Jose Angel Santana said he slapped the "127 Hours" star with the bad grade because he missed 12 of his 14 "Directing the Actor II" classes while pursuing a master's in fine arts.
Santana said he then suffered all kinds of drama -- first from Franco, who publicly ridiculed him, then from his department, which axed him over the "D."
"The school has bent over backwards to create a Franco-friendly environment, that's for sure," Santana, 58, said. "The university has done everything in its power to curry favor with James Franco."
Santana, who is suing NYU in Manhattan Supreme Court for his job back, asserts that Franco, whose career took off after a 2001 portrayal of James Dean, blew off just as many classes in other courses. But the star's other professors at NYU's Tisch School of the Arts still gave him good grades, Santana said.
He suggested that the good grades Franco received were payback to the actor for hiring one of his other professors, Jay Anania.
Franco hired Anania to write and direct the film "William Vincent," which starred Franco, the suit states.
Franco, 33, also wound up teaching an NYU course this past fall on adapting poetry into short films.
"In my opinion, they've turned the NYU graduate film degree into swag for James Franco's purposes, a possession, something you can buy," Santana said.
Neither Anania, nor a spokesman for NYU returned calls for comment. A rep for Franco had no immediate comment.