HGT Law Commences Derivative Lawsuit Against El Pollo Loco Insiders to Recover Illicit Trading Profits

On September 23, 2016, HGT Law commenced a shareholder derivative lawsuit against directors, officers and controlling stockholders of El Pollo Loco Holdings, Inc. (a “quick service restaurant plus”) for breaches of fiduciary duties in connection with certain, alleged illicit trading profits.  The lawsuit alleges that in May 2015, these defendants sold more than 6 million shares of El Pollo Loco stock (for approximately $132 million) just five days after reassuring investors on a conference call that, despite slower than projected growth in the first quarter, the company was still on track to achieve growth targets for the year.  During the conference call, certain defendant executives denied that the slower growth trends were attributable to price increases on various items on El Pollo Loco’s value menu, and instead blamed other factors.  The lawsuit alleges that three months later, on August 13, 2015, El Pollo publicly revealed for the first time that customer traffic had indeed been adversely affected by the company’s decision in 2015 1Q to depart from the value-priced menu offerings and raise prices.  In reaction to this announcement, the price of El Pollo Loco stock plummeted 20%, to the lowest closing price since the company went public, and 33% below the price at which the corporate insiders sold their shares back in May 2015.

As alleged in the Complaint, the plaintiff, on behalf of El Pollo Loco, seeks to recover for the harm sustained by the Company as a result of the breaches of fiduciary duty by the company’s directors, officers and controlling stockholders.  Plaintiff also seeks a return of the illicit insider trading profits made through the use of confidential company information.

For more information about the El Pollo Loco lawsuit or any of our other cases, please contact us on (646) 453-7288 or via email at info@hgtlaw.com.