Attorneys for British banker Gary Klesch asked a federal appeals court to order a new trial in his lawsuit against Liberty Media Corp. over a failed venture to buy German cable television networks, saying a judge’s mistake denied Klesch an award potentially worth hundreds of millions of dollars.
Klesch had filed suit seeking at least $611 million in damages from Liberty, saying the Englewood, Colo.-based holding company had gone behind his back to negotiate a separate deal with German cable operator Deutsche Telekom.
In September 2004, a federal court jury in Denver denied Klesch’s claims, saying Liberty was justified in breaching its contract with Klesch & Co. Ltd.
Klesch’s attorney, Michael Bowe, told the Denver-based 10th U.S.
Circuit Court of Appeals on Wednesday that the jurors ruled against Klesch because the trial judge improperly told them they could not consider a June 2001 document that updated terms of their partnership agreement.
“What (the judge) told them was that he was concluding Liberty Media had not breached obligations it had and had not breached a confidentiality agreement,” Bowe told a three-judge panel of the 10th Circuit.
Liberty’s attorney, Jeffrey Lamken, said the judge acted correctly because until near the end of the trial, Klesch had argued that the June 2001 document was unenforceable, and Klesch could not collect damages under such an agreement.
“You cannot claim benefits under a contract and at the same time disaffirm the contract,” Lamken said.
Bowe disputed that, saying the jury had to be given the ability to consider the June agreement because Klesch claimed it was central to the alleged fraud.
“We always sang the same tune,” Bowe said.
The judges did not indicate when they would rule.
Klesch’s attorneys had argued the June 2001 agreement required Liberty to provide Klesch with a 25 percent equity option and other compensation in the deal with Deutsche Telekom, or pay him $165 million if the deal closed.
The June 2001 agreement was a “ruse” by Liberty to secure Klesch’s permission for Liberty to acquire the cable assets on its own, Klesch’s attorneys argued. They also argued the agreement was legally void because Klesch signed under duress, fearing he would otherwise lose all potential profits from the deal.
Deutsche Telekom in 1999 had decided to sell off majority stakes in each of nine regional cable networks, and Klesch contacted Liberty Media Chairman John Malone about working together to acquire six of them in a move that would have created one of Europe’s largest cable operators. Klesch would negotiate the arrangement while Liberty would underwrite the acquisitions.
Under the original deal, Klesch and Liberty would acquire 55 percent of the networks with an option for an additional 20 percent, but Liberty said it learned later that under German law, it would need to acquire slightly more than 75 percent to give it the control it wanted.
Klesch said Liberty then began negotiating directly with Deutsche Telekom behind his back, trying to push him out of the deal.
In June 2001, Liberty said Klesch abandoned the negotiations, and Liberty announced it would acquire 100 percent of the cable networks for $4.8 billion, while Klesch would have an option to buy a 25 percent stake.
The deal collapsed under the antitrust concerns of German regulators.
