Chipotle has just recently managed to reopen all of its restaurants after multiple food safety scares, but now faces the backlash from angry investors. Investors filed suit in the U.S. District Court for the South District of New York in early January, claiming that Chipotle’s “quality controls were inadequate to safeguard consumer and employee health.” Additionally, the restaurant chain is in the midst of a federal criminal investigation.
[I]t is the norovirus outbreak in California that has led to federal action.
During October of 2015, Chipotle was forced to shut down forty-three restaurants in Washington and Oregon after a widespread E. coli breakout that left fifty-five people sick. A second smaller outbreak followed shortly after in the Midwest, affecting five people. Many had to be hospitalized after eating at the Mexican grill, but fortunately no one died. The source of the E. coli has yet to be identified, and some blame companies like Monsato for creating the outbreak as revenge for Chipotle going GMO free. These claims have yet to show any merit and likely will not prove true.
As Chipotle was attempting to manage the West Coast and Midwest, another outbreak occurred in Boston. Initially, many feared that East Coast burrito lovers had also been sickened with E. coli. However, a swift investigation determined that the norovirus was responsible for this round of vomiting and nausea. Only one store had been affected in Boston, but the particular store sits near Boston College, resulting in 140 people, many students, becoming ill. This outbreak has been attributed to a Chipotle employee who was sick with norovirus while working.
However, it is the norovirus outbreak in California that has led to federal action. In August of 2014, more than 200 people became sick after eating at a Simi Valley Chipotle. Allegedly, Chipotle was negligent in some manner that led to the norovirus passing quickly among customers. Although it has yet to be revealed exactly what Chipotle did wrong that caused the virus to spread, it may have been a result of poor hand washing or poor restaurant cleanliness. An initial investigation revealed a cell phone on a food prep table, meat stored above temperature, and flies circling recycling bins. Additionally, much like Boston, an employee likely was infected with norovirus.
The Food and Drug Administration along with the U.S. Department of Justice began with a criminal investigation into just went wrong at the California Chipotle. Then, Chipotle was hit with a subpoena in late December that expanded the investigation to its nationwide food practices. The investigation will cover the restaurant’s activities as far back as 2013. If the investigators find that Chipotle acted in some manner inconsistent with what how it is expected to, charges could be formally brought and Chipotle could be indicted by grand jury.
At this point, it is unclear exactly what Chipotle could be charged with. The expected charge would be criminal negligence, which means that Chipotle’s activity grossly deviated from the standards of care a restaurant should take. It is unlikely that investigators will find any evidence of intentional tampering, so that takes any charge that has an intent element off the table.
[Chipotle’s] stock has already plummeted this winter as a result of the bad publicity and lawsuits.
Individual lawsuits are also being filed. In Boston, the site of the East Coast norovirus outbreak, a mother is suing Chipotle after her son ate at the restaurant and became ill. She has brought a cause of action on the theory that Chipotle was negligent and did not exercise ordinary and reasonable care. Here, the chance of a trial is almost zero, considering the large number of people that contracted the virus from the same location. Chipotle could win if it could somehow prove that it was not the reason for the spread of the virus, but this would be difficult to prove that it was a customer, not an employee, that was patient zero. Therefore, Chipotle is expected to settle.
Likewise, a suit was filed in California by six people for the August infection. The suit alleges that Chipotle allowed a sick employee to work for two days before contacting the health department. The suit goes on to accuse Chipotle of trying to cover up the situation because it was in the middle of handling a salmonella poisoning problem that caused twenty-two people to become sick at a Minnesota Chipotle. This particular incident was caused by salmonella-laced tomatoes. A Minnesota law firm is currently attempting to gather people for a class-action lawsuit.
Lawsuits are also being filed in Washington state and Oregon as a result of the October E. coli spread. These suits are likely to settle, as Chipotle cannot afford the negative publicity of a trial. Its stock has already plummeted this winter as a result of the bad publicity and lawsuits.
[Chipotle] is shutting down every one of its over 1,900 locations to conduct a food safety training.
This 45 percent drop in Chipotle’s stock is what sparked investors to bring suit. A securities class action lawsuit filed in early January accuses Chipotle of misleading investors. The complaint alleges that Chipotle did not tell investors that “quality controls were not in compliance with applicable consumer and workplace safety regulations” and that these controls were “inadequate to safeguard consumer and employee health.” This lack of quality control is the alleged reason for the food safety problems, leading to the 30 percent drop in sales.
Although federal food safety investigations are rare, civil food safety actions are not. In 2013, The Cheesecake Factors was sued after a man contracted scrombroid poisoning from bacteria in seafood. The man passed out after eating mahi mahi at a Wisconsin Cheesecake Factor location. The restaurant settled for $14,000 and removed mahi mahi from its menu.
This past November, a McDonald’s in Waterloo, New York, was sued by a customer who claimed to be “exposed to hepatitis A” after an employee was identified as having the virus. No customers had reported actually contracting the disease, but the fear was enough for local health officials to set up a vaccination clinic.
Restaurants are volatile businesses, and have enough trouble competing in a tough market while looking out for food safety. However, food safety needs to be the number one priority, or a restaurant can quickly tank. Chipotle seems to have reevaluated its procedures – it is shutting down every one of its over 1,900 locations to conduct a food safety training. Still, the chain has a long road ahead to not only deal with the multitude of lawsuits, but also to regain consumer trust.