Papa John's founder John Schnatter finally has his day in court, testifies against the board

  • John Schnatter appeared in a Delaware courthouse Monday to testify against Papa John's.
  • Schnatter, who filed the lawsuit in late July, is seeking documents related to his departure as chairman.
  • He said he suspected the board breached its fiduciary duties.

Papa John's founder John Schnatter finally got his day in court.

On Monday, the former CEO and chairman of the Kentucky-based pizza company testified in a Delaware courtroom against his former board of directors in seeking documents related to his July ouster as chairman.

Schnatter was notably more calm and reserved in the courtroom, compared with the bombastic tone he's previously taken in statements to the press and against his former company.

He testified that Papa John's refused to correct stories about a May conference call in which he admitted to using a racially charged epithet. He also said the board didn't back him in clarifying controversial comments he made about the NFL last November. He had blamed 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 give up his post as CEO in December and chairman in July, he said.

Schnatter once again said he had a "gut feeling" the company was actively trying to push him out and that the board breached its fiduciary duties.

He said he planned to fire current CEO Steve Ritchie, who knew his performance "evaluation would be subpar."

Monday's trial marks the first time the founder has formally faced the company, though a very public feud has escalated since Schnatter's ouster this summer.

"I don't want to be in the CEO position, for sure, but you know I definitely want to be part of the company, and I am part of the company," Schnatter told CNBC.

Schnatter still holds a 30 percent stake in the company but is prohibited from purchasing more stock until July 2019, according to a poison pill plan put in place by the board of directors after his ouster.

In the meantime, the company is attempting to put the scandal behind it, launching a new ad campaign minimizing Schnatter's presence.

"We have already provided John Schnatter all of the materials he is entitled to as a director and will not be distracted by his misstatements, words and actions," Papa John's told CNBC. "There is nothing he's entitled to that he hasn't already received. This is being dealt with through the appropriate legal channels."

Shares of the company have fallen more than 31 percent over the last year, but the company's woes started long before Papa John's was locked in a bitter battle with its founder.

Since hitting an all-time high of $90.49 per share in December 2016, Papa John's stock has lost nearly half its value on disappointing same-store sales growth. On Monday, the stock was down more than 2 percent, last changing hands at around $50 per share.

Sales growth at stores open for at least a year was strong in 2016, peaking during the third quarter. But that growth started to slip by the fourth quarter of that year and has progressively gotten worse. By the fourth quarter of 2017, same-store sales turned negative and have continued to decline. Those sales troubles are expected to continue throughout the rest of the year and could cause store closures.

Representatives for Schnatter declined to comment further.

Papa John's spokesman Peter Collins declined to comment on Schnatter's remarks about Ritchie.

The board previously issued a letter from its independent directors in late August that said Schnatter fully supported Ritchie as CEO.

"However, when the Company decided to implement a new marketing plan that did not feature John Schnatter, he began to criticize the management team and undermine the new CEO's leadership," they said in the Aug. 29 letter.