Much of the risk in investing in a publicly-traded company is based on the internal and external performance of the company you entrust your money to, and includes factors like the economy, regulatory affairs, and even public health. That last item–public health–has seriously impacted Chipotle Mexican Grill: the Denver-based food chain, which has stakes in both the U.S. and Europe and is publicly traded on the New York Stock Exchange under ticker symbol CMG, has quickly fallen into chaos in light of several major food safety controversies.
In late November 2015, Chipotle experienced a food company’s worst nightmare: an E. coli breakout. However, Chipotle’s E. coli outbreak was not the only health crisis to plague the company. In a matter of a few short weeks, the company has been slapped with lawsuits due to other outbreaks that include diseases like the norovirus. These have raised questions about the corporate efficacy of Chipotle Mexican Grill, Inc.
One notable lawsuit was filed by former Chipotle investors in the U.S. District Court of the Southern District of New York. The suit was filed by Susie Ong, a former investor of the company, alleging that Chipotle’s “quality controls were inadequate to safeguard consumer and employee health,” and that the company intentionally misled investors by falsifying food safety practices. Officially known as Susie Ong v. Chipotle, et al., the class-action suit will be heard by federal district magistrate judges later this year.
One primary argument in the court filings was that the company misled its investors, employees, and customers into thinking their restaurants were utilizing industry-leading food safety practices and jumping on the “band-wagon” of using non-genetically modified (GMO) food products. Chipotle adopted a mantra, “food with integrity,” which accompanied a campaign to use local food products and responsible practices for sustainability in their business model.
The Ong lawsuit also attacks the senior leadership of Chipotle for knowing and having a “controlling” position in swaying the direction of the company.
Aside from investor lawsuits, numerous suits have been filed due to sicknesses suffered by customers and employees alike. The Seattle Times reports that one E. coli victim has filed a federal suit in the U.S. District Court in the District of Western Washington for an incident that occurred in late July, just weeks before the outbreaks in the latter part of 2015.
In addition, CNBC reports that a criminal probe from the Department of Justice and the Food and Drug Administration’s criminal division has been launched by the U.S. Attorney’s office in Los Angeles. The U.S. Attorney’s office believes that there are potential grounds for felony and misdemeanor charges for adulterated food under the statutory authority of the Food, Drugs, and Cosmetics Act (FDCA).
The probe is also intended to examine the threats of the norovirus. According to the Centers for Disease Control (CDC), the norovirus is highly contagious and is popularly known as the “stomach flu.”
Chipotle reported the DOJ-FDA subpoena in a Form 8K filing on finances, which is required by the Securities and Exchange Commission for publicly traded companies.