Former Employee Awarded $31 Million in Damages After Fraud Allegations Against Dallas-Based Company

DALLAS, TEXAS – A former employee of Sun Holdings, based in Dallas, was recently awarded a whopping $31 million in damages in a civil court trial. The ex-employee claimed that both the company and its owner had committed fraud against him.

The jury initially granted Jerry Stockton $15.6 million in compensatory damages on February 13. Stockton had filed a lawsuit in 2019 against Sun Holdings and its CEO, Guillermo Perales, alleging that he was owed a share of the profits from over 100 Popeyes restaurants. The very next day, the jury awarded Stockton an additional $15.1 million in punitive damages, with $12 million of that amount personally assessed against Perales.

Guillermo Perales founded Sun Holdings in 1997, transforming it into a major franchisee for various brands such as Burger King, Papa Johns, McAlister’s Deli, Applebee’s, and Popeyes. With approximately 1,800 locations, Sun Holdings is ranked as the fourth-largest restaurant franchisee in the United States, according to the Franchise Times Restaurant 200 list, with a revenue of $1.59 billion in 2022.

Before Sun Holdings acquired the Popeyes restaurants in 2001, Stockton oversaw the operations of 23 Popeyes locations for AFC Enterprises. Subsequently, he continued to work for Perales as the director of operations and later as the vice president of operations for his 150 Popeyes units until retiring in 2018. In his lawsuit, Stockton claimed that he was the essential operator for those restaurants and, based on the language in the franchise agreement and promises made by Perales, he was entitled to 5 percent of their operating profits.

According to the suit, Stockton alleged that the defendants had assured him that his 5 percent ownership interest in the operating profits of the Popeyes restaurants would be reinvested until his retirement, at which point it would be disbursed to him. However, Stockton claimed that Perales denied his multiple requests for payment of the operating profits.

While Stockton was not specifically named as a key operator in the franchise agreement, his attorney, Daniel Charest, argued that he should have been listed. Charest, from Burns Charest law firm, described the litigation as contentious and anticipated it would go to trial.

Perales expressed his surprise and disagreement with the verdict, believing that the jury may have misinterpreted the definition of a key operator in the franchise agreement. Perales denied ever promising Stockton 5 percent of the Popeyes profits and emphasized that the provision in the franchise agreement regarding a key operator’s entitlement had been intended for investor-owned franchises, not for Sun Holdings, where he is the sole owner. Additionally, Perales argued that the analysis of operating profits had utilized inaccurate figures and failed to account for expenses such as rent and interest.

One of Perales’ attorneys, David Coale, who leads the appellate practice at Lynn Pinker Hurst Schwegmann, acknowledged the jury’s decision and expressed respect for it. However, Coale indicated that they would challenge the verdict in the trial court, citing a flawed claim based on a one-sided narrative. He stated that if a judgment was entered, they would appeal and expected it to be reversed for all parties involved.