Paparo is suing the borough and council members for his firing last month.
The lawsuit cites racial discrimination and denial of due process.
The council says it fired Paparo over $380,000 in overspent funds.
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Paparo, who is white, has stated his job was on the line because of his race.
The borough has a population of about 12,000 people: roughly 88% of residents are African American.
"When people say that they want a Black chief because it's a Black town, I didn't want to believe it," Paparo previously stated.
Borough Council President Sharon Council-Harris said race was never the case.
"It was not based on race. It was not based on his color. It was based on whether he was qualified to take the job," said Council-Harris.
The lawsuit is seeking compensatory and punitive damages and a reinstatement of Paparo's job.
You can read the full lawsuit here.