Deutsche Bank AG faces two separate court battles this week in its nine-year, 3.3 billion-euro ($4.5 billion) feud with Leo Kirch, highlighted by appearances by the lender’s former Chief Executive Officer Rolf Breuer and Kirch.
The Munich Regional court is scheduled to rule tomorrow on a 1.3 billon-euro suit over claims that comments by Breuer about Kirch’s media group’s creditworthiness caused its 2002 bankruptcy. Three days later, Kirch, 84, and Breuer, 73, are scheduled to testify at an appeals court in a case where Kirch is seeking 2 billion euros.
“That’ll be like a showdown of yesterday’s men, because, frankly, both Kirch and Breuer don’t play central roles in Germany’s economy anymore,” said Hans-Peter Burghof, a professor of banking at the University of Hohenheim in Stuttgart. “Kirch is a patriarch who lost his empire and is now going back again and again to look for answers.”
Kirch’s dispute with the Frankfurt-based bank stems from a February 2002 Bloomberg television interview in which 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. Kirch Holding GmbH, which owned a controlling stake in Formula One racing and more than 50 percent of Germany’s biggest TV broadcaster, filed the country’s biggest bankruptcy case since World War II four months later.
Courts, Shareholder Meetings
Kirch has battled Deutsche Bank, Germany’s biggest bank, inside and outside of courtrooms ever since. Kirch’s lawyers attend every one of the lender’s annual shareholder meetings, oppose its decisions and sue afterwards.
Kirch, a friend of former German chancellor Helmut Kohl, founded the company in the 1950s after buying the rights to Federico Fellini’s ``La Strada.'' He turned his one-man business into Germany’s No. 2 media company before it faltered.
In tomorrow’s lawsuit, involving Kirch’s former Printbeteiligungs unit, he claims that he was forced to sell a 40 percent stake in Axel Springer AG in an October 2002 foreclosure sale to Deutsche Bank. The shares were collateral for a loan from the lender.
The Federal Court of Justice, Germany’s highest civil court ruled in 2006 that Breuer was wrong to question the condition of Kirch’s group in the interview. While dismissing two-thirds of Kirch’s case, the court said Printbeteiligungs may be able to seek compensation because it was the only company that had a contract with Deutsche Bank.
In a hearing in November, Presiding Judge Brigitte Pecher said Kirch still had to prove that other banks didn’t provide any more loans because of the Breuer interview.
Printbeteiligungs didn’t show that the remarks caused the bankruptcy and the claimed damage, Deutsche Bank spokesman Christian Streckert said in an e-mailed statement Feb. 18. Peter Heckel, who represents Breuer and the bank in the suits, said the statement applies to the former CEO as well.
Later in the week, on Feb. 25, Kirch and Breuer are scheduled to testify in a separate case filed by 17 of Kirch Media’s units. The Munich appeals judges will question the men on whether negotiations between the Kirch units and Deutsche Bank progressed to a point that triggers the right to make contractual claims under German law, court spokesman Wilhelm Schneider said in an e-mailed statement last week.
Judge Pecher and her colleagues in March 2009 had dismissed the suit, saying most of the Kirch units didn’t have contract with Deutsche Bank and a statute of limitations applied to the only one that did.
In the appeals case, Kirch can’t seek anything because the companies didn’t have a contractual relationship with the lender, Streckert said.
‘Off the Cuff’
“The case shows that there aren’t really any off the cuff remarks when it comes to the capital markets, every word counts,” Burghof said. “But we also cannot know whether it was actually that Breuer remark that triggered the demise of the Kirch group or whether it was already on the way downwards.”
Breuer resigned as Deutsche Bank chairman in 2006, less than three months after the top court ruling in the Kirch case. He had spent his career at the lender, joining the company in 1956 as an apprentice and becoming CEO in 1997 and chairman in 2002.
He was charged by prosecutors in 2009. They claimed he lied to judges in an effort to avoid liability in the Kirch suit. He has rejected the allegations as unfounded. A Munich court has been deliberating since that time whether to allow the charges go to trial.
This week’s events won’t end the saga. Whoever loses in tomorrow’s or the Feb. 25 case is likely to appeal. Germany’s top civil court will eventually get a chance to rule on the issue again. Settlement talks suggested by Judge Pecher in 2009 didn’t yield any results.
“The problem that this seems to be a never-ending story and the amount at stake here leaves the market with a feeling of uncertainty,” said Konrad Becker, a Munich-based analyst at Merck Finck & Co. who recommends buying the stock. “It would be good to get some closure here to allow that uncertainty to go.”
Tomorrow’s case is LG Muenchen, 33 O 9550/07. The Feb. 25 case is OLG Muenchen, 5 U 2472/09.