October 2025

Out of Delaware’s Court of Chancery, we have another tale of messy startup contract drafting, with facts that are increasingly bizarre and horrifying.

Consultant was hired by a startup, and the startup fell into arrears paying its bills.  The CEO and sole director offered a warrant for stock in lieu of payment, at a cheap (“practically free”) exercise price.  The company’s counsel (Wilson Sonsini) drafted the warrant for 1% of outstanding shares at the time of the warrant’s issuance.  The consultant’s attorney then amended the agreement to say 1% of shares at exercise.  The consultant returned the signed amended agreement to the CEO, but not in blackline and with no warning of the change.  The CEO, apparently without reading it, signed the revised agreement.  The agreement was recorded on the company’s books as being for 100,000 shares, i.e., 1% at time of issuance.

Later, the company conducted a stock split, and the warrant was revised on the company’s books to reflect 1 million shares.  At one point, KPMG audited the company for a counterparty considering a transaction, and flagged the discrepancy, but the company made no change.

Eventually – plot twist! – the consultant apparently got into some…

Seton Hall faces a need for a visitor to teach their four-credit Business Association course this spring. The class is taught in the daytime, in person. Syllabi and teaching materials are available from faculty who ordinarily teach the course there. If interested, contact:

Devon Corneal, M.S., JD (she/her/hers)
Associate Dean for Academics 
Seton Hall University School of Law
One Newark Center 
Room 307
Newark, NJ 07102
+1.973.642.8726
devon.corneal@shu.edu

This week, the Second Circuit issued an opinion reversing a district court’s dismissal of a securities fraud complaint filed against The Hain Celestial Group. The facts are these.

The plaintiffs alleged that Hain Celestial Group, and certain of its officers, engaged in a channel stuffing scheme by offering various concessions to distributors, so that it could book sales early and meet Wall Street expectations.  Allegedly, Hain failed to properly account for the concessions that it offered, which were accomplished through “off book” arrangements.  Distributors were granted an “absolute right to return,” with one employee reportedly processing hundreds of thousands of dollars in returns in one quarter – but the sales were included in Hain’s financial results regardless.

Eventually, as with all channel stuffing schemes, things fell apart, and the whole thing ended in the restatement of several years of financial results and a dramatic drop in sales.

The Second Circuit first held that the plaintiffs had properly alleged misstatements in violation of Section 10(b).  Restatements are a per se admission of falsity, so that covered the financials.  Further, Hain had engaged in misleading half-truths when it attributed its purportedly positive results to customer demand, rather than the distributor concessions.…

Dear BLPB Readers:

Below is information regarding the 2026 Midwest Academy of Legal Studies in Business (MALSB) Conference Call for Participation:

“MALSB invites you to join us for the annual conference in Chicago on March 25-27, 2026, and to share your scholarship, including: papers, abstracts, panel presentations, or other substantive presentations. Submissions to the MALSB/Legal Studies track must relate to business law, the legal environment of business or ethics, or the teaching of one of these topics. Program sessions provide an opportunity to present papers and learn from the scholarship of others in a collegial environment. The submission deadline is January 20, 2026.

MALSB encourages submission for its Master Teacher Competition, its Proceedings Awards, and its newly created Student Paper Competition. Submissions for these awards must comply with the requirements outlined below and final papers must be received by the submission deadline. Submissions will be evaluated for Awards and MALSB Proceedings, based upon a peer review process.

Abstracts, substantive presentations, and works in progress may be submitted. While a proposal may be accepted for presentation based upon an abstract or similar, all presenters must prepare and submit substantive materials by March 1, 2026. These substantive materials are required to support…