It looks like Nationwide Mutual Insurance Company will have its day in court come January 2014 to defend itself against a mutual fund lawsuit.
That's becasue NorthPointe Holdings, a domestic-equity firm dedicated to serving institutional and high net worth investors, is looking to pursue its lawsuit against the Columbus, Ohio-based insurer and its various entities alleging “fraud, lack of good faith and fair dealing, and breach of contract.”
The lawsuit, filed in the Delaware Superior Court, relates 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 allegedly 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.
According to NorthPointe, documents subsequently obtained through the discovery process revealed that Nationwide was planning on replacing NorthPointe as a sub-advisor on its mutual funds even before the buyout agreement was sealed.
Harry Hallowell, Nationwide’s chief investment officer, negotiated NorthPointe’s buyout when he was Nationwide’s Treasurer in 2007. Michael Spangler, president of Nationwide Funds Group, spearheaded the termination of the company’s relationship with NorthPointe.
“This law suit (sic) cannot be characterized as baseless,” Delaware Superior Court Judge Jerome Herlihy said in one of three rulings denying Nationwide’s motions for summary judgment.
NorthPointe filed its lawsuit in November 2009. Judge Herlihy denied Nationwide’s third dispositive motion in May 2013. A trial date has been set for January 2014.
“The evidence is overwhelming that Nationwide never intended to honor the commitments it made when it agreed to sell us their majority interest,” stated Michael Hayden, NorthPointe’s CEO.
"Nationwide strongly disputes NorthPointe’s allegations, and stands behind its business practices," according to an e-mail statement from the firm's spokesman Kris Kagel.
"Nationwide strives to provide its clients with long-term, above average performance at competitive costs. To accomplish this, Nationwide follows a rigorous selection and review process for its subadvisers. Northpointe was unable to deliver investment performance that met our standards, and Nationwide believed it was in the best interests of the funds’ shareholders to replace NorthPointe as a subadviser. Nationwide is confident that it acted appropriately and that the Court will ultimately decide in its favor."