Media Company Loses in Court

A California judge Friday affirmed a jury ruling against Bertelsmann, ordering the German media conglomerate to pay $260.8 million, plus interest, to two former executives as part of a contract dispute related to the sale of the company’s stake in AOL Europe.

In December, a Santa Barbara jury awarded Jan Buettner and Andreas von Blottnitz an estimated $250 million, saying the German media conglomerate short-changed the former consultants who had helped it earn a fortune on the Internet. Jurors found that the two men were promised a stake in the AOL Europe venture between Bertelsmann and Time Warner Inc.

Bertelsmann agreed to sell its 50% stake to Time Warner in 2000 for $6.75 billion.

But confusion over the jury’s verdict led Bertelsmann to argue that the award was $20 million, while lawyers for Von Blottnitz and Buettner said it was $300 million.

Friday’s decision by Santa Barbara Superior Court Judge James Brown clears the way for Bertelsmann to ask the judge to reduce or overturn the award.

“There will be a lot of issues that could be raised on appeal,” including that the case should be retried in Germany, said Anthony Murray, a lawyer for Bertelsmann. “Everything was based on events that happened in Germany.”

In the trial, Buettner and Von Blottnitz claimed Bertelsmann and its former CEO, Thomas Middelhoff, promised them a stake in AOL Europe. They sought more than $3 billion.

But the media giant, whose assets include publishing business Random House and music unit BMG, denied that it offered the pair an equity stake and said it planned to seek a new trial. The company had tried to have the case moved to Germany.

The jury awarded the plaintiffs about $130 million each for Bertelsmann’s breach of contract, plus a separate award of $12 million each against Middelhoff for breach of oral contract and an additional $7 million each under a German law that compensates for harms from different breaches of contract, lawyers for the men said.

The judge Friday removed both the award against Middelhoff and the $7-million awards, saying there was no evidence to support the separate damage awards.

The case was in Santa Barbara because the plaintiffs lived there. The contracts were in German, and the case hinged on the interpretation of a phrase Von Blottnitz and Buettner said meant “equity.” Bertelsmann said it meant a share in a company bonus system for executives.

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Bloomberg News was used compiling this report.