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Leadership

John Schnatter sues Papa John’s

The company’s beleaguered founder is seeking documents related to his ouster.
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John Schnatter has filed a lawsuit against Papa John’s International seeking documents related to his dismissal from the company earlier this month, saying that a special committee of the board was either “grossly negligent” or staged a “coup.”

Schnatter, the company’s founder and former CEO, also claims that the company did not do enough to stand by him after reports earlier this month that he used a racial slur during a conference call—comments he acknowledged and apologized for, but which led to his resignation as chairman earlier this month.

A special committee of the company’s independent directors subsequently ended its founder’s agreement with Schnatter, removing him as its spokesman and kicking him out of his office at the company’s Louisville, Ky., headquarters.

“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.

“The company’s refusal to provide the requested documents to Mr. Schnatter demonstrates that the company, board and special committee, instead of standing behind its founder and chairman, did just the opposite by failing to engage with the news media to explain what actually occurred.”

The statement said that “rather than address the real issues like the health of the business,” the company is “using Mr. Schnatter as a scapegoat to cover up their own shortcomings and failures.”

In a statement on Thursday, a Papa John’s spokesperson called the lawsuit “needless and wasteful.”

“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,” the spokesperson said. “We are providing Mr. Schnatter all of the materials he is entitled to as a director. We will not let his numerous misstatements in the complaint and elsewhere distract us from the important work we are doing to move the business forward for our 120,000 corporate and franchise team members, and our franchisees, customers and stakeholders.”

The lawsuit intensifies a mounting battle between Schnatter and the company he founded and for which he remains a director and an owner of 30% of its stock.

In his lawsuit, Schnatter says the special committee is making decisions “without informing itself properly.”

The lawsuit says that directors “acted without adequate information and breached their duty of care, or the purportedly independent directors planned this coup in advance with the assistance of the company’s advisors unbeknownst to Mr. Schnatter.”

Schnatter, as a company director, says in the lawsuit that he is entitled to receive information and advice that other directors receive. He says that the company has refused to provide him with those documents.

Schnatter says in his statements that stories about him, including one on the company’s culture and another in which he used the N-word during a conference call with Papa John’s marketing agency, were “misreported.”

“When Mr. Schnatter asked the company to assist in correcting the misreported stories by communicating the true facts, the company’s public relations department and other top executives told Mr. Schnatter to ignore the issue because it would eventually go away,” the statement said.

“This type of flawed public relations strategy is unfortunately par for the course for the company, which has a history of sticking its head in the sand when dealing with comments that have been misconstrued and falsely reported.”

UPDATE, July 26, 2018: This story has been updated to add Papa John's statement.

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