Chipotle Mexican Grill has faced no shortage of lawsuits over the years, from food-safety crises to wage-and-hour disputes and shareholder claims.
This month, the fast-casual restaurant chain came out a winner in court.
A federal judge dismissed a securities class action lawsuit accusing Chipotle of misleading investors about portion sizes and customer dissatisfaction, as first reported in Bloomberg Law.
In the ruling, the judge said the complaint did not show Chipotle made “materially false or deceptive statements.”
On November 11, 2024, investor Michael Stradford filed a lawsuit on behalf of shareholders. The case, Stradford v. Chipotle Mexican Grill, Inc., et al., was filed in the U.S. District Court for the Central District of California (Case No. 24-cv-02459).
Stradford’s complaint focused on shareholders who purchased Chipotle stock or certain options between February 8 and October 29, 2024. It claimed Chipotle had downplayed internal issues related to inconsistent portion sizes.
Stradford asserted the complaints were fueling customer backlash, largely on social media. In his complaint, Stradford referenced viral posts showing customers accusing the chain of “skimping” on portions and alleged that the inconsistent portion sizes would affect margins and earnings.
Last year, then-CEO Brian Niccol disputed accusations of skimpy servings.
“First, there was never a directive to provide less to our customers,” he said during a July 2024 earnings call, a few months before the suit was filed. “Generous portion is a core brand equity of Chipotle. It always has been, and it always will be.”
Nevertheless, Niccol said the complaints had led him to re-examine Chipotle’s practices across its operations.
“To be more consistent across all 3,500 restaurants, we have focused in on those with outlier portion scores based on consumer surveys,” he said. “We are re-emphasizing training and coaching around ensuring we are consistently making bowls and burritos correctly.”
On December 18, Judge Sherilyn Peace Garnett of the U.S. District Court in Los Angeles sided with Chipotle and dismissed the lawsuit.
Garnett said the plaintiff failed to meet the legal standard for securities fraud, noting that consumer complaints and social-media criticism — even when the posts go viral — did not demonstrate that Chipotle knowingly misled investors or made false statements with the intent to deceive.
Related: Chipotle sees concerning customer trend
“The facts alleged do not show Niccol and [food safety officer Laurie] Schalow made a false or misleading statement by denying that the Company had reduced the size of its portions,” wrote Garnett, according to reporting in The Independent.
