DoubleLine's and Gundlach's Expert: TCW's Expert is Way Off on "Reasonable Royalty"

So you'll recall that TCW and its former bond king, Jeffrey Gundlach, had a whopper trial out in California and the jury found that Gundlach and his friends had stolen some trade secrets of TCW but the issue of damages was left to the judge. You'll also recall that the same jury found that TCW had stiffed Gundlach and three of his compadres for some money owed and that they owed the group $67 million.

TCW and the court are now moving forward with the hearing on TCW's trade secrets damage. The facts seem clear that Gundlach and the team that left with him now control about $48 billion in assets under management and a good deal of those assets were from former clients they serviced at TCW. TCW's expert has looked at the departed customer files and the information the jury was convinced that Gundlach and his friends misappropriated. He opined that Gundlach and his friends would've had to have paid a royalty of $81.7 million if an arms-length negotiated transaction took place. That's TCW's argument.

Not so fast, says DoubleLine's expert. He says TCW wouldn't have negotiated a royalty for those $48 billion in royalties to leave with Gundlach. BusinessWeek quotes DoubleLine's expert saying: "TCW would not have allowed the transfer of the $48 billion in assets under management. It’s not a proper assumption for a hypothetical negotiation.” So now it is apparently up to the judge. What will he decide?

Stay tuned . . . .