Chipotle Targeted in Federal Investigations, Shareholder Suit Filed in New York Federal Court
Chipotle Mexican Grill has reportedly been served with a grand jury subpoena as part of a U.S. Attorney’s Office and Food and Drug Administration criminal investigation into a California norovirus outbreak in August 2015 that sickened more than 200 people. The company’s fare was also linked to a norovirus outbreak in Massachusetts in December 2015. Chipotle’s food safety practices face additional scrutiny over an ongoing E. coli outbreak that has resulted in the closure of 43 Chipotle locations in Washington and Oregon and reports of related illnesses in several other states. See The New York Times, January 6, 2016.
In a January 6 Form 8-K filing with the U.S. Securities and Exchange Commission, Chipotle reported a 14.6 percent drop in fourth quarter 2015 sales and non-recurring expenses related to its foodborne illness incidents of $14 to $16 million.
Meanwhile, Pomerantz LLP announced on January 8 that it has filed a purported class action against Chipotle and certain of its officers in a New York federal court on behalf of individuals and entities that purchased company securities between February 4, 2015, and January 5, 2016. According to a news release, the complaint asserts that the defendants “made false and/or misleading statements and/or failed to disclose that: (i) Chipotle’s quality controls were not in compliance with applicable consumer and workplace safety regulations; (ii) Chipotle’s quality controls were inadequate to safeguard consumer and employee health; and (iii) as a result of the foregoing, Chipotle’s public statements were materially false and misleading at all relevant times.” The suit seeks to recover damages under the Securities Exchange Act of 1934.
Issue 589
