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05/11/88 James Buhle, Indiv. and On v. Chicago Board Options

May 11, 1988

JAMES BUHLE, INDI

v.

AND ON BEHALF OF THOSE SIMILARLY SITUATED, PLAINTIFF-APPELLANT,

v.

CHICAGO BOARD OPTIONS EXCHANGE, INC., DEFENDANT-APPELLEE.

-- A. P. ARCIERO, LTD., PLAINTIFF-APPELLANT

v.

CHICAGO BOARD OPTIONS EXCHANGE, INC., DEFENDANT-APPELLEE



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, THIRD DIVISION

523 N.E.2d 1276, 170 Ill. App. 3d 65, 120 Ill. Dec. 365 1988.IL.728

Appeal from the Circuit Court of Cook County; the Hon. Roger J. Kiley, Jr., Judge, presiding.

APPELLATE Judges:

JUSTICE FREEMAN delivered the opinion of the court. WHITE, P.J., and RIZZI, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE FREEMAN

Plaintiff, James Buhle *fn1 and A. P. Arciero, Ltd., appeal the trial court's granting of the motion of defendant, Chicago Board Options Exchange, Inc. (Exchange), to dismiss their amended complaints in two consolidated cases. The trial court dismissed the amended complaints for failure to state a cause of action.

On appeal plaintiffs contend that the amended complaints sufficiently allege that defendant owed a fiduciary duty to plaintiffs, that defendant breached the fiduciary duty, and also that defendant breached its contractual duty to plaintiffs.

For the reasons stated below, we affirm the judgment of the circuit court.

Plaintiffs' amended complaints are identical except for the named plaintiff in each. The amended complaints seek recovery under the theories of unjust enrichment (count I), breach of fiduciary duty (count II), and breach of contract (count III). The trial court granted

Specifically, the amended complaints allege the following. The Exchange is a national securities exchange, the members of which trade options on common stock and other securities. Plaintiffs are former members of the Exchange who sold their memberships through the secretary of the Exchange. Plaintiffs' actions allege that the Exchange wrongfully invested proceeds from the sales of their memberships and wrongfully retained all profits made as a result of the investment.

The Exchange operates a facility in Chicago for the trading on an exchange of "put" and "call" options on various publicly held stocks and certain stock indices. The trading of "put" and "call" options and stock indices on the Exchange is conducted by members of the Exchange. The constitution and rules of the Exchange set forth terms relating to the approval of persons for membership, conduct of members, fees and dues of members, and the sale and transfer of membership interests. The constitution and rules of the Exchange provide that an owner of a membership interest may sell his interest by submitting, pursuant to Exchange Rule 3.14, a written offer of sale to the Exchange. A binding sale occurs when a bid, filed in accord with Exchange Rule 3.13, is matched with the offer. The purchaser of a membership interest must be approved by the Exchange.

Exchange Rule 3.15 provides that upon the sale of a membership interest, the Exchange shall "hold" the proceeds of the sale for a period of 20 days from the date of posting the "Notice of Effectiveness" regarding the sale, during which period claims against the proceeds may be made by Exchange members. Thereafter, as soon as practicable following the 20-day period, the proceeds of the sale are to be applied and paid for the purposes and in the order of priority set forth in Rule 3.15. After amounts owed to the Exchange, the clearing corporation, and other members are paid out, "[the] surplus, if any," is paid to the selling member.

Plaintiffs' amended complaints allege that the Exchange "retained all amounts earned or received from the investment of the proceeds of the sale of membership interests during the

"Upon any sale of a membership . . ., the Secretary shall hold the proceeds of the sale for a period of 20 days . . ., during which period claims against the proceeds may be filed by members for payment in accordance with this Rule. . . .

(f) The surplus . . . of the transfer of membership, after provision for the above payments . . . [for claims], shall be paid to the member whose membership is transferred . . .." (Emphasis added by plaintiffs.)

Plaintiffs contend that the allegations of count II of their amended complaints, which incorporate the above-quoted language, sufficiently plead the creation of an express trust and hence the existence of a fiduciary relationship.

Plaintiffs cite Sears v. First Federal Savings & Loan Association (1971), 1 Ill. App. 3d 621, 275 N.E.2d 300, which defines an express trust as "'. . . one which is created in express terms in the deed, writing or will, or which arises from the direct and positive action of the parties evidenced by a written instrument . . ..'" (Sears, 1 Ill. App. 3d at 626-27, quoting 35 Ill. L. & Prac. Trusts ยง 4, at 176 (1958).) Plaintiffs contend that Exchange Rule 3.15 is ...


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