Kleinwort bankers to pursue Commerzbank bonus case

Financial Times
08 March 2011

Commerzbank faces a high-profile trial sparked by one of the biggest disputes arising from the credit crunch after 104 investment bankers were allowed by a UK court to pursue a claim for about €50m ($69m) from a €400m discretionary bonus pool set up by Dresdner Kleinwort.

The UK's Court of Appeal on Tuesday rejected attempts by Commerzbank to have the case thrown out. Instead it ruled that two separate lawsuits from the bankers who were employed in 2008 by Dresdner Kleinwort, which is now owned by Commerzbank, can proceed to trial.

The lawsuits centre on allegations by the bankers that Dresdner Kleinwort Investment Banking created a "guaranteed minimum bonus pool of €400m" at the height of the credit crunch to avoid a staff exodus. The bankers alleged that they later received a 10th of the bonuses they expected.

During the hearing, the Court of Appeal was told that the bonuses in question ranged from €15,000 to €2m.

The court was told that staff had been informed at a "town hall" meeting in August 2008 by Stefan Jentzsch, then head of Dresdner's corporate and investment banking arm, that a guaranteed minimum bonus pool of €400m had been allocated to front and middle-office employees to be awarded on a discretionary basis according to individual performance.

The Court of Appeal has ruled that the bankers can now use details such as the town hall meeting - which took place before bonus letters went out in December 2008 - in the trial.

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

Mark Levine and Daniel Naftalin, partners at Mishcon de Reya, said: "We welcome the Court of Appeal's decision to fully reinstate our original claim and are pleased that it has recognised that this matter should proceed to trial. We hope a hearing can take place as soon as possible."

Commerzbank, which bought Dresdner in early 2009, said it was "disappointed" with the court's resolution to require more evidence for a decision but "intends to defend these claims vigorously. "

"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 said.