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Judge voids part of TCW Group suit against DoubleLine funds

January 21, 2011 |  2:05 pm

The judge presiding over the bitter legal battle between L.A. money managers TCW Group Inc. and DoubleLine Capital has thrown out TCW’s attempt to effectively shut down DoubleLine’s mutual funds pending a trial.

L.A. County Superior Court Judge Carl West on Thursday denied TCW’s request that the court create a trust that could lay claim to gains generated by the DoubleLine funds.

The judge said that “such a remedy is not available” to TCW under federal law, and dismissed the request.

Gundlachj Had he supported TCW's claim, it could have caused shareholders in the DoubleLine funds to flee, crippling the company.

TCW, which manages $115 billion in assets, fired star bond fund manager Jeffrey Gundlach in December 2009, saying he had threatened to leave and take his staff with him.

Within two weeks of his termination Gundlach set up DoubleLine, and about 40 members of his 65-member bond team at TCW quickly left to join him.

TCW then sued Gundlach, alleging that he stole “vast quantities of TCW proprietary information” before his ouster, charges that Gundlach has denied. In turn, Gundlach countersued TCW, alleging that the firm sought to oust him to avoid having to share up to $1.25 billion in fees from assets he had managed.

With the initial case scheduled for trial in July, in December TCW filed a second suit, aiming at the trustees of the DoubleLine mutual funds. That case included the request to claim earnings of the funds, which have attracted $4.5 billion in assets since their April launch. DoubleLine competes directly with TCW's bond funds and funds of other industry giants such as Pimco.

Ron Redell, president of the DoubleLine funds, said that with the judge’s ruling the funds’ investors “are duly protected from TCW regardless of what TCW does in the future.”

But TCW said it wasn’t giving up in its suit against the funds and would refile its complaint while deleting requests the judge had denied.

“The trial against the DoubleLine mutual funds will follow our original case against Jeffrey Gundlach, DoubleLine Capital and other codefendants,” said Steve Madison of Quinn Emanuel, TCW’s legal counsel.

-- Tom Petruno

Photo: DoubleLine Capital Founder Jeffrey Gundlach. Credit: Alex Gallardo / Los Angeles Times