Commerzbank in bonus fight appeal

Financial Times
17 February 2011

Commerzbank has asked the UK's Court of Appeal to throw out claims made by 104 investment bankers who maintain that they were entitled to receive around €50m ($68m) in discretionary bonuses from a €400m pool.

The German bank is asking the court to dismiss two separate lawsuits from bankers who were employed in 2008 by Dresdner Kleinwort's investment banking division, which was taken over by Commerzbank in 2009.

The case is one of the biggest bonus disputes arising from the credit crunch.

It centres on allegations by the bankers that Dresdner Kleinwort Investment Banking created a "guaranteed minimum bonus pool of €400m" during the crunch to avoid a staff exodus. The bankers alleged that they later received a tenth of the bonuses they expected.

Andrew Hochhauser QC, representing 21 of the bankers, told the Court of Appeal on Wednesday that the bonuses in question ranged from €15,000 to €2m.

"We allege there were binding and enforceable contractual promises by senior executives of the bank on behalf of DK between August and December 2009," he told the court.

He told the court that staff had been told at a "town hall" meeting in August 2008 by Stefan Jentzch, then head of Dresdner's corporate and investment banking arm, that a guaranteed minimum bonus pool of €400m was allocated to front and middle office employees.

Mr Hochhauser told the court that Dr Jentzsch had made categorical assurances that "there would be a minimum bonus pool".

"That was the whole driving purpose behind the announcement made on August 18 - staff retention," he told the court.

Commerzbank got part of the lawsuit struck out last year but failed to have the claim completely dismissed and wants the Court of Appeal to throw the claim out before it goes to full trial.

Eighty-three of the investment bankers are represented by Stewarts Law and 21 by Mishcon de Reya and Mr Hochhauser.

The bankers are seeking to have part of their original claim reinstated after it was struck out last year.

An earlier ruling prevents them from relying on evidence prior to a letter sent by the bank to staff in December 2008 on bonuses.

Commerzbank said it was defending the claims.

A spokesman said: "Dresdner Bank was entitled to reduce its employees' 2008 discretionary bonuses in the light of the marked deterioration in the investment bank's performance in late 2008."

The case continues.