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Chipotle Is Being Sued by Its Shareholders

J

jwk94

Member
The lawsuit, filed in the U.S. District Court of Colorado, argues that Denver-based Chipotle deceived both investors and customers into believing that the chain had fixed its food safety issues, and in doing so kept its stock price artificially high; now, they’re losing money thanks to the falling stock.

“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,” the suit claims. The company’s stock price has fallen by more than 10 percent this week.

The plaintiffs are seeking damages and legal fees. The suit also names founder and CEO Steve Ells, former co-CEO Marty Moran, and chief financial officer John Hartung as defendants.
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Eater

These guys can't catch a break.
 
M

mnannola

Member
I don't get it, aren't shareholders suing Chipotle in turn just suing themselves? Or is this suit only against the C level employees?
 
R

Ricerocket

Member
Chipotle is pretty much dead.

I remember when lines were usual and everyone liked it. My local Chipotles are DEAD. More employees sitting around and behind the counter than customers every few times I go for a bowl.
 
H

Hjod

Banned
tenor.gif


Is that a thing? Suing because the stock falls?
 
F0rneus

F0rneus

Tears in the rain
Never had Chipotle in my life since I'm in Canada's boondocks. Now I never will. Weird to see a huge chain go down in flames like this.
 
P

Poppy

Member
i know you shouldnt sympathize with faceless corporations but i feel bad for chipotle

i guess being anti gmo should take away my sympathy, but its the classic logic vs "i really like burritos" conundrum
 
DOWN

DOWN

Banned
Hjod said:
tenor.gif


Is that a thing? Suing because the stock falls?
Click to expand...
If you believe the company intentionally or recklessly misled about the security of the company’s value, yeah

They are saying chipotle doesn’t have a hold on food safety and pretended they did
 
P

Pyrokai

Member
Ricerocket said:
Chipotle is pretty much dead.

I remember when lines were usual and everyone liked it. My local Chipotles are DEAD. More employees sitting around and behind the counter than customers every few times I go for a bowl.
Click to expand...

They're alive and kicking where I'm at. I still eat there too frequently.
 
B

Barzul

Member
mnannola said:
I don't get it, aren't shareholders suing Chipotle in turn just suing themselves? Or is this suit only against the C level employees?
Click to expand...

Yeah this is actually allowed. I believe it's called a shareholder derivative suit. The board of directors get to review the merits of the case and act to correct the harm effectively stopping the suit from going forward (the business judgement rule). If the plaintiffs can prove like fraud by the directors you can bypass that requirement.
 
H

Hjod

Banned
Rubenov said:
Anyone watched Billions Season 2? This reminds of that Juice company...
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It really does, first thing I thought about as well haha.

DOWN said:
If you believe the company intentionally or recklessly misled about the security of the company’s value, yeah

They are saying chipotle doesn’t have a hold on food safety and pretended they did
Click to expand...

Ah ok, thanks for the clarification, I could've almost guessed that but I wasn't sure.
 
K

Khaos Kontrol

Banned
Ricerocket said:
Chipotle is pretty much dead.

I remember when lines were usual and everyone liked it. My local Chipotles are DEAD. More employees sitting around and behind the counter than customers every few times I go for a bowl.
Click to expand...

I wish my Chipotles were like yours. Every time I go in there are huge lines.
 
C

CaviarMeths

Member
Looks like the shareholders don't give a damn about the food safety standards. They just care that its affecting the share value.

Either way, Chipotle can get fucked if they cut corners on health and safety regulations.
 
T

Tall4Life

Member
Ricerocket said:
Chipotle is pretty much dead.

I remember when lines were usual and everyone liked it. My local Chipotles are DEAD. More employees sitting around and behind the counter than customers every few times I go for a bowl.
Click to expand...

Um... the one near me is pretty much always packed.
 
Q

QuantumBro

Banned
mnannola said:
I don't get it, aren't shareholders suing Chipotle in turn just suing themselves? Or is this suit only against the C level employees?
Click to expand...

They're not suing Chipotle, they're suing the CEO, former CEO, and CFO of Chipotle for misleading investors by saying that they had fixed all the food illness issues. If they win, the money would come from the personal accounts of the executives.
 
B

Brandon F

Well congratulations! You got yourself caught!
Hjod said:
tenor.gif


Is that a thing? Suing because the stock falls?
Click to expand...

On the grounds that there was an expectation that senior leadership promised to fix any of these issues the first time around(2015) and seemingly failed to live up to that promise(2017). Sure why not? The reputation and profitability of their investment has been damaged potentially by negligence(if proven in the lawsuit).

They also have the power to oust and replace these guys if they so wish.
 
T

TangoAlphaLima

Member
Barzul said:
Yeah this is actually allowed. I believe it's called a shareholder derivative suit. The board of directors get to review the merits of the case and act to correct the harm effectively stopping the suit from going forward.
Click to expand...

That's actually a different thing, whereby shareholders can sue third parties on behalf of the corporation. This is the shareholders directly suing the corporation, essentially for what they allege to be fraud.
 
W

winjet81

Member
DOWN said:
If you believe the company intentionally or recklessly misled about the security of the company’s value, yeah

They are saying chipotle doesn’t have a hold on food safety and pretended they did
Click to expand...

This is like suing Blackberry for falling stock prices because they pretended that their technology was still leading edge.
 
F

Fuchsdh

Member
Ricerocket said:
Chipotle is pretty much dead.

I remember when lines were usual and everyone liked it. My local Chipotles are DEAD. More employees sitting around and behind the counter than customers every few times I go for a bowl.
Click to expand...

Eh, smaller companies have survived worse setbacks, but they're certainly trying to bat a thousand. I'm trying to think of a food company that had an equivalent health crisis, and I can't think of any that persisted this long.
 
P

Parch

Member
Restaurants are huge investment risks. It's gotta be a chain with thousands of consistently profitable franchises before even considering buying stock, or you luck out on starter value stock before they get popular. Even with seemingly successful chains, it can all come crumbling down pretty quick.

I don't know if they can actually prove the chain was being deceptive. Good luck with that. My guess is the stock holders are going to lose this one. Sounds like the typical risks you take with restaurant stock IMO.
 
B

Barzul

Member
TangoAlphaLima said:
That's actually a different thing, whereby shareholders can sue third parties on behalf of the corporation. This is the shareholders directly suing the corporation, essentially for what they allege to be fraud.
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https://www.legalmatch.com/law-library/article/suing-a-corporation-as-a-corporate-shareholder.html

Derivative Lawsuit: Suing Directors and Officers on Behalf of the Corporation
In a shareholder derivative suit action, an individual or shareholder of the corporation would bring suit against the corporation on behalf of the corporation, rather than as a individual person. Derivative suits are usually brought against insiders of the corporations like the directors, officers, board members who have been accused or suspected of acts that caused harm against the corporation.
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Pretty sure this scenario is also called a derivative suit. The right to sue the corporation is derived from their shareholder status. I took a class on it...I'm not a lawyer though so I might be wrong.
 
S

#sorrynotsorry

Member
Barzul said:
Yeah this is actually allowed. I believe it's called a shareholder derivative suit. The board of directors get to review the merits of the case and act to correct the harm effectively stopping the suit from going forward (the business judgement rule). If the plaintiffs can prove like fraud by the directors you can bypass that requirement.
Click to expand...

It is allowed, but - and I mean this in the nicest way - everything you said after the first sentence is completely incorrect.

The shareholder derivative suit can't suit the corporation (only a third party, such as a CEO or director). But shareholders do have a cause of action when corporations deceive them. This is probably a securities class action.
 
F

FinKL

Member
Guevara said:
There are literally conspiracy theories out there that Chipotle is the victim of ongoing corporate sabotage.
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Well I mean when you read stories of that one guy that caused a fire in Target to drop it's stock price, anything is possible right
 
S

SamuelSupreme

Banned
mnannola said:
I don't get it, aren't shareholders suing Chipotle in turn just suing themselves? Or is this suit only against the C level employees?
Click to expand...

Haven't read the article but I know at recent meetings Shareholders were expecting resignations and there were none. The brand has irreparable damage done to it.
 
5

5taquitos

Member
winjet81 said:
This is like suing Blackberry for falling stock prices because they pretended that their technology was still leading edge.
Click to expand...
Which would be a perfectly valid lawsuit if the executives were found to be willfully misleading investors to artificially inflate stock prices. These suits are relatively common.
 
I

Imperfected

Member
I mean, the reasonable thing would be shareholders suing executives for deception and taking their golden parachutes/exorbitant salaries to compensate, but I have no idea how you would actually go about that given the limited liability native to corporations.
 
N

NewFresh

Member
Ricerocket said:
Chipotle is pretty much dead.

I remember when lines were usual and everyone liked it. My local Chipotles are DEAD. More employees sitting around and behind the counter than customers every few times I go for a bowl.
Click to expand...

Really depends on the area. The ones in the suburbs near me are moderately busy. But the ones in the metro and office park areas are packed to the brim,
 
B

Barzul

Member
#sorrynotsorry said:
It is allowed, but - and I mean this in the nicest way - everything you said after the first sentence is completely incorrect.
Click to expand...

I'm not an expert, I didn't try to come off as one either I don't think haha. I'm going off a class I took awhile ago. I thought there was a business judgement rule that had to be satisfied before the suit could go forward?
 
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