CME Group, Inc. v. Chicago Bd. Options Exch., Inc., C.A. No. 2369-VCN (June 25, 2009)(Noble, V.C.)

In a case addressing the class counsel’s exclusions of potential settlement class members on various grounds from participating in the benefits conferred under the settlement, the Court overturned several of the class counsel’s decisions regarding these exclusions. The Court had recently approved a proposed stipulation of settlement in this class action lawsuit and had appointed class counsel to supervise and administer the claims process. In carrying out this task, class counsel excluded a variety of potential class members because of their failure to strictly comply with the settlement’s conditions for eligibility. The Court grouped the objectors to the class counsel’s exclusions into three distinct groups: 1) objectors who, for various reasons, submitted untimely settlement claim forms; 2) objectors who failed to transfer their CME shares in book entry to Computershare during the requisite time period; and 3) those who did not “beneficially own” the requisite three parts needed to qualify as a Class A Settlement Member.

To be eligible to participate in the benefits conferred by the settlement, a settlement class member must have submitted a claim form by October 14, 2008. Class counsel excluded certain settlement class members from participating in the settlement based upon their failure to submit this form in a timely manner. In overturning the class counsel’s exclusion of these late filers, the Court held that it did not matter whether the appropriate legal standard was “excusable neglect” or the more stringent “substantial compliance” because under either standard, equitable principles demanded that the filing deadline be waived for the objectors in this group. The settlement also required all class members to transfer to Computershare to be held a sufficient number of CME Group shares to qualify as a Class A Settlement Member for a specified time period. Mr. Nicholas Rapanos argued that he was unaware of the requirement because he never received the necessary information in the mail, while the Ira S. Nathan Revocable Trust argued it had inadvertently transferred its shares out of Computershare a few hours prior to the conclusion of the required time frame. The Court found the balance of the equities tipped in both of their favors and allowed them to become settlement class members.

Finally, the settlement required all class members to “beneficially own” three parts: a B-1 membership, an ERP and 10,000 shares of CME Group common stock. The Court upheld the class counsel’s exclusions of Kottke Associates, WH Trading, Geneva Trading USA, and DRW Securities but overturned hose relating to Barbara Whitlow and the Kolton Family Limited Partnership. In upholding the exclusion of Kottke Associates and WH Trading, the Court held that having one of the three parts assigned to you does not amount to “beneficial ownership.” Similarly, “beneficial ownership” could not be achieved through a wholly owned subsidiary or other affiliate, thereby validating the exclusions of Geneva Trading USA and DRW Securities. Conversely, the Court found that the Kolton Family Limited Partnership qualified as a “beneficially owner” of the three parts even though two of the three parts were owned individually by the partnership’s general partner. Because the family-owned partnership served purposes parallel to those of the trusts expressly allowed to participate in the settlement, a balance of the equities demanded the partnerships inclusion in the settlement. The Court also found Barbara Whitlow to qualify as a true “beneficial owner” of the three parts, having inherited them from her late husband on September 6, 2008.

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