Lawsuit by Top Manager Is Latest Blow to Pilgrim Baxter

Pilgrim, Baxter & Associates' attempts to hang on to prized portfolio manager Jim McCall may end up hurting the firm more than helping it. Lawsuits filed by both parties in the dispute over McCall's desire to depart Pilgrim for rival Merrill Lynch (MER Quote) offer a behind-the-scenes glimpse at the troubled mutual fund firm, and the view is anything but pretty.

McCall sued Wayne, Pa.-based Pilgrim and parent United Asset Management (UAM Quote) in Massachusetts state court Friday, as reported in the Wall Street Journal. The portfolio manager alleges breach of contract, fraud and "interference with advantageous business relations" by Pilgrim in its efforts to stymie his plans to accept a portfolio manager position with Merrill.

Pilgrim claims McCall's employment by Merrill would violate a non-compete agreement McCall signed. The firm followed McCall's suit with its own complaint, which seeks to prevent McCall from "accepting an offer of employment from a direct competitor in violation of the non-competition provisions of his employment contract with Pilgrim Baxter." ...