Federal Court Dismisses Shareholder Suit Against Chipotle

A federal court in New York has dismissed with prejudice a shareholder suit against Chipotle Mexican Grill Inc., finding the plaintiffs were unable to allege that the company made “demonstrably false” statements about foodborne illness outbreaks linked to its restaurants. Ong v. Chipotle Mexican Grill, No. 16-0141 (S.D.N.Y., entered March 22, 2018). The plaintiffs alleged that Chipotle and three of its executives misled shareholders and the public in 2015 and 2016 statements after outbreaks of norovirus, E. coli and Salmonella were linked to its restaurants. In addition to finding Chipotle’s annual reports contained sufficient disclosures about its processes, the court found that the plaintiffs failed to adequately allege that executives who knew about the outbreaks’ connection to Chipotle sold more than $214 million in stock because the stock sales occurred months before the outbreaks were linked to the company.