Chipotle sued for allegedly misleading investors over food safety

Chipotle Mexican Grill is facing an investor lawsuit after E. Coli and norovirus outbreaks linked to its restaurants across several U.S. states this fall. The lawsuit was filed on Friday Jan 8, in the U.S. District Court for the Southern District of New York.

The investors sue the restaurant chain for allegedly misleading investors about its food safety controls. The lawsuit brought by investor Susie Ong said the burrito chain made "materially false and misleading statements" and did not disclose that its "quality controls were not in compliance with applicable consumer and workplace safety regulations" and that its public statements were false, according to Fortune.

The Mexican grill chain having been struck by outbreaks of E. Coli and norovirus that sickened more than 500 people across 12 states since October 2015.

The class-action lawsuit complaint that Chipotle quality controls were inadequate to safeguard consumer and employee health.

The lawsuit, which also lists co-CEOs Steve Ells and Monty Moran as defendants among others, claimed that the company's stock price has taken a beating by the outbreak of foodborne illnesses linked to its stores. The suit seeks damages on behalf investors who bought Chipotle shares between February 2015 and January 2016.

According to Reuters, Chipotle's shares fell to their lowest level in more than two years. The shares are down 35 percent since the end of October. The investors lawsuit claims that they would not have bought shares if they had known how bad the outbreaks really were.

After the norovirus outbreak that sickened at least 234 customers and employees, Chipotle has been served with a grand jury subpoena as a part of a criminal investigation by the U.S. Department of Justice and the Food and Drug Administration, The Guardian reported. The company was severed with the subpoena in December, but only informed its investors about it on Wednesday Jan 6.

In Wednesday filing Chipotle  warned the investors that sales had dropped 30 percent in December and had been down as much as 37 percent immediately following reports od Centers for Disease Control and Prevention (CDC) investigations.

In Friday lawsuit, investors claim that Steve Ells and other Chipotle executives  were "personally motivated to make false statements and omit material information necessary to make the statements not misleading in order to personally benefit from the sale of Chipotle securities from their personal portfolios".

Chipotle's spokesperson, Chris Arnold, declined to comment about company policy on legal proceedings. In an effort to address the situation, Chipotle has apologised to customers in more than 60 newspapers across the U.S. and announced in December that it was changing its food preparation methods.

Tags

Chipotle, E. coli, norovirus, U.S. District Court, Class-Action Lawsuit, subpoena, U.S. Department of Justice, Food and Drug Administration

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