Papa John’s Founder and Major Shareholder Granted Access to Company Docs After Resignation Controversy

A Delaware judge sided with Papa John’s founder and former chairman John Schnatter, granting him access to company documents he has been requesting since his resignation.

Schnatter willingly stepped down as chairman at the company’s request after controversy erupted over comments made by Schnatter over the NFL’s handling of national anthem protests.

According to the opinion, many in the media criticized Schnatter’s comments as being “racial in nature.” Schnatter dismissed those allegations, including an article from Forbes which he claims “mischaracterized” the racial elements of his complaints with the NFL.

Schnatter claims that his use of the word “nigger,” was “in no way racist,” after he used the racial epithet during a training exercise, according to the 49-page ruling.

Days after Schnatter stepped down from his position as chairman, Papa John’s also asked him to resign as director of the company, which he refused.

Papa John’s then took the matter further, establishing a special committee to investigate all relationships Schnatter shared with the company. Papa John’s also decided to terminate existing agreements they had with the former face of the company, according to the opinion authored by Chancellor Andre G. Bouchard.

The fallout with Papa John’s sparked legal backlash from Schnatter, who requested to inspect several categories of documents involving the company and his termination as chairman.

The opinion states that Schnatter was “perplexed about why the company made no effort to defend him as the founder and longstanding public face of the company from what he believes was unfair treatment by the media, and why the company instead seemed intent on abruptly cutting ties with him without investigating the matter, Schnatter questions whether his fellow directors fulfilled their fiduciary obligations.”

Before the current ruling, 13 out of 17 categories of documents requested by Schnatter had been resolved. Delaware’s Court of Chancery ruled that additional documents, which include text messages and emails related to Schnatter’s termination should be given to him.

“The company’s other directors, CEO, and general counsel used personal accounts and devices to communicate about changing the company’s relationship with Schnatter, they should expect to provide that information to the company,” the judge wrote. “That would apply not only to emails, but also to text messages, which in the court’s experience often provide probative information.”

To date, Schnatter is still Papa John’s largest shareholder, owning roughly 30 percent of the company’s shares.   

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