Delaware judge orders Papa John's to turn over documents to founder

WILMINGTON, Del. (Reuters) - A Delaware judge said on Tuesday Papa John’s International Inc must turn over internal documents to the company’s founder who has been seeking to reassert control over the pizza delivery chain after he resigned as chairman in July.

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John Schnatter, who owns about 30 percent of the company, has been seeking the documents to try to show the company was mismanaged and to determine if he was improperly pushed out.

The founder of the third-largest pizza delivery chain resigned in July following a Forbes story that he had used a racial slur on a media training conference call.

Schnatter said the comment was mischaracterized and since then he has battled the company in court.

On Tuesday, Chancellor Andre Bouchard of Delaware’s Court of Chancery ordered the company’s directors to turn over documents and communications, including text messages on personal devices, related to Schnatter’s firing. The order covered some messages between directors and their lawyers.

Both sides said in statements they were pleased with the ruling. The company noted the judge narrowed the scope of the document requests, while Schnatter called it a vindication of his right to the information.

The ruling comes as Papa John’s is working to identify potential buyers for the company, which has drawn the interest of private equity investors.

Bouchard rejected the company’s argument that Schnatter did not deserve the documents because it claimed he was seeking them for his personal gain, not for the benefit of shareholders.

The judge said Schnatter’s testimony during a one-day trial led credence to his concern that he was forced out before the board investigated the Forbes story. The judge also noted he had a right to investigate why the company would quickly abandon him as the long-standing face of the company, which raised questions about management and oversight.

Schnatter also sued the board in August for breaching its fiduciary duties and causing what he said was “irreparable harm” to the company.

In November, the company reported a smaller-than-expected decline in quarterly comparable sales in North America, helped by new advertising aimed at moving past its split with Schnatter.

Reporting by Tom Hals in Wilmington, Delaware; Editing by Tom Brown