Nature of the Case
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Facts
P started work at D in May 1977. In 1981 D offered P the opportunity to buy some stock. By November 1983 P had purchased 188 of the 20,100 shares outstanding. P was working on purchasing 62 more shares. Forty people other than P held stock in Duff & Phelps. P purchased at 'book value,' and D required P to sign a 'Stock Restriction and Purchase Agreement' (the Agreement). P was required on termination for any reason, including resignation, discharge, death, disability or retirement to sell to D all his stock at adjusted book value. During 1983 D adopted a resolution -- of which P did not learn until 1984 -- allowing employees fired by the firm to keep their stock for five years. Between May and August 1983 D negotiated a merger valued at $50 million, but an official at Security Pacific vetoed the deal on August 11, 1983. P had family problems and needed to work in another city. Underwood offered P a job at $110k per year vs. the $67k D paid him. On November 16, 1983, P told D that he was going to resign and accept employment with Underwood. P was allowed to work the rest of the year in order to receive book value on his stock. P delivered his certificate on December 30 and D mailed him a check for $23,225 and surrendered as worthless the right to buy the remaining 62 shares. P was startled by the announcement on January 10, 1984, of a merger between D and a subsidiary of Security Pacific. D would be valued at $50 million. If P had been an employee on January 10 and paid for the other 62 shares, and the merger had closed that day, he would have received $452,000 in cash and the opportunity to obtain as much as $194,000 more in 'earn out.' P refused to cash the check and demanded his stock back. P sued asking for damages measured by the value his stock would have had under the terms of the acquisition. The transaction was never approved by the Federal Reserve and D asked the court to dismiss P’s suit, and P moved to ask for rescission instead of damages. Management then decided to acquire D. The employees at the time, together with Carol Franchik, received cash, notes, and beneficial interests in the Trust. P asserts that the package was worth almost $2000 per share, or $497,000 if he had held 250 shares in December 1985. D moved for summary judgment. The judge concluded that D did not violate any duty to disclose because P sold the stock on December 31st and the agreement in principle was not approved until January 6th. The court then held that D was not entitled to rescission because he was not employed by D, and the Agreement ties ownership to employment. P appealed.
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