Contractual penalties for lack of readiness for acceptance or compensation for use? Amicable settlement in a dispute worth over EUR 46 million
At the 31st Chamber for Commercial Affairs, which is part of the Stuttgart Commercial Court, two parallel proceedings were ongoing in which the purchaser of a double-digit number of large machines was taking action against the manufacturer. The Plaintiff’s parent company is based in the United Kingdom and the Defendant belongs to a group of companies from Switzerland. The total value in dispute amounted to more than EUR 46 million. The Plaintiff asserted contractual penalty claims against the Defendant totalling around EUR 23.5 million. It relied in particular on the lack of readiness for acceptance and technical defects of the machines, which, nevertheless had been transferred to it by the Defendant and which were actually in use – according to the Plaintiff – in order to avoid even greater damage. In turn, the Defendant claimed interest in the form of a counter-claim for allegedly late payments, compensation for use, etc., totalling approximately EUR 23.8 million.
Prepared by a case management conference in November 2020, an initial oral hearing took place at the end of February 2021 with the Chairman of the Chamber, Dr. Schumann, and two commercial judges. The Chamber made a proposal for a settlement following a detailed indicative ruling. By all accounts, the parties continued intensive out-of-court negotiations over several weeks in the summer of 2021. These negotiations eventually resulted in an out-of-court settlement. Both of these major cases (31 O 51/20 KfH and 31 O 52/20 KfH) have now been settled. The details of the compromise reached were not released to the public. According to reports, the parties agreed not to disclose the information.
Sport, data and two former board members
The plaintiffs in both proceedings were members of the board of a public limited company (AG) to which the professional division of a well-known sports club had been transferred. Both had been dismissed due to (alleged) breaches of duty in connection with investigations against the association for breaches of data protection law. In the first of the proceedings, the Chairman of the 31st Chamber for Commercial Affairs, Dr. Schumann, consulted with the commercial judges ahead of the scheduled hearing and then submitted the Chamber’s settlement proposal to the participating lawyers in advance of the hearing. In both cases (31 O 13/21 KfH and 31 O 108/21 KfH), an amicable agreement was reached before the scheduled hearing, which meant that the court cases did not go ahead as planned. The amounts in dispute each exceed EUR 1 million.
Dr. Schumann, Chairman of the 31st Chamber for Commercial Affairs, said: “Sometimes an oral hearing is important, both for the parties and for the public. Sometimes, however, both sides have an interest in reaching an agreement outside the pressure of a public hearing. What is important here is developing an instinct for the cases in which the Chamber can build a bridge to find a compromise by making advance proposals to the parties.”
The failed “Covid masks” test
“Covid” masks are tested and certified before they go on sale. The 31st Chamber for Commercial Affairs was involved in a legal dispute concerning an unsuccessful test of “Covid masks” with an amount of EUR 2.5 million in dispute. The importer claimed that the tests were not carried out properly and that the negative test result caused significant damage to the importer due to the resulting unsaleability of the masks. This legal dispute also ended in May 2022 without a hearing (31 O 7/22 KfH).
Service providers versus car manufacturers
Following an invitation to tender under a framework agreement, the plaintiff in the proceedings provided services for a car manufacturer. When there was a disagreement between the parties over various points and no more orders were placed, the parties continued the dispute in court (31 O 85/21 KfH). Among other things, the dispute was about whether there was an obligation to accept operational arrangements made by the service provider. In March 2022, the parties accepted the settlement proposal of the 31st Chamber for Commercial Affairs. The settlement, which was reached on a revocable basis with regard to reservations of the board, was then validated.
Disputes arising from company purchase agreements
By far the majority of the disputes handled by the 31st Chamber for Commercial Affairs since the establishment of the Commercial Court in October 2020 arising from or in connection with company purchase agreements (a double-digit number) have already been settled.
Outlook: High profile proceedings of the 31st Chamber for Commercial Affairs
Since the establishment of the Stuttgart Commercial Court in October 2020, the 31st Chamber for Commercial Affairs has handled 13 disputes (as of May 2022) arising from mutual commercial transactions with disputed values in excess of EUR 2 million, of which three have already been settled (all by undisputed settlement). One of the pending cases includes, inter alia, an application for payment of more than EUR 68 million, which even exceeds the threshold for the fees. In the 13 cases mentioned above, the parties are disputing a total of more than EUR 180 million (average per case: around EUR 13.9 million).
The 31st Chamber for Commercial Affairs is also responsible for appraisal proceedings under corporate law. Five appraisal proceedings are currently pending concerning the valuation of companies for the purpose of determining compensation for minority shareholders. The sum of the company values determined in advance by an expert valuation, which are still considered too low by the plaintiffs and which therefore need to be reviewed by the courts, amounts to more than EUR 3 billion. Since the fourth quarter of 2017, the Chamber has already completed eight appraisal proceedings with aggregated company values of more than EUR 5.7 billion. Appraisal proceedings are ongoing for the “squeeze out” at WMF AG and former minority shareholders are currently making a decision (as of May 2022) on the acceptance of a settlement offer made by the Respondent on the initiative of the Chamber.