Commerzbank AG asked a judge in London today to dismiss the claims from more than 100 current and former bankers at its Dresdner Kleinwort unit in the largest bonus dispute in the U.K. stemming from the financial crisis
The collapse of Lehman Brothers Holdings Inc. and its affect on the financial markets made it impractical for the bank to pay what it considered discretionary bonuses, said Jonathan Sumption, a lawyer for Commerzbank. The bankers say they were paid a 10th of what they were owed in a contract with Dresdner Kleinwort before it was acquired by Commerzbank last year.
Allianz SE, the insurer that sold Dresdner Bank to Commerzbank, had earmarked about 400 million euros ($523 million) for Dresdner bonuses, including retention payments. Later, Dresdner’s investment-banking operations posted a 6.3 billion-euro loss for 2008 amid the global financial crisis. The losses, plus Commerzbank’s need to tap the German government for 18.2 billion euros of capital, created a material change to the contracts, Sumption said.
“There was a hope, and no doubt an expectation, but it was not an obligation,” Sumption said of the bonuses.
Employees were told of the bonus pool in August 2008 and received letters in December with an expected bonus, Sumption said. Of the 400-million euro pool, 150 million was paid out, he said.
Commerzbank is asking the court to dismiss the two lawsuits filed by the workers instead of going to trial.
Louise Beeson, a spokeswoman for some of the bankers, said that the bonuses were retention bonuses, not discretionary payments.
“Our clients argue the decision, by new owner Commerzbank, to renege on the repeatedly promised payment was a breach of contract that should be determined at full trial,” Beeson said.
The case is: The parties named in Schedule A v Dresdner Kleinwort Ltd & ors, High Court, IHQ/10/0062 IHQ/10/0063