DealBook: TCW Settles Suit With Its Former Star Investor

One of the year’s most contentious white-collar employment disputes came to an end Thursday, as Trust Company of the West, the California-based mutual fund, announced that it had settled a lawsuit with its former star investor, Jeffrey E. Gundlach.

The settlement, announced in two separate statements by TCW, as Trust Company of the West is known, and DoubleLine Capital, Mr. Gundlach’s new fund, capped a bitter and protracted dispute that turned the normally anodyne mutual fund world into a heated legal battleground. The terms of the settlement were not disclosed, and the firms said in statements that they would not discuss it further.

TCW sued Mr. Gundlach, its former chief investment officer, in 2010 for hundreds of millions of dollars in damages, accusing him and several associates of stealing trade secrets and breaching their fiduciary duty in order to set up a competing firm after he was fired from TCW in 2009.

Mr. Gundlach countersued, arguing that he was entitled to hundreds of millions of dollars in lost fees from the funds he oversaw at TCW. More than 40 TCW employees eventually followed Mr. Gundlach to DoubleLine.

A six-week trial ensued this summer, during which attorneys for TCW tried to paint Mr. Gundlach, a closely watched figure in fixed-income investing who has referred to himself as “the Pope” and “the Godfather,” as a self-centered renegade who was bent on sabotaging the firm. DoubleLine’s legal team tried to show that Mr. Gundlach’s ouster was the result of a long-held vendetta by Marc Stern, the firm’s chief executive, and other firm officials.

In September, a Los Angeles jury gave a mixed verdict in the civil case that awarded Mr. Gundlach and three associates $66.7 million in damages in the countersuit, while finding them liable for breaching their fiduciary duty to TCW and misappropriating trade secrets.

Thursday’s settlement will essentially override the jury’s verdict, which had yet to be finalized by a judge. The judge, Carl J. West, had yet to rule on an outstanding dispute over whether TCW was owed millions of dollars in “reasonable royalties” for the jury’s trade secrets finding.

TCW, a unit of the French bank Societe Generale, has been the target of speculation in recent weeks. After reports surfaced that the bank, which has been trying to raise capital by selling non-core assets, was planning to sell the mutual fund manager, it batted down the rumors.

With a settlement with Mr. Gundlach and DoubleLine now behind it, TCW will have one fewer worry going into the new year.

“We are pleased that an agreement has been reached and that this matter is now behind us,” Peter Viles, a TCW spokesman, said in an e-mail. “TCW is well positioned to continue the strong momentum and growth it has established over the past two years.”

This post has been revised to reflect the following correction:

Correction: December 30, 2011

Article source: http://feeds.nytimes.com/click.phdo?i=57636a96f20e4e891bdc238a9971944c