Papa John's founder John Schnatter sues pizza chain

Former Papa John’s chairman John Schnatter has sued the company he founded, alleging that the pizza chain has treated him in a “heavy-handed way” since his resignation.

Continue Reading Below

In the lawsuit filed in a Delaware court, Schnatter is seeking access to internal company documents amid a dispute over his departure.

“Mr. Schnatter’s attorneys are seeking to inspect company documents because of the unexplained and heavy-handed way in which the company has treated him since the publication of a story that falsely accused him of using a racial slur,” Schnatter’s attorneys said in a statement, according to Reuters.

Papa John’s responded in a statement that it “will not let [Schnatter’s] numerous misstatements in the complaint and elsewhere distract us from the important work we are doing to move the business forward.”

“We are saddened and disappointed that John Schnatter has filed a needless and wasteful lawsuit in an attempt to distract from his own words and actions,” a Papa John’s spokesperson said. “We are providing Mr. Schnatter all of the materials he is entitled to as a director.”

On a conference call with a marketing agency, Schnatter reportedly used the “N-word” when discussing KFC founder Colonel Sanders’ alleged use of the offensive term. He apologized for the remark and stepped down as Papa John’s chairman following a Forbes report about the media training call.

Since then, Schnatter has said he regrets his decision to resign, accusing the company’s board of forcing him to give up his position based on “rumor and innuendo,” he wrote in a letter to the board. He also said the company failed to conduct an investigation into his comments.

“I then said something on the order of, Colonel Sanders used the word' 'N,' (I actually used the word,) that I would never use that word and Papa John’s doesn’t use that word,” Schnatter wrote in the letter. “Let me be very clear: I never used the 'N' word in that meeting as a racial epithet, nor would I ever.”

Schnatter remains on Papa John’s board as a director. He also owns about 29% of Papa John’s stock, making him the largest single shareholder.

The Louisville, Kentucky-based company has adopted a “poison pill” measure to fend off a potential hostile takeover by Schnatter. The move will prevent any shareholder from acquiring more than 15% of Papa John’s common stock without receiving approval from the board of directors.

TickerSecurityLastChangeChange %
PZZAPAPA JOHNS INTL62.62+0.01+0.02%

The infighting has taken a bite out of Papa John’s shares, which have fallen 12% over the past month.