Deutsche Bank AG (DBK) rejected a 775 million-euro ($1.1 billion) settlement proposed last month by a Munich court that may have ended a nine-year dispute with Leo Kirch over the collapse of his media group, two people familiar with the case said.
The March 24 proposal by the Munich appeals court was made a day before Kirch testified in the case, said the people, who declined to be identified because the negotiations were private. The bank spurned the offer because the amount was too high, one of the people said.
Kirch has filed suits against the Frankfurt-based bank over a 2002 Bloomberg television interview by Rolf Breuer, the bank’s chief executive officer at the time. In the interview, Breuer said “everything that you can read and hear” is that “the financial sector isn’t prepared to provide further” loans or equity to Kirch. Four months later Kirch Holding GmbH filed the country’s biggest bankruptcy since World War II.
The settlement would have ended all the litigation. Kirch has filed two separate damages suits against the lender and Breuer seeking a total of 3.3 billion euros. He has also filed criminal complaints and civil suits challenging votes at shareholder meetings. The bank and Breuer deny wrongdoing.
It’s the court’s duty to work toward an amicable solution and the bank “of course” examined the proposal, Deutsche Bank spokesman Christian Streckert said. A spokesman for Kirch declined to comment.
Chief Executive Officer Josef Ackermann is scheduled to testify May 19 at the Munich court in a hearing over one of the lawsuits, court spokesman Wilhelm Schneider said in an interview today. The bank’s chairman, Clemens Boersig, and management- board members Juergen Fitschen and Hermann-Josef Lamberti are also testifying. The court summoned the men at Deutsche Bank’s request.
In the case, Kirch is seeking 2 billion euros, claiming Deutsche Bank had a secret plan to cause difficulties for his media company and then force him to hire the bank to help restructure the firm.
After testimony from Kirch and other witnesses on March 25, Presiding Judge Guido Kotschy said in a preliminary assessment that the court isn’t likely to find that Kirch holds a claim similar to one he would have if there were a signed contract. Kotschy also said Kirch hadn’t yet shown he suffered the losses he claimed because of the interview.
“Courts normally tell parties how they see chances for either side and a settlement proposal is reflecting that case’s situation at a given moment,” said Elke Umbeck, a litigation attorney at Heuking Kuehn Lueer Wojtek in Hamburg. “Executives of listed companies will only accept it if they have a solid opinion by their lawyer telling them: ‘Yes, it’s a good deal.’”
The executives can be held liable if they agree to a settlement that doesn’t seem favorable in light of all circumstances, said Umbeck. If there is still evidence to be taken or if the court has voiced doubts about their opponent’s ability to prove that damage was done, companies may be reluctant to settle, she said.
This isn’t the first attempt by a court to broker a settlement. The Munich Regional Court in 2009 started moderated talks between Kirch and the lender. After failing to reach an agreement, both parties in March 2010 claimed the other side wasn’t willing to agree to reasonable terms.
In the Munich appeals case, Kirch has sought to establish that negotiations with Deutsche Bank in 2001 and early 2002 reached a point under German law that allows a plaintiff rights similar to breach-of-contract claims.
Kirch may still be able to prevail with his claim the lender intentionally tried to hurt the group, depending on how the case proceeds, Kotschy said. The witnesses will have to testify about the bank’s intentions.
Kirch lost the case in a lower court in 2009 and then appealed. The lower tribunal hadn’t taken any evidence. The same court rejected Kirch’s separate 1.3 billion-euro suit in February.
The Munich appeals judges have now also called Thomas Middelhoff, the CEO of Bertelsmann AG at the time, to testify about a Jan. 27, 2002, meeting he had with Breuer and Germany’s then-chancellor, Gerhard Schroeder. Kirch claims the men discussed breaking up his company and the sale of his stake in Axel-Springer AG. (SPR) Friede Springer, vice chairwoman of the publisher’s supervisory board, has also been called to testify.
Breuer didn’t intend to hurt Kirch with his interview comments and made that clear in his February statement to the court, Streckert said. The witnesses testifying next month will also confirm that, he said.
The lender told the court their executives will say the bank didn’t plan to actively contact Kirch to procure restructuring work. The court has ordered the bank to produce a transcript of a Jan. 29, 2002, management board meeting.
The Munich appeals case is: OLG Muenchen, 5 U 2472/09.
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