The lawsuit, filed in The Delaware Superior Court, related to NorthPointe’s 2007 buyout of Nationwide’s majority interest in the firm. The agreement provided that Nationwide would maintain assets and retail mutual funds with NorthPointe for at least three years. However, Nationwide began removing significant assets within three months of the closing and effectively closed most of the mutual funds NorthPointe managed for the insurance company within 14 months of the buyout closing.
Judge Andrea L. Rocanelli ruled in a 60-page decision there was a “preponderance” of evidence to support NorthPointe’s breach of contract claim and a “breach of good faith and fair dealing.” The Court awarded more than $15 million to NorthPointe in damages and termination fees, less an offset for amounts still owed by NorthPointe to Nationwide, for a net amount of over $10.3 million.
“The implications of a judge concluding that Nationwide was incompetent and lacked good faith go way beyond our firm,” said Michael Hayden, NorthPointe’s CEO. “The money management business is predicated entirely on trust. There can be no bigger slap to a firm in this industry. It’s also rather astounding that the only Nationwide defense witness Judge Rocanelli found credible was an employee who left the company several years ago.”
Judge Rocanelli found that “Nationwide’s own witnesses contradicted and undermined” the company’s defense arguments, including Michael Spangler, the executive who oversees Nationwide’s Philadelphia-based mutual funds business. Judge Rocanelli also found that Nationwide executives made their business decisions without regard to contractual obligations with NorthPointe. Indeed, most of Nationwide’s witnesses claimed to have never read the Purchase Agreement.
Judge Rocanelli referred to Nationwide’s withdrawal of $260 million in monies from NorthPointe funds as a “looting of assets” and said Nationwide suffered from “institutional incompetence” resulting from considerably high management turnover.
Pete Cahill, NorthPointe’s CIO said the firm is pleased with the decisiveness of Judge Rocanelli’s decision.
“We endured a long and drawn out legal battle to hold Nationwide accountable for its wrongdoing,” Mr. Cahill said. “We are grateful to our employees for staying focused on creating top notch client experiences through superior investments results and client service throughout this unfortunate process.”
Rodger D. Young, founding partner of Farmington Hills, MI-based Young & Associates, represented NorthPointe in the litigation.
NorthPointe Capital, LLC, is a 100% employee-owned institutional money management firm located in Troy, Michigan, focusing on domestic equity strategies. NorthPointe’s dedicated teams of investment professionals manage a spectrum of specialized disciplines, including micro-cap and small-cap value and growth funds and a highly regarded large-cap value strategy. Additionally, the firm builds customized client portfolios designed to meet specific needs and investment objectives.