Taco Bell sued

After dealing late last year with an E. coli outbreak which was initially thought to trace back to raw green onions, Taco Bell -- a division of Yum! Brands (NYSE:YUM) -- is being summoned to court. The Southern California farm responsible for harvesting said controversial (but in fact perfectly fine) green onions has filed a libel lawsuit, alleging that the fast food company continued to attribute the outbreak to the farm's green onions, even though the produce was not contaminated.

An attorney for Boskovich Farms has said that "Taco Bell engaged in an irresponsible and intentional crusade to save its own brand at the expense of an innocent supplier." This move ultimately cost the Farms "millions of dollars in business."

A Taco Bell spokesperson said the fast food company was merely acting in the interest of safety for its customers. "We believed green onions may have been the source based on the presumptive positive testing, so we immediately removed them from our products . . . we later learned they were not the source of the E. coli outbreak." Later analysis indicated that lettuce was the likely source of the outbreak, but not before green onions were stripped from all items at the company's 5,800 worldwide locations. Lettuce still remains in about 70% of the Taco Bell menu items.

The breakout, which caused more than 70 people in the Northeast to fall sick, cost the chain an estimated $20 million in operating profit.

In early trading, YUM shares are virtually unchanged.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.