Bill Gross’ lawsuit against PIMCO, the firm he co-founded in 1971, is “a legally groundless and sad postscript” to his tenure, the company said in its official response to the filing.
PIMCO’s lawyers Boies, Schiller & Flexner filed a 20-page “demurrer” response to Gross’ complaint yesterday, asking the court to reject the case.
“The complaint suffers from two fatal flaws. First, the allegations are untrue. Second… the complaint fails to state any viable legal claim.” —PIMCO’s legal filingIn the document, PIMCO questioned the central claims made by the former bond king and challenged whether there was a case for the company to answer.
The document claimed parts of Gross’ complaint were “more like a screenplay than a court pleading”.
“The complaint suffers from two fatal flaws,” the response said. “First, the allegations are untrue. Second, even if every well-pled fact were assumed to be true, the complaint fails to state any viable legal claim.”
Bill Gross filed his lawsuit, claiming damages and costs of at least $200 million, at the Superior Court of California in Orange County last month—just over a year after his dramatic exit from the company he had led for more than 40 years.
Gross’ complaint detailed allegations that he had become “the target of a power struggle… that eventually led to his wrongful and illegal ouster” from PIMCO. The company also “wrongly and illegally denied [Gross] hundreds of millions of dollars in earned compensation”.
PIMCO declined to acknowledge many of Gross’ claims about the actions of individual members of staff—including former CEO and co-CIO Mohamed El-Erian and current CIO for fixed income Andrew Balls—referring to the allegations only as “irrelevant and false personal attacks” in its preliminary comments.
Profit-sharing
In his complaint, Gross had alleged that PIMCO had denied him a third-quarter bonus payment of $80 million, but the company’s response disputed this. Gross’ argument “misconstrues” the rules of the bonus pool, PIMCO claimed.
PIMCO set out details of the profit-sharing plan, of which Gross was a member. An extract from the plan’s rules said employees could only receive bonuses from a “partial covered quarter” in the event of disability or death. While he was paid his second quarter bonus, Gross resigned from PIMCO to join Janus Capital on September 26, 2014, “before he was eligible for a third quarter bonus”.
PIMCO also rejected Gross’ claim that he was entitled to a 20% share of the employees’ bonus pool, as the company’s compensation committee had the power to “determine the share for each participant on a quarter-by-quarter basis”.
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The Departure
Bill Gross now runs the Janus Global Unconstrained Bond fund.Gross also claimed constructive termination, arguing that he
had been “forced into a corner” by the actions of PIMCO CEO Douglas Hodge and
other executives. He claimed that the company “overruled” an agreement Gross
had made with parent company Allianz’s then-CEO Michael Diekmann, which would
have allowed him to remain at PIMCO—albeit in a much reduced capacity.
However, PIMCO countered that Diekmann—who stepped down from Allianz in May this year—was not proven within Gross’ complaint to have the authority to make such an agreement. Gross also did not detail in his claim the exact promises PIMCO’s executives were alleged to have breached, the company said.
“PIMCO has moved forward since Mr Gross’ resignation. It is time for him to do the same.”In addition, as Gross had admitted that he was willing to take the reduced role purportedly promised by Diekmann, PIMCO argued that the circumstances leading up to his resignation could not have been “sufficiently extraordinary and egregious” to have forced him to quit.
In his filing, Gross also claimed he had been verbally promised a position on PIMCO’s executive committee for five years when he was re-elected as CIO in 2014. The written terms of Gross’ employment overruled any verbal agreements, PIMCO argued.
“PIMCO has moved forward since Mr Gross’ resignation,” the company said. “It is time for him to do the same, instead of treating this court as a forum to engage in the kind of reputational warfare embodied in his legally groundless complaint.”
Bill Gross and Janus Capital have yet to respond to a request for comment.
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