Papa John’s International, Inc.
- Company Name
- Papa John’s International, Inc.
- Stock Symbol
- Class Period
- February 25, 2014 to July 19, 2018
- Motion Deadline
- October 29, 2018
- Southern District of New York
The complaint charges Papa John’s and certain of its officers with violations of the Securities Exchange Act of 1934. Papa John’s operates and franchises pizza delivery and carryout restaurants under the Papa John’s trademark in the United States and internationally. Papa John’s is among the largest carryout and pizza delivery restaurant chains in the United States.
The complaint alleges that throughout the Class Period, defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, defendants failed to disclose that: (i) Papa John’s executives, including defendant John H. Schnatter (“Schnatter”), had engaged in a pattern of sexual harassment and other inappropriate workplace conduct at the Company; (ii) Papa John’s Code of Ethics and Business Conduct was inadequate to prevent the foregoing misconduct; (iii) the foregoing conduct would foreseeably have a negative impact on Papa John’s business and operations, and expose Papa John’s to reputational harm, heightened regulatory scrutiny, and legal liability; and (iv) as a result, Papa John’s public statements were materially false and misleading at all relevant times.
On July 10, 2018, post-market, and July 11, 2018, media outlets reported that Papa John’s founder, defendant Schnatter, had used a racial slur during a conference call in May 2018.
On this news, Papa John’s stock price fell $2.46 per share, or 4.84%, to close at $48.33 per share on July 11, 2018.
Later that day, Papa John’s announced Schnatter’s resignation as chairman of Papa John’s board.
Then, on July 19, 2018, Forbes published an article entitled “The Inside Story of Papa John’s Toxic Culture.” Citing “interviews with 37 current and former Papa John’s employees—including numerous executives and board members,” the Forbes article reported that “Schnatter’s alleged behavior ranges from spying on his workers to sexually inappropriate conduct, which has resulted in at least two confidential settlements.” The Forbes article further reported that “[t]o protect himself, Schnatter . . . installed loyalists in the firm’s top ranks, who enabled its ‘bro’ culture.”
On this news, Papa John’s stock price fell $2.60 per share, or 4.85%, to close at $51.00 per share on July 19, 2018.