Thousands of longtime members of Chicago’s futures exchanges are a major step closer to winning substantial damages against CME Group in a lawsuit filed seven years ago.
A Cook County Circuit Court judge on Dec. 3 certified the class of plaintiffs, allowing them to go forward with the litigation on behalf of thousands of traders, many of whom are now retired and have seen the value of their memberships plummet since the parents of the Chicago Board of Trade and Chicago Mercantile Exchange combined and went public.
The plaintiffs allege CME violated members’ rights when it moved its primary electronic trading platform to west suburban Aurora from Chicago in 2012. One of those member benefits was reduced trading fees, but the Aurora system resulted in often leveling the fees between members and nonmembers, and in some cases charging lower fees to nonmembers, according to the lawsuit.
CME efforts to dismiss the suit have been unsuccessful, and now it has lost its bid to stave off class certification. Much of the legal discovery has taken place in the meantime, bringing resolution of this long-standing dispute finally into view.
The company continues to take a hard line nonetheless. “This case is without merit and CME Group will continue to defend itself vigorously against these claims,” a spokeswoman said in an email.
At the heart of the dispute is what these longtime traders believe was a fundamental betrayal after they cleared the way for the exchanges, originally member-owned, to go public and combine. In many other similar instances—think the New York Stock Exchange or Nymex—the exchanges bought out the memberships when they migrated from member-owned platforms to publicly traded companies. CME kept the memberships intact and promised that members would continue to benefit, attorneys for the plaintiffs say.
The result was the opposite. A membership worth well over $1 million in 2007 when CME acquired CBOT now is worth a few hundred thousand dollars, according to attorney Steve Morrissey, partner at Susman Godfrey, who’s representing the plaintiffs. Meanwhile, CME shares have substantially increased.
With thousands of members affected, the damages could run well into the hundreds of millions or more if a jury concludes the decline in membership value is due to what plaintiffs say was a violation of CME’s deal with them.
CME’s annual net income from 2018 to 2020 averaged $2.1 billion, to put the consequences of such large potential damages in context.
Many of the plaintiffs are former traders from the days of open outcry, when Chicago’s raucous commodities pits were routinely featured in documentaries about the city and its unique features. They’re now in their 60s or 70s in many cases, and considered the memberships retirement nest eggs and assets to be passed onto their heirs.
While the class certification is a critical step—and often in other class-action suits, such a ruling prompts settlement discussions—there’s no sign of that happening anytime soon. There’s more discovery to be done even though a fair amount has taken place.
Determining damages, if CME is found responsible, is complicated. The judge in the case, Celia Gamrath, has made clear that different types of memberships (old Board of Trade ones vs. Merc ones, for example) would be entitled to different treatment if CME is found liable.
But, she wrote in the Dec. 3 order: “This court finds that a class action is the most efficient means of resolving this controversy. Although there are different rights and privileges associated with different divisions and B series shares, the creation of nine subclasses to address these variations renders this case manageable and appropriate as a class action.”
The case also will be transferred to a different division within the Cook County system and a different judge, now that it’s heading toward a potential trial. That judge will have to rule on a future motion for summary judgment before then.
A trial wouldn’t be likely until 2023 at the earliest.
For CME, though, the choice eventually may well be whether to take its chances on a Cook County jury given all the time that’s elapsed and the losses in value the aging members have experienced.