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Chipotle hit with lawsuit after shares plunge

The complaint, which seeks to recover damages for alleged violations of the federal laws under the Securities Exchange Act, alleges defendants made materially false and misleading statements regarding the company’s business, operational and compliance policies.

January 8, 2016

Pomerantz LLP has filed a class action lawsuit against Chipotle Mexican Grill in the United States District Court, Southern District of New York, on behalf of anyone who purchased Chipotle securities between Feb. 4, 2015 and Jan. 5, 2016, according to a company press release.

The complaint, which seeks to recover damages for alleged violations of the federal laws under the Securities Exchange Act, alleges defendants made materially false and misleading statements regarding the company’s business, operational and compliance policies. Specifically, it states defendants made false and/or misleading statements and/or failed to disclose that:

• Chipotle’s quality controls were not in compliance with applicable consumer and workplace safety regulations.
• Chipotle's quality controls were inadequate to safeguard consumer and employee health
• As a result of the foregoing, Chipotle's public statements were materially false and misleading at all relevant times. 

According to the suit, during the week of Aug. 18, 2015, approximately 100 patrons and employees of a Chipotle restaurant in Simi Valley, California became ill. On Sept.  4, 2015, the Ventura County Environmental Health Division announced the illnesses were a norovirus outbreak. Health inspectors said the restaurant in question contained dirty and inoperative equipment, equipment directly linked to the sewer and other sanitary and health violations.

Between Aug. 19 and Sept. 3, 2015, 64 people fell ill after dining at Chipotle restaurants in Minnesota, and on Sept. 17, 2015, the Minnesota Department of Health announced the illnesses were salmonella linked to tomatoes consumed at 22 Chipotle locations. The affected restaurants changed tomato suppliers but did not close.

The suit states on or around Nov. 1, 2015, Chipotle closed all of its restaurants in Portland, Oregon and Seattle, Washington, following reports of approximately 20 cases of E. coli by Chipotle patrons.

Shortly after Chipotle stock fell $16.23, or approximately 2.5 percent, to close at $624 on Nov. 2, 2015.

Beginning on or around Dec. 2, 2015, more than 140 Boston College students fell ill after dining at a Chipotle restaurant in Brighton, Massachusetts.  On Dec. 9, 2015, health officials confirmed the students had contracted norovirus.

As a result of this news, between Dec. 1 and 9, 2015, Chipotle stock fell $32.73, or roughly 5.6 percent, to close at $548.01 on Dec.9, 2015.

On Jan. 6, 2016, pre-market, Chipotle announced the company was served in December 2015 with a federal grand jury subpoena as part of a criminal investigation tied to the previous summer’s norovirus outbreak at the company’s restaurant in Simi Valley.The investigation is being conducted by the U.S. Attorney's Office for the Central District of California in conjunction with the Food and Drug Administration

On this news, Chipotle stock fell $22.36, or 4.98 percent, to close at $426.67 on January 6, 2016.