This action was brought in the aftermath of the October 19, 1987 "Black Monday" stock market upheaval a day in which the stock and other equity markets across the United States experienced gross declines without comparison since the stock market crash of 1929. The Dow Jones Industrial Average fell by 508 points a decline of 22.6 percent from the close of trading on Friday, October 16, to the close of trading on Monday, October 19, 1987. The index for Standard & Poors 500 dropped 57.68 points, or 20.74 percent of its value. The volume of trading on all exchanges soared.
This suit was based specifically on the events which occurred on the floor of the Chicago Board Options Exchange ("CBOE") on October 20, 1987, the day after the vast declines had taken place in the equity markets. The prices for these options on October 19 & 20, 1987, were unusually high at times and unstable throughout the day, at least in part, because of the declines and instability in the equity markets.
The first complaint in this case was filed in March 1988. Two other complaints were filed in the next three months. The plaintiffs' principal theory of liability was premised upon the defendants' failure to disclose certain risks. Defendants included CBOE, the Options Clearing Corporation ("OCC"), and a number of market makers. In June 1988, the first complaint was consolidated with the two other similar complaints. The remainder of 1988 was devoted to sorting out the various claims, including the filing of a consolidated complaint, followed by the first motion to certify the class, class discovery, and the first motions to dismiss. The case accelerated when the second consolidated complaint was filed in March 1989. The balance of 1989 was devoted to class discovery, briefing on certification of the class and the several motions to dismiss, and frequent hearings before the court to clarify the substance and parameters of the claims. The defendants filed surreply memoranda opposing class certification and supporting the motions to dismiss. CBOE also sought a hearing to present testimony on the issue of class certification.
In January 1990, we granted the class certification motion. The class was defined as:
All persons, other than market makers, who purchased OEX or OEZ series [Standards & Poors 100] index options through market orders during a rotation on October 20, 1987, at the Chicago Board Options Exchange, and who [allegedly] suffered damages from such purchases because of paying excessive prices for those options as a result of defendants' alleged misconduct.
Class Certification Order, entered January 30, 1990. On October 24, 1990, we granted in part and denied in part the defendants' motions to dismiss, dismissing the defendant market makers from the case. Most of 1991 was devoted to discovery. Defendants CBOE's and OCC's motion for summary judgment was filed in early 1992, and expert discovery continued for several months. On December 3, 1992, we granted in part and denied in part the defendants' motion for summary judgment. The defendants' motion for summary judgment was granted with respect to the Securities Act of 1933 § 12(2) claim and denied with respect to the Securities and Exchange Act of 1934 § 10b (and Rule 10b-5) claim generally. Partial summary judgment was also granted on one issue under 10b-5 the risk from the way the rotations were conducted. Preparation for trial continued. On December 22, 1992, the case was resolved by settlement, in the amount of $10,000,000.00.
