In re Honest Company, Inc. Securities Litigation

On January 26, 2022, Labaton Keller Sucharow was appointed lead counsel in a securities class action against the Honest Company, Inc. (Honest) and other defendants.  Based in Los Angeles, California, Honest develops, markets, and sells clean and sustainable household and personal care products.  Of Honest’s three business segments—Diapers and Wipes, Skin and Personal Care, and Household and Wellness—its Diapers and Wipes category accounts for the majority of Honest’s revenue.

Lead Plaintiff filed an amended complaint on February 22, 2022, which alleges that Honest made numerous false and misleading statements regarding the company’s financial prospectus in the offering materials for Honest’s IPO in violation of the Securities Act of 1933.  Specifically, the amended complaint alleges that the offering materials failed to disclose Honest’s pre-IPO deceleration in sales, attributable to inter alia (i) customers were experiencing issues with Honest’s Clean Conscious Diaper, a product type Honest uses to acquire new customers for its remaining products; (ii) despite the surge in demand for Honest’s products amidst the COVID-19 pandemic, retailers were destocking COVID-19 products; and (iii) risks associated with Honest’s customer acquisition and retention and adverse economic conditions were already negatively impacting Honest’s operating results at the time of the IPO.

On July 18, 2022, Judge Scarsi denied Defendants’ motion to dismiss, sustaining claims against Honest, its directors and officers, and the underwriters for the IPO.  Judge Scarsi credited Lead Plaintiff’s allegations regarding “customers’ efficacy and safety concerns with the Clean Conscious Diaper” and found that “contrary to what Defendants led potential investors to believe through the offering documents, COVID-19 related product demand was declining at the time [of the IPO].”

On February 13, 2023, Lead Plaintiff filed a motion for class certification.  Following briefing on the motion and oral argument, on May 1, 2023, the Court issued an Order granting the class certification motion, certifying the Class, appointing Lead Plaintiff as Class Representative, and appointing Labaton Keller Sucharow LLP as Class Counsel.

The case is In re Honest Company, Inc. Securities Litigation, No. 21-CV-074405 (C.D. Cal.) Labaton Keller Sucharow represents Lead Plaintiff Kathie Ng.  The defendants are Honest, certain of its officers and directors, and the underwriters for its IPO.