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JORDAN v. DUFF AND PHELPS, INC. Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: A closely held corporation failed to disclose pending merger negotiations to an employee-shareholder who resigned and was contractually obligated to sell his stock back at book value. The court held the company may have had a fiduciary duty to disclose this material information under Rule 10b-5.
Legal Significance: Establishes that a closely held corporation’s fiduciary duty to a shareholder under Rule 10b-5 may require disclosing material merger negotiations before repurchasing stock from a resigning at-will employee, treating the resignation as an investment decision.
JORDAN v. DUFF AND PHELPS, INC. Law School Study Guide
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Case Facts & Court Holding
Key Facts & Case Background
Plaintiff James Jordan was an employee-shareholder at Duff and Phelps, Inc., a closely held financial consulting firm. Jordan was an employee-at-will. A stock purchase agreement required that upon termination of his employment for any reason, he must sell his shares back to the corporation at their prior year-end book value. For personal reasons, Jordan resigned in November 1983, with his departure effective December 31, 1983. At the time of his resignation, Duff & Phelps management, who knew of his decision, did not disclose that the company was engaged in serious merger negotiations with Security Pacific. A prior round of talks had failed, but the board had recently authorized a renewed effort to sell the company. Jordan tendered his shares on December 30, 1983, for their book value of approximately $23,000. In January 1984, Duff & Phelps publicly announced a merger that would have valued Jordan’s shares at over $450,000. Jordan filed suit, alleging that the company’s failure to disclose the merger negotiations constituted securities fraud in violation of SEC Rule 10b-5.
Court Holding & Legal Precedent
Issue: Does a closely held corporation have a fiduciary duty under SEC Rule 10b-5 to disclose material, nonpublic information about pending merger negotiations to a resigning employee-shareholder before repurchasing his stock pursuant to a shareholder agreement?
Yes. The court reversed the summary judgment for the defendant. A closely Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum
IRAC Legal Analysis
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Legal Issue
Does a closely held corporation have a fiduciary duty under SEC Rule 10b-5 to disclose material, nonpublic information about pending merger negotiations to a resigning employee-shareholder before repurchasing his stock pursuant to a shareholder agreement?
Conclusion
This case establishes that in a close corporation, the fiduciary duty to Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut a
Legal Rule
A closely held corporation has a fiduciary duty to disclose all material Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proide
Legal Analysis
The Seventh Circuit distinguished this case from its recent holding in *Flamm Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proiden
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