Auditor liability in the Wirecard case: EY avoids test case
The article was first published on March 17 in Versicherungsmonitor.
In the dispute with thousands of Wirecard investors, EY has scored an important victory: The Bavarian Higher Regional Court recently ruled that the requirements for claims for damages against the auditing firm do not need to be clarified in a test case. Whether the decision is "100% wrong," as lead plaintiff attorney Peter Mattil stated, must now be clarified by the Federal Court of Justice. If investors are also unsuccessful there, claims for damages against EY would be a distant prospect. The proceedings already show how "mammoth proceedings" in capital market disputes are pushing the judiciary to its limits.
The insolvency of Wirecard AG, widely described as one of the biggest economic scandals in the history of the Federal Republic of Germany, has been occupying the courts for years. The many investors who lost money on the shares of the insolvent payment service provider quickly turned their attention to the auditors at EY, who issued unqualified audit opinions – known as testates – on Wirecard's consolidated financial statements and group management reports for each of the years from 2014 to 2018.
In the expectation of being able to claim against EY as a solvent debtor, several thousand investors initiated a so-called model case against EY under the Capital Investor Model Case Act (KapMuG), which initially appeared promising from the investors' point of view. In March 2022, the Munich I Regional Court issued a referral order requiring the Bavarian Higher Regional Court (BayObLG) to issue a decision on the declaratory relief sought to establish EY's liability.
Audit opinion not capital market information
However, the investors have now suffered a severe setback before the BayObLG, which makes the enforcement of claims for damages against EY a distant prospect for the time being. In a partial model decision dated February 28, 2025 (Ref. 101 Kap 1/22), the 1st Civil Division of the BayObLG rejected as inadmissible all declaratory relief sought in the order for reference, which was intended to establish the prerequisites for claims for damages against EY.
The investors were doomed by the fact that the model case is still being conducted under the KapMuG in the version applicable until July 19, 2024. The BayObLG ruled that claims for damages against EY for issuing unqualified audit opinions in the years 2014 to 2018 do not fall within the scope of the "old" Section 1 (1) No. 1 KapMuG.
According to this provision, claims for damages due to false, misleading, or omitted public capital market information are eligible for model proceedings. However, the BayObLG limits the scope of application to claims for damages against issuers and other persons who are obliged or have voluntarily undertaken to inform the capital market.
Insofar as the claims for damages are based on a breach of audit duties by EY, only the audit opinions issued can be considered public capital market information to which liability can be attached. However, an auditor does not communicate the results of the audit to the capital market with the audit opinion. Rather, the obligation to disclose the audit opinion lies with the audited corporation, which thereby also assumes the task of informing the capital market.
A severe setback for investors
There has long been controversy in case law and legal literature as to whether claims for damages against the auditor for issuing an audit opinion fall within the scope of the KapMuG. The legislature has responded to this by expressly including the audit opinions of auditors on annual financial statements to be disclosed in the "new" KapMuG, which came into force last summer, in the list of relevant capital market information.
However, this change in the law may come too late for the investors who brought the action. The next round has already been heralded: the lawyers representing the lead plaintiff have announced that they will make use of the option granted by the BayObLG to appeal to the Federal Court of Justice (BGH). The highest civil court will then decide whether the BayObLG's decision is really "one hundred percent wrong," as the investor representatives believe.
However, it is not particularly likely that the investors will be successful before the BGH. The BGH has already taken the position in the past that only claims for damages fall within the scope of the "old" Section 1 (1) No. 1 KapMuG where liability depends on responsibility for the publication of capital market information. In its decision, the BayObLG explains in a comprehensible manner that there is no such direct link between EY's liability and capital market information that qualifies under the old KapMuG.
Conclusion
If the investors are also unsuccessful with the model case before the Federal Court of Justice, they may be forced to enforce their claims in lengthy individual lawsuits – with an open outcome. Whether it is possible to initiate a model case under the rules of the "new" KapMuG is also uncertain and fraught with a number of other risks. For the time being, investors will therefore have no choice but to have the BayObLG's decision reviewed by the BGH.
However, given the complexity and scope of the proceedings, a quick decision from Karlsruhe is not to be expected. The case is therefore likely to keep the courts and lawyers busy for years to come. The Wirecard proceedings are thus currently further proof that the goal proclaimed by the legislature of making capital market disputes simpler and faster is regularly failing in practice.
