TCW's complaints in its lawsuit against DoubleLine Funds Trust, seeking to stop the marketing of DoubleLine Capital mutual funds, were all dismissed.
California Superior Court Judge Carl J. West's ruling on Thursday allows TCW, within 30 days, to file new pleas and amend five of the seven claims in the suit that were dismissed, but he ordered a hold in any further litigation in the case until the resolution of a separate lawsuit TCW filed against Jeffrey Gundlach, its former chief investment officer, and DoubleLine, which he formed in late 2009.
But Mr. West, in his 26-page decision, ruled against bringing before the court again any refiling of two claims, including one of TCW's key demands for a return of profits of investors in the DoubleLine mutual funds, saying such restitution would violate federal law.
The DoubleLine Funds Trust suit, filed Dec. 1, did not name Mr.Gundlach as a defendant but made similar allegations to the TCW suit against him, including misappropriation of confidential and proprietary information, unfair competition and unjust enrichment. The suit seeks unspecified damages.
In the ruling, Mr. West said that because mutual funds are clients of the investment adviser, there are “insufficient factual allegations that the trust, as opposed to the adviser, ever possessed, disclosed, or used TCW's alleged trade secrets.” Although the TCW December complaint noted the trustees were elected last April, he said, “it is difficult to see how the trustees could have had knowledge of the alleged misappropriation when, on the face of the pleading, they were not yet elected.”
TCW filed suit against Mr. Gundlach and DoubleLine Capital on Jan. 7, 2010, alleging theft of property, fraud and breach of fiduciary duty. That suit seeks more than $200 million in damages. The suit is scheduled for trial in California Superior Court on July 25.
Mr. Gundlach countersued TCW on Feb. 10, seeking $1.25 billion and accusing his former employer of scheming to deprive him and his associates of lucrative compensation arrangements.
Peter Viles, TCW senior vice president, corporate communications, said that although the court dismissed the demand for returns from DoubleLine fund investors, there is “other injunctive relief that TCW can pursue in the case.” TCW plans to refile the five claims within the time frame required by the judge, Mr. Viles said.
Ron Redell, president of DoubleLine Funds Trust, who was not named as a defendant in the case, said in a statement: “We are satisfied with the court's ruling. … Fortunately, by granting our motion to strike with prejudice, the court struck down TCW's unprecedented attempt to claim the returns of mutual fund investors. So their returns are duly protected from TCW regardless of what TCW does in the future. This ruling is what we had expected.”
Steven G. Madison, partner in the law firm of Quinn Emanuel Urquhart & Sullivan, representing TCW, said in a statement: “Despite DoubleLine's attempts to spin this ruling into something it is not, TCW's case against the DoubleLine mutual funds is in no way dismissed and is indeed going forward. According to yesterday's ruling, the trial against the DoubleLine mutual funds will follow our original case against Jeffrey Gundlach, DoubleLine Capital, and other co-defendants.”