After a week of hearing emotional testimony, a Dallas County jury returned a 10-2, $46 million verdict in favor of the plaintiff in a dispute between two cousins who purchased Cicis Pizza.
It took jurors about five hours to decide that Anand Gala and Gala Capital Partners Cici’s were entitled to the damages. Gala had sued his cousin, Sunil Dharod, after the partnership soured, and Gala lodged counterclaims as well. The jury returned a $46 million verdict, but the defense will argue Gala has to pick which $23 million claim to recover damages on, breach of contract or breach of fiduciary duty. Final judgment will include an award of attorney fees.
Dharod, who came to Gala with the opportunity to buy Cicis Pizza for $11 million, put up 70% of the capital to buy the business in 2020. Gala put up the remaining 30%.
Gala’s company, 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.
Gala accused his cousin, Dharod, of firing him soon after purchasing the business, consolidating complete control over Smiley Slice. He alleged Dharod, his trust and his companies, SSCP and OnWin, committed 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.
“We’re really excited to have Mr. Gala’s rights vindicated and that the jury was able to hear his story and reach what we think is the right result,” Gibson, Dunn & Crutcher partner Betty Yang told The Texas Lawbook.
The jury found that Dharod, his trust, OnWin and SSCP failed to comply with the operating agreement regarding the management fee charged to Smiley Slice. The jury awarded Smiley Slice $20 million in damages.
The jury also found that Dharod and his entities failed to make distributions to GCP Cici’s. The jury awarded $3,039,252 in damages to GCP Cici’s on that claim.
For the failure of Dharod, his trust, OnWin and SSCP to give GCP Cici’s documents required by the operating agreement, the jury awarded $29,000 to GCP Cici’s for damages.
The jury found Dharod, OnWin and SSCP failed to comply with their fiduciary duties to Smiley Slice when they conditioned GCP Cici’s’ receipt of distributions on its signing of a general release of all potential claims, caused Smiley Slice to pay an excessive management fee to SSCP and cause Smiley Slice to loan $7.9 million to purchase a franchise of a different restaurant.
The jury awarded $320,000 for the total interest paid by Smiley Slice under the loan for that restaurant, $3,039,252 for underpayment of distributions to GCP Cici’s and $20 million as the amount Smiley Slice paid as a management fee beyond what the jury considered reasonable.
The jury also determined OnWin and SSCP were part of a conspiracy to damage GCP Cici’s.
Dharod lost all his counterclaims against Gala.
Attorney fees and equitable relief from breach of fiduciary duty and piercing the corporate veil have not been decided.
In closing arguments, Yang said this trial has been about the kind of people Dharod and Gala are.
With emotion in her voice, Yang said Dharod’s life story, immigrating to the U.S. from India when he was 15 and becoming a U.S. citizen in his 20s, was one that resonated strongly with her as a first-generation immigrant herself.
Yang said that the “measure of a man” is the way he treats people once he has achieved success and power.
“What this case is about is the fact that Mr. Dharod has used that wealth and success and power and privilege to step on the neck of the man whose family gave him the opportunity to live the American dream,” Yang said to the jury.
Yang alleged Dharod “used” his family and Gala by violating his fiduciary duty to the company.
She asked the jury to turn up the volume for Dharod to hear Gala.
“A stereo goes zero to 10. What we would submit to you is that the stereo should be turned up to two, that you award Mr. Gala exemplary damages of two times whatever award you give him for compensatory damages, make sure Mr. Dharod hears you that his behavior in this case is not OK, and this award is especially important because Mr. Gala is still trapped in this relationship,” Yang said.
Winston & Strawn partner LeElle Slifer, who represents Dharod, told the jury during closing arguments that her client was only trying to do the right thing.
Slifer mentioned the way the plaintiff’s lawyers questioned her client over a personal chef and other witnesses over company cars and ordering Chick-fil-A.
“Sometimes the jabs were just a joke. Sometimes they were meant to embarrass the witness, and sometimes they were flat-out bullying,” Slifer said. “The only reason they did that was to distract you from the substance of the issue.”
She told the jury not to let Gala fool them and to look at the language of the contracts.
“We really respect the jury’s time, and we’re pleased that they didn’t take Mr. Gala’s invitation to punish our client for anything he did,” Slifer told The Lawbook, referencing plaintiff’s counsel’s request for exemplary damages of millions.
She said they are looking at their appellate options.
“I think it was clear from the trial that the emotion of the case took a toll on both sides,” Slifer added.
The Texas Lawbook is an online news publication focused on business law in Texas. For more on this and other legal news, visit texaslawbook.net.