After the Regional Court (LG) Munich I made first-instance decisions in favor of Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft (EY), the Higher Regional Court (OLG) Munich has now given a notice that is remarkable in several respects (notice dated 09.12.2021 – 8 U 6063/21). It is a precise instruction for the Regional Court how to deal with the investor claims – and very much in the sense of the aggrieved investors. The notice does come from any senate of the OLG Munich, but from the capital investment senate specialized in such disputes. Investors can hope now all the more for compensation. Fortunately, the OLG Munich has also expressed itself very clearly with regard to the capital markets model case proceedings pursuant to the Capital Markets Model Case Act (Kapitalanleger-Musterverfahresngesetz – KapMuG) against which EY has so far – but not for too long anymore – successfully defended itself.

In addition, the OLG Munich also gave a further detailed opinion on various legal issues. It is particularly pleasing to note that even with regard to these legal details, the OLG Munich’s notice is extremely investor-friendly, for example with regard to the aspect of causality and the so-called Kursdifferenzschaden, a type of inflation damage (which is similar to what is known in the US and elsewhere as “out-of-pocket damage”).

The Munich Higher Regional Court is expressly in favor of investor model case proceedings against EY under the German Capital Markets Model Case Act (KapMuG). The OLG Munich justifies this – in the opinion of WEISSWERT attorney Maximilian Weiss quite rightly – with the fact that audit opinions can be “public capital market information” in the sense of the KapMuG.

According to the Munich Higher Regional Court, EY is also a suitable model defendant within the meaning of the KapMuG. Various other factual and legal questions are also suitable for model proceedings. In short: In the opinion of the OLG Munich, nothing stands in the way of model proceedings. Thus, the OLG Munich shares now also the opinion of WEISSWERT attorney Maximilian Weiss, who filed the first request seeking the establishment of a model case against EY (to be read in the contribution after Wirecard balance scandal – extension of the sample procedure, in: bankintern special, special supplement to issue 27/2020). At the latest after this clear sailing instruction given from the Munich Higher Regional Court to the Regional Court, the start of the model proceedings should only be a matter of time.

The Munich Higher Regional Court also clearly rejected the Regional Court’s previous dismissal of the action in question. The Regional Court regularly did not even address the question of whether EY’s audit opinion(s) was/are erroneous, but merely denied the “concrete causality” of an – assumed – erroneous audit opinion. As a result, according to the LG, it was ultimately irrelevant whether the audit opinion was erroneous or not.

In view of this, malicious tongues may claim that this was a trick of the Regional Court to avoid having to delve deeper into the complex matter of the Wirecard scandal and at the same time to get rid of the accumulating files as quickly as possible. Be that as it may: It is indeed not that simple. After all, according to the case law of the German Federal Court of Justice (BGH), it has long been recognized that a causal connection between a company report and the investors’ decision to purchase shares is presumed if the shares were acquired after a company report was published. It is not a question of whether the investor actually read or was aware of the report: The decisive factor is that the report helps to determine the assessment of a security by the assessment of a security in specialist circles and thus generates an investment sentiment (Anlagestimmung).

Not least on this aspect the OLG Munich dealt accordingly decidedly. In this respect, it criticized the action of the LG, citing the case law of the highest courts, and thus put a stop to the previous practice of the LG.

Nevertheless, the notice from the Munich Higher Regional Court – at least when viewed as a whole – is not only a slap in the Regional Court judges faces, but it contains a well-intentioned hint for the judges: they can ultimately pass on the pending and upcoming proceedings against EY “upwards”, namely by means of an order of reference for model case proceedings under the KapMuG. In this way, following the order of reference, the Munich I Regional Court can suspend the proceedings in the future to the model proceedings – and in this way ultimately also get rid of the files. This would serve both the Regional Court and the investors alike, who can then join forces to litigate against EY in the model case. A model case increases the chances for investors significantly and saves costs and cost risks. However, the special panel of the OLG Munich will not conduct the KapMuG proceedings (more on this later).

The questions dealt with so far are only a part of the thoroughly pleasing notice of the OLG Munich, which reads in part almost like a textbook and was very carefully reasoned. Finally, we would like to highlight one particular aspect for those familiar with German capital markets law: The OLG Munich also took a position in its notice on which causality requirements have to apply in the context of liability under Section 826 of the German Civil Code (Bürgerliches Gesetzbuch – BGB) when compensation for the inflation damage (Kursdifferenzschaden) is claimed by investors..

In this case, the OLG Munich explains, it is only necessary to prove that a different price would have been formed if the capital market had been correctly informed. In other words, the investor does not have to prove that he would not have acquired the financial instruments in question if he had known about the true circumstances. This proof, in turn, is conceivably easy to provide in practice.

What may sound plausible, however, is not a matter of course: In the legal literature a majority advocates that within the framework of Section 826 of the BGB the transaction causality is to be proven. This shall apply independently of whether one asserts the transaction damage (similar to what is known elsewhere as rescission damage) or the inflation difference damage. This view is extremely doubtful as the protective purpose of § 826 BGB is not limited to the protection of free will, Insofar, at least in the context of the assertion of the inflation damage, what already applies to Sections 97, 98 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) must therefore also apply to Section 826 of the BGB: price causality is sufficient.

Fortunately, this is now also the view of the OLG Munich. Thus, in the opinion of the OLG Munich, anyone claiming price difference damages on the basis of Section 826 BGB only has to prove price causality. However, the IKB decision of the Federal Court of Justice (BGH) cited by the special panel of the OLG Munich (ruling of December 13, 2011 – XI ZR 51/10) was completely silent on this aspect. At that time, the decision concerned claims under Section 37b (1) WpHG (old version), but not claims under Section 826 BGB. However, the opinion of the OLG Munich is not entirely new. For the first time, Professor Bachmann drew what we believe to be the correct conclusions on the sufficiency of price causality under section 826 of the German Civil Code (Bürgerliches Gesetzbuch, BGB) in his comments on the IKB decision (see Bachmann, “Zur Haftung wegen fehlerhafter Kapitalmarktinformation”, JZ 2012, 578, 581).

In view of the encouraging news, one would like to wish investors that the specialized senate of the OLG Munich would, if possible, also rule on EY’s liability in the KapMuG proceedings. However, this is not the case. Pursuant to Section 6 (6) of the KapMuG, the federal states of Germany can establish cross-state jurisdiction of a court for KapMuG proceedings. The Free State of Bavaria has made use of this option. The Judicial Jurisdiction Ordinance (GZVJu) states that the Bavarian High Court (Bayerisches Oberstes Landesgericht) has exclusive jurisdiction for KapMuG proceedings. The Munich Higher Regional Court, for its part, is therefore condemned to watch. It is to be hoped that the composition of the Bavarian High Court for the KapMuG proceedings against EY will have a similar expertise as the special senate of the Munich Higher Regional Court, which is staffed with proven experts in the matter. This would be conducive to the progress of the proceedings – and would thus also be advantageous for the aggrieved investors.