Danker v. Papa John’s International, Inc., et al 1:18-cv-07927 — On August 30, 2018, investors sued Papa John’s International, Inc. (“Papa John’s) in United States District Court, Southern District of New York. Plaintiffs in the PZZA class action allege that they acquired Papa John’s stock at artificially inflated prices between February 25, 2014 and July 19, 2018 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of Papa John’s alleged misconduct during that time. For more information on the Papa John’s Lawsuit, please contact us today!

Summary of the Allegations

Company Background

Papa John’s (NASDAQ: PZZA) has been in business since 1984 and is “among the largest carryout and pizza delivery restaurant chains in the United States.” It also has restaurants and provides pizza delivery services overseas. Specifically, Papa John’s claims it has more than 5,000 locations in 45 countries and territories globally.

Founded by John Schnatter, Papa John’s is incorporated in Delaware and is based in Louisville, Kentucky.

Schnatter served as Papa John’s CEO from April 20ll through December 2017. The company’s failure to disclose his alleged misconduct, as well as that of other executives, is at the crux of the August 30 complaint.

Summary of Facts

Papa John’s and three of its current and former officers and/or directors (the “Individual Defendants”) are now accused of deceiving investors by lying and withholding critical information about the company’s business, compliance and operational policies during the Class Period.

Specifically, they are accused of omitting truthful information about inappropriate workplace behavior and the company’s ability to prevent it from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused Papa John’s stock to trade at artificially inflated prices during the time in question.

The truth emerged in a series of events beginning after the market closed on July 10 and on July 11, 2018. During that time, news broke that Schnatter, who was then chairman of the board, had used a racial slur during a conference call in May 2018. Papa John’s announced Schnatter’s resignation as chairman after its stock price dropped by more than 4.8% on July 11.

Then, on July 19, 2018, Forbes published an article about the “toxic culture” at Papa John’s, in which it cited “interviews with 37 current and former Papa John’s employees – including numerous executives and board members.” As the article stated, “Schnatter’s alleged behavior ranges from spying on his workers to sexually inappropriate conduct, which has resulted in at least two confidential settlements.” The article further stated that Schnatter “installed loyalists in the firm’s top ranks, which enabled its ‘bro’ culture” in order to shield himself.

A closer look…

The August 30 complaint alleges that Papa John’s and/or the Individual Defendants repeatedly made false and misleading public statements throughout the Class Period.

For instance, on a form filed with the SEC on February 25, 2014, Papa John’s acknowledged that it had adopted a written code of ethics (the “Code of Ethics and Business Conduct”), and noted in pertinent part that it “applies to our directors, officers and employees.”

The Code of Ethics and Business Conduct referenced on the form also states in pertinent part: “In addition, Papa John’s is committed to providing a workplace for its team members that is free of harassment or other intimidating, hostile or offensive behavior based on any of the above characteristics or any other characteristic protected by applicable law.”

On another form filed with the SEC on February 27, 2018, Papa John’s said in relevant part: “If we are unsuccessful in managing incidents that erode consumer trust or confidence, particularly if such incidents receive considerable publicity or result in litigation, our brand value and financial results could be negatively impacted.”

What Papa John’s failed to disclose, however, was that its executives, including Schnatter, “had engaged in a pattern of sexual harassment and other inappropriate workplace conduct at the Company.” Papa John’s also failed to disclose that its Code of Ethics and Business Conduct lacked the provisions necessary to prevent such conduct, and also the effects that this conduct have had on the business.

Impact of the Alleged Fraud on Papa John’s Stock Price and Market Capitalization

The following chart illustrates the stock price during the class period:

Actions You May Take

If you have purchased shares during the Class Period, you may join the class action as a lead plaintiff, remain a passive class member, or opt out of this litigation and pursue individual claims that may not be available to the class as a whole.

NOTE: The deadline to file for lead plaintiff in this class action is October 29, 2018. You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court. Typically, the plaintiff or plaintiffs with the largest losses are appointed lead plaintiff.

In order to identify your potential exposure to the alleged fraud during the time in question, you may wish to perform an analysis of your transactions in Papa John’s common stock using court approved loss calculation methods.

Recently Filed Cases

Listed below are recently filed securities class action cases being monitored by us, along with the class period and the deadline to file a motion to be appointed as the Lead Plaintiff in the action.  Please contact us if you would like an LK report for any of these cases:

About Us

Levi & Korsinsky is a leading securities litigation firm with a hard-earned reputation for protecting investors’ rights and recovering losses arising from fraud, mismanagement and corporate abuse.  With thirty attorneys and offices in New York, Connecticut, California and Washington D.C., the firm is able to litigate cases in various jurisdictions in the U.S., England, and in other international jurisdictions.

Levi & Korsinsky provides portfolio monitoring services for high-net worth investors and institutional clients.  Our firm also assists investors in evaluating whether to opt-out of large securities class actions to pursue individual claims.

For additional information about this case or our institutional services, please contact us.