Overview
This week, Judge Failla dismissed a putative class action stemming from the 2015 food-borne illness outbreak among Chipotle customers. According to the complaint, at least seven E. coli outbreaks at Chipotle restaurants in 2015 were caused by Chipotle's switch from processing produce at a central facility to processing produce in each of its 1,900 restaurants. The complaint alleged that Chipotle and its executives failed to disclose the change in produce processing and the resulting increase in the risk of food-borne illness outbreaks.
Judge Failla found that these statements were not actionable:
It is perhaps true that in electing to speak regarding the risks posed by its food preparation methods, Chipotle put those risks at issue and was required to ensure that its statements regarding them were truthful and complete. But Plaintiffs have not indicated that Chipotle’s statements were not: Plaintiffs have not argued, for instance, that it is untrue that "the majority" of Chipotle’s food was prepared "in-store," or that this fact put Chipotle at a higher risk for food-borne illness. Rather, Plaintiffs have argued that Chipotle was obligated to disclose that this risk was perhaps heightened by Chipotle’s 2014 transition to in-store produce preparation. No facts support an inference that any Defendants were aware of this heightened risk at the time this statement was made, if indeed there was such a heightened risk. Rather, Plaintiffs’ facts support just the opposite inference: Plaintiffs allege that Chipotle transitioned to in-store produce production in "late 2014," and have pleaded facts indicating that the first outbreak of food-borne illness at a Chipotle restaurant occurred in July 2015, at least seven months later. For at least seven months, therefore, this transition appeared not to heighten Chipotle’s risk at all. Plaintiffs argue awareness from the mere fact that the later events transpired, but such post hoc, ergo propter hoc pleading has been repeatedly rejected by the courts.Further, Judge Failla found that the plaintiffs failed to plead scienter, both because the claims were implausible and because the allegations implicated the PSLRA's safe harbor for forward-looking statements. The complaint was dismissed without prejudice, and plaintiffs were given leave to amend.