intention to deceive, manipulate, or defraud.”3 Tellabs, Inc.

v. Makor Issues & Rts., Ltd., 551 U.S. 308, 313

(2007); see 15 U.S.C. § 78u–4(b)(1), (2).

After the district court first dismissed the

Plaintiffs’ Complaint, In re Hain Celestial Grp. Inc.

Sec. Litig. (Hain II), No. 16-CV-4581, 2020 WL

1676762, at *17 (E.D.N.Y. Apr. 6, 2020), and we

reversed, In re Hain Celestial Grp., Inc. Sec. Litig., 20

F.4th 131, 137-38 (2d Cir. 2021), the Defendants

again moved to dismiss. 4 Largely adopting the

Unless otherwise indicated, when quoting cases, all internal

quotation marks, alteration marks, emphases, footnotes, and

citations are omitted.

To date, this case has seen four substantive district-court

opinions and one opinion from this Court. See In re The Hain

Celestial Grp. Inc. Sec. Litig. (Hain I), No. 16-CV-4581, 2019 WL

1429560, at *22 (E.D.N.Y. Mar. 29, 2019) (dismissing thenoperative complaint without prejudice); In re Hain Celestial Grp.

Inc. Sec. Litig. (Hain II), No. 16-CV-4581, 2020 WL 1676762,

at *17 (E.D.N.Y. Apr. 6, 2020) (dismissing Complaint with

prejudice), vacated and remanded 20 F.4th 131 (2d Cir. 2021);

In re Hain Celestial Grp. Inc. Sec. Litig. (Hain III), No. 16-CV4581, 2022 WL 18859055 (E.D.N.Y. Nov. 4, 2022), report and

conclusions of Magistrate Judge Lee G. Dunst’s

Report and Recommendation (“R&R”), In re Hain

Celestial Grp. Inc. Sec. Litig. (Hain III), No. 16-CV4581, 2022 WL 18859055 (E.D.N.Y. Nov. 4, 2022), the

district court (Joanna Seybert, Judge) granted the

Defendants’ motion to dismiss under Federal Rule of

Civil Procedure 12(b)(6), concluding that the Plaintiffs had failed to adequately allege that the Defendants acted with scienter, In re Hain Celestial

Grp. Inc. Sec. Litig. (Hain IV), No. 16-CV-4581, 2023

WL 6360345, at *14-18 (E.D.N.Y. Sep. 29, 2023).

On appeal, we conclude that the Plaintiffs have

adequately alleged that the Defendants made actionable misstatements in connection with Hain’s channel-stuffing practices and did so with scienter under

Rule 10b-5(b); they also sufficiently alleged loss

causation. We further determine that the Plaintiffs’

claims for control-person liability against the Individual Defendants under Section 20(a) of the Exchange

Act may proceed. For the reasons set forth in further

detail below, we VACATE the district court’s order

dismissing the Plaintiffs’ Complaint and REMAND

the matter for further proceedings consistent with

this opinion.

BACKGROUND

I. Factual History

The following facts are drawn primarily from the

factual allegations of the Plaintiffs’ Complaint, which

we treat as true for present purposes, “drawing all

reasonable inferences in favor of [the] Plaintiffs to

the extent that the inferences are plausibly suprecommendation adopted (Hain IV), No. 16-CV-4581, 2023 WL

6360345, at *17–*18 (E.D.N.Y. Sep. 29, 2023) (dismissing

Complaint with prejudice again).

ported by allegations of fact.” Hain, 20 F.4th at 133.

The Complaint relies on allegations from eight

unnamed confidential witnesses (“CWs”), seven of

whom are former Hain employees, and one of whom

worked for a company that provided warehousing

services for Hain. We generally consider and take as

true allegations by CWs at the pleadings stage so

long as the CWs “are described in the complaint with

sufficient particularity to support the probability that

a person in the position occupied by the source would

possess the information alleged.” Emps.’ Ret. Sys. of

Gov’t of the Virgin Islands v. Blanford, 794 F.3d 297,

305 (2d Cir. 2015). The Complaint also incorporates

by reference various publicly available documents,

such as SEC filings, an SEC order, and earning calls

transcripts, of which we take judicial notice. See San

Leandro Emergency Med. Grp. Profit Sharing Plan v.

Philip Morris Cos., 75 F.3d 801, 808–09 (2d Cir.

1996).

A. Hain’s Alleged Channel-Stuffing Scheme

Hain is a leading marketer, manufacturer, and

seller of organic, natural, and personal care products,

which it sells primarily to specialty and natural food

distributors, supermarkets, and select e-commerce

retailers. In the early 2010s, Hain faced stiffening

competition from other brands and retailers offering

a similar selection of natural and organic foods,

which weakened demand for Hain’s products. Hain

feared that it could meet neither its own financial

projections nor the predictions made by Wall Street

financial analysts about Hain’s financial performance—shortcomings that could send Hain’s stock

prices tumbling. Hain resorted to “channel stuffing,”

offering its distributors significant concessions to

purchase substantial quantities of product in advance

of the distributors’ typical purchasing patterns. See

Greebel v. FTP Software, Inc., 194 F.3d 185, 202

(1st Cir. 1999); Steckman v. Hart Brewing, Inc., 143

F.3d 1293, 1298 (9th Cir. 1998). But channel stuffing

may exact a heavy toll: By pulling sales forward, the

company artificially inflates its present sales at the

expense of its future performance—it robs Peter to

pay Paul. See Steckman, 143 F.3d at 1298. Among

the concessions Hain allegedly offered its distributors

to front-load their purchases were (1) cash incentives

as high as $500,000 for a single distributor in a

single quarter; (2) product discounts of up to 20%;

(3) extended payment terms; (4) spoils coverage, or

reimbursements for excess product that spoiled or

expired; and (5) an absolute right to return unsold

product.

Hain’s channel stuffing worked roughly as follows.

Each quarter, Hain publicly reported its financial

results and provided investors with guidance on its

projected net sales and earnings per share. Independent Wall Street financial analysts then established consensus prospective quarterly estimates, i.e.,

financial benchmarks for the company, that were

generally consistent with Hain’s guidance and predicted continued sales growth for the company.

Investors used these forecasts to gauge a company’s

financial performance and health, but a company’s

failure to meet these “Street expectations” could

trigger a decline in the company’s stock price.

That all is standard practice—but here’s the rub:

As sales weakened during the Class Period, Hain

faced a “sales shortfall” between its actual, midquarter results and its projected figures. Joint App’x

208 ¶ 63. To bridge that gap, Carroll, the CEO

of Hain North America, obtained the mid-quarter

numbers, estimated the sales shortfall, and, along

with Hain President and CEO Simon, enticed Hain’s

distributors to take on additional inventory by offering the various concessions. Carroll and Simon then

directed Hain brand managers to ship the excess

inventory to distributors. By pulling forward these

sales, Hain could report to investors that it had met

its performance benchmarks without disclosing its

declining financial prospects.

For one key Hain distributor, United Natural

Foods, Inc. (“UNFI”), end-of-quarter sales were

especially prominent. Hain and UNFI agreed to

quarterly inventory purchasing targets of around

$90 million per quarter; however, UNFI communicated to Hain that it might miss these targets by as

little as $10 million and as much as $30 million. To

ensure that UNFI would meet its targets, Hain

negotiated “off-contract” incentives and concessions.

UNFI bought between 52-64% of its inventory based

on these off-contract incentives, constituting more

than 15% of Hain’s entire U.S. quarterly sales.5 Hain

relied on similar tactics with another key distributor,

Walmart Stores, Inc., which accounted for around 8%

of Hain’s net U.S. sales.

But these channel stuffing practices raised serious

accounting issues. For one, as Hain later disclosed,

although Hain negotiated these concessions “offcontract” or in “side agreements”—rather than in, for

instance, its annual sales contracts—it did not have

effective internal controls to “identify, accumulate[,]

and assess the accounting impact” of these arrangements. Joint App’x 231–32 ¶ 147. Indeed, Hain’s

The U.S. business segment, in turn, represented around half

of Hain’s global net sales during the Class Period.

10a

agreements with UNFI were, according to a subsequent SEC investigation, “typically memorialized

only in email correspondence with the distributor,”

and some incentives agreed to only “orally.” Id. at 361

¶ 9. Moreover, Hain allegedly resorted to using

millions of dollars’ worth of credits and accruals6 to

offset sales deficits on its balance sheet. But Hain

accounted for the “credits and off-invoice concessions

as revenue as soon as the shipments left the warehouse.” Id. at 209 ¶ 64; see id. at 215 ¶ 82. And

because of the size of the credits and accruals and the

ensuing “drop off” in sales following Hain’s end-ofquarter product push, id. at 212 ¶ 76, Hain’s Chief

Operating Officer (“COO”) and non-defendant James

Meiers “smoothed out” and “chang[ed]” the credits,

concessions, and sales and revenue numbers to make

the numbers “look pretty,” id. at 209, ¶ 64, 220–21

¶ 104.

Booking Hain’s shipments as revenue as soon as

they went out the door also proved especially troublesome because, according to the CWs, Hain offered its

distributors an “absolute right to return” product

with no obligation to pay. Joint App’x 207 ¶ 59. One

CW reported having routinely processed hundreds of

thousands of dollars in quarterly product returns,

including $700,000 in one quarter of 2015 alone.

Nonetheless, Meiers sent the sales and revenue

numbers for inclusion in Hain’s SEC filings to Hain’s

In “accrual basis” accounting, an accrual is revenue that

is actually earned but not yet paid, whereas in “cash basis”

accounting, “revenues are recognized when cash is received

(as opposed to earned).” Setzer v. Omega Healthcare Invs., Inc.,

968 F.3d 204, 209 n.8 (2d Cir. 2020). One CW reported becoming

wary about the size and legitimacy of the accruals used to offset

sales deficits. Joint App’x 215–16 ¶ 85.

11a

CFO (either Smith or Conte), who signed off on

Hain’s accounting statements and certified their

accuracy.

In addition to presenting accounting problems, the

channel-stuffing practices were also unsustainable.

The following fiscal quarter, distributors often

returned the excess inventory from the previous

quarter, “and the process would begin again,

although with an increasingly larger deficit due to

the prior quarter’s credits [for returns] and off-invoice

concessions.” Id. at 209 ¶ 65. Faced with declining

end-customer demand for Hain’s products, distributors also began to hit an inventory wall, reaching

their capacity. All the while, the Defendants made

repeated public statements attributing Hain’s strong

growth in sales numbers to “strong consistent consumer demand” and other “organic” factors, while

failing to disclose how the channel-stuffing practices

artificially inflated sales figures. See, e.g., id. at 259

¶ 257, id. at 260 ¶ 260, id. at 262 ¶ 266.

B. The Channel-Stuffing Scheme Unravels

Around late 2015, things fell apart. As sales ebbed,

accruals and credits flowed. Filled to the brim

with inventory, Hain’s distributors informed Hain

that they would no longer accept more inventory

than necessary. Hain’s newly arrived Treasurer

James Langrock, brought onboard in late 2015

and “surprised” by what he found in Hain’s books,

questioned “how [Hain was] accounting for” its

various practices. Id. at 224–25 ¶¶ 115, 117. He

subsequently brought in external auditors, including

Ernst & Young (“EY”).

On January 11, 2016, as EY began to dig into

Hain’s books, Hain cut its quarterly and annual

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guidance, announcing that it anticipated its full-year

sales to be $70 million less than expected and its

earnings per share in the range of $1.95-$2.10, below

its previous issued guidance of $2.11-$2.26. On

January 21, 2016, Hain revealed in an SEC filing

that Ross Weiner resigned from his positions as Vice

President of Finance and Chief Accounting Officer,

allegedly because “he did not like what he was

seeing regarding the off-invoice concessions offered

to distributors.” Id. at 226 ¶ 122. Despite Simon’s

assurances to investors on January 22, 2016, that

there is “nothing wrong with Hain’s accounting at

all,” Hain’s share price declined 7% between January

21 and January 25, 2016, from $36.10 a share to

$33.46. Id. at 226 ¶¶ 123–24.

On August 15, 2016, Hain also announced that it

would delay its release of its 2016 financial results

because “the Company identified concessions that

were granted to certain distributors in the United

States [and] . . . is currently evaluating whether

revenue associated with those concessions was

accounted for in the correct period and is also currently evaluating its internal control over financial

reporting.” Id. at 226–27 ¶ 125. Hain disclosed that it

was reevaluating whether it should have recognized

revenue associated with concessions when its products sold through the distributors to end customers,

rather than at the time of shipment to distributors,

as it had been doing. From August 15 to 16, 2016,

Hain’s share price fell by 26%, from $53.40 to $39.35

per share, shaving $1.6 billion off of Hain’s market

capitalization. On August 30, 2016, Hain informed

the SEC that it would not be able to file its annual

Form 10-K report for Fiscal Year 2016 by the filing

deadline because of its reevaluation of its revenuerecognition policies.

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Although Hain announced in a November 16, 2016,

press release that it had completed its internal audit

without finding any “evidence of intentional wrongdoing,” it disclosed that it had “begun to implement a

remediation plan to strengthen its internal controls

and organization” and was still unable to release

financial results. Id. at 228 ¶ 132. Despite the purported conclusion of its internal investigation, on the

final day of the Class Period, February 10, 2017,

Hain announced it had expanded the scope of its

internal investigation to encompass its historical

financial results and that the SEC had launched a

formal investigation of Hain and issued subpoenas

seeking relevant documents. Hain’s stock price fell a

further 8%, from $38.53 to $35.10 per share. Over the

next months, Hain removed Carroll from his role as

CEO for North America, received notice that its stock

was subject to delisting from the National Association of Securities Dealers Automated Quotations

(“NASDAQ”), and obtained several additional extensions for the deadline to file its financial results.

C. Hain Restates its Financial Results

On June 22, 2017, having failed to publicly file any

financial reports for almost a year, Hain issued its

belated Report on Form 10-K for Fiscal Year (“FY”)

2016, as well as its Reports on Form 10-Q for the

first, second, and third quarters of FY 2017. Hain

admitted that it identified “deficiencies that constituted individually, or in the aggregate, material

weaknesses in [its] internal control over financial

reporting as of June 30, 2016,” including an ineffective control environment and inadequate revenuerecognition mechanisms. Id. at 231–32 ¶ 147.

Specifically, it acknowledged, “both [its] fiscal 2016

and fiscal 2015 net sales benefited from certain

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concessions provided to [its] largest distributors,

including payment terms beyond the customer’s

standard terms, rights of return of product[,] and

post-sale concessions, most of which were associated

with sales that occurred at the end of each respective

quarter.” Id. at 231 ¶ 146.

In conjunction with these disclosures, Hain restated its historic financials, disclosing that it overstated its net sales by $167 million—2.1%, 2.9% and

1.9% in FY 2014, FY 2015 and for the nine months

ending March 31, 2016, respectively—and its GAAP

earnings per share by $0.13 for Fiscal Years 2014,

2015 and the first three quarters of FY 2016. Despite

having previously reported financial results that met

Wall Street’s consensus estimates for three of the six

quarters from FY 2015 through the second quarter of

FY 2016, Hain’s restatement revealed that it would

have missed those estimates in every quarter had it

engaged in proper accounting practices. Hain also

announced that CFO Conte was being replaced by

James Langrock, effective immediately; according to

a CW, Hain also terminated several senior members

of its financial team, including its Controller Marla

Hyndman.

Hain’s business subsequently nosedived. In the

first nine months of FY 2017, U.S. net sales fell 14%

year-over-year, and net income and earnings per

share each plummeted 51.1%. These numbers, the

CEO of Hain North America acknowledged, were

“obviously a significant hit for [Hain] to take.” Id. at

235 ¶ 154.

D. SEC Investigation and Settlement

On December 11, 2018, the SEC concluded its

almost two-year-long investigation and announced it

15a

had entered a consent decree with Hain (the “SEC

Order”). See id. at 358–65. Hain admitted that it

violated Section 13(b)(2)(A) of the Exchange Act,

which requires Hain to make and keep records that

accurately and fairly reflect Hain’s transactions,

and Section 13(b)(2)(B), which requires Hain to

devise and maintain a system of internal accounting

controls sufficient to provide reasonable assurance

that transactions are executed in accordance with

management’s authorization and in conformity with

GAAP.

The SEC Order recounted its findings. It stated

that Hain had engaged in “end of quarter sales” in

which Hain asked its two leading distributors—which

together accounted for 30% of Hain’s U.S. net sales—

to purchase specific dollar values of inventory by

quarter-end, in exchange for the following incentives:

(1) cash incentives (up to $500,000),

(2) extended payment terms (up to 90 days),

(3) discounts off list price (up to 20% off), and

(4) spoils coverage, whereby Hain agreed to

reimburse the distributor for products that

spoiled or expired before the distributor

could sell through to retailers.

Id. at 360. While the SEC Order stated that the “vast

majority of the products purchased in connection

with [end-of-quarter] sales . . . ultimately sold

through to retailers,” and “[n]one of these types

of incentives are improper,” it noted that these

incentives “could have financial reporting implications.” Id. at 360–61. Moreover, it concluded that

“Hain lacked sufficient policies and procedures to

provide reasonable assurances that [end-of-quarter]

sales were accounted for properly.” Id. at 361.

Ultimately, in part because Hain engaged in rem-

16a

edial acts, self-reported to the SEC, and assisted

with its investigation, the SEC declined to impose a

civil penalty. It did, however, order Hain to cease

and desist from committing violations of Section

13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act.

II. Procedural History

The case before us already has a lengthy procedural history. On August 17, 2016, three plaintiffs

filed separate securities fraud actions against Hain,

which the district court consolidated, appointing

Lead Plaintiffs. On September 7, 2017, Plaintiffs filed

a second complaint, adding additional individual

defendants.

A. Prior Proceedings

On March 29, 2019, the district court7 dismissed

the Plaintiffs’ allegations under Sections 10(b) and

20(a) of the Exchange Act and Rule 10(b)-5 without

prejudice and granted the Plaintiffs leave to amend.

See Hain I, 2019 WL 1429560, at *22. The Plaintiffs

filed their operative Complaint on May 6, 2019, and,

responding to the district court, added additional

allegations, including those based on additional CWs.

On April 6, 2020, the district court again dismissed

the Plaintiffs’ Complaint, this time with prejudice.

See Hain II, 2020 WL 1676762, at *17. The court

dismissed the Plaintiffs’ claims under Rule 10b-5(a)

and (c),8 which prohibits the “employ[ment of] any

device, scheme, or artifice to defraud,” 17 C.F.R.

At this time, Judge Arthur B. Spatt presided over the case;

the case was transferred to Judge Seybert after Judge Spatt’s

passing.

As discussed below, these claims are not before us on this

appeal.

17a

§ 240.10b–5(a), and “engage[ment] in any act,

practice, or course of business which operates or

would operate as a fraud or deceit upon any person,”

id. § 240.10b–5(c). Hain II, 2020 WL 1676762 at

*9–12. The court determined that the Plaintiffs had

not sufficiently alleged an “absolute right to return”

purchased product, Hain II, 2020 WL 1676762, at

*11; this absolute right to return was dispositive to

these “scheme liability” claims, the court held,

because “[c]hannel stuffing becomes a form of fraud

only when it is used to book revenues on the basis of

goods shipped but not really sold because the buyer

can return them,” id. at *10–11 (quoting Makor

Issues & Rts., Ltd. v. Tellabs Inc., 513 F.3d 702, 709

(7th Cir. 2008)). The court then dismissed the

Plaintiffs’ Section 10(b) and Rule 10b-5(b) claims

because the court had already determined that the

channel-stuffing scheme was legitimate. Id. at *12

(“This theory fails because its predicate is the

illegitimacy of the channel stuffing practices the

Court already found to be legitimate.”). The court

also reached the issue of scienter, concluding that

although the Plaintiffs’ allegations were “quite close”

to meeting their burden, they nonetheless failed to do

so. Id. at *14–17. The Plaintiffs timely appealed from

the district court’s dismissal of their allegations of a

violation of Rule 10b-5(b), but not clauses (a) and (c).

On appeal, we vacated the district court’s judgment

and remanded the case for the district court to

reconsider the Defendants’ motion to dismiss. See

Hain, 20 F.4th at 138. We concluded that the district

court had erred in dismissing the Plaintiffs’ Rule 10b5(b) claim because whether the channel-stuffing

scheme is itself fraudulent under 10b-5(a) or (c) is not

dispositive to a Rule 10b-5(b) claim, which focuses

“not on schemes, devices, or practices, but on state-

18a

ments made.” Id. at 136–37. Rule 10b-5(b), we

elaborated, “does not require that conduct underlying

a purportedly misleading statement or omission

amount to a fraudulent scheme or practice.” Id. at

137. We clarified that the success of the Plaintiffs’

theory—“that [the] Defendants made statements

attributing Hain’s high sales volume to strong consumer demand, while omitting to state that increased

competition had weakened consumer demand and

that Hain’s high sales volume was achieved in

significant part by the offer of unsustainable channel

stuffing incentives,” id. at 137—depends on whether

“something said was materially misleading, either

because it included a false statement of a material

fact or because it omitted to state a material fact

which omission rendered the things said misleading,”

id. at 136. We therefore vacated the district court’s

decision that the Complaint failed to satisfy Rule

10b-5(b)’s requirements. Id. at 137.

As to scienter, we concluded that the district

court erred twice. First, the district court’s mistaken

understanding of the Plaintiffs’ theory “inevitably

affected” its scienter analysis, requiring reconsideration. Id. Second, we determined that the court

erred in failing to “assess the total weight of the circumstantial allegations together with the allegations

of motive and opportunity.” Id. at 137–38. We

directed the district court to consider anew whether

the Complaint sufficiently stated a Rule 10b-5(b)

claim. Id. at 138.

B. The District Court’s Opinion on Remand

On remand, the Defendants’ motion to dismiss was

referred to Magistrate Judge Lee G. Dunst. Judge

Dunst issued a report and recommendation (“R&R”)

recommending that the district court grant the

19a

Defendants’ motion to dismiss with prejudice, concluding that the Plaintiffs had failed to adequately

plead (1) any actionable misstatement or omission

under Rule 10b-5(b) and (2) scienter. See Hain III,

2022 WL 18859055, at *34.

On September 29, 2023, Judge Seybert issued a

memorandum and order adopting much of the R&R.

See Hain IV, 2023 WL 6360345, at *18. While the

court “concur[red]” with “Magistrate Judge Dunst’s

threshold recommendation finding that [the] Plaintiffs have failed to plead an actionable misstatement

or omission,” id. at *14, it explicitly adopted only the

R&R’s “scienter-related recommendations,” id. at *18.

Because the court concluded that the Plaintiffs had

failed to make the requisite scienter allegations, it

dismissed the Plaintiffs’ Rule 10(b) and Rule 20(a)

claims and denied the Plaintiffs leave to amend their

Complaint. Id. at *18. The Plaintiffs appeal for a

second time.

DISCUSSION

I. Applicable Law

A. Standard of Review

We review the district court’s dismissal of a

complaint for failure to state a claim de novo.

Johnson v. Nextel Commc’ns, Inc., 660 F.3d 131, 138

(2d Cir. 2011). “To survive a motion to dismiss, 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, 556 U.S. 662,

678 (2009).

“Any complaint alleging securities fraud must satisfy the heightened pleading requirements of the

[Private Securities Litigation Reform Act of 1995

20a

(the “PSLRA”)] and Fed. R. Civ. P. 9(b) by stating

with particularity the circumstances constituting

fraud.” ECA, Loc. 134 IBEW Joint Pension Tr. of

Chicago v. JP Morgan Chase Co., 553 F.3d 187, 196

(2d Cir. 2009). Under the PSLRA’s heightened pleading requirement, the plaintiff must “(1) ‘specify each

statement alleged to have been misleading [and] the

reason or reasons why the statement is misleading,’

and (2) ‘state with particularity facts giving rise to a

strong inference that the defendant acted with the

required state of mind,’” i.e., scienter. Tellabs, 551

U.S. at 321 (quoting 15 U.S.C. §§ 78u–4(b)(1), 78u–

4(b)(2)). While we “normally” draw all reasonable

inferences in favor of the plaintiff, “the PSLRA

establishes a more stringent rule for inferences

involving scienter because the PSLRA requires

particular allegations giving rise to a strong inference

of scienter.” ECA, 553 F.3d at 196.

B. Securities Law

The Plaintiffs’ primary claims are brought pursuant to Section 10(b) of the Exchange Act, 15 U.S.C.

§ 78j(b), and the relevant provision of its

implementing regulation, Rule 10b-5(b), 17 C.F.R.

§ 240.10b–5(b). Section 10(b) makes it unlawful for

“any person, directly, or indirectly . . . [t]o use or

employ, in connection with the purchase or sale of

any security . . . any manipulative or deceptive device

or contrivance in contravention of” rules and

regulations promulgated by the SEC for the protection of investors. 15 U.S.C. § 78j(b). Rule 10b-5(b),

in turn, makes it unlawful to “make any untrue

statement of a material fact or to omit to state a

material fact necessary in order to make the

statements made, in the light of the circumstances

21a

under which they were made, not misleading.” 9

17 C.F.R. § 240.10b–5(b). As we explained when this

case was last on appeal, violations of Rule 10b-5(b)

“do[] not require that the defendant have used

a fraudulent or otherwise illegal device, scheme,

artifice, act, practice, or course of business” but

rather turn on “whether something said was

materially misleading, either because it included a

false statement of a material fact or because it

omitted to state a material fact which omission

rendered the things said misleading.” Hain, 20 F.4th

at 136.

To succeed on a Section 10(b) claim, “a plaintiff

must prove (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.” Stoneridge Inv. Partners, LLC

v. Sci.-Atlanta, 552 U.S. 148, 157 (2008). The Plaintiffs also bring Section 20(a) control-person liability

claims against the Individual Defendants, which

require an adequately pleaded Rule 10b-5(b) claim as

a predicate. ECA, 553 F.3d at 207.

C. Channel Stuffing

Channel stuffing is not necessarily fraudulent:

Offering distributors concessions is a common practice, see Tellabs, 551 U.S. at 325, and there may be

legitimate reason for a company “pressing for sales to

be made earlier than in the normal course,” Greebel,

The Supreme Court has found an implied private right of

action in Section 10(b) and Rule 10b–5. See Macquarie Infrastructure Corp. v. Moab Partners, L. P., 601 U.S. 257, 260

(2024).

22a

194 F.3d at 202, such as to “incite [its] distributors to

more vigorous efforts to sell the stuff lest it pile up

in inventory,” Makor, 513 F.3d at 709. However,

channel stuffing may become fraudulent when it is

“done to mislead investors.” Garfield v. NDC Health

Corp., 466 F.3d 1255, 1262 (11th Cir. 2006). Parsing

between “[a] certain amount of channel stuffing [that]

could be innocent,” Makor, 513 F.3d at 709, and

illegitimate channel stuffing done to mislead investors has been no easy task for courts. In Tellabs, the

Supreme Court suggested that a company “writing

orders for products customers had not requested” is

the “illegitimate kind” of channel stuffing, 551 U.S. at

325; on remand, the Seventh Circuit opined that

channel stuffing becomes fraudulent “only when it is

used . . . to book revenues on the basis of goods

shipped but not really sold because the buyer can

return them” because the conditions of revenue

recognition—the transfer of “ownership and its

attendant risks”—have not actually occurred. Makor,

513 F.3d at 709.

As we previously explained in this case, a plaintiff

proceeding under Rule 10b-5(b) 10 may successfully

plead securities fraud even when the alleged channelstuffing practices are not themselves “fraudulent or

otherwise illegal” because Rule 10b-5(b) focuses “on

whether something said was materially misleading,

either because it included a false statement of a

material fact or because it omitted to state a material

Two other provisions of Rule 10b-5, clauses (a) and (c),

impose liability on public companies for “use of a fraudulent or

deceptive device, scheme, artifice, act, or practice.” Hain, 20

F.4th at 136. Because these provisions are not before us, we do

not consider the circumstances in which channel stuffing might

become a fraudulent scheme in and of itself.

23a

fact which omission rendered the things said misleading,” rather than on whether “that conduct

underlying a purportedly misleading statement or

omission amount to a fraudulent scheme or practice.”

Id. at 136–37. In our Circuit, courts have recognized

two relevant scenarios in which a company may incur

liability under Rule 10b-5(b) in connection with

channel-stuffing practices.

First, district courts have recognized that channel

stuffing may give rise to liability if it results in

improper revenue recognition and, therefore, false

financial statements and violations of GAAP. See,

e.g., Plumbers & Pipefitters Nat. Pension Fund v.

Orthofix Int’l N.V., 89 F. Supp. 3d 602, 608–09, 616

(S.D.N.Y. 2015) (concluding, where the plaintiff

alleged that the defendant engaged in “large bulk

sales to distributors designed to inflate revenue

before the end of a quarter” and the defendant

restated its financial results and admitted violations

of GAAP, that the plaintiff adequately alleged a

securities-fraud claim). Improper revenue recognition

could occur, for example, if the company offers its

distributors the “right to return” product and fails to

account for those returns, or if it does not properly

recognize the costs associated with the incentives

used to induce channel stuffing. Of course, even if

channel stuffing requires financial corrections or

results in false affirmations of GAAP compliance,

those misstatements must be material, and a

plaintiff must adequately plead scienter for a cognizable securities-fraud claim to obtain. See Novak v.

Kasaks, 216 F.3d 300, 309 (2d Cir. 2000) (“Only

where such allegations [of GAAP violations or

accounting irregularities] are coupled with evidence

of corresponding fraudulent intent might they be

sufficient.”).

24a

A second possibility—regardless of whether the

company restated its financial results—is that the

company made misleading statements about, for example, the company’s financial success or channel

inventory levels without disclosing its reliance on

channel stuffing. See Hain, 20 F.4th at 136–37

(holding that a company may incur liability based

“on whether something said was materially misleading” in connection with channel stuffing on Rule

10b-5(b) claim); see, e.g., Okla. Firefighters Pension

& Ret. Sys. v. Lexmark Int’l, Inc., 367 F. Supp. 3d

16, 31–34 (S.D.N.Y. 2019) (concluding that the

defendants’ statements about inventory levels,

revenue growth, and price harmonization were

actionable in light of channel-stuffing allegations);

San Antonio Fire & Police Pension Fund v. Dentsply

Sirona Inc., 732 F. Supp. 3d 300, 316 (S.D.N.Y. 2024)

(statements about “the strength and sustainability of

the company’s earnings in general and demand for

[the] products in particular” are misleading if “much

of [the company’s] sales were due to channel

stuffing”); In re SolarEdge Techs., Inc. Sec. Litig., No.

23-CV-9748, 2024 WL 4979296, at *7 (S.D.N.Y. Dec.

4, 2024) (“Plaintiffs have adequately pleaded that it

was misleading for [the defendant] to attribute

increased revenues in late 2022 to a variety of factors

meanwhile omitting that part of the increase in

revenues was caused by a practice of channel

stuffing.”). Failing to disclose the existence of channel

stuffing, under this theory, is misleading because

investors would want to know that revenue is not

being driven by increased demand but by sales tactics

that will likely prove unsustainable once distributors

reach maximum inventory and the company can no

longer flood them with product.

25a

Mindful of these principles, we turn to the

Plaintiffs’ allegations.

II. Actionable Misstatements

We first examine whether the Plaintiffs have

plausibly alleged actionable misstatements. The

district court noted only that it concurred with the

portions of the R&R that concluded that the Plaintiffs

had failed to allege such actionable misstatements

and omissions, Hain IV, 2023 WL 6360345, at *14,

but did not specifically adopt those portions of the

R&R into its findings, see id. at *18 (“The Court

adopts Magistrate Judge Dunst’s scienter-related

recommendations.”). So, although the district court

did not reach the misstatement issue, we first consider the alleged actionable misstatements because

our conclusions as to which statements are actionable

are, of course, relevant in determining whether the

Defendants acted with scienter in making them.

A. Legal Principles

Under Rule 10b–5(b), it is unlawful to (1) “make

any untrue statement of a material fact,” or (2) “omit

to state a material fact necessary in order to make

the statements made . . . not misleading.” 17 C.F.R.

§ 240.10b–5(b). These prongs correspond to two

actionable theories under Section 10(b) and Rule

10b–5: (1) a false statement, i.e., “an actual statement . . . that is . . . ‘untrue’ outright,” and (2) a halftruth, i.e., a “representation[ ] that state[s] the

truth only so far as it goes, while omitting critical

qualifying information.” 11 In re Vivendi, S.A. Sec.

Litig., 838 F.3d 223, 239–40 (2d Cir. 2016).

We use the term “half-truth,” rather than “omission,” to

avoid confusion with non-actionable, “pure omissions.” See

26a

A false statement is the most intuitive: it must, of

course, be false at the time it was made, and the

plaintiff must demonstrate with specificity why the

statement is false. Rombach v. Chang, 355 F.3d 164,

172 (2d Cir. 2004).

A half-truth theory involves more nuance. A classic

contract-law example of a half-truth is “the seller

who reveals that there may be two new roads near a

property he is selling, but fails to disclose that a third

potential road might bisect the property.” Universal

Health Servs., Inc. v. United States ex rel. Escobar,

579 U.S. 176, 188–89 (2016). For securities-fraud

claims, although “§ 10(b) and Rule 10b–5 do not

create an affirmative duty to disclose any and all

material information,” Matrixx Initiatives, Inc. v.

Siracusano, 563 U.S. 27, 44 (2011), once “a company

speaks on an issue or topic,” it must “tell the whole

truth,” Meyer v. Jinkosolar Holdings Co., 761 F.3d

245, 250 (2d Cir. 2014). That is, when a company

does speak, it assumes “a duty to be both accurate

and complete,” Caiola v. Citibank, N.A., N.Y., 295

Vivendi, 838 F.3d at 240 n.9. “[T]he difference between a pure

omission and a half-truth is the difference between a child not

telling his parents he ate a whole cake and telling them he had

dessert.” Macquarie, 601 U.S. at 264. Although we had

previously held that liability may arise under a “pure omission”

theory—omissions when the “corporation is subject to a duty to

disclose the omitted facts,” such as where a different statutory or

regulatory provision obligates the company to speak

affirmatively, Vivendi, 838 F.3d at 239–40 & n.8—the Supreme

Court has since clarified that they are not actionable under Rule

10b–5(b), see Macquarie, 601 U.S. at 264; Maso Cap. Invs. Ltd. v.

E-House (China) Holdings Ltd., No. 22-355, 2024 WL 2890968,

at *4 (2d Cir. June 10, 2024) (summary order) (“Rule 10b–5(b)

does not proscribe pure omissions, but instead covers half-truths

by requiring disclosure of information necessary to ensure that

statements already made are clear and complete.”).

27a

F.3d 312, 331 (2d Cir. 2002), and adequate disclosure

is required to make other statements, “in light of the

circumstances under which they were made, not

misleading,” Meyer, 761 F.3d at 250. To determine

whether a statement is misleading, our inquiry is

objective, from the perspective of a “reasonable

investor,” considering not only a statement’s “literal

truth” but also its “context and manner of presentation.” Singh v. Cigna Corp., 918 F.3d 57, 63 (2d

Cir. 2019).

The plaintiff must also adequately allege that the

misstatement or half-truth is “material,” meaning

that “a reasonable investor would have considered [it]

significant in making investment decisions.” Caiola,

295 F.3d at 329. In other words, there must be a

“substantial likelihood” that the statement or omission “would have been viewed by the reasonable

investor as having significantly altered the total mix

of information made available.” Matrixx, 563 U.S. at

38.

Here, the Plaintiffs allege that Defendants made

both actionable false statements to investors related

to Hain’s financial results and accounting practices

and misleading “half-truths” in failing to disclose

their reliance on channel stuffing when attributing

their financial success and discussing inventory

levels.

B. Misstatements

Theory

under

Accounting

Fraud

We first conclude that the Plaintiffs have plausibly

alleged that the Defendants made a series of material

misstatements about, among other things, Hain’s

financial results, its compliance with GAAP, the

existence of effective internal controls, its description

28a

of its revenue-recognition policies, and its certifications in its SEC filings that, among other things,

those filings did not contain any untrue or misleading

statements of material fact and rested on adequate

internal controls (the “SOX certifications”).12 See, e.g.,

Joint App’x 238–57 ¶¶ 163–250 (detailing false

statements in Hain’s financial results); id. at 271–72

¶¶ 294–96 (Hain’s compliance with GAAP); id. at

272–73 ¶¶ 297–99 (Hain’s revenue-recognition

policies); id. at 273 ¶¶ 300–02 (Hain’s statement that

“incentives are deducted from our gross sales to

determine reported net sales”); id. at 273–74 ¶¶ 303–

05 (Hain’s statement that “[a]ccruals for trade

promotions are recorded primarily at the time a

product is sold to the customer based on expected

levels of performance”); id. at 274–77 ¶¶ 306–12

(SOX certifications); id. at 277–81 ¶¶ 313–19 (Hain’s

statements about the existence of adequate internal

controls). Hain’s subsequent restatement of its financial results and disclosure of material weaknesses in

its internal controls and financial-reporting and accounting practices, see id. at 231–33 ¶¶ 147–49, suffice

to establish that these statements were in fact false

The Defendants’ principal argument on this score is that

the Plaintiffs abandoned these claims, a conclusion with which

the R&R agreed. See Hain III, 2022 WL 18859055, at *16–17.

However, our review of the record reveals that the Plaintiffs

maintained that these statements were false and material

before both the magistrate judge and the district court. See, e.g.,

Joint App’x 947 (the Plaintiffs’ opposition to Defendants’ motion

to dismiss before the magistrate judge stating that “Hain’s

quarterly and annual reported financial results during the Class

Period, including net sales, net income, and EPS, were

materially overstated in violation of GAAP because the

Company failed to account for the off-invoice sales concessions

and incentives granted to distributors, including with respect to

revenue recognition”).

29a

at the time they were made, 13 see, e.g., Fresno

Cnty. Emps.’ Ret. Ass’n v. comScore, Inc., 268

F. Supp. 3d 526, 544 (S.D.N.Y. 2017) (“In light of

[the defendant’s] admission that it must restate its

financial statements, there can be no dispute that the

[complaint] pleads numerous false and misleading

misstatements with respect to revenue, revenue

related metrics, and [the defendant’s] compliance

with GAAP.”); In re Atlas Air Worldwide Holdings,

Inc. Sec. Litig., 324 F. Supp. 2d 474, 486 (S.D.N.Y.

2004) (“Although a restatement is not an admission

of wrongdoing, the mere fact that financial results

were restated is sufficient basis for pleading that

those statements were false when made.”).

C. Actionable “Half-Truths” in Failing

Disclose Channel-Stuffing Practices

We also conclude that the Defendants made a

series of actionable misleading, “half-true” state13

The SOX certifications are statements of opinion, which

may be actionable if, among other things, that statement does

not rest on the issuer’s “meaningful inquiry” or “fairly align with

the information in the issuer’s possession at the time.” New Eng.

Carpenters Guaranteed Annuity & Pension Funds v. DeCarlo,

122 F.4th 28, 46–47 (2d Cir. 2023). As the Defendants press, a

subsequent restatement of financial results or disclosure of

material weaknesses in internal controls, “standing alone, does

not mean that the original certified opinions were disingenuous[,] [n]or is a genuinely held opinion that turned out to be

wrong necessarily actionable.” Id. at 47. However, as we explain

further below, the Plaintiffs allege that the Defendants never

had an internal audit or compliance department and documented the concessions they personally negotiated in potentially

deceptive ways. Such allegations, coupled with the later disclosure, suggest that “the speaker kn[ew] or reasonably should

[have] know[n] of different material facts” about Hain’s internal

controls and accounting practices. Abramson v. Newlink

Genetics Corp., 965 F.3d 165, 175 (2d Cir. 2020).

30a

ments by failing to disclose to investors their reliance

on the channel-stuffing practices when discussing

Hain’s financial success and inventory levels at its

distributors.

As an initial matter, the Plaintiffs have adequately

alleged that Hain relied on various channel-stuffing

practices to boost its revenues. According to the CW

allegations, Hain offered distributors an absolute

right to return purchased product. The Defendants

counter that the CW allegations are too vague and

conclusory to support this conclusion, but this

argument founders. We may credit the allegations

of the CWs so long as they “are described in the

complaint with sufficient particularity to support the

probability that a person in the position occupied by

the source would possess the information alleged.”

Novak, 216 F.3d at 314. The Plaintiffs’ Complaint

does just that: CW 6, who served as Senior Manager

of Customer Support at Hain, alleged that they alone

processed a $700,000 product return from UNFI in

just one quarter of 2015, while CW 7, who served as

Senior Director of Supply Chain Finance, also

reported that Simon negotiated a right of return with

UNFI. Hain’s disclosure in its FY 2016 SEC filing

that its net sales benefited from “rights of return of

product” fortifies these allegations. Joint App’x 231

¶ 146. That disclosure and the subsequent SEC

Order together reveal that Hain relied on a host of

other practices that may have been of interest to

investors, such as quarterly cash incentives of up to

$500,000 to distributors, extended payment terms,

price discounts of up to 20% off, and spoils coverage,

including up to $1.6 million for one distributor in one

quarter alone. The Plaintiffs have therefore plausibly

alleged that Hain used undisclosed, material sales

tactics to meet benchmarks that may have made a

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difference in the mind of a “reasonable investor.”

Caiola, 295 F.3d at 329.

Having determined that the Complaint sufficiently

alleges that Hain employed various channel-stuffing

tactics, we further conclude that the Defendants

made a series of actionable misleading statements

by failing to disclose their reliance on channel

stuffing to meet investor benchmarks. In making

these statements, Hain triggered the “half-truth”

doctrine—that “once a company speaks on an issue

or topic, there is a duty to tell the whole truth,”

Meyer, 761 F.3d at 250—by repeatedly attributing its

financial results during the Class Period to factors

such as “expanded distribution and brand contribution,” Joint App’x 241 ¶ 174, “strong demand for

[its] organic and natural brands as demonstrated by

the increasing consumption of [its] products,” id. at

242 ¶ 181, “momentum for organic and natural products,” id. at 244 ¶ 190, its “diverse portfolio of

brands and products,” id. at 246 ¶ 198, and “strong

worldwide demand for [its products],” id. at 250

¶ 219. But it did not disclose that it allegedly

achieved its financial results in no small part by

granting distributors credits, incentives, spoils

coverage, or a right to return product. By “put[ting]

the reasons for the company’s success at issue, but

fail[ing] to disclose a material source of its success,

specifically the practice of channel stuffing, the[se]

statement[s]

[were]

materially

misleading.”

SolarEdge, 2024 WL 4979296, at *8; see also San

Antonio Fire, 732 F. Supp. 3d at 316 (concluding that

statements discussing strength and sustainability of

the company’s earnings and demand for its products

“would be misleading if (as alleged) the company was

having trouble getting the materials to make the

products, many of the products it did make didn’t

32a

work, and much of its sales were due to channel

stuffing”); Okla. Firefighters, 367 F. Supp. 3d at 33

(“[A] reasonable investor would likely have found it

significant that . . . revenues were driven by inflated

channel inventory and not increased end-user

demand because those forces fundamentally differ in

sustainability.”).

We similarly conclude that several of the Defendants’ statements about distributors’ inventory levels

were also misleading. For example, on January 12,

2016, the day after Hain cut its quarterly and annual

guidance for anticipated sales and earnings, Carroll

acknowledged to investors that the guidance cut was

“in the area of inventory” but stated that these

problems were “one-offs.” Joint App’x 267 ¶ 281. If, as

the Complaint alleges, demand for Hain’s products

had waned, and Hain’s distributors had already

reached their inventory capacity, the characterization

of these problems as “one-offs” would be misleading

since inventory saturation would persist. See Novak,

216 F.3d at 311–12 (holding that the defendants’

“reassurances that inventory was under control or

giving false explanations for its growth” constituted

“conscious misstatements”); Okla. Firefighters, 367 F.

Supp. 3d at 31 (concluding that statements that

channel inventory levels were “flat,” “neutral,” or had

increased only a “bit” were misleading because they

failed to mention “the true nature of [the defendant’s]

channel inventory levels”). For the same reason—

that a buildup of inventory based on channel stuffing

“would inevitably require a drawdown in future

quarters,” Okla. Firefighters, 367 F. Supp. 3d at 35—

several of the Individual Defendants’ other statements about inventory levels and declining sales are

similarly actionable, see, e.g., Joint App’x 258–59

¶¶ 253–56 (Carroll downplaying inventory concerns

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on a February 4, 2014, earnings conference call); id.

at 266 ¶ 278, 269 ¶ 288, 270 ¶ 291 (Carroll and Conte

attributing declining sales to distributor and account

shifts, rather than inventory saturation from channel

stuffing); id. at 269–70 ¶¶ 290–91 (Carroll telling

investors that “[w]e’re resolving some of the issues we

had with retailers, for example, with . . . distributors

as we had accounts shift” in response to question

about declining sales growth in U.S. segment on a

May 4, 2016, earnings call).

The Defendants contend that Hain adequately

disclosed these practices to investors, but we are

unpersuaded. The “truth-on-the-market” defense

invoked by the Defendants provides that “a misrepresentation is immaterial if the information is

already known to the market because the misrepresentation cannot then defraud the market.”

Ganino v. Citizens Utils. Co., 228 F.3d 154, 167 (2d

Cir. 2000). Here, Hain urges that it disclosed its

channel-stuffing practices to investors by stating in

SEC filings that it undertook “[s]ales incentives and

promotions” such as “price discounts, slotting fees

and coupons” in an effort to “support sales of the

Company’s products.” See, e.g., Hain Celestial Group,

Inc., Annual Report at 42 (Form 10-K) (Aug. 21,

2015).

The Defendants’ argument fails at the pleading

stage. We have emphasized that the “corrective

information must be conveyed to the public with a

degree of intensity and credibility sufficient to

counter-balance effectively any misleading information created by the alleged misstatements” and

cautioned that “[t]he truth-on-the-market defense is

intensely fact-specific and is rarely an appropriate

basis for dismissing a § 10(b) complaint for failure to

34a

plead materiality.” Ganino, 228 F.3d at 167. For one,

Hain’s statement that it used various incentives and

promotions did not disclose that it offered distributors a right to return product. And because the

“truth-on-the-market defense” is a fact-intensive

inquiry, whether Hain’s generic language about

offering sales incentives and promotions sufficiently

counterbalanced the statements that attributed sales

growth to growing demand should not be resolved at

the pleadings stage. See, e.g., In re Fannie Mae 2008

Sec. Litig., 891 F. Supp. 2d 458, 476 & n.12 (S.D.N.Y.

2012), aff’d, 525 F. App’x 16 (2d Cir. 2013) (rejecting

the defendants’ contention that it disclosed sufficient

information to “correct, clarify, or render immaterial

the purported misstatements” on motion to dismiss).

We cannot conclude, for example, that Hain’s

boilerplate statement that “[s]ales are reported net of

sales and promotion incentives” in its revenuerecognition policies,14 Joint App’x 272 ¶ 297, would

inform a reasonable investor that Hain’s increasing

reliance on credits, discounts, and incentives

propelled those sales numbers, see, e.g., Solomon v.

Sprint Corp., No. 19-CV-5272, 2022 WL 889897, at *6

(S.D.N.Y. Mar. 25, 2022) (company’s general disclosures of its use of promotions “do not defeat the

clear impression generated by the company’s other

statements about the strength of the business

overall”). Indeed, the Defendants can hardly be said

to have disclosed their channel stuffing when, despite

their alleged increasing reliance on the practice, they

failed to update these statements year over year,

“render[ing] [the statements] meaningless in light of

the changing circumstances and risks.” In re Salix

In any event, it appears that this statement was false in

light of Hain’s subsequent disclosures.

35a

Pharms., Ltd., No. 14-cv-8925, 2016 WL 1629341, at

*12 (S.D.N.Y. Apr. 22, 2016) (concluding that the

defendant’s cautionary language was inadequate

to invoke the PSLRA’s safe-harbor provision for

forward-looking statements15). Compare Hain, Annual

Report at 42, 61 (Form 10-K) (Aug. 21, 2015) with

Hain, Annual Report at 37, 54 (Form 10-K) (Aug. 27,

2014).

Nor do the cases cited by the Defendants salvage

their argument. For instance, in Dalberth v. Xerox

Corp., 766 F.3d 172 (2d Cir. 2014), we concluded

on summary judgment that one of the individual

defendants adequately disclosed that the company’s

reorganization of U.S. operations had negative effects

on the company’s revenue growth where, for example,

the individual defendant stated that cash generation

was “clearly unsatisfactory” and attributed this

problem in part to the company’s “reorganization and

restructuring,” id. at 186. This specific disclosure

about a discrete problem is miles apart from Hain’s

generic statement that it generally employed promotions and incentives—just as a child telling his

parents that he ate dessert is misleading if he ate the

entire cake. See Macquarie Infrastructure Corp. v.

Moab Partners, L. P., 601 U.S. 257, 264 (2024).

Because the PSLRA’s safe-harbor provision applies to forward-looking statements, it is not applicable to the Defendants’

representations of present fact. See Okla. Firefighters, 367 F.

Supp. 3d at 33. However, the doctrine’s treatment of unchanging,

boilerplate language is illustrative here. See Slayton v. Am. Exp.

Co., 604 F.3d 758, 772–73 (2d Cir. 2010) (holding that the doctrine requires the defendants to “demonstrate that their

cautionary language was not boilerplate and conveyed substantive information” and concluding that cautionary language was

mere boilerplate in part because “the defendants’ cautionary

language remained the same even while the problem changed”).

36a

In sum, we conclude that Hain made actionable

misstatements when it stated, among other things,

its financial results, the existence of adequate

internal controls, and its compliance with GAAP.

That Hain restated its financials and admitted

deficiencies in its practices suffices to establish that

they were false at the time they were made. We

further conclude that Hain made a series of

misleading “half-truths” in discussing the causes of

its financial success without disclosing its reliance on

channel stuffing.

III. Scienter

We next turn to whether the Plaintiffs have adequately alleged scienter, “a mental state embracing

intent to deceive, manipulate, or defraud.”16 Tellabs,

551 U.S. at 319. Under the PSLRA, a plaintiff must

allege facts giving rise to a “strong inference that the

defendant acted with [scienter],” 15 U.S.C. § 78u4(b)(2)(A), where a “strong inference” means that the

inference “must be more than merely plausible or

reasonable—it must be cogent and at least as

compelling as any opposing inference of nonfraudulent intent,” Tellabs, 551 U.S. at 314. That inference,

however, need not be “irrefutable,” of the “smokinggun genre,” or even the “most plausible of competing

inferences.” Id. at 324. Instead, we must consider

“whether all of the facts alleged, taken collectively,

give rise to a strong inference of scienter, not whether

any individual allegation, scrutinized in isolation,

The Individual Defendants’ scienter can be imputed to

Hain. See Teamsters Loc. 445 Freight Div. Pension Fund v.

Dynex Cap. Inc., 531 F.3d 190, 195 (2d Cir. 2008) (“When the

defendant is a corporate entity, . . . the pleaded facts must

create a strong inference that someone whose intent could be

imputed to the corporation acted with the requisite scienter.”).

37a

meets that standard,” id. at 323, and we must take

into account inferences favoring both the plaintiff

and the defendant, Blanford, 794 F.3d at 305.

A plaintiff may establish scienter by alleging facts

showing that (1) the defendants had the motive and

opportunity to commit fraud, or (2) strong circumstantial evidence of conscious misbehavior or

recklessness. ECA, 553 F.3d at 198. A plaintiff can

also meet his scienter burden with both motive-andopportunity and circumstantial allegations, considered collectively. See Hain, 20 F.4th at 137–38. The

Plaintiffs here advance both motive-and-opportunity

and recklessness arguments; because a plaintiff who

fails to show motive must provide correspondingly

stronger circumstantial allegations, Ark. Pub. Emps.

Ret. Sys. v. Bristol-Myers Squibb Co., 28 F.4th 343,

355 (2d Cir. 2022), we consider the strength of the

Plaintiffs’ motive allegations first.

A. Motive and Opportunity

The Plaintiffs first argue that the Individual

Defendants had the motive and opportunity to make

the false and misleading statements. We generally

presume that high-level corporate insiders, such as

C-suite executives, have the opportunity to commit

fraud. See In re Scholastic Corp. Sec. Litig., 252 F.3d

63, 74 (2d Cir. 2001). To establish a motive to engage

in fraud, “plaintiffs must assert a concrete and

personal benefit” to the individuals who allegedly

carried out the fraud. Kalnit v. Eichler, 264 F.3d 131,

139 (2d Cir. 2001). We have cautioned against

inferring motive from a “generalized” desire of individual defendants to see strong corporate performance or higher stock prices, “common to all corporate

executives and, thus, too generalized to demonstrate

scienter,” id.—otherwise, “virtually every company in

38a

the United States that experiences a downturn in

stock price could be forced to defend securities fraud

actions.” ECA, 553 F.3d at 201. The Plaintiffs allege

that we may infer motive from the Individual

Defendants’ suspicious stock sales and compensation

incentives that were tied to erroneous financial

statements. We agree.

First, the Plaintiffs have adequately alleged that

two of the Individual Defendants, Carroll and Simon,

engaged in suspicious stock sales during the Class

Period; as a point of comparison to the Class Period

sales, the Plaintiffs provide a Control Period from

July 30, 2010, to November 4, 2013, a period equal in

length to and before the Class Period. During the

Class Period, Carroll disposed of approximately 74%

of his total shares for more than $24.3 million, and

Simon sold 66% of his total for more than $80 million,

both of which represent significantly higher volumes

and totals than during the Control Period.

We find the timing and volume of stock sales

unusual, even if the allegations lack several attributes that might make the inferences drawn in the

Plaintiffs’ favor even stronger. Although the Plaintiffs did not plead net profits that Carroll and Simon

received from the sales, our caselaw instructs that

the amount of profits is merely one of several

“[f]actors considered in determining whether insider

trading activity is unusual,” including “the portion of

stockholdings sold, the change in volume of insider

sales, and the number of insiders selling,” Scholastic,

252 F.3d at 74–75, and therefore imposes no netprofit pleading requirement. We decline to impose

one here. That the Plaintiffs do not allege that the

sales occurred in the final 100 days of the nearly

four-year-long class period or that two of the other

39a

Individual Defendants, Smith and Conte, engaged in

suspicious sales might weaken the strength of the

inferences we draw in the Plaintiffs’ favor. Cf. San

Leandro, 75 F.3d at 814 (concluding that the failure

of some individual defendants to sell stock during

class period undermined the plaintiffs’ allegations

that any defendant intended to inflate stock for

personal profit); Chapman v. Mueller Water Prods.,

Inc., 466 F. Supp. 3d 382, 412 (S.D.N.Y. 2020) (stating that district courts in our Circuit are “frequently

skeptical that stock sales are indicative of scienter

where no trades occur in the months immediately

prior to a negative disclosure”). But that does not

mean we discount the Plaintiffs’ allegations altogether. Rather, consistent with the teachings of

Tellabs, we simply consider at the pleading stage

whether “all of the facts alleged, taken collectively,”

support an inference of scienter, even if that

inference is “not [] irrefutable.” 551 U.S. at 323–24.

We therefore abstain from imposing a brightline rule

that securities-fraud plaintiffs must allege that sales

took place in the final 100 days of a class period or

that all Individual Defendants engaged in such sales.

See Scholastic, 252 F.3d at 75 (explaining that San

Leandro and similar cases did not “establish[] a per

se rule that the sale by one officer of corporate stock

for a relatively small sum can never amount to

unusual trading[;] [r]ather, each case was decided on

its own facts”). The Plaintiffs’ allegations of motive,

taken collectively, tip the scale in their favor.

Second, we give weight to the Plaintiffs’ allegations

that Simon and Carroll had the motive to commit

fraud because bonuses they received were tied to the

very metrics that Hain admittedly overstated. To be

sure, “[m]otives that are common to most corporate

officers, such as the desire for the corporation to

40a

appear profitable and the desire to keep stock prices

high to increase officer compensation, do not constitute ‘motive’ for purposes of this inquiry.” ECA, 553

F.3d at 198. But we may infer the defendants’

“motive to sweep problems under the rug” if the allegations support a “direct link between the compensation package and the fraudulent statements.” Id. at

201. Here, the Plaintiffs’ allegations move the needle

because the significant bonuses and stock awards

that Simon and Carroll received in FY 2015—a bonus

of $5,565,725 and $8,787,355 in stock awards for

Simon and a bonus of $711,711 and $1,119,854 in

stock awards for Carroll—were tied to the metrics

that Hain overstated, including Hain’s net sales, net

income, and earnings per share. 17 That Simon met

his bonus target for net sales in FY 2015 by only

0.1%—and would not have hit that metric had

Hain properly accounted for its channel-stuffing

practices—suffices to show that the “defendants

benefitted in some concrete and personal way from

the purported fraud.” Novak, 216 F.3d at 307–08; see

also San Antonio Fire, 732 F. Supp. 3d at 318 (motive

allegations weigh in favor of scienter where the

alleged fraud of several million dollars was “critical”

because “the company just barely hit the thresholds

necessary for bonuses”).

Because we conclude that the Plaintiffs’ motive

allegations weigh in favor of scienter, the circumstantial evidence need not be as great, although it

must still be strong. See Ark. Pub. Emps., 28 F.4th at

355.

Executive compensation packages may, of course, depend

on a host of metrics, but we may infer motive where there is a

“direct link” between at least some of the metrics and the

alleged fraudulent statements. ECA, 553 F.3d at 201.

41a

B. Circumstantial Evidence of

Misbehavior or Recklessness

Conscious

We next consider the Plaintiffs’ allegations of

circumstantial evidence of conscious misbehavior or

recklessness. Here, recklessness is “highly unreasonable” conduct representing “an extreme departure

from the standards of ordinary care” and “approximating actual intent,” rather than “merely a heightened form of negligence.” Setzer v. Omega Healthcare

Invs., Inc., 968 F.3d 204, 214–15 (2d Cir. 2020).

“[S]ecurities fraud claims typically have sufficed to

state a claim based on recklessness when they have

specifically alleged [the] defendants’ knowledge of

facts or access to information contradicting their

public statements.” Id. at 215. “Under such circumstances, [the] defendants knew or, more importantly,

should have known that they were misrepresenting

material facts related to the corporation.” Novak, 216

F.3d at 308.

As discussed above, the Plaintiffs here advance two

broad sets of actionable misstatements: (1) false

statements about, among other things, Hain’s financial results and accounting and internal controls

practices, and (2) misleading, half-true statements

about Hain’s financial success and inventory. While

both scienter inquiries turn on the same principle—

whether the Defendants “knew or, more importantly,

should have known that they were misrepresenting

material facts related to the corporation,” Novak, 216

F.3d at 308—our precise inquiry in applying that

principle varies with the type of actionable misstatement. For the false statement theory, the

question is whether the Defendants knew or should

have known that their revenue-treatment policies

and hence their contemporaneous financial state-

42a

ments were incorrect. See In re Bristol-Myers Squibb

Sec. Litig., 312 F. Supp. 2d 549, 566 (S.D.N.Y. 2004);

Plumbers & Pipefitters, 89 F. Supp. 3d at 616–17. For

the half-truth theory, we ask whether the Defendants

knew or should have known that the channel-stuffing

practices and its implications contradicted their

statements about Hain’s financial success and inventory levels. See San Antonio Fire, 732 F. Supp. 3d

at 319–20; Okla. Firefighters, 367 F. Supp. 3d at 37.

Because of the substantial overlap between these

inquiries, we consider them together.

i. Confidential

Witnesses’

Allegations

About Individual Defendants

The Plaintiffs first argue that the Individual

Defendants’ actual knowledge of and active participation in the channel-stuffing practices support an

inference of scienter. Again, we have recognized that

such circumstantial evidence can support scienter

where the defendants “knew facts or had access to

information suggesting that their public statements

were not accurate.” ECA, 553 F.3d at 199. We

conclude that the Plaintiffs’ allegations support a

strong inference that the Individual Defendants had

actual knowledge of the channel-stuffing practices

that made their statements about financial success

and inventory misleading.

Start with the Plaintiffs’ allegations that Individual Defendants negotiated the concessions and

directed Hain employees to push product on distributors. According to the CWs, Carroll requested midquarter sales numbers from CW 6 to calculate sales

shortfalls, negotiated the credits and off-invoice

concessions to make up for sales shortfalls, and

informed sales-calls attendees about the concessions.

At the end of the fourth quarter of FY 2016, Simon

43a

called the general manager of a customer, BluePrint,

told him that BluePrint “needs to make [the forecasted sales numbers] this quarter,” and directed CW

2 18 to “push[] inventory” to BluePrint’s distributor.

Joint App’x 213 ¶ 78. And, according to CW 7, Simon

dealt directly with UNFI’s owner on the concessions

and revenue and could “always make [UNFI] buy

more [product] if needed.” Id. at 218 ¶ 94. These

allegations, which we treat as true for present

purposes, contradict Hain’s public statements attributing its financial success to factors such as strong

demand and downplaying inventory issues. See

Scholastic, 252 F.3d at 73 (concluding that the

company’s “aggressive sales practices . . . would

furnish additional support for the proposition that

company officials were aware of declining sales and

increasing returns”). They also support scienter as to

the false financial and accounting statements because the Individual Defendants knew or had access

to information about sales on “loosened terms.”

Plumbers & Pipefitters, 89 F. Supp. 3d at 617.

The CWs’ allegations about Hain’s accounting

practices further support a strong inference of

scienter. For example, according to CW 7, Hain

pushed out inventory, used credits and accruals to

offset sales deficits on its balance sheet, and engaged

in creative accounting tactics to smooth out sales,

which would plummet in the first month of a subsequent quarter after Hain had pushed its inventory

on distributors. Several CWs confirmed that Hain

offered its distributors a right to return product: CW

6 reported a $700,000 product return in 2015 and

CW 2 served as a Senior Sales Analyst, “responsible for

forecasting, trade planning, and profit and loss analysis at the

BluePrint brand business at Hain.” Joint App’x 199 ¶ 33.

44a

stated that $500,000 in quarterly returns were on the

“low-end” of such returns. Joint App’x 211 ¶ 72. CW

3—who prepared budget materials as an Executive

Assistant to COO Meiers—stated that at the end of

2015 and early in 2016, they witnessed a significant

increase in returns and credits. CW 7 reported that

accruals began to climb into the millions of dollars

from a starting point of around $200,000. CW 1

eventually left Hain in June 2016 because he

believed “something screwy” was going on with

Hain’s financial numbers after he saw sales declining

but credits increasing to millions of dollars each

quarter. Joint App’x 217 ¶ 89.

Burnishing the scienter allegations, the Individual

Defendants’ involvement continued through concession negotiations and top-down directives to accounting and reporting. After Carroll and Simon directed

Hain’s managers to ship off-invoice product to

distributors, Smith and Conte prepared Hain’s financial reports for the public, and they, with Simon,

signed off on their accuracy. Notably, Smith and

Carroll received weekly reports on sales, inventory,

and guidance targets. Such allegations suggest actual

knowledge of the alleged unsustainable practices and

improper revenue-recognition practices. See, e.g.,

Okla. Firefighters, 367 F. Supp. 3d at 37 (the

plaintiffs sufficiently alleged knowledge where the

defendants tracked inventory levels and saw data at

monthly meetings); Freudenberg v. E*Trade Fin.

Corp., 712 F. Supp. 2d 171, 198 (S.D.N.Y. 2010)

(conversations and attendance at meetings show

“access to and actual knowledge of facts”). That Hain

never had an internal audit or compliance department and subsequently disclosed in its Form 10-K for

FY 2016 that its “internal controls to identify,

accumulate and assess the accounting impact of

45a

certain concessions or side agreements on whether

the Company’s revenue recognition criteria had been

met were not adequately designed or operating

effectively,” Joint App’x 231–32 ¶ 147; see also id. at

362 ¶ 16 (SEC Order finding that Hain maintained

insufficient policies), further suggests recklessness on

the part of the Defendants, see San Antonio Fire, 732

F. Supp. 3d at 321 (collecting district court cases in

this Circuit holding that “poor internal controls

support an inference of scienter”).

Consider next the Plaintiffs’ allegations that the

Defendants maintained an inappropriate “tone at the

top,” i.e., a company culture of secrecy and fear, and

poor internal controls. See San Antonio Fire, 732 F.

Supp. 3d at 320–21 (collecting district court cases

that have “repeatedly held that improper tone at the

top . . . support[s] an inference of scienter”). For

example, according to CW1, after Hain’s August 15,

2016, announcement that it would delay releasing its

FY 2016 financial results, Carroll demanded that

“employees refrain from using the term ‘loading’” and

rephrase it as “‘inventory reduction.’” Joint App’x

217–18 ¶ 92. CW7 alleged overhearing Carroll and

Simon stating that they were “not supposed” to be

discussing their arrangements with UNFI in front of

others. Id. at 218–19 ¶ 95. And, according to CW 7,

Hain executives told one employee who was

eventually fired during the class period—to stop

asking questions about the end-of-quarter tactics. Id.

at 223 ¶ 113. Such secrecy insinuates knowledge of

wrongdoing.

Bolstering the scienter inference is that the alleged

fraud touched on large swaths of Hain’s U.S. business

and areas of critical import to Hain and its

executives, who we may infer “are likely to know

46a

more about things central to their business.” 19

Stadium Cap. LLC v. Co-Diagnostics, Inc., No. 22-cv6978, 2024 WL 456745, at *5 (S.D.N.Y. Feb. 5, 2024).

Hain ultimately adjusted its net sales by 2.1%, 2.9%,

and 1.9% in FY 2014, FY 2015 and for the nine

months ending March 31, 2016, respectively, which,

taken together, accounted for about $167 million of

$7 billion (around 2.4%) in net sales over a three-year

period. The total size of this alleged fraud is

comparable to other cases in which we have credited

scienter allegations, see Scholastic, 252 F.3d at 77

(holding that a total of $24 million in charges for book

returns “undermines, at the pleading stage, the

argument that the defendants were unaware” of any

increase in returns), although the figures are not eyepopping as a percentage of net sales, cf. Salix, 2016

In making this argument, the Plaintiffs invoke two related

doctrines, the “core-operations” and “magnitude of the fraud”

doctrines. The core-operations doctrine posits that “scienter

may be imputed to key officers who should have known facts

relating to the ‘core operations’ of their company,” In re

Wachovia Equity Sec. Litig., 753 F. Supp. 2d 326, 352

(S.D.N.Y. 2011), while the magnitude of the fraud doctrine

suggests recklessness if the alleged falsity impacted a large

portion of the company’s sales or operations, see Rothman v.

Gregor, 220 F.3d 81, 92 (2d Cir. 2000). We have not, however,

“clearly affirmed the validity of [the core-operations] doctrine

following the passage of the PSLRA,” In Re Renewable Energy

Grp. Sec. Litig., No. 22-335, 2022 WL 14206678, at *3 n.4 (2d

Cir. Oct. 25, 2022) (summary order), although we have

suggested that the doctrine “can provide supplemental support

for allegations of scienter, even if they cannot establish

scienter independently,” New Orleans Emps. Ret. Sys. v.

Celestica, Inc., 455 F. App’x 10, 14 n.3 (2d Cir. 2011) (summary

order). Here, we assume that the size of the alleged fraud,

coupled with its importance to Hain’s operations, provides

supplemental support for the Plaintiffs’ other sufficiently

pleaded allegations of scienter.

47a

WL 1629341, at *3, 16 (considering a “startling”

magnitude of alleged fraud, around 12.5% of sales).

Further tilting the balance in the Plaintiffs’ favor,

moreover, is the importance of this alleged fraud to

Hain. See, e.g., Scholastic, 252 F.3d at 76–77 (stating

that pleaded facts establishing significance of

inventory levels to company’s financial performance

supported allegation that defendants acted recklessly

when they failed to acknowledge publicly the

company’s decreased sales and increased returns);

New Orleans Emps. Ret. Sys. v. Celestica, Inc., 455

Fed. App’x 10, 14 & n.3 (2d Cir. 2011) (summary

order) (the plaintiffs properly pleaded scienter where

“inventory levels” were “key to measuring [the

defendant’s] financial performance and [were] a

subject about which investors and analysts often

inquired”). As already recounted, pushing product at

the end of quarters through various channel-stuffing

tactics was a top-down priority, deemed critical to

meet Wall Street financial benchmarks, and

involving top Hain executives and the company’s

most important distributors. Because of the size of

the restatement, the importance of the end-of-quarter

practices to meet financial targets, and the

distributors affected, we infer that the Individual

Defendants would have “monitored [these operations]

closely,” San Antonio Fire, 732 F. Supp. 3d at 319,

and knew or should have known information

contradicting their public statements, see Okla.

Firefighters, 367 F. Supp. 3d at 37–38 (inferring

scienter from allegations of fraud in the defendant’s

“primary profit engine”). Put simply, it would strain

credulity to conclude that the Individual Defendants

were unaware of channel stuffing and its potentially

insidious implications for investors.

48a

ii. Personnel Changes During and After the

Class Period

District courts in our Circuit have concluded that

key personnel changes—while not sufficient to

establish scienter—may add to the total mix of

circumstantial evidence of fraud when those changes

are “highly unusual and suspicious,” especially “when

independent facts indicate that the resignation was

somehow tied to the fraud alleged.” In re AppHarvest

Sec. Litig., 684 F. Supp. 3d 201, 245 (S.D.N.Y. 2023).

Here, the Plaintiffs provide a litany of suspicious

personnel changes—the terminations of seven

executives and demotions of two more—some of

which the CWs’ allegations link to the alleged fraud.

See Joint App’x 288–90 ¶¶ 339–47.

Of particular note, each of the Individual Defendants and other key personnel departed under suspicious circumstances. On September 8, 2015, Hain

announced that Conte would be replacing Smith as

CFO after only two years in the role, allegedly

because Smith clashed with Simon over the

company’s practices. On December 7, 2016, Hain

transferred Meiers, who oversaw the accounting

issues, from his position as COO to a role as CEO for

the Hain Pure Protein division, in a move that one

CW characterized as a demotion. On March 6, 2017—

less than a month after the revelation that the SEC

had launched an investigation—Hain announced that

Carroll would be removed from his role as CEO for

Hain North America. Then, on June 22, 2017, the

same day that Hain restated its financial results and

announced its remedial measures, Conte resigned as

CFO. On that day, Hain also announced that it would

be creating an expanded “team with new hires

including a new controller for the U.S. segment, a

49a

global revenue Controller, a Head of Internal Audit,

and a Chief Compliance Officer.” Id. at 290 ¶¶ 346–

47. In 2018, Simon and Senior Vice President and

Controller Marla Hyndman also departed.

Fortifying these allegations, several other Hain

executives left the company, allegedly because they

took issue with Hain’s channel-stuffing practices

and its financial reporting. See, e.g., id. at 223 ¶ 112,

289 ¶ 341 (Hain firing Senior Vice President of

Finance/Business Planning, Rose Ng, in September

2015, allegedly because she was “butting heads with

Meiers” over Hain’s financial-reporting practices); id.

at 226 ¶ 122 (Hain announcing Ross Weiner’s

resignation from his position of Vice President—

Finance, Chief Accounting Officer on January 21,

2016, and CW 6 alleging that Weiner left because “he

did not like what he was seeing regarding the offinvoice concessions offered to distributors”). We view

these allegations as offering supplemental, circumstantial support for the Plaintiffs’ scienter pleadings.

iii. The SEC Order

Finally, we reject the Defendants’ insistence that

the SEC Order exonerates them of potential liability.

The Defendants assert that the SEC Order “undermines any inference of wrongful intent” because of

the Order’s statement that the incentives were not

necessarily improper and the SEC’s decision not to

charge Hain or any individual with fraud. Appellee’s

Br. at 29 (citing Hain IV, 2023 WL 6360345, at *15).

As a preliminary matter, the SEC’s decision not

to pursue charges is “irrelevant as to whether

Plaintiffs have plausibly alleged claims in this case,”

Vanleeuwen v. Keyuan Petrochems., Inc., No. 13-cv6057, 2014 WL 3891351, at *4 n.5 (S.D.N.Y. Aug. 8,

2014), because the SEC Order was the result of

50a

negotiated, “private bargaining” between the SEC

and Hain, rather than “the result of an actual

adjudication of any of the issues,” Lipsky v.

Commonwealth United Corp., 551 F.2d 887, 893–94

(2d Cir. 1976). Indeed, by its own terms, the SEC

Order states that Hain consented to the entry of the

Order “[s]olely for the purpose of these proceedings

and any other proceedings brought by or on behalf of

the Commission, or to which the Commission is a

party.” Joint App’x 358. It does not doom the

Plaintiffs here.

But even taking the Defendants’ argument on its

own terms, the SEC Order is consistent with the

Plaintiffs’ theory. As we pointed out above, the

inquiry under Rule 10b-5(b) is not on the legality of

“schemes, devices, or practices, but on statements

made.” Hain, 20 F.4th at 136. Again, that principle

establishes that the Defendants’ exposure to Rule

10b-5(b) liability does not turn on the propriety of the

incentives described in the SEC Order, 20 but on

whether the Defendants made misleading statements

in connection with those practices. What is more,

while noting the legality of these incentives in a

vacuum, the SEC Order explicitly recognized that

those incentives “could have financial reporting

implications,” Joint App’x 360 ¶ 5—consistent with

the Plaintiffs’ theory as to Hain’s allegedly fraudulent accounting practices. Nor does the SEC Order’s

determination that the “vast majority of the products

purchased [by distributors] in connection with [endof-quarter] sales . . . ultimately sold through to

retailers,” id. at 361–62, absolve the Defendants.

Note, too, that the SEC Order did not speak about a right

to return, but we have credited the Plaintiffs’ allegations on this

point.

51a

That finding is consistent with the Plaintiffs’ theory

that distributors would be stuffed to the gills with

inventory and eventually either return Hain’s

product or stop buying it, causing sales to fall off a

cliff. See id. at 206 ¶ 57. And Hain’s numbers

eventually did precisely that, with year-over-year

U.S. net sales falling by 14% and net income

plummeting by 51.1% for the first nine months of

FY 2017 after Hain imposed remedial measures.

That much of the product may have eventually sold

through to end customers negates neither Hain’s

admission that it failed to account properly for those

sales in its SEC filings nor its allegedly misleading

statements about its financial and operational status

during the Class Period.

C. Holistic Evaluation

Allegations

the

Plaintiffs’

Having analyzed the Plaintiffs’ allegations, we now

consider “whether all of the facts alleged, taken

collectively, give rise to a strong inference of scienter,

not whether any individual allegation,

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