The ownership group that bought Cici’s out of bankruptcy and helped turn it around has dissolved in a legal battle pitting the two principal investors, both run by cousins who got their start as franchisees.
This week, Gala Capital Partners, run by Anand Gala, won a $46 million judgment against SSCP Management, run by Gala’s cousin Sunil Dharod. A jury agreed with Gala’s that Dharod pushed him out of Cici’s shortly after the acquisition and then paid his own company exorbitant management fees.
But attorneys for Dharod argue that the actual award is $23 million, as the $46 million is largely comprised of two $20 million awards to the parent company of Cici’s and two $3 million awards to Gala. But each of those can only be awarded once.
Other arguments still need to be made, over issues such as attorneys’ fees, before a final judgment is made.
The dispute dates back to 2020. At the time, Gala Capital—which formed an entity called GCP Cici’s—along with SSCP acquired the Cici’s debt. Cici’s filed for bankruptcy the following January, and the two investors took control of the chain using a debt-for-equity swap, a common form of acquisitions, particularly coming out of the pandemic.
Under the arrangement, according to court documents, SSCP owned 70% of the company and GCP owned 30%. The ownership company was known as Smiley Slice. They also formed a separate management company, controlled by Dharod, called OnWin.
Gala was appointed CEO and the chain quickly turned things around. According to court documents, EBITDA—or earnings before interest, taxes, depreciation and amortization—went from negative to $14 million by 2022. The company improved operations and installed more video games, among other things.
Gala said he didn’t receive compensation in 2021 but was promised annual pay of $250,000 in 2022. But those payments were halted and he was removed as CEO.
According to Gala, Dharod accused him of not carrying out his duties properly.
But Dharod in his response to the lawsuit said Gala “neglected Cici’s while secretly pursuing lucrative restaurant deals for himself.”
Dharod in his response said that Smiley Slice was formed to make investments in other restaurant chains. Gala, however, argued that the two sides were free to pursue their own interests. And Gala Capital acquired multiple chains, including Dillas Quesadillas, Dunn Brothers Coffee and Rusty Tacos. Dharod accused Gala of hiding those investments.
“Gala botched his duties as CEO and had no intention of living up to his promise that he would share restaurant deals with Dharod and Smiley Slice,” Dharod said in his response.
Gala, however, said that Dharod also forced amendments to the original investment agreement giving him “unbridled decision-making power.” He accused Dharod of pushing through a change to the agreement requiring Gala to first bring investments to Smiley Slice.
But Gala also accused Dharod of paying himself management fees that started at $5 million and later grew to $15 million. He also accused Dharod of refusing to provide financial statements or budgets and said Dharod stopped providing distributions to minority shareholders.
Dharod said that the fees were “more than reasonable given industry standards” and services provided by SSCP. He also called Gala’s accusations “unfounded.” He also said that several checks were sent to Gala and went uncashed.
Gala said that GCP Cici’s suffered “substantial losses” because of Dharod’s moves and that the management fees reduced Smiley Slice’s profitability and the value of the original investment.
The two sides worked to arrange a buyout of Gala’s interest, but Gala accused Dharod of orchestrating a “blatantly erroneous valuation process” that depressed the value of the investment. That ultimately led to the lawsuit.
The jury ultimately agreed with Gala.
“This case was about more than just business—it was about integrity, accountability, and honoring one’s word,” an attorney for Gala said in a statement. “The jury sent a clear message: Partnerships must be honored, fiduciary duties matter, and the truth will win out.”
They called it “a defining victory for Gala Capital Partners and every party who seeks to enforce their contractual rights and demand fairness in business.”
Attorneys for Dharod said they are considering their post-trial and appeal options. But they added that 70% of the $20 million award would go to Dharod himself, as the majority owner of Smiley Slice.
“We respect and appreciate the jury’s time and are pleased that they didn’t take Mr. Gala up on his invitation to punish our client,” they said. “The jury significantly limited the damages Mr. Gala was seeking.”
UPDATE: This story has been changed to add reaction and questions about the size of the jury award.
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