Papa John's criticizes founder for restaurant merger meeting: letter

NEW YORK (Reuters) - Papa John's International Inc PZZA.O has publicly criticized founder John Schnatter for attending a meeting in July about a potential deal with a competitor without its CEO, the latest salvo in a feud for control of the company.

FILE PHOTO: John Schnatter (R), founder of Papa John's Pizza, arrives at the 2011 American Music Awards in Los Angeles November 20, 2011. REUTERS/Danny Moloshok/File Photo

Schnatter violated instructions from Papa John's board when he met with hamburger restaurant chain Wendys Co WEN.O, people familiar with the matter said on Thursday.

The board had told Schnatter only to meet with the restaurant if Chief Executive Officer Steve Ritchie was present, said a letter posted by the company on Wednesday from a committee formed to audit Papa John’s culture.

Schnatter declined to comment. Wendy’s said it does not comment on what it described as rumors or speculation. Papa John’s declined further comment.

The committee also said Schnatter ignored the board’s directions when he criticized the National Football League over national anthem protests by players last year.

Papa John’s has been trying to distance itself from Schnatter, who stepped down as company chairman in July following reports that he had used a racial slur on a media training call.

“John Schnatter is harming the Company, not helping it, as evidenced by the negative impact his comments and actions have had on our business and that of our franchisees,” the committee’s letter said.

Schnatter remains a member of the board and holds 30 percent of the company’s shares.

The only way Papa John’s could remove Schnatter from the board is to hold a special shareholder vote, or propose a slate without him at its annual meeting next year.

Minor Myers, a corporate governance professor at Brooklyn Law School, said that may do little to further separate Papa John’s from Schnatter because of his ownership stake.

“He has 30 percent of the stock, shareholders voting include him,” Myers said.

Schnatter, who is suing the company for documents related to his departure, has said Ritchie should not be CEO and is responsible for its flagging financial performance. He also accused Ritchie’s team of sexual misconduct, an allegation the company has denied.

On Thursday, a Papa John’s shareholder filed a lawsuit seeking class-action status, accusing the company and Schnatter of securities fraud for concealing his alleged inappropriate workplace conduct, and how its code of ethics was inadequate to prevent it.

Papa John’s and Schnatter declined to comment on the lawsuit.

Reporting by Jessica DiNapoli in New York; additional reporting by Jon Stempel; editing by Grant McCool