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Founder of Papa John’s sues board in business litigation filing

Litigation between businesses is a daily undertaking for many Oregon business law attorneys. Disputes involving shareholders, former officers and directors of a company are also common. They sometimes turn into business litigation when the disputes cannot be resolved by negotiations.

A recent prime example of such a dispute involves the founder of Papa John’s pizza chain and the corporation’s board of directors. Some months back, John Schnatter, the founder of Papa John’s resigned as the chief officer of the company but remained as a board member. The resignation was prompted by a phone call that he had with a marketing company in which he allegedly used a racial epithet.

He was accused of using the racial slur when discussing KFC founder Colonel Sanders’ alleged use of the same slur in the past. Schnatter apologized for saying those comments and stepped down as Papa John’s chairman after Forbes published an article on the incident. Schnatter has in the past incurred the wrath of liberal groups by making alleged discriminatory comments about minorities that tended toward an alleged attitude of white superiority.   

Recently, Schnatter filed suit against Papa John’s in a Delaware court. He complains in the suit that the board has treated him in a “heavy-handed” way since the Forbes story. He accuses the board of forcing him out without conducting an investigation.

The dispute stands out due to the widespread publicity garnered by the company’s founder over past controversies. When the celebrity aspect is disregarded, this general kind of dispute between directors and a former officer is not uncommon. The business litigation formally resurrects the controversy and brings it to a head. In the coming months, the parties will go through discovery and, if they don’t settle, the case will either be dismissed for legal insufficiency or it will go to trial to be decided by a jury. This is the general pattern of litigation between businesses and former officers that occurs similarly in Oregon.

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