PITTSBURGH – A federal judge has declared that a motion for sanctions against Chipotle Mexican Grill, which is facing a class action lawsuit which claimed that the chain restaurant fails to provide proper amounts of change to its customers in exchange for purchased food, is inappropriate.
Megan Fox and Bridget McMahon of Allegheny County (on behalf of themselves and all others similarly situated) first filed suit in the Allegheny County Court of Common Pleas on Aug. 20, 2020 versus Chipotle Mexican Grill, Inc. (doing business as “Chipotle”) of Newport Beach, Calif.
“On Aug. 13, 2020, plaintiff Fox entered the Chipotle store in Wexford, Pennsylvania, ordered a steak burrito for $8.72 and tendered a $20 bill to the cashier. Consistent with what is believed to be defendant’s corporate policy, the defendant’s representative accepted the tender of $20, and handed Fox a receipt, her order and $11 change. The Chipotle receipt showed change due to Fox of $11.28, which was not the amount returned to her by Chipotle,” the suit said.
“On Aug. 18, 2020, plaintiff McMahon entered the Chipotle store in Allison Park, Pennsylvania, to purchase prepared food to go. Plaintiff’s total purchase was $15.51. To pay for the purchase, plaintiff tendered cash in the form of a $20 bill. The defendant’s cashier accepted the tender. After plaintiff McMahon’s order was prepared and bagged, the defendant’s cashier did not return the $4.49 in change indicated on the receipt. Instead, Chipotle returned only $4.00 to plaintiff, thereby converting $0.49 without providing a credit or other compensation to plaintiff.”
The named plaintiffs said they, and others just like them, were the victims of Chipotle pocketing and misappropriating funds belonging to the consumer for Chipotle’s financial benefit, rather than either (a) giving the correct amount of change, (b) rounding the purchase price down to benefit the consumer, or (c) giving the consumer credit toward a future purchase to offset the loss to the consumer.
“The actual price charged by Chipotle for food purchased is different, and more than the advertised price of the food. Moreover, the receipts provided to plaintiffs Fox and McMahon deceptively indicated that the plaintiffs, had, in fact, received change of more than they were actually given, thus covering up evidence of Chipotle’s improper actions,” the suit said.
The matter of venue in the case remains to be seen, as Chipotle filed to remove the case to the U.S. District Court for the Western District of Pennsylvania on Sept. 25, citing diversity grounds pursuant to the Class Action Fairness Act of 2005 (CAFA) and the amount in controversy, which could total more than $5 million.
However, the plaintiffs filed a counter-motion to remand the case on Sept. 29, 2020, arguing that Chipotle’s removal notice was filed beyond the 30-day statutory window.
U.S. District Court for the Western District of Pennsylvania Judge William S. Stickman issued a memorandum opinion on Feb. 23, 2021, denying the motion to remand the case to the Allegheny County Court of Common Pleas.
The judge explained that discovery revealed that Eduardo Macias, a contract security guard, signed for the mailed removal notice at Chipotle’s Newport Beach headquarters on Aug. 25, 2020.
“Macias signed the mail receipt, but did not know which letter corresponded with the mail receipt, did not open the letter, did not know who had sent it and did not know what its contents included. Chipotle did not authorize Macias to accept legal process on Chipotle’s behalf,” Stickman said.
Stickman said the burden was on the plaintiffs to show they served the proper agent of a corporation.
Chipotle asserted that the plaintiffs did not properly serve it on Aug. 25, 2020 and rather, the Court should count from Aug. 27, the day the sheriff in Allegheny County served Chipotle. Thus, Chipotle alleged its notice of removal was timely filed on Sept. 25, 2020.
“The Court finds that plaintiffs’ process of service by certified mail was improper. Thus, Chipotle’s Sept. 25, 2020 notice of removal was untimely,” Stickman stated.
Since Macias was not an executive officer, partner or trustee of Chipotle, was not authorized to receive service of process on behalf Chipotle and was not a manager, clerk or person in charge, Stickman explained he could not be an example of proper service.
Furthermore, the Court determined that removal under CAFA was both fair and appropriate, given the size of the class involved (over 100 members) and the damages in question, at least $5,000,000 – thereby, conferring jurisdiction on the federal court.
UPDATE
After Fox was dismissed from the case in January and James Rice entered the case as a plaintiff, Chipotle filed a motion for sanctions against plaintiff counsel Frank Salpietro, alleging he solicited clients unethically in this action and thus, the claims should be dismissed in their entirety.
The motion alleged that Salpietro “manufactured this lawsuit by asking his daughter and her friends to purchase food from Chipotle and intentionally tender cash in excess of the exact amount charged” – while plaintiff counsel insists the suit originated based on the experiences of the managing shareholder of Salpietro’s law firm, William E. Lestitian, at multiple Chipotle locations in July 2020.
In a Nov. 14 memorandum opinion, Stickman denied the company’s sanctions motion.
“Salpietro claims that he asked McMahon to make her purchase as part of an effort to test the pervasiveness of the alleged shortchanging conduct that was first brought to Salpietro’s attention by Lestitian. Additionally, Salpietro points out that Chipotle does not claim that Rice had any prior knowledge of Chipotle’s alleged shortchanging or that he consented to receiving inadequate change. Given the ambiguity around what McMahon knew, the existence of Rice as a plaintiff without prior knowledge of the coin shortage, and Rule 11’s high bar for frivolousness, the Court holds that Salpietro’s alleged unethical solicitation does not render the merits of plaintiffs’ claims ‘patently unmeritorious or frivolous,” Stickman said.
“The Court shares Chipotle’s concern about Salpietro’s conduct at the origins of this litigation, but does not view Rule 11 as the proper vehicle for addressing the unethical solicitation alleged here. Again, sanctions are reserved ‘only for exceptional circumstances’…given this, Salpietro’s assertion that the lawsuit was initiated based on Lestitian’s experiences is enough to establish that he reasonably believed that the original complaint and the amended complaint were not filed for an improper purpose. Because Salpietro has satisfied Rule 11’s standard of reasonableness under the circumstances, the Court also declines to impose sanctions under 28 U.S.C. Section 1927, which requires a finding that an attorney has multiplied proceedings in an unreasonable manner as well as a finding of bad faith. For the same reasons, the Court also declines to exercise its inherent power – which is reserved only for cases where the conduct of ‘an attorney is egregious and no other basis for sanctions exists’ – to impose sanctions on Salpietro.”
Though deciding not to impose sanctions, Stickman added that the Court was “concerned” about the allegations against Salpietro and about his contention that his suit was based upon events supposedly occurring to the managing shareholder of his own firm.
However, Stickman concluded that such allegations are best considered at the class certification stage, to come in the future.
For counts of misappropriation and conversion, unfair trade practices, breach of contract/unjust enrichment and injunction, the plaintiffs are seeking an injunction preventing Chipotle from refusing to provide correct change to customers who tender cash as a form of payment for Chipotle’s goods or services, requiring Chipotle to provide a credit to their customers in those circumstances and for it to not market goods towards non-credit card paying-customers at a higher price than it does for credit card customers. The plaintiffs also request a trial by jury.
The plaintiffs are represented by Frank G. Salpietro and William F. Ward of Rothman Gordon, in Pittsburgh.
The defendants are represented by Lindsey C. Kennedy and Derek J. Illar of Eckert Seamans Cherin & Mellott in Pittsburgh, plus Betsy Bulat and Robert Jennings Mollohan Jr. of Martenson Hasbrouck & Simon, in Atlanta, Ga.
U.S. District Court for the Western District of Pennsylvania case 2:20-cv-01448
Allegheny County Court of Common Pleas case GD-20-008917
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com