A damages expert asserted Trust Company of the West (TCW) is owed $81.7 million in royalties due to trade secret theft as the high-profile civil case pitting the asset mangement firm against its former chief investment officer Jeffrey Gundlach resumed on Tuesday.
Both sides sued each other in one of the most contentious battles to grip the multitrillion bond fund world after Gundlach was fired from TCW in December 2009 and set up a rival firm, DoubleLine Capital.
In September a Los Angeles jury ordered TCW to pay Gundlach $66.7 million in wages, to be divided by Gundlach between himself and his co-defendants. Gundlach and his associates had sought hundreds of millions of dollars.
TCW prevailed in its claim the famed fund manager took trade secrets, although it is now up to a judge to decide damages.
Bradford Cornell, a damages witnesses for TCW, a unit of French bank Societe Generale (SOGN.PA), said that without the use of proprietary information obtained from his former employer, Gundlach would not have been able to build up his new rival business Doubleline Capital so quickly and effectively.
Doubleline is less than two years old, but is already managing $18 billion in assets, according to the most recent data given by DoubleLine.
Without trade secrets, Gundlach's business wouldn't have been ready, Cornell told California Superior Court Judge Carl J. West on Tuesday.
The $81.7 million figure was based on a hypothetical negotiation that would have occurred in the fall of 2009 if Gundlach had tried to buy the information contained in the trade secrets, Cornell said.
Lawyers for Gundlach and Doubleline insist they do not owe anything.
TCW is living in an alternative universe. They are seeking royalties based on a draft that envisioned TCW negotiating with Jeffrey Gundlach to continue to manage $48 billion in assets as part of an amicable separation. Instead, TCW fired Jeffrey, and he built DoubleLine from scratch, without a penny from TCW. said Doubleline spokesman Lew Phelps:
Doubleline was unable to call witnesses on Tuesday due to time constraints and a second hearing on the trade secrets damages portion of the case was scheduled for Nov 21.
EPIC FUND BOND BATTLE
The damages hearing was the first return to court for both sides after the six-week trial ended in mid-September, in which jurors got a glimpse about the huge personalities involved in the dispute. Jurors heard testimony about tirades against TCW by Gundlach in the company cafeteria and other sometimes salacious details.
Meanwhile, against the backdrop of the bruising courtroom drama, Gundlach continues to score high in the market.
His DoubleLine Core Fixed Income Fund (DBLFX.O), rose 9.5 percent for the nine months ended September 30, putting in the top percentile of its category, according to financial research firm Morningstar.
TCW, which has said Gundlach gutted its entire mortgage-backed securities team when he left, sued its former star a month after it fired him. Gundlach fired back with a counter-lawsuit.
In the weeks following his termination, Gundlach formed DoubleLine, along with three of his co-defendants at the trial. Roughly 45 TCW employees followed him.
The case is in Superior Court of California, County of Los Angeles is Trust Co of the West v. Jeffrey Gundlach et al, BC429385.