John Schnatter settles lawsuit over Papa John’s ousting

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After nearly six and a half years and more than 500 court filings, John Schnatter settled his lawsuit against a marketing team who leaked a call that led to his ousting from the pizza empire he built.

It started with a 2018 conference call in which the Papa John’s founder, and then-CEO, sliced his ties with the pizza brand in a matter of hours, following his use of a racial slur. The lawsuit ended unceremoniously in federal court May 11 with an undisclosed settlement amount.

In between, nearly 14,000 pages of court filings detail the self-made billionaire’s fight to contain allegations around his alleged abuse of alcohol and attendance at a treatment center in Western Pennsylvania.

The lawsuit’s culmination came just a week after a federal judge declared he was unsure “what more could be done” when any further unredacted medical records relating to the Western Pennsylvania treatment center, as well as a lab and hospital, could not be produced due to a medical provider’s “document retention policy.”

Schnatter’s attorneys jointly agreed to settle by dismissing the case’s final claim with prejudice May 11 from the Western District of Kentucky, according to court records.

The final claim, for breach of contract, was one of at least half a dozen claims brought forward by the pizza maker. Terms of the settlement were not disclosed in the court record.

Attorneys for both parties did not immediately respond to a request for an interview by The Courier Journal. Spokespersons for Schnatter, Papa John’s and Papa John’s Investor Relations also did not respond to a request seeking comment from the newspaper.

Confidential meeting details lead to breach of contract claim

In January 2020, Schnatter filed a lawsuit against Laundry Service, a marketing firm working with him on media training, for violating a non-disparagement agreement after allegedly disclosing information of a meeting to Forbes Magazine, “who in turn published confidential details of the meeting on July 11, 2018 stating that Schnatter had used the ‘N-word’ during the meeting,” federal court records state.

Schnatter admitted to the allegations and apologized that same day.

Court records also detail the following:

• In January 2020, Schnatter originally filed suit for three claims (breach of contract, tortious interference with prospective economic advantage and intentional infliction of emotional distress).
• In July 2020, he dismissed his own claim for emotional distress.
• By October 2020, he amended his complaint to include three new claims (contractual breach of the implied covenant of good faith and fair dealing, tortious interference with contract and prima facie tort.)
• Then in January 2023, Schnatter again amended his complaint, keeping breach of contract, but including two new claims (intrusions upon seclusion and false light.)
• Eight months later, in August 2023, Laundry Service was granted summary judgment on two claims (false light and intrusion upon seclusion).

That left only the breach-of-contract claim to be argued.

The ‘shield’ and the ‘sword’

On May 11, Schnatter and Laundry Service entered into a joint stipulation of settlement and agreed to dismiss the lawsuit, according to an order submitted to U.S. District Judge Benjamin Beaton and U.S. Magistrate Judge Colin Lindsay. Magistrate judges assist district court judges with various preliminary administrative matters, like orders and other hearings, in both criminal and civil cases.

More than 500 filings in the case detail an extensive feud between the two sides, showing both were preparing for trial as recently as May 1, including a long push by Laundry Service attorneys for unredacted, complete medical records.

Laundry Service’s push for medical records stems from an undated deposition by former Papa John’s CEO Steve Ritchie, who testified that “he suspected (Schnatter) of abusing alcohol and that alcohol use had impacted his work,” court records state.

Then, in a November 2024 memorandum order regarding a motion to seal, also signed by Lindsay, the judge outlines four separate arguments between the two sides, including regarding the allegations of alcohol abuse.

Court records state that Ritchie also testified he had approved an intervention by then-board member Wayne Kent Taylor to take Schnatter “to a rehabilitation center in Pennsylvania, but he did not complete his treatment.”

Schnatter denied abusing alcohol while he was CEO, as well as having received treatment in Pennsylvania.

Laundry Service then asked Schnatter to produce all documents and communication related to his program attendance for abuse or addiction to alcohol.

In an opinion and order, Lindsay wrote that if Schnatter “never received such treatment, then he should have been able to confirm that no such records existed.”

Instead, Schnatter and his attorneys responded to the request calling it “irrelevant, overly broad and seeks privileged confidential and private information.”

Laundry Service asked Lindsay to “compel” production of the rehabilitation records and Lindsay agreed, stating Schnatter could not “rely on both the shield of protection for substance abuse treatment records and the sword of insisting that he never received such treatment in the first place.”

Schnatter objected, arguing “his alleged alcohol abuse and treatment were irrelevant to the case and thus not discoverable.”

Fast forward hundreds of filings to April 15, when Lindsay held a status conference via phone to discuss issues with discovery. Attorneys for Laundry Service claimed that Schnatter “inappropriately redacted and withheld” portions of his medical records regarding the treatment center, lab and hospital.

Schnatter was ordered by the court to provide his entire medical records, along with what had already been given to attorneys for Laundry Service so the judge could review them.

On April 17, though, Schnatter filed a report stating that he had produced all of those records. His attorneys also stated Schnatter’s medical provider did not preserve some of the documents requested due to its “document retention policy,” according to court records.

Based on his review of the documents provided, the judge could not determine whether Schnatter was withholding anything from Laundry Service.

“As such, it is unclear to the Court what more must be done regarding the unredacted documents,” a May 6 order states, signed by Linsday. “Therefore, the Court will take no further action with respect to those documents at this time.”

Those medical records, detailed in an April court filing, were in regard to the treatment center Caron, Reading Hospital and HLN Lab Medicine. Both are located in Western Pennsylvania.

An April 17 email from Elizabeth Gray, a managing partner of Gray Ice Higdon which represented Schnatter, sent to attorneys on both sides said that they had “decided to fully resolve” the discovery issues regarding health information by providing electronic document copies “produced as Attorney’s eyes only.” Gray also said the firm would provide a full set of unredacted records from Caron, also marked confidential.

Problems before Schnatter used racial slur

The firestorm around Schnatter and the dip of Papa John’s sales started before he resigned.

In November 2017, he blamed declining sales at the national pizza chain on the NFL’s “poor leadership” regarding its handling of player demonstrations during the national anthem. Papa John’s was an NFL sponsor, with Schnatter appearing in commercials with NFL stars like Peyton Manning and Joe Montana.

“White supremacist groups hailed the pizza maker … forcing the company to denounce [the groups’] racist views,” The Courier Journal previously reported.

Schnatter was forced to step down as chairman in July 2018 after reports surfaced that he used a racial slur during a media training session in a May conference call with a marketing team to role-play scenarios to help Schnatter learn to respond to questions about racial issues.

Forbes reported in July 2018 that Schnatter said “Colonel Sanders called blacks ‘n—–s,'” offending several people on the call.

“Schnatter also reflected on his early life in Indiana, where, he said, people used to drag African-Americans from trucks until they died,” Forbes reported.

In a matter of 12 hours after Forbes published the internal dialogue, Schnatter admitted to the remarks in a statement, resigned as chairman of Papa John’s and from the University of Louisville’s board of trustees. The Courier Journal previously reported he later said he erred in resigning.

“Two days after Forbes reported the call, Papa Johns announced that it would no longer include (Schnatter) in any advertising or marketing materials for the brand,” Lindsay wrote in the November 2024 memorandum. “The University of Louisville, Purdue University, the University of Kentucky and (Ball) State University all cut ties with Schnatter.”

Eventually, UofL would remove his company’s name from Cardinal Stadium. His hometown of Jeffersonville also removed Schnatter’s name from its historic fieldhouse. He previously donated $800,000 toward its renovations.

Court records say Papa John’s canceled its licensing agreement with its founder, prohibited him from speaking on its behalf and denied Schnatter access to its Louisville headquarters (2002 Papa Johns Blvd), which is located near Blankenbaker Parkway.

The University of Louisville recently reconciled with Schnatter, where he met with the board of trustees as they learned more about his 2018 departure from the board.

Papa John’s held its last earnings call on May 7, four days before the settlement, to discuss financial results from the first quarter. A date is not yet set for their second-quarter earnings call. That quarter ends June 30.

Reporting by Stephanie Kuzydym, Louisville Courier Journal / USA TODAY Network via Reuters Connect.