Court Opinion

ID: 9475995
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:45:10.626565+00
Date Added: 2024-06-11T17:45:04.672548
License: Public Domain

POSNER, Circuit Judge,
dissenting.
A corporate employee at will quit, owning shares that he had agreed to sell back to the corporation at book value. The agreement was explicit that his status as a shareholder conferred no job rights on him. Nevertheless the court holds that the corporation had, as a matter of law, a duty, enforceable by proceedings under Rule 10b-5 of the Securities Exchange Act, to volunteer to the employee information about the corporation’s prospects that might have led him to change his mind about quitting, although as an employee at will he had no right to change his mind. I disagree with this holding. The terms of the stockholder agreement show that there was no duty of disclosure, and since there was no duty there was no violation of Rule 10b-5.
The plaintiff, a young man named Jordan, had gone to work for Duff and Phelps as a financial analyst. He had no employment contract; he was an employee at will. See, e.g., Long v. Arthur Rubloff & Co., 27 Ill.App.3d 1013, 1023, 327 N.E.2d 346, 353 (1975). As a junior executive he was permitted to buy modest quantities of stock in the company, which was (and is) closely held. He agreed that if he left the company, whether voluntarily or involuntarily, he would sell back his stock at its book value on the December 31 preceding or coinciding with the end of his employment.
After working for Duff and Phelps for six and a half years Jordan had accumulated about one percent of the company’s stock. His stock had a book value on December 31, 1983, of $23,000 (I round all dollar figures to the nearest $1,000). Earlier in 1983 Jordan had decided to leave Chicago because his mother, who also lived in Chicago, didn’t get along with his wife. After Duff and Phelps declined to move him to its only other office (Cleveland), he began to explore the possibility of leaving the firm. On November 11, 1983, he accepted a job in Houston, Texas, at a substantially higher salary than his salary at Duff and Phelps ($110,000 versus $67,000). On November 14 he told Hansen, the chief executive officer of Duff and Phelps, that he was quitting, and on November 16 handed him a letter of resignation. At Jordan’s request, Hansen agreed that the resignation would not take effect till the end of the year, so that Jordan would get a higher price for his stock. Both men believed that the book value of the stock would be higher on December 31, 1983, than it had been on December 31, 1982, the relevant date if Jordan’s resignation took effect before the end of the year.
Hansen did not reveal to Jordan that in the summer he and Jeffries (the other principal officer of Duff and Phelps) had negotiated with some executives at Security Pacific Corporation to sell Duff and Phelps to Security Pacific for $50 million; that had the deal gone through Jordan’s stock would have been worth $640,000 rather than $23,-000; that the deal had been nixed in August by higher levels of Security Pacific’s management; but that the episode had so encouraged Hansen that at a meeting of the board of directors of Duff and Phelps on November 14 (just before Jordan came to him with the news that he was leaving) he had sought and obtained authority to make active efforts to sell the company.
Negotiations between Duff and Phelps and Security Pacific resumed in December. On December 30, Jordan, who knew nothing of the negotiations, delivered his shares to Duff and Phelps, as his agreement with the company required him to do. The resumed negotiations were successful, and resulted in an announcement in January (1984) that Security Pacific would buy Duff and Phelps for $50 million, contingent on regulatory approval. Shortly afterward Duff and Phelps sent Jordan a check for $23,000 in payment for his stock. Rather than cash the check Jordan brought this suit, seeking damages equal to the value of his stock if he hadn’t quit Duff and Phelps and if the deal with Security Pacific went through. It didn’t go through. It col*445lapsed the following January when the Federal Reserve Board refused to approve it except on conditions that Security Pacific found too onerous. Jordan amended his complaint, dropping the claim for damages and asking instead for rescission of the sale of his stock to Duff and Phelps. Almost a year later, Duff and Phelps reorganized, and its shareholders exchanged their stock for a combination of cash, notes, and pension rights that Jordan believes to be worth about $40 million.
Rule 10b-5 forbids “fraud or deceit” in the sale or purchase of corporate securities. Jordan does not argue that Duff and Phelps made any misleading statements. He makes nothing of the fact that when he told Hansen he was quitting, Hansen said that the firm had a good potential for growth and that Jordan’s shares would rise in value if he stayed. The target of the complaint is not misrepresentation or even misleading half-truths; it is Hansen’s omission to tell Jordan that he should think twice about quitting since the company might soon be sold at a price that would increase the value of Jordan’s stock almost 30-fold. The statement that Hansen failed to make may have been material, since it might have caused Jordan to change his mind about resigning. I say “may have been material” rather than “was material” because Hansen need not have allowed Jordan to change his mind about resigning. But I shall pass this point and assume materiality, in order to reach the more fundamental question, which is duty. “[0]ne who fails to disclose material information prior to the consummation of a transaction commits fraud only when he is under a duty to do so.” Chiarella v. United States, 445 U.S. 222, 228, 100 S.Ct. 1108, 1114, 63 L.Ed.2d 348 (1980).
We should ask why liability for failing to disclose, as distinct from liability for outright misrepresentation, depends on proof of duty. The reason is that information is a valuable commodity, and its production is discouraged if the producer must share it with the whole world. Hence an inventor is not required to blurt out his secrets, and a skilled investor is not required to disclose the results of his research and insights before he is able to profit from them. See Kronman, Mistake, Disclosure, Information, and the Law of Contracts, 7 J. Legal Stud. 1 (1978). But one who makes a contract, express or implied, to disclose information to another acts wrongfully if he then withholds the information. The question is whether Duff and Phelps made an undertaking, and therefore assumed a duty, to disclose to any stockholding employee who announced his resignation information regarding the prospects for a profitable sale of the company.
My brethren find such a duty implicit in the fiduciary relationship between a closely held corporation and its shareholders. By this approach, what should be the beginning of analysis becomes its end. A publicly held corporation is a fiduciary of its shareholders, too; yet if Duff and Phelps had been publicly held it would have had no duty to tell Jordan about the company’s prospects of being sold. This is the “price and structure” rule, which this circuit adopted in Flamm v. Eberstadt, 814 F.2d 1169 (7th Cir.1987) — rightly so, in my opinion. Thus the mere existence of a fiduciary relationship between a corporation and its shareholders does not require disclosure of material information to the shareholders. A further inquiry is necessary, and here must focus on the particulars of Jordan’s relationship with Duff and Phelps.
The cases do not establish an automatic duty to disclose, even on the part of closely held corporations, though they are not sheltered by the “price and structure” rule. Kohler v. Kohler Co., 319 F.2d 634, 638 (7th Cir.1963), says that the duty “must be fashioned case by case as particular facts dictate.” The court found no duty in that case. Michaels v. Michaels, 767 F.2d 1185, 1192-93, 1197-98 (7th Cir.1985), did find a duty, and it is the case most like the present one factually, because it involved a shareholder who, like Jordan, was also an employee. But his status as a shareholder, unlike Jordan’s, was not contingent on his remaining an employee. The contingent nature of Jordan’s status as a shareholder has a twofold significance. First, it raises *446a question about the applicability of the majority’s rule requiring disclosure “in the course of negotiating to purchase stock.” One may doubt whether there was any real negotiation in this case, for once Jordan resigned he was contractually obligated to sell back his stock at a predetermined price. Second, and more important, the contingent nature of Jordan’s status as a shareholder negates the existence of a right to be informed and hence a duty to disclose. This point is central to my dissent and has now to be explained.
Jordan’s deal with Duff and Phelps required him to surrender his stock at book value if he left the company. It didn’t matter whether he quit or was fired, retired or died; the agreement is explicit on these matters. My brethren hypothesize “implicit parts of the relations between Duff & Phelps and its employees.” But those relations are totally defined by (1) the absence of an employment contract, which made Jordan an employee at will; (2) the shareholder agreement, which has no “implicit parts” that bear on Duff and Phelps’ duty to Jordan, and explicitly ties his rights as a shareholder to his status as an employee at will; (3) a provision in the stock purchase agreement between Jordan and Duff and Phelps (signed at the same time as the shareholder agreement) that “nothing herein contained shall confer on the Employee any right to be continued in the employment of the Corporation.” There is no occasion to speculate about “the implicit understanding” between Jordan and Duff and Phelps. The parties left nothing to the judicial imagination. The effect of the shareholder and stock purchase agreements (which for simplicity I shall treat as a single “stockholder agreement”), against a background of employment at will, was to strip Jordan of any contractual protection against what happened to him, and indeed against worse that might have happened to him. Duff and Phelps points out that it would not have had to let Jordan withdraw his resignation had he gotten wind of the negotiations with Security Pacific and wanted to withdraw it. On November 14 Hansen could have said to Jordan, “I accept your resignation effective today; we hope to sell Duff and Phelps for $50 million but have no desire to see you participate in the resulting bonanza. You will receive the paltry book value of your shares as of December 31, 1982.” The “nothing herein contained” provision in the stockholder agreement shows that this tactic is permitted. Equally, on November 14, at the board meeting before Hansen knew that Jordan wanted to quit, the board could have decided to fire Jordan in order to increase the value of the deal with Security Pacific to the remaining shareholders.
These possibilities eliminate any inference that the stockholder agreement obligated Duff and Phelps to inform Jordan about the company’s prospects. Under the agreement, if Duff and Phelps didn’t want to give him the benefit of the information all it had to do to escape any possible liability was to give him the information and then fire him. This case is just like Villada v. Merrill Lynch, Pierce, Fenner & Smith Inc., 460 F.Supp. 1149 (S.D.N.Y. 1978), and the court’s words are strikingly apropos:
It seems to us an extraordinary proposition that a defendant can be charged with fraud by its mere neglect to tell a plaintiff facts which might have enabled the plaintiff to persuade defendant to refrain from taking certain action con-cededly within its own absolute discretion. Such a contention seems particularly absurd on the facts before us. Let us suppose that Merrill Lynch, having failed to dissuade plaintiff from deserting it for Bache, had told him “Well, you’ll be sorry because we’re going public and the stock you hold will become much more valuable;” and the plaintiff had responded “O.K. in that case I’ll wait around until you go public and then desert you for Bache.” It seems to us that Merrill Lynch would have been well within its rights if it had — and probably would have — exercised its option forthwith and told plaintiff to find such solace as he could in whatever employee stock option plan Bache might offer him.
Id. at 1150 (emphasis in original).
My brethren correctly observe that, “Because the fiduciary duty is a standby or *447off-the-rack guess about what parties would agree to if they dickered about the subject explicitly, parties may contract with greater specificity for other arrangements.” But, they add, “we need not decide how far contracts can redefine obligations to disclose. Jordan was an employee at will; he signed no contract.” It is true that he signed no contract of employment, but he signed a stockholder agreement that defined his rights as a shareholder “with greater specificity.” The agreement entitled Duff and Phelps to terminate Jordan as shareholder, subject only to a duty to buy back his shares at book value. The arrangement that resulted (call it “shareholder at will”) is incompatible with an inference that Duff and Phelps undertook to keep him abreast of developments affecting the value of the firm.
The majority states that “the absence of explicit clauses counsels caution in creating implicit exceptions to the general fiduciary duty.” A similar caution was not evident when this circuit in Flamrn adopted the “price and structure” rule. That rule allows a publicly held corporation to withhold material information from its shareholders until a corporate transaction is firmed up. Its premise is that the shareholders are compensated for being kept in ignorance, by the prospect of greater gains than if the information were disclosed. Ignorance will cause some shareholders to sell their shares before the transaction takes place, and thus to be losers after the fact; but on average the winners will outnumber the losers; so the shareholders can be assumed to have consented in advance to surrender their right to be informed. The grounds for an inference that Jordan surrendered his right to be informed are stronger. His stockholder agreement, read in light of his status as an employee at will (a status the agreement emphatically declined to modify), waived either explicitly or by implication every pertinent right he might otherwise have had, except to the book value of his shares on the December 31 preceding or coinciding with the end of his employment. Since the company had a right to deprive him of any participation in the profits from a sale of the company, a duty to reveal to him information about the value of the company would have been empty. If Hansen had wanted Jordan to stay he would have told him about the rosy prospects for selling Duff and Phelps. Evidently Hansen didn’t care whether Jordan stayed or not, so he didn’t tell him. He could have fired him, or told him and then fired him— possibilities that make my brethren’s statement that Jordan “could have remained at Duff & Phelps” highly ambiguous.
Since receipt of the information would have conferred no right on Jordan to benefit from the information, how can the parties be thought to have intended Duff and Phelps to have an enforceable duty to disclose the information to him? There is no duty to give shareholders information that they have no right to benefit from. See Toledo Trust Co. v. Nye, 588 F.2d 202, 206-10 (6th Cir.1978); St. Louis Union Trust Co. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 562 F.2d 1040, 1048-54 (8th Cir.1977); Ryan v. J. Walter Thompson Co., 453 F.2d 444, 447 (2d Cir.1971) (per curiam); Blackett v. Clinton E. Frank, Inc., 379 F.Supp. 941, 947-48 (N.D. Ill.1974). By signing the stockholder agreement Jordan gave Duff and Phelps in effect an option (as in Nye) to buy back his stock at any time at a fixed price. The grant of the option denied Jordan the right to profit from any information that the company might have about its prospects but prefer not to give him. If Hansen had known of the rule of law that my brethren adopt today, he could have avoided liability simply by telling Jordan that, come what may, December 30 would be Jordan’s last day working for Duff and Phelps. Failure to disclose would be immaterial because Jordan could not act on the disclosure. Only because Hansen failed to make Jordan’s resignation effective immediately (a generous gesture, which we have given Hansen Cause to regret), as he could have done without violating any contractual obligation, is he held to have violated a duty of disclosure.
The case would be different if Jordan had had an employment contract or if he had had the right to retain his stock after *448ceasing to be an employee. Then a right to information about the prospects of the company would have been meaningful. Such a right is not meaningful when the employee has no right to act on it. That was Jordan’s position. The company could have told him everything yet still have prevented him from benefiting from the information, by firing him.
Was Jordan a fool to have become a shareholder of Duff and Phelps on such disadvantageous terms as I believe he agreed to? (If so, that might be a reason for doubting whether those were the real terms.) He was not. Few business executives in this country have contractual entitlements to earnings, bonuses, or even retention of their jobs. They would rather take their chances on their employer’s good will and interest in reputation, and on their own bargaining power and value to the firm, than pay for contract rights that are difficult and costly to enforce. See Miller v. International Harvester Co., 811 F.2d 1150, 1151 (7th Cir.1987); Tyson v. International Brotherhood of Teamsters, Local 710 Pension Fund, 811 F.2d 1145, 1147 (7th Cir.1987); Kumpf v. Steinhaus, 779 F.2d 1323, 1326 (7th Cir.1985); Epstein, In Defense of the Contract at Will, 51 U.Chi. L.Rev. 947 (1984). If Jordan had had greater rights as a shareholder he would have had a lower salary; when he went to work for a new employer in Houston and received no stock rights he got a higher salary.
I go further: Jordan was protected by Duff and Phelps’ own self-interest from being exploited. The principal asset of a service company such as Duff and Phelps is good will. It is a product largely of its employees’ efforts and skills. If Jordan were a particularly valuable employee, so that the firm would be worth less without him, Hansen, desiring as he did to sell the firm for the highest possible price, would have told him about the prospects for selling the company. If Jordan was not a particularly valuable employee — if his departure would not reduce the value of the firm — there was no reason why he should participate in the profits from the sale of the firm, unless perhaps he had once been a particularly valuable employee but had ceased to be so. That possibility might, but did not, lead him to negotiate for an employment contract, or for stock rights that would outlast his employment. By the type of agreement that he made with Duff and Phelps, Jordan gambled that he was and would continue to be such a good employee that he would be encouraged to stay long enough to profit from the firm’s growth. The relationship that the parties created aligned their respective self-interests better than the legal protections that the court devises today.
My brethren are well aware that Duff and Phelps faced market constraints against exploiting its employee shareholders, but seem to believe that this implies that the company also assumed contractual duties. Businessmen, however, are less enthusiastic about contractual duties than lawyers are, see Macauley, Non-Contractual Relations in Business: A Preliminary Study, 28 Am. Sociological Rev. 55, 64 (1963), so it is incorrect to infer from the existence of market constraints against exploitation that the parties also imposed a contractual duty against exploitation. Contractual obligation is a source of uncertainty and cost, and is therefore an expensive way of backstopping market forces. That is why employment at will is such a common form of employment relationship. It is strange to infer that firms invariably assume a legal obligation not to do what is not in their self-interest to do, and stranger to suppose — in the face of an explicit disclaimer — that by “allowing] employees to time their departures to obtain the maximum advantage from their stock,” Duff and Phelps obligated itself to allow them to do this.
Having earlier in its opinion tried to get mileage out of the fact that Jordan “signed no [employment] contract,” the majority later tries to get additional mileage from the observation that employment at will is a “contractual relation.” This is the kind of legal half-truth that should make us thankful that our opinions are not subject to Rule 10b-5. Employment at will is a voluntary relationship, and thus contractual in *449the sense in which the word contract is used in the expression “freedom of contract.” And the relationship can provide a framework for contracting: if Duff and Phelps had not paid Jordan his agreed-on wage after he had earned it, he could have sued the company for breach of contract. But the only element of employment at will that is relevant to this case is that employment at will is terminable at will, meaning that the employer can fire the employee without worrying about legal sanctions and likewise the employee can quit without worrying about them. Freedom of contract includes freedom not to contract.
The distinction between the underlying “at will” relationship and the separate contracts that may grow out of it is well stated in Nat Nal Service Stations, Inc. v. Wolf, 304 N.Y. 332, 336, 107 N.E.2d 473, 475 (1952):
The agreement alleged here was clearly one at will and for no definite or specific time____ It is clear from the complaint and affidavit that neither party obligated itself to do anything. Unless and until plaintiff had offered to place an order for gasoline and the defendants had accepted such offer and filled the order, only then did there come into existence a legal obligation, viz., the obligation of defendants to pay the agreed discount.
My brethren say that Coleman v. Graybar Electric Co., 195 F.2d 374 (5th Cir.1952), holds that employment at will is subject to an implied duty not to be opportunistic; actually Coleman rests on the distinction articulated in Wolf. “The appellant does not challenge, but concedes, the right of the defendant to discharge him at any time, but asserts that nevertheless should it do so without cause it was impliedly obligated to pay the plaintiff the commissions earned by him up until the time of discharge.” 195 F.2d at 376 (emphasis added). Coleman had a contractual right to be paid at the agreed-upon rate for work done. Jordan had no contractual right that he would have been deprived of by being fired. His only relevant contractual right was to sell back his shares at book value.
The majority’s view that “the silence of the parties” is an invitation to judges to “imply other terms — those we [judges] are confident the parties would have bargained for if they had signed a written agreement” is doubly gratuitous. The parties did not want their relationship dragged into court and there made over by judges. And the parties were not silent. The stockholder agreement provides that Jordan’s rights under it do not give him any employment tenure.
The inroads that the majority opinion makes on freedom of contract are not justified by its quotation from my academic writings concerning the purpose of contract law (which presupposes an agreement that the parties regard as legally enforceable) or by the possibility that corporations will exploit their junior executives, which may well be the least urgent problem facing our nation. The majority’s statement that “one term implied in every written contract and therefore, we suppose, every unwritten one, is that neither party will try to take opportunistic advantage of the other” confuses the underlying rationale of contract law with the actual requirements of that law, and is anyway irrelevant since the parties decided not to subject the relevant parts of their relationship to the law of contracts and not to give Jordan any contractual protections against being fired. There was no “implied pledge to avoid opportunistic conduct” any more than there were “implicit parts of the relations” giving rise to contractual obligations. (The plaintiff in Zick v. Verson Allsteel Press Co., 623 F.Supp. 927 (N.D.Ill.1985), was sanctioned under Fed.R.Civ.P. 11 for making such an argument!) “The common law doctrine that an employer may discharge an employee-at-will for any reason or for no reason is still the law in Illinois, except for when the discharge violates a clearly mandated public policy.” Barr v. Kelso-Burnett Co., 106 Ill.2d 520, 525, 88 Ill.Dec. 628, 630, 478 N.E.2d 1354,1356 (1985). See also Criscione v. Sears, Roebuck & Co., 66 Ill.App.3d 664, 667-69, 23 Ill.Dec. 455, 458, 384 N.E.2d 91, 94 (1978). “The rule in this state is that an employment at will relationship can be terminated for ‘a good reason, *450a bad reason, or no reason at all.’ ” Id. at 669-70, 23 Ill.Dec. at 459, 384 N.E.2d at 95, quoting Loucks v. Star City Glass Co., 551 F.2d 745, 747 (7th Cir.1977). “Where discharge was for the purpose of avoiding a benefit [that] the employer was not obligated to provide” (this case precisely), it still is not actionable. Zick v. Verson Allsteel Press Co., supra, 623 F.Supp. at 929 n. 4. And of course Jordan was not fired.
And if Duff and Phelps had fired Jordan (or refused to let him withdraw his resignation), this would not necessarily have been opportunistic. One might equally well say (in the spirit of Villada) that by trying to stick around merely to participate in an unexpectedly lucrative sale of Duff and Phelps, Jordan would have been the opportunist. The majority says that “understandably Duff & Phelps did not want a viper in its nest, a disgruntled employee remaining only in the hope of appreciation of his stock.” I call that “viper” an opportunist.
The majority cites Rao v. Rao, 718 F.2d 219, 222-23 (7th Cir.1983), which held, applying Illinois law, that a restrictive covenant that by its terms became effective if the employee was discharged “for any reason” was unenforceable because the employee in question had been discharged in bad faith. That decision provides very weak support for the majority’s position in this case. The employee, Hari, had a contract with Mohan Corporation which entitled him, on completing four years of service, to obtain 50 percent of Mohan for $1. Ten days before the four years were up, Hari was fired — precisely so that he would not obtain the 50 percent interest. This court did not suggest that the divestment of Hari was a breach of contract or otherwise unlawful; he apparently had made no such argument. All the court held was that Mohan could not enforce the restrictive covenant. The primary reason was that the covenant was too restrictive, and therefore contrary to public policy. Restrictive covenants are disfavored, and the bad faith displayed by Mohan was an additional reason against enforcing this one. See id. at 223-25.
The issue of Duff and Phelps’ duty to Jordan is a little more complicated than I have portrayed it. A resolution passed at the November 14 meeting of Duff and Phelps’ board of directors provided that any employee who was terminated involuntarily could retain his stock for up to five years. If treated as an amendment to Jordan’s stockholder agreement, the resolution would have prevented Duff and Phelps from forcing him to give up his stock by converting his voluntary termination into an involuntary one. There is a question, however, whether the resolution was effective without all the shareholders’ consent. Moreover, another provision of the same resolution weakens Jordan’s position: “If an employee voluntarily resigns (or gives notice of resignation) from the Corporation, the employee shall sell to the Corporation and the Corporation shall buy all of the Corporation’s common stock then owned by the employee at book value.” Jordan gave notice of resignation on November 14; and, undér the resolution, having given notice he was obligated to sell his stock back to the company at book value.
I would understand, though might not agree, if the majority thought that the issue whether Duff and Phelps had a duty to disclose is unclear enough to warrant a trial. I cannot understand its holding that the duty exists as a matter of law. If, as appears, the holding is that just because Jordan was a shareholder Duff and Phelps had a duty to disclose material information to him, it is inconsistent with the basic premise of the “price and structure” rule (that premise being that a corporation isn’t always required to disclose to its shareholders inside information regarding the prospects for selling the corporation), with the proposition seemingly endorsed by the majority that a duty of disclosure can be waived by its beneficiary, with the even more fundamental proposition that duty is a function of circumstances, and with the terms of the stockholder agreement in this case and of the employment relationship to which that agreement was expressly linked. If the holding is, instead, that the duty to disclose wells up from the complex of implied parts of relations, implied under*451standings, implied pledges, usual practices, and other particulars of the relationship between the parties (that is, if the discussion of these things in the majority opinion is anything more than rebuttal of this dissent), then I do not see how the duty can be thought a matter of law, to be imposed by this court without the benefit of a jury’s or a trial judge’s findings. See Western Industries, Inc. v. Newcor Canada Ltd., 739 F.2d 1198, 1205 (7th Cir.1984); Meyers v. Selznick Co., 373 F.2d 218, 222-23 (2d Cir. 1966) (Friendly, J.). I have a similar doubt whether characterizing the dealings between Hansen and Jordan as “negotiations” within the meaning of the rule announced today is a question of law rather than fact.
Although my principal disagreement is with the majority’s holding about duty to disclose, I also have reservations about the majority’s discussion of causation and damages. The majority is rightly troubled by the issue of causation. If Hansen had made full disclosure to Jordan, what would have happened? Would Jordan have tried to snatch back his resignation? Would Hansen have let him? (He wouldn’t have had to. See Gras v. Clark, 46 Ill.App.3d 803, 807-08, 5 Ill.Dec. 177, 181, 361 N.E.2d 316, 320 (1977); Bauer v. Saper, 133 Ill. App.2d 760, 762, 272 N.E.2d 703, 705 (1971).) Would Jordan’s wife have let him? The case on remand will be a soap opera. The majority believes that the issue of causation can be elided by computing damages as follows: ask an investment banker to estimate the value of shares in Duff and Phelps on December 31, 1983, given what Hansen knew on that day; then subtract (1) the book value of the shares plus (2) the difference between Jordan’s salary at Duff and Phelps and his higher salary at the Houston firm to which he switched. For illustrative purposes only, the court assumes that the investment banker would find that there was a one-third chance of no sale, a one-third chance of the sale to Security Pacific, and a one-third chance of the reorganization made after the deal with Security Pacific fell through.
I have three reservations about this approach:
(1) The book value of Jordan’s shares shouldn’t be subtracted from the award of damages. Jordan never received that book value. He didn’t cash Duff and Phelps’ check for $23,000 in 1984 when he received it, and it is too late to cash it now.
(2) My brethren say they need not choose between “rescissionary damages” and “market damages,” because these are the same thing in this case. They are not; for if the proper measure of damages is compensation rather than restitution, the emotional cost to Jordan of remaining in Chicago must be monetized and subtracted from the award of damages. It is a cost that he avoided by going to Houston; hence it is a benefit that Hansen conferred on him by failing to disclose the information about the firm’s prospects.
(3) Also, if market damages are the correct measure, Duff and Phelps must be permitted to show that the difference between Jordan’s salary from it and from his new employer in Houston was a net benefit to him, rather than merely compensation for giving up a right to buy stock in the new employer. Only if it was the latter would his new, higher salary fairly estimate a cost that Duff and Phelps saved by his departure.
Finally, I do not share the majority’s hope that its suggested method of determining damages will answer the question of causation. That question (would Jordan have stayed with Duff and Phelps if he had known what Hansen knew?) depends not on the valuation of the firm by an investment bank (though that valuation may be relevant) but on the answers to the following questions:
(1) What value would Jordan have placed on the shares, if he had known what Hansen knew? He is not an investment bank.
(2) What was Jordan’s attitude toward taking risks?
(3) How would Jordan have traded off his estimate of the value of his shares — a value he could not have realized immediately even if he had remained with Duff and Phelps — against the higher salary he was *452to receive in Houston and against freedom from domestic conflict?
(4) Would Hansen have let Jordan rescind his resignation?
(5) If so, would Jordan still have been working for Duff and Phelps two years later, when the firm was reorganized?
(6) In this connection, how would Jordan have reacted to the collapse of the Security Pacific deal? Would this have precipitated his departure?
The larger the estimated value of Duff and Phelps when Jordan resigned, the less likely it is that he would have resigned. But that is different from saying, as the majority does, that estimating that value “appears to kill two birds with one stone,” the second bird being the issue of causation. The basis of this statement is the majority’s unduly sanguine assumption that “the probability of Jordan’s remaining tracks the probabilities of these different outcomes____” The majority believes that since Jordan presumably would have left Duff and Phelps if but only if he saw no prospect of a sale of the company, the hypothesized one-third probability of no sale is the probability he would have left. Using the court’s figures, this would knock Jordan’s damages down to $192,000.
If this is what the court is doing, it is breaking with the tradition of expressing causation in either-or terms, and I applaud its boldness. See DePass v. United States, 721 F.2d 203, 206-10 (7th Cir.1983) (dissenting opinion). Only it is using the wrong formula for the relevant probability. The probability that Jordan would have stayed if Duff and Phelps had fulfilled its duty of disclosure is not the probability that an investment bank would assign to Duff and Phelp’s being sold or reorganized; it is a function of the six factors that I have listed.