Chipotle Mexican Grill, (CMG) already reeling from an E.coli outbreak last fall that has badly damaged its sales and reputation, is facing a new headache.
A lawsuit filed on Friday accusing the company of misleading investors about its food safety measures. The burrito chain made “materially false and misleading statements” and did not disclose that its “quality controls were not in compliance with applicable consumer and workplace safety regulations” and that its public statements were false, said the lawsuit filed in U.S. District Court in Manhattan by investor Susie Ong. “Chipotle’s quality controls were inadequate to safeguard consumer and employee health,” according to the suit, a class action complaint.
Because of those shortcomings, Chipotle’s stock has taken a beating, the lawsuit claimed. Chipotle’s shares, once one of the hottest on Wall Street, have fallen 45% since hitting a 52-week high in October. The lawsuit, which also lists co-CEOs Steve Ells and Monty Moran as defendants among others, seeks damages on behalf of investors who bought Chipotle shares between February 2015 and January 2016.
A Chipotle spokesperson, Chris Arnold, declined to comment, citing company policy on legal proceedings.
The lawsuit is the latest headache for Chipotle: the company earlier this week reported comparable sales in December fell 30%. On Monday, Chipotle disclosed that it had been served with a subpoena in a federal criminal probe linked to norovirus cases in California last summer.