A weeklong trial began in Dallas County Tuesday with opening statements in a dispute between two cousins who assumed Cicis Pizza debt during the COVID-19 pandemic.
Trial was originally scheduled to begin Monday, when the parties addressed questions and exhibits and selected the 12-person jury panel before recessing for lunch. Attorneys filled nearly every spot in the gallery of Judge Tonya Parker’s courtroom on the sixth floor of the George Allen Courts Building.
Everyone waited in the silent courtroom for the jurors to be brought out to hear opening statements. However, that moment didn’t come Monday. One juror didn’t feel well so the court recessed. The trial resumed Tuesday morning after a new juror was selected.
Gibson, Dunn & Crutcher partner Andrew LeGrand, who told the jury his first job was at Cicis Pizza, gave opening statements for the plaintiffs — Anand Gala and Gala Capital Partners Cici’s.
“Anand Gala resuscitated Cicis Pizza. Sunil Dharod got greedy,” LeGrand said to the jury.
Sunil Dharod came to Gala with the business opportunity to buy Cicis Pizza for $11 million.
Dharod put up 70 percent and Gala put up 30 percent of the necessary capital to buy the business. GCP 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.
The business partnership commenced with six written contracts detailing their roles.
Gala did not take a salary while CEO of Cicis. To help Cicis survive the pandemic and to prevent the company from losing money, they kept prices low for customers.
After a year of owning Cicis Pizza, it saw millions in profit and continues to do so.
A fourth amended petition alleged Dharod fired Gala a year and a half after purchasing the business. Dharod allegedly consolidated power over Smiley Slice, controlling it himself and other entities. He discontinued distributions to members of Smiley Slice and awarded himself a management fee of $5 million in 2022 and $15 million in 2023.
LeGrand told the jury that while Cicis profits decreased, the management fee increased.
“This all started because Mr. Dharod decided to charge a management fee,” LeGrand said.
The management fee was paid to SSCP, which is Dharod owns. LeGrand said SSCP’s profits do not have to be shared, whereas Cicis profits are shared.
“I’m asking you to follow the money,” LeGrand said.
LeGrand then reviewed Dharod’s claims against Gala, which are breach of fiduciary duty, fraud by nondisclosure and fraudulent misrepresentation.
There was a data breach while Gala was CEO. LeGrand showed the jury emails from Gala responding in the wake of a data breach that hit Cicis, which he said refutes claims from Dharod that he was absent during the crisis.
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.
LeGrand said Cicis still uses Altametrics’ point-of-sale systems because they work well.
“By the end of this trial, Mr. Gala is going to ask you for your help. He is going to ask you to enforce the parties’ written contracts, the contracts he and Mr. Dharod signed,” LeGrand said.
Winston & Strawn Dallas partner LeElle Slifer, who represents Dharod, started opening statements by talking about the management fees Gala charges for his other businesses. She said he charges more than Dharod did for Cicis.
Slifer said there is more than one way to run a business but Gala only wanted it to be his way and this business was not Dharod’s first time.
She then talked about how Dharod immigrated to the U.S. when he was 15 years old with the help of his uncle, who is Gala’s father. Dharod became a U.S. citizen in 1986 when he was 22 years old.
Dharod first bought a struggling Jack in the Box location after he was held at knifepoint in the bathroom. He was told not to buy it, but he did it anyway. Under his ownership, the Jack in the Box became successful. He continued his career buying and investing in franchise businesses like Sonic and Applebee’s.
Slifer said Dharod wanted to include family in business deals and saw Cicis Pizza as an opportunity.
“It was the start of creating a family legacy,” Slifer said.
Slifer said it was well known that Altametrics was owned by Gala’s brother, but Gala’s involvement with the company was not disclosed when it should have been based on their contracts. She showed documents from the secretary of state’s office in California listing Gala as the president of the company.
After what Slifer called “three strikes” with Gala, Dharod fired Gala as CEO, but he was still an owner.
Slifer told the jury that Dharod tried to buy Gala out of the company, but Gala asked for $65 million. Dharod didn’t think the company was worth that much, and he hired a firm to assess the company’s value and Gala’s interest, which showed Dharod was correct, and the business was worth millions less than what Gala was asking for.
“Nothing is ever good enough for Mr. Gala in this case,” Slifer said.
GCP Cici’s’ petition alleged Dharod committed breach of contract, breach of fiduciary duty and civil conspiracy.
Dharod alleged in court filings that the lawsuit was an attempt to “unfairly smear” his reputation and the goodwill he has built in the restaurant industry.
He claimed the proposal was that he would put up 70 percent of the necessary capital and Gala 30 percent, provided that the two would partner on all future restaurant investment opportunities in the same manner for the rest of their lives.
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.
Dharod’s response to the petition addressed the allegation he was paying himself large management fees by stating it showed how little Gala paid attention to Smiley Slice’s business while he was CEO and that it was a reasonable amount.
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.