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Judge rules for bond manager Jeffrey Gundlach in pre-trial dispute with TCW Group

July 6, 2011 |  1:53 pm

A judge has ruled in favor of star bond fund manager Jeffrey Gundlach on a key element of his legal battle with TCW Group, agreeing that Gundlach’s assertion that TCW sought to cheat him out of a huge chunk of income should be decided by a jury.

The ruling means that Gundlach’s claim will be heard in the case scheduled for trial beginning July 25, along with TCW’s claim that Gundlach set up his new firm, DoubleLine Capital, with trade secrets stolen from TCW.

Los Angeles County Superior Court Judge Carl West on Wednesday wrote that Gundlach’s claims were “triable issues of fact” that should go before a jury rather than be dismissed by the court, as TCW had asked.

Gundlachmay2011 Gundlach, 51, was chief investment officer at TCW until December 2009, when the firm abruptly fired him, alleging that he was threatening to leave and take his bond-management team with him.

Gundlach denies giving TCW an ultimatum, but once out of TCW he quickly set up DoubleLine Capital in L.A. Most of his TCW team members defected to join him.

TCW sued Gundlach in January 2010, accusing him and his top lieutenants of conspiracy, unfair competition and theft of proprietary TCW information.

A month later Gundlach countersued, alleging that TCW ousted him to avoid having to share up to $1.25 billion in fees from assets Gundlach had managed at TCW.

TCW, which manages more than $100 billion, sought to have Gundlach’s claims thrown out in part on grounds that he no longer was under written contract with the firm when he was fired. His contract had expired on Dec. 31, 2007. The two sides negotiated a new arrangement in the spring of that year but Gundlach never signed it, according to court documents.

Still, Judge West said the fact that Gundlach continued working for TCW from 2007 on “suggests, at minimum, that a reasonable inference can be drawn that the parties were operating on the assumption” that they had a compensation agreement.

One of Gundlach’s attorneys, Kevin Allred of Munger, Tolles & Olson, said the judge’s ruling on the compensation issue and related matters in the case Wednesday were “a total win” for DoubleLine and Gundlach. “We look forward to trial of the remaining issues in this case,” he said.

Susan Estrich, an attorney for TCW at Quinn Emanuel, said the judge’s decision “changes absolutely nothing in this trial. . . . All of this evidence will go to the jury, and TCW is confident in its case.”

DoubleLine has become one of the mutual fund industry’s biggest success stories of recent years on the strength of the performance of the DoubleLine Total Return Bond fund, launched in April 2010. The fund’s assets have mushroomed to $8.3 billion, and DoubleLine manages $12 billion overall.

-- Tom Petruno


Gundlach wants to buy the Buffalo Bills

Photo: DoubleLine Capital founder Jeffrey Gundlach. Credit: Jessica Rinaldi/Reuters