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Chipotle sued over alleged misleading food safety statements

Chipotle sued over alleged misleading food safety statements

Federal lawsuit argues that company deceived shareholders

Chipotle Mexican Grill Inc. was sued in a federal court Friday for allegedly misleading investors about its food safety practices amid an unprecedented series of foodborne illness outbreaks at the Denver-based operator’s restaurants.

The lawsuit, filed in New York, alleges that Chipotle failed to disclose that its quality controls did not comply with food safety regulations and that they were inadequate to safeguard consumer health.

A Chipotle spokesman declined to comment on Friday, saying that it is company policy not to comment on pending legal action.

Chipotle has been battered since October following multiple foodborne illness outbreaks in several states. The company said this week that fourth-quarter same-store sales fell 14.6 percent, including a 30-percent decline in December.

Chipotle’s stock price has plunged about 33 percent since October, when it was well above $700 a share. It closed at $413.29 per share on Friday, its lowest point in three years.

Law firms that specialize in securities litigation typically investigate such steep declines in stock price and may even file a lawsuit, and in recent weeks several such firms have announced investigations. The lawsuit filed on Friday is the first such suit in the Chipotle case.  

Chipotle’s problems began in August 2015, when 100 customers and employees of a restaurant in Simi Valley, Calif., became ill in a norovirus outbreak. Chipotle restaurants in Minnesota were the source of a salmonella outbreak in late summer.

In October, Chipotle shut down restaurants in Portland, Ore., and Seattle amid an E. coli outbreak there. That outbreak spread to several states, but the cause has yet to be determined. A total of 53 people have been infected.

And in early December, more than 140 people fell ill after eating at a Chipotle restaurant in Brighton, Mass., in another norovirus outbreak.

Earlier this week, Chipotle acknowledged that it had received a subpoena for documents related to its Simi Valley location in a rare, federal criminal investigation.

Chipotle has been working to prevent such problems in the future. It outlined new cooking methods, as well as operational procedures, in an effort to combat additional outbreaks.

Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze

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