Papa John's founder accuses board of 'coup,' sues company for records

Ousted Papa John's founder sues firm
Ousted Papa John's founder sues firm

Papa John's founder John Schnatter is suing the pizza chain, seeking documents related to his ouster as chairman earlier this month and accusing the board of acting negligently or staging a possible "coup," according to the lawsuit filed Thursday in Delaware.

Schnatter resigned his post on July 11 after Forbes published an article detailing a May conference call in which Schnatter used the N-word. He confirmed his comments, apologized and stepped down as chairman that same day, after giving up his CEO post in November.

"Instead of standing behind the founder and working with news media to explain what actually occurred, the Company followed its usual, and flawed, manner of dealing with false and mistaken reporting as to comments made by Mr. Schnatter," according to the lawsuit obtained by CNBC.

Schnatter said he suspected the board breached its fiduciary duties, "either the purportedly independent directors acted without adequate information ... or [they] planned this coup in advance."

He said the company refused to correct "misreported stories" about his comments on the May conference call as well as when he took a shot at the NFL last November, blaming falling pizza sales on the league's "poor leadership" amid players kneeling during the national anthem. Instead of defending him, the board asked him to resign, he said in the lawsuit.

"Now they are doing the same thing again – 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's attorney Patty Glaser told CNBC in a statement.

Papa John's spokesman Peter Collins said the company is providing Schnatter, who remains on the board, with the documents he "is entitled to as a director."

"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," Collins told CNBC in an email. "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."

To read Schnatter's full suit against Papa John's click here. To read the additional material within the lawsuit click here.