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Papa John's founder sues the company, seeking documents related to his ouster

Papa John's founder sues the company, seeking documents related to his ouster
Papa John's founder John Schnatter resigned as the company's chairman after backlash over his use of a racial slur. He has since called the resignation a mistake. (Timothy D. Easley / Associated Press)

Papa John’s International Inc. founder John Schnatter is suing the pizza chain, demanding internal files related to directors’ handling of his ouster for using a racial slur during a media-training session.

Schnatter resigned as chairman this month but remains on the board and owns 29% of the company.

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A special committee of independent directors ordered the termination of an agreement that designated Schnatter as the brand’s face and voice, and requested he cease media appearances on behalf of the firm. Board members also ordered his eviction from the company’s headquarters and have refused to turn over information about its decision-making process, according to the lawsuit, filed Thursday in Delaware Chancery Court.

“Mr. Schnatter sought to inspect documents because of the unexplained and heavy handed way in which the company has treated him” after news surfaced of his use of a racial epithet, the founder’s lawyers said in the suit. After the report, Schnatter resigned as chairman of Papa John’s but later said he regretted the decision.

Schnatter, 56, faced a backlash after a Forbes report this month described the disputed session with media agency Laundry Service. Schnatter has acknowledged using the slur, but he said that it was in the context of a training exercise and that he isn’t a racist. He subsequently stepped down as board chairman.

“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,” Peter Collins, a Papa John’s spokesman, said in an emailed statement. “We are providing Mr. Schnatter all of the materials he is entitled to as a director.”

Schnatter’s “books and records” lawsuit aims to gather information that can be used in a subsequent action. A judge must decide whether Schnatter is entitled to the board information he is seeking and what must be turned over.

Schnatter is also mounting a campaign for new leadership at Papa John’s, including the chief executive officer and members of the board.

He said he is planning to speak with other shareholders about installing new leadership at the company in an effort to fix the struggling pizza chain.

“The shareholders are going to dictate the board, and I think we have to take a hard look at this board and if the composition of this board is the best thing for Papa John’s,” Schnatter said in a phone interview. “I would suggest we start looking for new leadership immediately.”

Schnatter said he is not interested in returning as CEO, but wants to have a role in plotting a comeback for the chain, which has reported slumping sales in addition to the public-relations controversies.

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