Chipotle Sued Over Food-Safety Scandal
First came the lawsuits from customers sickened after eating burritos and burrito bowls. Then came the federal criminal investigation. Now, adding to the legal headaches Chipotle is facing, a lawsuit has been filed on behalf of investors alleging that the chain misled stockholders about its food-safety protocols.
The civil suit, which was filed Friday in the U.S. District Court for the Southern District of New York, seeks compensation for stockholders who purchased shares between January 2015 and January 2016. The stock price has dropped by more than 40 percent in the past three months. Consumers, for their part, are also wary of the restaurant chain in the wake of the various outbreaks, with Chipotle reporting on Wednesday that same-store sales declined by 14.6 percent in the fourth quarter of 2015.
Chipotle has not commented on the new lawsuit.
The allegations are another sign that Chipotle’s triumphant year as a McDonald’s killer has been all but forgotten since its salmonella, E. coli, and norovirus outbreaks sickened customers and closed restaurants. Before the E. coli outbreak that started in October and temporarily shuttered more than 40 restaurants in Oregon and Washington state, 2015 was looking like a banner year. (There were earlier, smaller outbreaks, but they were largely overlooked.) Sales were up 20 percent, and profits rose by close to 50 percent through Q3.
Now, with multiple multistate outbreaks, scores sickened, a bevy of legal action, and the source of the pathogen in all but one outbreak still a mystery, things are looking far grimmer for Chipotle.
CEO Steve Ells has made numerous public apologies for making customers ill, and the chain has overhauled its food-safety protocols, which experts have said met the industry status quo when the outbreaks occurred.
As of last month, more than 350 people across 10 states fell ill in the five outbreaks. As of yet, there have been no deaths attributed to them.