New York federal judge on Monday has cleared a way for Pacific Investment Management Co. to pursue lawsuit against AIG in California for causing big losses to the firm in 2008. At the same time, Pimco also faced another legal battle with former co-founder Bill Gross.
Reuters reported that U.S. District Judge Paul Crotty in Manhattan said it made sense for a California state court to handle Pimco's case, rather than have him decide. However, AIG wanted the New York federal judge to decide on the matter.
AIG spokesman Jon Diat said the insurer disagreed with the judge's decision, but he looks forward to defend the company against Pimco in California court. While a lawyer for Pimco, Timothy DeLange, declined to comment.
In March 2015, AIG won court approval of a $970.5 million class action settlement over its exposure to subprime mortgages and credit default swaps. However, Pimco preferred to withdraw from the settlement and seek legal settlement on its own. The firm that manages $1.5 trillion of assets chose what other plaintiffs would do, making a lawsuit on their own to recover more settlement.
Following its rejection of the class action settlement, Pimco sued AIG for over more than 60 funds, including its flagship, Pimco Total Return Fund. Later on, AIG sued back seeking declaratory judgment to federal court. However, judge Crotty said that he was unable to approve declaratory judgment, calling the effort as to benefit from "more favorable" legal precedents.
"After extensive litigation, it is clear that Pimco's chosen forum (where it is headquartered) is suitable for the resolution of the dispute," Crotty wrote.
Legal battle with AIG is another battlefront which Pimco has to face. According to Globe and Mail, last October, its former co-founder and Chief Investment Officer Bill Gross sued the firm. He accused that the executives of Pimco had planned to oust him amidst negative reports on his leadership and weak return on flagship fund.
Peviously, Bill Gross announced his resignation in 2014 and joined Janus Capital Group. Following his departure, Pimco faced a decline. Bloomberg reported that Pimco's assets under management shrunk more than 20% to $1.43 trillion at the end of 2015, while its flagship Total Return Fund also dropped to $87.8 billion from its peak of $293 billion in 2013.
In a response to Gross' allegation, Pimco said it had warned Gross that he would lose his bonus if he left the firm before the end of the quarter. In a Monday's court filing, Pimco stated, "He had no employment agreement, and he acknowledged that leaving Pimco before the end of the third quarter of 2014 would render him ineligible for the profit sharing payments he now claims he is owed."
In the midst of two legal battle, Pimco is cleared to sue AIG in California. While Pimco also faced another legal battle with its former co-founder Bill Gross.
