Chipotle wins dismissal of investor lawsuit over foodborne illness

[March 23, 2018] By Brendan Pierson

NEW YORK (Reuters) - Chipotle Mexican Grill Inc on Thursday won the dismissal of an investor lawsuit claiming it concealed food safety risks, causing its stock to drop after widely publicized outbreaks of foodborne illnesses in 2014 and 2015.

U.S. District Judge Katherine Polk Failla in Manhattan said that while the outbreaks were cause for concern, the lawsuit failed to support its claim that Chipotle defrauded investors.

The judge wrote that she was "as concerned as the parties about foodborne illness outbreaks," but that "not all adverse events are the product of corporate misfeasance or nonfeasance."

Failla dismissed the lawsuit with prejudice, meaning it cannot be filed again. She had dismissed an earlier version of the case last March.

A lawyer for the investors, which include the Construction Laborers Pension Trust of Greater St. Louis and Germany’s Metzler Investment GmbH, could not immediately be reached for comment. A spokesman for Chipotle also could not immediately be reached.

Chipotle was linked to a series of outbreaks of salmonella, E. coli and norovirus in 2014 and 2015, causing sales to plummet. Chipotle's share price fell 47 percent in just over five months from its August 2015 peak above $758.

In their 2016 lawsuit, the investors claimed that in statements made to investors in 2015 and early 2016 the Denver-based company failed to disclose changes in its food handling practices, recorded cases of customer illness and details about its plans for dealing with the widely publicized outbreaks.

The investors had also brought claims against Chipotle's founder and Executive Chairman Steve Ells, former Co-Chief Executive Monty Moran and Chief Financial Officer John Hartung individually.

The judge said that although the newer version added more details, it failed to point to any specific instances of Chipotle or the executives knowingly making statements or failing to disclose information that would be material to investors.

(Reporting by Brendan Pierson in New York; editing by Jonathan Oatis and Phil Berlowitz)

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