Crucial Step toward Demutualization: CBOT Wins Sum

Judge McGann found special significance in the facts that no plaintiffs’ trading rights will be affected by the allocation of shares in the CBOT plan and that the associate members will actually increase their voting strength.

One question at issue was whether the full members owed a fiduciary duty to the associate members. Judge McGann found, as a matter of law, that they do not and that accordingly the members are entitled to vote their own self-interest. “The plaintiffs have cited no case nor can the court find one that invalidates any otherwise legitimate corporate action merely because it benefits a majority of shareholders at the supposed expense of minority shareholders.”

Another question was whether a majority or dominant shareholder or clique had usurped the corporate decision-making process. In this case, that question arose because plaintiffs alleged excessive full-member control of the allocation committee (also known as the Thompson committee because it was chaired by former Illinois Governor James Thompson).

Mr. Thompson had made an observation during his deposition, according to the plaintiffs, that proved that the committee was prejudiced against the interests of the associate members. But the court considered this comment, in context, innocuous.

“The Thompson committee was not controlled or directed by any member,” the court found. “Now, there is some comment about testimony from former Governor Thompson where he indicated that he had no duty specifically to the minority shareholders. However, a complete reading of the transcript of his deposition indicates that he perceived his duty as a duty directed toward all members of the exchange and that it was inappropriate for him to single out the interest of any single membership classification.”

“I think this decision was a straightforward application of Delaware law,” said Ms. Welch.