OLG Frankfurt; 2021-03-09; 5 U 58/18
Decision by national courts in the field of European Union law — ECLI:DE:OLGHE:2021:0309.5U58.18.00
Date: 2021-03-09
Subject matter: Judicial cooperation in civil matters
Origin: Germany

82021DE0309(52)_ENG_SUMJURE
JURE summary
JURE summary
A holding company incorporated under English law (hereinafter ‘the plaintiff’) asserted a claim against a German company producing and distributing software solutions capable of learning by means of artificial intelligence (hereinafter ‘defendant 1’), the 74.9 percent shareholder of defendant 1 (hereinafter ‘defendant 2’) and the managing director of defendant 1 with sole power of representation regarding the invalidity of the exercise of a so-called ‘call option’.
The plaintiff held a 25.1 percent stake in defendant 1 together with defendant 2. The dispute concerned the exercise of the call option, a contractual clause in the Investment Framework Agreement of 11 June 2014. This agreement stipulated the cooperation between the plaintiff and the defendants as well as the plaintiff’s capital participation in defendant 1. The call option allowed the defendants to purchase the plaintiff’s shares for just EUR 1 in the event of default on payment. The plaintiff was contractually obliged to make payments gradually, but in 2015, a short-term default on an instalment of EUR 50 000 occurred.
Defendant 2 made use of the call option by declaring that it would acquire the plaintiff’s shares in defendant 1 for EUR 1. The parties dispute whether the exercise of the call option was lawful and whether the underlying contractual clause offends common decency pursuant to Article 138 of the BGB (1), since, in the plaintiff's opinion, it represents a gross disproportion between its performance (shares in defendant 1) and the consideration (EUR 1). The plaintiff considered the exercise of the call option to be a significant breach of faith and terminated the Investment Framework Agreement with immediate effect. The plaintiff also declared its resignation as a shareholder of defendant 1 for good cause.
The Landgericht Frankfurt (hereinafter ‘the Court of First Instance’) ruled in favour of the plaintiff. The call option was not effectively exercised because the exercise contained formal deficiencies. In addition, the call option offends common decency as it disproportionately disadvantages the plaintiff. The Court of First Instance also ruled that the termination of the Investment Framework Agreement by the plaintiff was effective and that it was entitled to withdraw from defendant 1 as a shareholder for good cause. The defendants subsequently appealed. The call option was necessary in order to secure a new strategic partner in the event of default in payment. In addition, the plaintiff and its representatives had accepted the clause prior to the conclusion of the contract, which would imply that a breach of good faith did not occur.
On appeal, the Oberlandesgericht Frankfurt (hereinafter ‘the Court of Appeal’) largely upheld the decision of the Court of First Instance. The exercise of the call option offends common decency pursuant to § 138 of the BGB, as it represented a gross disproportion between the plaintiff's actual performance and the agreed consideration. The plaintiff held 25.1 percent of the shares of defendant 1, which were valued in the double-digit million range, and these were to be transferred to the defendants for only EUR 1 in the event of a minor default in payment. This imbalance is so grossly disproportionate that the contractual clause must be classified as offending common decency.
With respect to the termination of the Investment Framework Agreement, the Court of Appeal held that the plaintiff’s termination was lawful. The plaintiff terminated the contract for good cause because the exercise of the call option seriously and irreversibly destroyed the relationship of trust between the parties. The defendants attempted to secure the plaintiff's valuable shares for a minimal amount, which represents a significant breach of fiduciary duty. In view of this breach of trust, it was unreasonable for the plaintiff to continue to remain a shareholder of defendant 1.
The Court of Appeal dismissed the defendant’s appeal. The judgment of the Court of First Instance remained essentially in force.
(1) Bürgerliches Gesetzbuch (German Civil Code).