Chipotle Mexican Grill Inc (NYSE:CMG) jumped a hurdle this week when a lawsuit claiming the struggling burrito chain hid its food safety risk at the time of the outbreaks of food-borne illnesses in 2014 and 2015, was dismissed.
Katherine Polk Failla, a US district judge in Manhattan, said that the suit, which was filed by investors who were up in arms about the sharp drop in Chipotle’s share price, did not “support its claim that Chipotle defrauded investors,” according to a Reuters report.
While Failla was "as concerned as the parties about foodborne illness outbreaks ... not all adverse events are the product of corporate misfeasance or nonfeasance," according to Reuters.
Failla threw out the lawsuit with prejudice Thursday, so it cannot be lodged again.
The dismissal of the lawsuit came in the same week that Chris Brandt was hired away from Yum! Brands Inc.'s (NYSE:YUM) Taco Bell to put a new slant on the branding efforts at Chipotle as its new chief marketing officer.
Brian Niccol, Chipotle’s chief executive and former Taco Bell boss, recruited Brandt to help the burrito maker get past dismal publicity stemming from a series of outbreaks of salmonella, E. coli and norovirus illnesses caught by diners at its chains.
Brandt, who replaces Mark Crumpacker, was in charge of marketing at Taco Bell and also worked in a similar role at Outback Steakhouse. “Having worked with Chris in the past, I have seen first-hand his ability to generate sales overnight and build brands over time,” Niccol said in a statement.
Chipotle, which offers burritos, tacos, burrito bowls and salads, has seen store traffic decline, with reports of outbreaks of food-borne illnesses damaging its reputation.
In midday trading, Chipotle shares slipped 1.7% to US$330.93.