Schnatter sues Papa John's, says he is being made 'scapegoat'

LOUISVILLE, Ky. (WDRB) – John Schnatter sued Papa John’s International on Thursday over access to company records, a significant escalation of a weeks-long feud between the company’s founder and the other members of its board of directors.

Schnatter gave up his position as chairman of the company – a post he had held since starting Papa John’s in 1985 – earlier this month following a July 11 Forbes report about his use the N-word during a business conference call in May.

He initially said in a statement that the report was true, but later said in a letter to the board that the remark was taken out of context and that it was "a mistake" to resign as chairman.

“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.

“…rather than address the real issues like the health of the business, the Company is hiding documents that, we believe, will disclose the actual facts as to what is occurring here, including using Mr. Schnatter as a scapegoat to cover up their own shortcomings and failures.”

Schnatter remains on the company’s board, as he owns nearly 30 percent of its stock.

Schnatter's lawsuit takes aim at the "special committee" of the board formed earlier this month to review the company's relationship with Schnatter. The special committee includes all the board members except Schnatter.

Over the weekend, the board adopted a “poison pill” plan that would discourage Schnatter from buying up a controlling stake in the company.

The other directors previously kicked Schnatter out of his company office and terminated his “founder agreement” with the company.

The special committee voted to terminate the office and founder agreements within hours of the committee's formation on July 15 -- so soon that the other directors either breached their fiduciary duty by acting "without adequate information" or "planned this coup in advance with the assistance of the Company's advisors unbeknownst to Mr. Schnatter," according to the lawsuit. 

The lawsuit says the special committee has "abandoned all pretense of good corporate governance, let alone best practices, by making material decisions on behalf of the Company on complicated issues without properly informing itself."

The lawsuit, filed in state court in Delaware, where Papa John's is incorporated, seeks an expedited schedule calling for a trial next month:

There was no immediate response from the company.

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Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2018 WDRB News. All rights reserved.

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Chris Otts reports for WDRB.com about business and economic topics, higher education and local / state government. He joined WDRB News in 2013 after seven years with The Courier-Journal. Got a tip? Chris is at 502-585-0822 and cotts@wdrb.com.