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Jordan v. Duff and Phelps, Inc.

United States Court of Appeals for the Seventh Circuit
815 F.2d 429 (7th Cir. 1987)



Jordan (plaintiff) was an employee of Duff and Phelps, Inc. (Duff) (defendant) and bought 188 shares in Duff. He signed a purchase agreement that provided that when he stopped working for Duff for whatever reason, he was required to sell his stock back to Duff at the book value of the stock at the end of the year preceding the employment termination. In 1983, Duff was engaged in merger negotiations and had a deal in place with Security Pacific Corp. (SPC) that valued Duff at $50 million, but the deal fell apart for the time being. In November 1983, Jordan was seeking to move out of town for family reasons, and accepted a job in another city. Jordan told Hansen, the Duff chairman of the board, that he was going to resign and Hansen did not mention anything about the merger or the valuation of Duff. Jordan stayed at Duff for the rest of 1983 in order to get the December 31, 1983 book value for his stock. He sold back the stock for a total price of $23,225. Before Jordan cashed the check from the sale, he heard a January 10, 1984 announcement that Duff had merged with SPC and that the merger valued Duff at $50 million. If Jordan had waited to resign and sell his stock until after the merger, he would have received over $450,000. Jordan refused to cash the check for $23,225 and demanded that Duff return his stock. Duff refused and Jordan filed suit in March 1984. Eventually, the Duff merger with SPC failed to be completed and Jordan amended his complaint seeking rescission rather than damages. Duff ended up selling the firm to a trust in a leveraged buyout for $40 million toward the end of 1985. The trial court granted summary judgment to Duff. Jordan appealed.

Rule of Law


Holding and Reasoning (Easterbrook, J.)

Dissent (Posner, J.)

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