Lawyers for 104 UK-based bankers accused Germany's Commerzbank
Kicking off a battle that will see Commerzbank's Chief Executive Martin Blessing square up to former Dresdner investment bank head Stefan Jentzsch, lawyers said the bank reneged on pledges in an industry where one's word is one's bond.
Put briefly, those promises (to pay bonuses) have not been honoured and that is why we are here today, lawyer Andrew Hochhauser told a court room so packed with lawyers on Wednesday that piles of files were relegated to the floor.
The London-based bankers, whose claims range from around 15,000 euros to 2.6 million, launched their legal battle in late 2009 after some were paid only 10 percent of the discretionary bonuses they were promised for 2008 out of a guaranteed minimum bonus pool of 400 million euros.
The case hinges on whether Germany's second-largest bank, which bought Dresdner in January 2009, was entitled to slash bonus awards as the credit crisis brought banks to their knees and triggered a rash of state bailouts.
Critics say the two-year bonus battle is out of step with the current reality of public fury at taxpayers bailing out banks at a time when living standards are slumping and even conservative politicians decry excessive banker rewards.
Politically, it is a hot potato, said Jonathan Evans, chairman of investment bank headhunters Sammons Associates.
Bonus is such a dirty word at the moment, I'm not sure it will do our business any favours ... The man in the street has been deeply offended by the whole continuing saga of the word bonus in investment banking.
One lawyer said even other bankers might struggle to sympathise with the former Dresdner financiers.
Even the most successful bankers have this year had their bonus awards slashed by approximately 30-40 percent, said Howard Hymanson, head of employment law at law firm Harbottle & Lewis.
The case, being fought amid the ornate splendour of the Royal Courts of Justice in central London, is unusual because of the size of the bonus pot, the number of claimants and the rarity of group action among investment bankers.
Commerzbank has argued that discretionary bonuses were dependent on bank performance, that bonus letters sent to staff and verbal promises were not really contractual offers and that there had been an acute danger to the continued existence of Dresdner as a going concern.
In his opening statement, Hochhauser said the bonus pool had been created expressly to retain talent at a time when the bank already knew it was making heavy losses, was restructuring and faced a mass staff exodus.
Although the claimants remained loyal to the bank and the bonus promises first made by Jentzsch in August 2008 were reiterated on numerous occasions, the bank moved the goalposts, Hochhauser said.
It introduced a so-called MAC (Material Adverse Change) clause just six working days before the end of the year, which the bank says allowed it to review and slash bonus awards in light of additional drops in revenue and earnings forecasts.
One doesn't give very much comfort to a claimant if you promise one thing one day and do something different at the end of the year, Hochhauser said.
Commerzbank has said it will vigorously defend the claims.
(Editing by David Cowell)