Chipotle case highlights supply chain risks for executives

An E.coli outbreak that caused fast-food chain Chipotle to close 43 restaurants in the US last year could have significant legal implications for other companies. Consumers have filed civil lawsuits and shareholders have filed securities class actions, claiming that the company duped them about its food safety practices. Chipotle has also received a grand jury subpoena from the US Department of Justice (DOJ) along with the US Food and Drug Administration. Recent cases suggest that the DOJ is targeting food company executives in criminal prosecutions that would carry the risk of prison sentences. In 2015, deputy attorney general of the DOJ, Sally Yates, stated that the department will focus on individuals' culpability in future cases and will refuse to give companies cooperation credit unless relevant facts about individual misconduct are disclosed.

Customers hungry for a burrito or taco last fall in Washington state or Oregon may have reached the door of their local Chipotle Mexican Grill Inc. restaurant only to find the following sign: “FYI: We are sorry. But we are temporarily closed due to a supply chain issue. We will reopen as soon as possible.”

A “supply chain issue” sounds fairly harmless, but what was actually happening at the Denver-based, fast-casual food company was anything but. Chipotle temporarily shuttered 43 restaurants in the two states because of an E. coli outbreak linked to its restaurants.