Despite his ouster as CEO earlier last July, Papa John’s founder John Schnatter is far from done with the business of his former pizza chain, filing a lawsuit against the company’s former ad agency Laundry Service for breach of contract.
“Today, I've taken a major step forward in search of the truth of what happened that caused me to lose my company, which resulted in thousands of franchisees and employees suffering from the economic fallout,” said Schnatter in a statement.
The lawsuit comes almost two months after he told FOX Business in an exclusive interview that he is the only person who can fix Papa John's. "You are not going to fix Papa John’s without Papa John," he said. The legal action also follows his sale of 1.9 million shares of Papa John’s stock, worth $107.5 million.
The lawsuit stems from a diversity meeting led by Laundry Service in May 2018 that was allegedly taped in secret. During the meeting, Schnatter used a racial slur and audio of his comments were leaked to Forbes. The leak of the comments, which Schnatter told FOX Business "got twisted" and the ensuing firestorm, forced his resignation from the pizza chain.
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Schnatter contends that the leak of the secretly taped meeting violated confidentiality provisions of the service agreement contract between Laundry Service and Papa John’s. The agency no longer works with the Papa John's company.
The suit, filed in Louisville, Kentucky, also names the agency’s parent company, California-based Wasserman Media.
The company's stock has fallen 3.6 percent since Schnatter stepped down as CEO in December 2017 following his criticism of the NFL's handling of national anthem protests by players, which he said hurt the league and curbed sales at Papa John's, a league sponsor. Schnatter resigned as chairman in July 2018 after using a racial slur on a company diversity training call.
For the third quarter that ended Sept. 29, Papa John’s net income was $385,000, for a loss of 10 cents a share, compared to a net loss of $13.3 million, or a loss of 42 cents a share a year ago. Revenues increased 4.8 percent to $403.7 million, from $385.2 million in the same quarter last year.