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Investigation of Potential Breaches of Fiduciary Duties by Management of Papa John’s International, Inc. (PZZA)

After the market closed on July 10, 2018 and on July 11, 2018, media outlets reported that Papa John’s founder, John Schnatter, 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.

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.” On this news, Papa John’s stock price fell $2.60 or 4.85% to close at $51.00 per share on July 19, 2018.

According to the article, “To protect himself, Schnatter, 56, installed loyalists in the firm’s top ranks, who enabled its “bro” culture. That includes international president Tim O’Hern, a close friend of Schnatter’s from Jeffersonville High School, as well as current CEO Steve Ritchie, who worked directly for Schnatter for three years and has run daily operations since 2014.”

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