The second day of the trial involving two cousins who purchased the debt of Cicis Pizza featured the testimony of both men Wednesday in Dallas County.
Sunil Dharod, who came to Anand Gala with the business opportunity to buy Cicis Pizza for $11 million, put up 70 percent and Gala put up 30 percent of the necessary capital to buy the business. Gala’s company, Gala Capital Partners Cici’s, along with Dharod and his entities, SSCP Management and OnWin, took over and reorganized Cicis Pizza under Smiley Slice. Dharod controlled a majority stake in Smiley Slice, while GCP Cici’s retained a minority interest. GCP Cici’s founder, Gala, became the chairman and CEO of Smiley Slice.
Gala accused his cousin, Dharod, of firing him soon after purchasing the business, consolidating complete control over Smiley Slice.
Gala’s claims against Dharod are breach of contract, breach of fiduciary duty and civil conspiracy. Dharod lodged counterclaims against Gala for breach of fiduciary duty, fraud by nondisclosure and fraudulent misrepresentation.
Gala was the first to take the witness stand. His attorney, Gibson, Dunn & Crutcher partner Betty Yang, began questioning him Tuesday afternoon, and Winston & Strawn partner LeElle Slifer started cross-examination Wednesday morning.
Gala’s testimony lasted several hours. Yang started by asking him if this was a case about what kind of man he is. He responded that he is a man who keeps his word.
When questioning turned to the 70 percent and 30 percent agreement, Gala said the contracts “clearly said” the cousins could enter into other business agreements separate from this one with Cicis Pizza.
Yang asked if those written contracts also spelled out what Dharod could charge as a management fee for their joint company. Gala said it clearly stated it was reasonable to charge for the reimbursement of the office and administrative expenses. He didn’t specify the amount, but did say he disagreed with the management fee that was charged in 2022.
Jurors heard that by 2022, Dharod increased his management fee from $72,000 to $5 million a month. Gala said that caused an argument between him and Dharod, but that his cousin “exerted his ability to just take the fees.”
Gala has been investing in restaurant companies for 35 years. He was 25 years old when he became the youngest franchisee of Applebee’s in California and Del Taco in Arizona.
Before the Cicis business partnership, Gala said he and Dharod had a very close relationship.
The cousins purchased Cicis Pizza for $11 million. Gala said he was only comfortable putting up about $4 million of the capital for Cicis Pizza, and Dharod covered the rest.
Yang asked if Gala would have ever agreed to a lifelong agreement to participate in a 70 percent and 30 percent partnership. Dharod believes Gala orally agreed to a lifelong agreement, which he broke by engaging in other business deals without him.
Gala said no because that would leave him as a minority owner in all future business deals.
“It seems like you’re giving up every opportunity for the rest of your life when this is the only thing I know how to do,” Gala said. “This is my livelihood, investing in businesses. That doesn’t make sense to me.”
After Dharod fired Gala as CEO of Cicis, an opportunity to buy out Gala’s shares of the company arose.
Gala said it was important to find a quick solution because he still owned shares of the company but had lost access. Dharod never bought Gala’s shares in the company. Gala asked for $65 million for his shares, which Dharod declined because he didn’t think the company was worth that much. Dharod hired a firm to assess what the company was worth and Gala’s shares. The firm came back with a much lower number, affirming Dharod’s belief.
While Gala was CEO, a data breach hit Cicis in 2022. Dharod has accused Gala of being absent and pointed to his lack of presence during the breach as an example.
On cross-examination, Slifer asked Gala about his whereabouts during the data breach. She displayed emails at the time from Gala, showing he planned on being in Dallas for meetings about investing in a different restaurant venture, Rusty Taco.
Gala said he didn’t remember if he was in Dallas that week, but agreed he did not visit the Cicis Pizza office and probably could have. How the data breach was handled while Gala was CEO of Cicis is the basis of one of the claims in the lawsuit that Gala was an absent owner.
Jurors also heard a video deposition of David Roberts, the head of technology during the data breach at Cicis Pizza, who said he “believed [Gala] provided a resource to help during the data breach.”
Under questioning from Gibson, Dunn & Crutcher partner Trey Cox Dharod told jurors that Cicis Pizza was in bankruptcy when the cousins purchased the company and have since turned it into a profitable company.
Cox displayed a demonstrative for jurors showing Cicis profits are shared, but SSCP profits fully go to Dharod since he is the sole owner.
Gala has alleged Dharod was siphoning money from Cicis to an entity Dharod solely controlled, meaning the profit was not shared.
Dharod said he wasn’t following Cox and that whether the profits are being shared or going directly to him doesn’t change things for him.
Dharod added, “I want to go to sleep at night doing the right thing.”
Cox noted Dharod is the CEO of more than a hundred companies, so he knows “his way around a spreadsheet.” Dharod agreed.
Cox had Dharod tell the jury he wants them to enforce the written contracts.
Dharod said he and Gala made an oral agreement in November 2020 for a 70 percent and 30 percent partnership for the next 10 to 15 years. Cox then showed several written contracts that stated any previous statements and agreements were rescinded. Dharod and Gala signed all of those contracts.
Dharod said the oral agreement still stands.
Cox asked if there was something “slippery” he was trying to do and if there was an entity that hadn’t signed a contract rescinding all previous agreements.
“There is nothing slippery about me,” Dharod said.
Cox is expected to continue questioning Dharod when the court resumes at 8:30 a.m. on Thursday.
The case is GCP Cici’s Inc v. Sunil Dharod, in his individual capacity and in his capacity as trustee of The Sunil D. Dharod Revocable Trust, SSCP Management LLC and OnWin LLC, DC-24-01196.