The opinion of the court was delivered by: HUYETT
Plaintiff, Stanley Bright, III, by complaint filed February 22, 1971, commenced this action against the Philadelphia-Baltimore-Washington Stock Exchange ("PBW"), and the individual members of its Board of Governors ("Board"). Plaintiff claims that defendants violated a duty created by the Securities Exchange Act of 1934, as amended ("Act"), 15 U.S.C. § 78a et seq., by their failure to comply with the provisions of the PBW constitution.
Plaintiff averred that defendants violated the provisions of the PBW constitution by indicating on ballots prepared for the PBW annual election that nine, rather than ten, vacancies of members of the Board were to be filed at the election. The ballot contained the names of ten persons, including plaintiff, nominated for the office of member of the Board. Plaintiff sought a Temporary Restraining Order enjoining the annual election of PBW scheduled for March 1, 1971. A hearing was held in open court on February 23, 1971, and the request for a Temporary Restraining Order was denied.
The annual election of PBW was held on March 1, 1971. Plaintiff received less votes than any other nominee and was not certified as an elected member of the Board.
Plaintiff then on March 15, 1971 filed an amended complaint requesting a declaratory judgment providing that:
1. Ten, rather than nine, persons were elected as members of the Board of PBW at the annual election of March 1, 1971; and
2. Plaintiff was elected to the Board at the annual election of March 1, 1971 for a three-year term.
Alternatively, plaintiff requests a declaratory judgment to invalidate the annual election, to supervise the printing and distribution of proper ballots and to conduct a proper election, and that the Court retain jurisdiction and grant plaintiff such further relief as may be appropriate. Plaintiff also seeks an award of costs and reasonable attorney's fee.
The parties have agreed that all relevant testimony was produced at the February 23, 1971 hearing. Considering the evidence presented at the hearing, the pleadings, and affidavits, we make the following findings of fact.
1. Plaintiff, Stanley Bright, III, is a member of PBW who sought election to its Board.
2. Defendant, PBW, is an association registered as a national securities exchange under Section 6 of the Act, 15 U.S.C. § 78f.
4. The constitution of PBW provides for the composition of the Board in Article II, Section 1, as follows:
"The government of the Exchange shall be vested in a Board of Governors consisting of the Chairman of the Board of Governors, the Vice-Chairman of the Board of Governors, the President of the Exchange, twenty-four others elected to the office of Governor and the immediate past Chairman of the Board of Governors who upon the expiration of the term to which he was elected, shall be an ex officio member of the Board of Governors for a term of one year * * *."
5. Article II, Section 2, of the constitution provides that the Chairman and Vice-Chairman of the Board each shall be elected by the membership of PBW annually to hold office for a term of one year, or until his successor is elected and qualified. Under Article V, Section 3, if a vacancy occurs in the office of Vice-Chairman, the Board shall elect a successor to serve until the next annual election.
6. Article II, Section 3, of the constitution provides that the twenty-four "others" elected to the Board shall be divided into three classes of eight each.
"* * * One class shall be elected by the membership of the Exchange each year to serve for three years or until their successors are elected and qualify."
7. Under Article III, Section 14, of the constitution, vacancies in the Board are to be filled by the Board by election, the person so elected to serve until the next annual election of PBW.
8. Article X, Section 1, of the constitution provides for the annual election of governors as follows:
"The annual election of the Exchange shall be held on the first Monday in March in each year. At such annual election there shall be elected, by ballot, a Chairman of the Board of Governors and a Vice-Chairman of the Board of Governors for a term of one year each, eight Governors for the term of three years, and also Governors to fill any vacancies in the Board of Governors which may have occurred during the preceding year. In any election of Governors, due regard shall be given to the provisions of Article II, Section 1 of the Constitution of the Exchange with respect to the composition of the Board of Governors of the Exchange.
"The term of office of persons so elected shall commence at 3:45 P.M. on the Third Wednesday of March after the date of their election."
9. Article X, Sections 3 and 4, provides for a nominating committee, appointed by the Chairman of the Board with the approval of the Board, which shall receive nominations for positions on the Board to be filled at the next annual election of the Exchange and which shall report to the Secretary of PBW, in writing by the first Monday of February, its nominees for such positions.
10. Under Article X, Section 5, of the constitution, independent nominations for membership on the Board may be made by written petition, signed by not less than ten members of PBW.
11. Article XII, Section 1, of the constitution provides for appeals to the Board from a decision of a standing committee by a member of PBW interested therein if he files a written notice of appeal with the Secretary of PBW within ten days after the decision has been rendered.
12. On March 7, 1970, George DeB. Bell, a governor of the class of 1972, was elected Vice-Chairman of the Board, and Allen Weintraub was elected governor by the Board to fill the vacancy created by the elevation of Bell.
13. It is undisputed that Weintraub was elected to serve only until the annual election held on March 1, 1971.
14. It is also undisputed that eight governors of the class of 1974 were to be elected on March 1, 1971.
16. Sometime shortly after January 1, 1971, Wetherill discussed with two or three other members of the Board what should be done concerning the selection of someone to fill the vacancy in the office of Vice-Chairman created by the resignation of Bell. Wetherill then approached S. Grey Dayton ...