Commerzbank suffers setback in UK bonus lawsuit

Reuters
08 March 2011

LONDON, March 8 (Reuters) - Commerzbank (CBKG.DE) lost an attempt to dismiss a 52 million euro ($72 million) lawsuit by more than 100 former Dresdner bankers over unpaid bonuses, setting the scene for a bitterly-fought British trial in 2012. In one of the highest-profile battles over bonuses, the Court of Appeal also dealt the German bank a blow by overturning a lower court's decision to dismiss banker claims that contractual promises were made during internal meetings in 2008 -- as well as in letters.

"While we are disappointed with the court's resolution to require more evidence for a decision on this matter, Commerzbank as the new owner of Dresdner Bank intends to defend these claims vigorously," a spokesman said.

"We are confident that we will demonstrate at a full trial that Dresdner Bank was entitled to reduce its employees' 2008 discretionary bonuses in light of the marked deterioration in the investment bank's performance in late 2008."

The bank declined to comment on whether it might appeal the latest judgment or consider a settlement.

A group of 104 former London-based Dresdner bankers launched their legal battle in late 2009 after some were paid only 10 percent of the discretionary bonuses they had been promised.

The case hinges on whether Germany's second-largest bank, which bought Dresdner in January 2009, was entitled to slash bonus awards for some of its staff by invoking a so-called "MAC" clause -- a material adverse change in economic conditions.

BONUS POOL

The bonuses were due to be paid from a guaranteed pool of 400 million euros, established with the agreement of UK regulator the Financial Services Authority (FSA) to prevent staff deserting the bank during a restructuring.

Commerzbank, which had to be bailed out by the German government after buckling in the credit crises, paid out 152.2 million euros in guaranteed bonuses in 2008. But it paid only 25 million euros -- rather than the 120.4 million euros set aside -- in discretionary bonuses.

It kept the remaining 222.8 million euros.