Commerzbank Lawsuit The Unwanted Prodigal Son

A German court has ruled that a fired banking executive has the right to return to his board position at Germany's second-largest bank, leaving both him and the bank in uncharted territory.
Coming back to haunt you: Ulrich Sieber (left) and Commerzbank chairman Martin Blessing in 2013.

Commerzbank was probably not expecting such a resounding defeat.

Germany’s second-largest bank has been told by a court in Frankfurt that the dismissal of its former human resources chief, Ulrich Sieber, was unlawful. In a second blow, the same court told Commerzbank that it could not appeal the decision to the German federal court.

The judgment means Mr. Sieber, a former member of the bank's executive board who it said was dismissed as part of cutbacks, could technically retake his position at the state-supported Frankfurt-based institution.

The judges’ decision could make Mr. Sieber the first executive board member to successfully fight dismissal and obtain a legally-binding judgment while still under contract.

Mr. Sieber’s attorney, Peter Rölz, said he welcomed the decisions.

“Anything else would have been a fatal signal for the independence of executive boards,” Mr. Rölz said.

Worker protections are strong in Germany - employers cannot fire workers without giving reason. Under the law, employees can only be fired if they engage in misconduct, or if the company can prove the dismissal was necessary on economic grounds.

The bank’s non-executive supervisory board, which hires and fires top managers, eliminated Mr. Sieber's position in November 2013. He went to court, and won a first-round legal battle in April 2014, when a lower court ruled that board members can only be dismissed for “good cause.”

Good cause is usually understood to be personal misconduct.

The bank, however, argued that it had dismissed Mr. Sieber to send a message that it wasn’t only rank and file staff members who were vulnerable to the 5,200 job cuts the bank had just announced.

The plaintiff not only has the right to his board member salary, but is also entitled to reassume his position. Christoph Grigoleit, Professor of law

The Frankfurt judges agreed with the lower court that this reason was insufficient to fire Mr. Sieber. They said the bank had failed to show why it could not have employed Mr. Sieber until his contract ran out in May 2017, only a short time after the job cuts were to have been concluded.

What is particularly painful to the bank and its high-profile German law firm, Hengeler Müller, is that the higher court judges did not allow an appeal.

“That means the legal situation was so unambiguous that the higher court judges didn’t even think it necessary to have it reviewed by the next court of appeal,” said Mr. Rölz.

The bank can fight the denial of leave to appeal, but this would be akin to a legal last straw.

Hans Christoph Grigoleit, a law professor at the Ludwig Maximilian University in Munich, said: “Statistically, a complaint against the denial of leave to appeal has very little chance of success.”

The failure to get the decision overturned could have curious, uncomfortable consequences for Commerzbank, which was bailed out by the German government at the height of the 2008 financial crisis and is still part-owned by the state.

“If the judgment becomes final, then the plaintiff not only has the right to his board member salary during the contract period, but is also entitled to re-assume his position as a full-fledged member of the board,” said Mr. Grigoleit.

That could indeed become reality. Should the Federal Court not allow an appeal - and such a decision doesn't normally take more than a year - the ruling could become final while Mr. Sieber is still under contract.

Still, it appeared unlikely that Mr. Sieber would actively return to his position. Until the appeal is rejected, the executive board dismissal can remain in effect.

“In this case, the decisions made by the board in the meantime remain valid,” said Andreas Cahn, a professor of law at Goethe University in Frankfurt.

Commerzbank’s chairman, Martin Blessing, has shown little inclination to reinstate his former colleague. At the bank’s annual press conference last week, he said he could “actually rather not envision” a return of Mr. Sieber.

Commerzbank has yet to decide how it will proceed. “We have taken note of the decision,” said a spokesman for the bank. “The bank will study its right to appeal.”

The supervisory board will probably make a decision on what to do by mid-March, but the institution is sure to have an interest in exhausting all legal possibilities.

 

The author is a financial editor with Handelsblatt in Frankfurt, covering banks and their regulators. To contact the author: [email protected]