As of late, the problems for Chipotle have been endless. 2015 was a year of several Salmonella, norovirus and E. coli outbreaks for the restaurant chain. With the first full week of the new year wrapped up, 2016 is off to perhaps an even rockier start, with news of the company being hit with both a class action lawsuit and a federal grand jury subpoena.
Company stockholder Susie Ong filed a civil complaint against Chipotle on January 8, stating that the company made false or misleading statements and failed to disclose that its “quality controls were inadequate to safeguard consumer and employee health.” Filed in the U.S. District Court for the Southern District of New York, the complaint calls out a norovirus outbreak that occurred in August in Simi Valley, California; a Salmonella outbreak in Minnesota that sickened 64 people; the closure of all company restaurants in Portland, Oregon and Seattle, Washington in November following an E.coli outbreak; and the highly-publicized norovirus outbreak that sickened more than 140 students from Boston College in Brighton, Massachusetts last month.
Ong’s complaint also mentions the federal grand jury subpoena, which Chipotle made public two days prior (January 6) in an SEC filing. Served in December, the subpoena is part of a criminal investigation by FDA and the U.S. Attorney’s Office for the Central District of California into the Simi Valley norovirus outbreak, which sickened about 100 patrons and employees (some reports state that more than 200 people fell ill). Ong’s lawsuit states that health inspectors found “dirty and inoperative equipment, equipment directly linked to the sewer, and other sanitary and health violations” at the Simi Valley restaurant.
With December’s norovirus outbreak in Brighton and the CDC’s announcement that it was further investigating five new cases of E. coli that were reported the month prior, restaurant sales were down 30% for the month, according to the SEC filing. Ong adds up all of these unfortunate events in the lawsuit, stating, “As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages.”
Chipotle has not yet publicly commented on the lawsuit.
Earlier in December, Chipotle called attention to improvements it was making to its food safety program by bringing in IEH Laboratories and Consulting Group to reevaluate its processes in an effort to prevent future outbreaks. Clearly that was not enough.
Food companies take heed. 2016 is off with a bang, and not in a good way. Last week industry was also buzzing about the DOJ’s investigation into Blue Bell Creameries over the deadly Listeria outbreak. FDA and the other federal powers-that-be are making it very clear that negligence will no longer be tolerated (Or should I say, alleged negligence, in this case). Compliance, accountability, and above all, ethical behavior are at the heart of the matter.
Will it all come tumbling down for Chipotle? It remains to be seen whether the company will be able to recover from these issues. And maybe an even bigger question is, who will be next?
