Onslaught of Chipotle suits: 2 diners file, 7 other law firms form investor class actions

| by S.A. Whitehead
Onslaught of Chipotle suits: 2 diners file, 7 other law firms form investor class actions

At least eight U.S. law firms have reported either filing, investigating or forming classes as part of lawsuits against Chipotle in connection with a norovirus outbreak in Sterling, Virginia.

Two of the suits have been filed by Virginia residents who allege being sickened two weeks ago after eating at the Tripleseven Road restaurant in Sterling. They each filed cases in Loudoun County Circuit Court in Virginia, according to court documents. More than 130 people reported getting sick on the iwaspoisoned.com website after allegedly eating at the same location on or around July 14. The chain's leadership said earlier this week a worker at that location was still contagious with the virus and came to work, though they said solid company policies prohibited that. 

Six other law firms nationwide issued press releases to say they have either filed or are forming classes of plaintiffs from those who invested in the company and lost money when the brand's stock plummeted following widespread news about the Virginia store illnesses, as well as other negative Chipotle news over the last two years. All six of those firms allege the brand and some of its leaders committed U.S. securities law violations which ultimately resulted in the mid-July event that caused investors' losses, according to a series of news releases from the firms. 

Two Virginians' suits ask for damages after men got sick

The suit filed in Loudoun County Circuit Court in Virginia lists two Virginia men, Kyle Hogan and Patrick Moore, as plaintiffs. The men dined at the Chipotle location at that time and later became ill, according to a news release from the firm of their attorney, Ron Simon.

"This is the sixth Chipotle food poisoning outbreak my firm has handled in the last three years," Simon said in the release. "Through these lawsuits, we will make sure that Chipotle learns to put the safety of its customers first."

The suits ask for damages of $74,000 plus interest. 

Class actions forming and filing alleging investor fraud

Additionally, six U.S. law firms have issued press releases saying they have either filed class actions or are forming classes to do so. All the firms allege that Chipotle and "certain officers," violated U.S. securities laws, leading investors to ultimately lose money when the stock dropped after the Virginia illnesses hit the news. The firms announcing class actions include:

  • Pomerantz Law Firm 
  • Bronstein, Gewirtz & Grossman
  • Goldberg Law
  • Klein Law Firm
  • Khang & Khang LLP 
  • Law Offices of Vincent Wong
  • Lundin Law 

All those suits comprise plaintiffs, who are or were Chipotle investors, who allege the company violated sections 10B and 20A of the Securities Exchange Act of 1934. Specifically, the firms stated that between early February last year and July 19 this year, Chipotle and its leadership "made materially false and misleading statements regarding the company's business, operational and compliance policies." As a result, the plaintiffs allege that these statements led investors to believe the brand had a good hold on steps to rectify problems that caused its two-year history of illness outbreaks, even though they allege:

  • Chipotle's purported improvements in food safety policies were "inadequate."
  • Chipotle's quality controls were not in compliance with applicable consumer and workplace safety regulations and were thus not sufficient to "safeguard consumer and employee health."
  • As a result, the suit alleges that the brand made claims that were "materially false and misleading at all relevant times."
  • All the firms say as a result then of news reports about the Sterling location last week, as well as a rat infestation at a Dallas location at the same time, the brand's stock price fell as a result. 

Indeed, the brand's stock has fallen from $390.17 at the close Monday before the most recent events became public to $349.49 at the close Thursday. 

As for brand leadership, it admitted that errors had been made during a Tuesday evening investors' call following the release of positive Q2 financials for the quarter ending June 30, before the outbreak. Brand leaders did not respond to inquiries about a reported rodent infestation or this series of lawsuits. In fact, the chain's Tuesday call made it clear they see this as a single incident at a single store where their policies were not followed. 

"We conducted a thorough investigation and it revealed that our leadership there didn't strictly adhere to our company protocols," Ells said. "We believe someone was working while sick, and we took swift action and made it clear to the entire company that we have a ... zero-tolerance policy for not following these protocols. These protocols were designed by leading experts on our food safety council and in-house by our food safety expert, Jim Marsden. ... When followed, they work perfectly."

 

Photo: iStock


Topics: Business Strategy and Profitability, Food Safety, Legal Issues



S.A. Whitehead

Award-winning veteran print and broadcast journalist, Shelly Whitehead, has spent most of the last 30 years reporting for TV and newspapers, including the former Kentucky and Cincinnati Post and a number of network news affiliates nationally. She brings her cumulative experience as a multimedia storyteller and video producer to the web-based pages of Pizzamarketplace.com and QSRweb.com after a lifelong “love affair” with reporting the stories behind the businesses that make our world go ‘round. Ms. Whitehead is driven to find and share news of the many professional passions people take to work with them every day in the pizza and quick-service restaurant industry. She is particularly interested in the growing role of sustainable agriculture and nutrition in food service worldwide and is always ready to move on great story ideas and news tips.


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