Trust Company of the West vs. DoubleLine Funds Trust et al.
December 1, 2010
Superior Court of California
TCW Group Inc. and Jeffrey Gundlach, its former chief investment officer, announced on Thursday, December 29, 2011, that they had settled a lawsuit over Gundlach’s firing in 2009 and allegations he stole trade secrets to set up his own firm. The terms of the settlement agreement were said to be confidential and the parties would not discuss them. Litigation and damages assessments had not concluded at the time of the settlement, but a jury had previously made preliminary findings.
On August 20, 2011, after seven weeks of trial and two days of deliberation, the California jury in the case between TCW and Jeffrey Gundlach, a former employee, concluded that Mr. Gundlach did technically misappropriate trade secrets and breach his fiduciary duty to the company. But the jury awarded his former employer nothing in damages, finding that Mr. Gundlach’s breach of duty had caused no harm to his former employer. The jury also found that Mr. Gundlach had intentionally interfered with contracts, but that TCW had not been harmed; they awarded no damages on that issue, either.
However, the jury determined TCW had withheld wages from Mr. Gundlach in violation of the state labor code, and found TCW liable to Gundlach for nearly $67 million in back-pay.
TCW may yet recover damages on the trade secrets count; damages for the jury’s finding of misappropriation will be determined by Judge West. TCW is seeking about $89 million for the trade secrets theft. However, the jury’s determination that the theft had not been willful and malicious ruled out an award of punitive damages.
TCW had filed an amended complaint for misappropriation of trade secrets, conspiracy and aiding and abetting in the theft of trade secrets, and common law unfair competition, among other claims, on February 09, 2011. The amended complaint followed a January rejection by Judge West of TCW's claims that the DoubleLine Fund Trust and its trustees had stolen trade secrets and engaged in unfair competition, saying the firm had failed to state a factual basis to support the allegations in its complaint.
TCW's first complaint in this action came nearly a year after the company originally sued Gundlach for breach of fiduciary duty, unfair competition, misappropriation of trade secrets and civil conspiracy, among other claims. Gundlach was TCW's former investment chief who launched DoubleLine Capital LP after being fired from TCW in December 2009.
The second lawsuit targeted a trust associated with Gundlach's investment firm. Like the previous suit, the second complaint claimed that Gundlach worked to steal TCW's data, including contact and holdings data for clients. If printed out, the allegedly stolen information would amount to roughly 9 million pages, according to TCW's suit. The trustees are also named in the second suit based on allegations that they knew that Gundlach and his co-conspirators had stolen confidential, proprietary information from TCW and that DoubleLine would use that material to manage the trust's mutual funds. The complaint included allegations of misappropriation of trade secrets, unfair competition, conspiracy to steal trade secrets, unjust enrichment and other related state law claims.
Trust Company of the West
Doe Defendants 1 through 10, DoubleLine Funds Trust, John C. Salter, Joseph J. Ciprar, Raymond B. Woolson, Robert J. Untracht