Delaware Chancery Rules in Favor of Papa John’s Founder John Schnatter

WILMINGTON, DELAWARE, JANUARY 15, 2019 – Papa John’s Founder John Schnatter announced that the Court of Chancery of the State of Delaware issued a ruling in his favor today. 

“We are pleased that Mr. Schnatter was vindicated today by the Delaware Court of Chancery, which ruled that Papa John’s must give Mr. Schnatter numerous documents it has wrongly withheld from him for months,” said Garland A. Kelley, attorney for Mr. Schnatter.

“Mr. Schnatter sought access to those documents after the unexplained and heavy-handed behavior of various Company insiders — including members of the Board and some in management — who may have placed their own self-interests ahead of the best interests of the Company, its shareholders, employees and franchisees. The Court’s ruling comes after a full trial on the matter, where the Company did not (or could not) offer any witness who could defend its position.”

Among other things, in its order the Court noted Mr. Schnatter’s concern that director Mark Shapiro, who also serves as President of Endeavor, may have, “benefitted from the Company’s efforts to cut ties with [Schnatter] because a company Shapiro owns is now doing advertising business with Papa John’s, which Schnatter would not have permitted.”

The Court further noted Mr. Schnatter’s concern that Papa John’s CEO Steve Ritchie may have “organized a coup to oust Schnatter from the Company after he learned that Schnatter had prepared a negative performance review of him and that Schnatter was planning to recommend to the Board that [Ritchie] be removed from the CEO position.”

The Court stated that given “his unique role as the Company’s longstanding public spokesman, Schnatter’s concerns that the Company made no effort to defend him in response to the controversies arising from his comments about the NFL and the publication of the Forbes Article, and that the Company instead appeared intent on abruptly severing ties with him, are relevant concerns that any director, including Schnatter, would have about the Company’s management and oversight.”

In addition, the Court found Mr. Schnatter’s reasons for seeking these documents to be “credible” and that they “arose from a genuine desire to investigate whether the other members of the Board had fulfilled their fiduciary obligations in handling the controversies during the period” before formation of the Special Committee.  In particular, the Court found that Mr. Schnatter’s credible testimony “lends credence to his concern that it was inappropriate for the Board to ask him to resign as Chairman and as a director within a few days of the publication of the Forbes Article and before the Board conducted an investigation or interviewed him.”

Mr. Kelley concluded, “We are confident that the documents the Court ordered be produced to Mr. Schnatter, including emails, texts messages and privileged materials, will help get to the bottom of what actually occurred here.”

 

Contact:

Mike Sitrick or Terry Fahn

Sitrick And Company

(310) 788-2850