The jury trial in Dallas County between two cousins who purchased the debt of Cicis Pizza has seen emotional testimony from one cousin as it nears its end this week after six days.
The trial has revolved around a business partnership between two cousins who have built careers buying and investing in restaurants.
Sunil Dharod, who came to Anand Gala with the 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.
Dharod took the witness stand all day Thursday last week. Gibson, Dunn & Crutcher partner Trey Cox questioned Dharod about how he runs his businesses.
While Dharod eventually answered Cox’s questions, he would sometimes ask for the opportunity to explain further, and at times said he didn’t agree with Cox’s wording.
Judge Tonya Parker stopped the testimony to tell Dharod that by not answering Cox’s questions, he was delaying the trial.
The parties told Judge Parker the trial was likely to last only five days, but it hasn’t progressed that quickly. The defense rested its case Tuesday afternoon, the sixth day of trial, and the jury is returning Wednesday morning to hear closing arguments and begin deliberating in the case.
Cox questioned Dharod about why he has a private chef on the company payroll.
Dharod said having a chef who cooks dinner at his home is an important part of him running the business because he frequently has business meetings at his home.
Dharod reiterated to the jury that he believed the oral agreement between him and Gala in November 2020 to 70 percent and 30 percent on all future business deals between the two still stands until they retire.
When Winston & Strawn partner LeElle Slifer cross-examined Dharod Thursday afternoon, she started by asking him what it was like to grow up in India. While talking about being poor and having to do manual labor to help his mother, Dharod began to get emotional on the stand. Slifer asked him why he was getting emotional, and he said it was because he felt like he was being attacked by Cox for doing the right thing.
Dharod told the jury that he and Gala used to have a close relationship, and he even called him “brother.” He said Gala was the first to bring his lawyer into their issues.
Slifer had Dharod address Cox’s question about the chef Dharod employs. He said the chef had worked at one of his restaurants, but the location had closed, and the chef needed to support his family, so Dharod hired him.
Gala’s claims in his fourth amended petition against Dharod and his trust are breach of contract, breach of fiduciary duty and civil conspiracy.
Prior to bringing the jury out on Monday, Gala’s attorneys moved to amend the petition to include two of Dharod’s entities, OnWin and SSCP, on the breach of contract claims. Gala originally only brought breach of fiduciary duty and civil conspiracy claims against OnWin and SSCP Management.
Slifer argued against the amendment, stating they prepared for trial defending Dharod individually and his trust against the breach of contract claims.
Judge Parker granted the amendment.
Dharod has lodged counterclaims against Gala for breach of fiduciary duty, fraud by nondisclosure and fraudulent misrepresentation.
Before resting Gala’s case, Gibson, Dunn & Crutcher partner Andrew LeGrand called University of Texas professor and valuation expert Jeffrey Andrien to the witness stand Monday morning.
He estimated Gala’s damages to be $4.5 million and Smiley Slice’s damages to be $38.4 million.
Andrien testified that the “excess management fees” reduced the profits.
Both cousins testified that the management fee was set lower than it should have been at first to get them through the bankruptcy and the pandemic. By 2022, Dharod increased his management fee from $72,000 to $5 million a month.
Monday afternoon, the defense presented its case to the jury by first calling Chief Financial Officer of SSCP Dan Patel to the witness stand.
Slifer asked Patel what he believed made Gala a “below-average CEO.”
Patel said that Gala living in California rather than Dallas did not help, since he couldn’t frequently visit the office, and that his responsiveness to calls and emails was “very minimal.”
When the court resumed Tuesday morning, Slifer called Jeff Hetzel, president of Cicis Pizza, to the witness stand.
Dharod’s fraudulent misrepresentation claim against Gala centers on his involvement with his brother’s company, Altametrics, which provides the point-of-sale systems for Cicis. Point-of-sale systems are the card readers and order management systems used by businesses. Cicis Pizza switched to Altametrics when Gala became CEO.
Slifer asked Hetzel about the decision to switch to Altametrics. He said he felt like he had to sign the contract for Altametrics because Gala was telling him to, but he was not convinced it was a good decision because he had concerns and was not familiar with the system.
Cicis still uses Altametrics’ point-of-sale system, but Hetzel said they are looking at other options.
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. Hetzel testified it would have been appreciated if Gala had come to the office while Cicis was in crisis.
Cox showed the jury several emails in which Gala was responsive and talking strategy on what amount of money to offer the threat actors.
At the same time, David Roberts, the chief technology officer, was on an Alaskan cruise with his family. He did not leave the cruise to come to the office in Dallas but was responsive by email and phone. Hetzel said he didn’t ask Roberts to fly to Dallas in response to the data breach.
Cox asked Hetzel about the company car he had that Dharod was leasing. Hetzel had a luxury “G-Wagon” or Mercedes-Benz G-Class SUV, for about 10 months. The price of a new G-Wagon ranges from $149,400 to $186,100.
“It’s a really nice car. Like what the Kardashians drive, right?” Cox asked Hetzel.
“I don’t know what the Kardashians drive. I don’t watch those shows like you do,” Hetzel responded.
The jury also heard testimony from management fee expert Tarig Kozouz, who said the management fees were reasonable.
He called Andrien’s valuation of Smiley Slice and the damages “unreliable” and said his methodology contained “flaws.”
Under cross-examination, LeGrand asked Kozouz if he had ever heard the phrase “they brought receipts.” Kozouz said no.
As LeGrand wrote on a board displayed to Kozouz and the jury, he said, “I’m going to call this ‘receipts.’ You might not have brought them, but I did.”
About 25 employees shifted from Cicis payroll to SSCP in 2023. The estimated worth of those employees was $4.2 million, but Cicis only saved about $1.5 million.
Kozouz said the costs SSCP incurs to provide services to Cicis were not germane to his analysis.
The defense’s financial expert, Erica Bramer, said she disagreed with a number of Andrien’s analyses. She explained that a company is very different before filing for Chapter 11 bankruptcy from a company coming out of bankruptcy.
“The point of the bankruptcy is to take a sick patient and make it healthier for the chance to survive,” Bramer said.
Dharod claimed Gala failed to fulfill his duties as CEO of Smiley Slice and instead focused his attention on closing deals to acquire outside restaurant ventures, including Dillas Quesadillas, Dunn Brothers Coffee and Rusty Tacos. Dharod and Smiley Slice allegedly didn’t have the opportunity to invest in the ventures.
Gala claimed Dharod committed breach of fiduciary duty when he used Smiley Slice to get an $8 million loan to purchase Corner Bakery.
Bramen determined the fair market value of Rusty Taco opportunity to be $2.5 million, Dunn Brothers Coffee at $9.1 million and Dillas Quesadillas at $1.2 million.
These are all restaurant investments Gala entered in without including Dharod.
LeGrand cross-examined Bramer about her analysis. When discussing the data breach and what Gala should have done, Bramer said she wasn’t asked to assess damages or liability.
“Mr. Gala should have hunted down the criminals — the threat actors — and made them release their hold on Cicis system, right?” LeGrand asked Bramen.
Bramen said any cause of the data breach was not within her scope of expertise.
“He’s a CEO, not Rambo,” LeGrand said, pointing at Gala.
“One never knows,” Bramen said.
“I know he wears glasses, but I don’t think that makes him Clark Kent, right?” LeGrand asked.
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.