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Jordan v. Duff & Phelps, Inc. - 815 F.2d 429 (7th Cir. 1987)


Close corporations buying their own stock, like knowledgeable insiders of closely held firms buying from outsiders, have a fiduciary duty to disclose material facts.


Plaintiff employee, James S. Jordan, purchased 188 shares of stock from defendant employer, Duff and Phelps, Inc., and later resigned. Jordan delivered his certificates on December 30, 1983, and Duff and Phelps mailed him a check for the book value of the stock. Before Jordan cashed the check, he became aware of a merger between Duff and phelps and a subsidiary that was to take place on January 10, 1984. Had Jordan quickly paid for the other 62 shares he was making payments on, he would have received $452,000 in cash. When Duff and Phelps refused to return Jordan's stock, Jordan filed suit seeking damages measured by the value his stock would have had under the terms of the acquisition. The district court granted summary judgment in favor of Duff and Phelps, holding that the agreement approved on January 6, 1984, was the first thing that needed to be disclosed and that because Jordan had sold his stock no later than December 31, 1983, Duff and Phelps did not violate any duty to disclose. Plaintiff Jordan appealed.


Did the district court err in granting summary judgment in favour of Duff and Phelps?




The Court reversed the dismissal of plaintiff employee's complaint and remanded for further proceedings, holding that the timing of the sale of the stock, the materiality of the information the employers withheld, and the expectations and intent of the parties were all factual issues to be decided by the jury. Hence, the grant of summary judgment was an error.

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