James S. Jordan, Cross-Appellee v. Duff and Phelps, Inc., Claire v. Hansen, and Francis E. Jeffries, Defendants- Cross-Appellants

Flamm v. Eberstadt, 814 F.2d 1169 (7th Cir.1987), holds that a corporation need not disclose, to investors trading in the stock market, ongoing negotiations for a merger. A public corporation may keep silent until the firms reach agreement in principle on the price and structure of the deal. See also, e.g., Staffin v. Greenberg, 672 F.2d 1196, 1204-07 (3d Cir.1982); Reiss v. Pan American World Airways, Inc., 711 F.2d 11, 14 (2d Cir.1983). Things are otherwise for closely held corporations. Michaels v. Michaels, 767 F.2d 1185, 1194-97 (7th Cir.1985), holds that a closely held firm must disclose material information to investors from whom it purchases stock, and that a decision to seek another firm with which to merge may be the sort of material information that must be disclosed to the investor selling his shares, even though the firm has not reached agreement in principle on the price and structure of a deal. See also Kohler v. Kohler Co., 319 F.2d 634, 637-38 (7th Cir.1963).

The treatment of public and private corporations is different because of the potential effects of disclosure. Often negotiations must be conducted in secrecy to increase their prospects of success. See Flamm, 814 F.2d at 1175-77. The prospect of disclosure to the public, and therefore to potential rival bidders, may reduce the willingness of some firms to enter negotiations and lead others to cut back on the best price they will offer. Investors are entitled to the benefits of secrecy during the negotiations; a law designed to prevent frauds on investors tolerates silence that yields benefits for investors as a group. Flamm also points out that negotiating firms need to know when they must disclose. Uncertainty may lead to premature disclosures that investors would like to avoid. A close corporation may disclose to an investor without alerting the public at large, however, so that disclosure does not injure investors as a whole. Moreover, a rule that the close corporation (or its managers) must disclose in the course of negotiating to purchase stock supplies a timing rule on which the firm may rely. It need disclose the existence of the decision to sell (and the status of negotiations) only to the person whose stock is to be acquired. The face-to-face negotiations allow the investor to elicit the information he requires, see Michaels, 767 F.2d at 1196, and Hamilton v. Harrington, 807 F.2d 102, 106-07 & n. 5 (7th Cir.1986), while permitting the firm to extract promises of confidentiality that safeguard the negotiations.

This case contains two wrinkles. First, it involves the acquisition of a closely held corporation by a public corporation. Second, the investor in the closely held corporation was an employee, and he was offered shares to cement his loyalty to the firm; yet he quit (and was compelled by a shareholders' agreement to sell his shares) for reasons unrelated to the value of the stock. The parties hotly contest the effects of these facts.

* The case is here following a grant of summary judgment for the defendants. Judge Hart denied one motion for summary judgment and told the parties to address in their trial briefs the defendants' second motion. Judge Leinenweber, to whom the case was reassigned, then granted this motion shortly before the trial. The materials that were identified in plaintiff's trial brief and the pretrial order, taken with reasonable inferences in the light favorable to him, support the following tale.

Duff and Phelps, Inc., evaluates the risk and worth of firms and their securities. It sells credit ratings, investment research, and financial consulting services to both the firms under scrutiny and potential investors in them. Jordan started work at Duff & Phelps in May 1977 and was viewed as a successful securities analyst. In 1981 the firm offered Jordan the opportunity to buy some stock. By November 1983 Jordan had purchased 188 of the 20,100 shares outstanding. He was making installment payments on another 62 shares. Forty people other than Jordan held stock in Duff & Phelps.

Jordan purchased his stock at its "book value" (the accounting net worth of Duff & Phelps, divided by the number of shares outstanding). Before selling him any stock, Duff & Phelps required Jordan to sign a "Stock Restriction and Purchase Agreement" (the Agreement). This provided in part:

Upon the termination of any employment with the Corporation ... for any reason, including resignation, discharge, death, disability or retirement, the individual whose employment is terminated or his estate shall sell to the Corporation, and the Corporation shall buy, all Shares of the Corporation then owned by such individual or his estate. The price to be paid for such Shares shall be equal to the adjusted book value (as hereinafter defined) of the Shares on the December 31 which coincides with, or immediately precedes, the date of termination of such individual's employment.

Duff & Phelps enforced this restriction with but a single exception. During 1983 the board of directors of Duff & Phelps adopted a resolution--of which Jordan did not learn until 1984--allowing employees fired by the firm to keep their stock for five years. The resolution followed the discharge of Carol Franchik, with whom Claire Hansen, the (married) chairman of the board, had been having an affair. When Franchik threatened suit, the board allowed her to keep her stock.

While Jordan was accumulating stock, Hansen, the chairman of the board, was exploring the possibility of selling the firm. Between May and August 1983 Hansen and Francis Jeffries, another officer of Duff & Phelps, negotiated with Security Pacific Corp., a bank holding company. The negotiators reached agreement on a merger, in which Duff & Phelps would be valued at $50 million, but a higher official within Security Pacific vetoed the deal on August 11, 1983. As of that date, Duff & Phelps had no irons in the fire.

Jordan, however, was conducting a search of his own--for a new job. Jordan's family lived near Chicago, the headquarters of Duff & Phelps, and Jordan's wife did not get along with Jordan's mother. The strain between the two occasionally left his wife in tears. He asked Duff & Phelps about the possibility of a transfer to the firm's only branch office, in Cleveland, but the firm did not need Jordan's services there. Concluding that it was time to choose between his job and his wife, Jordan chose his wife and started looking for employment far away from Chicago. His search took him to Houston, where Underwood Neuhaus & Co., a broker-dealer in securities, offered him a job at a salary ($110,000 per year) substantially greater than his compensation ($67,000) at Duff & Phelps. Jordan took the offer on the spot during an interview in Houston, but Underwood would have allowed Jordan to withdraw this oral acceptance.

On November 16, 1983, Jordan told Hansen that he was going to resign and accept employment with Underwood. Jordan did not ask Hansen about potential mergers; Hansen did not volunteer anything. Jordan delivered a letter of resignation, which Duff & Phelps accepted the same day. By mutual agreement, Jordan worked the rest of the year for Duff & Phelps even though his loyalties had shifted. He did this so that he could receive the book value of the stock as of December 31, 1983--for under the Agreement a departure in November would have meant valuation as of December 31, 1982. Jordan delivered his certificates on December 30, 1983, and the firm mailed him a check for $23,225, the book value (at $123.54 per share) of the 188 shares of stock. Jordan surrendered, as worthless under the circumstances, the right to buy the remaining 62 shares.

Before Jordan cashed the check, however, he was startled by the announcement on January 10, 1984, of a merger between Duff & Phelps and a subsidiary of Security Pacific. Under the terms of the merger Duff & Phelps would be valued at $50 million. If Jordan had been an employee on January 10, had quickly 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" (a percentage of Duff & Phelps's profits to be paid to the former investors--an arrangement that keeps the employees' interest in the firm keen and reduces the buyer's risk if profits fall short). Jordan refused to cash the check and demanded his stock back; Duff & Phelps told him to get lost. He filed this suit in March 1984, asking for damages measured by the value his stock would have had under the terms of the acquisition.

The public announcement on January 10 explained that the boards of the two firms had reached an agreement in principle on January 6. The definitive agreement was signed on March 23. Because Security Pacific is a bank holding company, the acquisition required the approval of the Board of Governors of the Federal Reserve. The Fed granted approval, but with a condition so onerous that the firms abandoned the transaction. The Fed objected to Security Pacific's acquisition of Duff & Phelps's credit rating business. 71 Fed.Res.Bull. 118 (1985). The agreement was formally cancelled on January 9, 1985. Duff & Phelps quickly asked the district court to dismiss Jordan's suit, on the ground that he could not establish damages. Jordan responded by amending his complaint, with Judge Hart's permission, to ask for rescission rather than damages.

Throughout 1985 Duff & Phelps continued looking for a partner; finding none, it decided to dance with itself. The firm's management formed an "Employee Stock Ownership Trust", which was able to borrow $40 million against the security of the firm's assets and business. The Trust acquired Duff & Phelps through a new firm, Duff Research, Inc. This transaction occurred in December 1985. The employees at the time, together with Carol Franchik, received cash, notes, and beneficial interests in the Trust. Jordan asserts that the package was worth almost $2000 per share, or $497,000 if he had held 250 shares in December 1985.

Defendants' second motion for summary judgment maintained that information about negotiations looking toward a merger is immaterial as a matter of law. The information Jordan says should have been disclosed before he departed includes: (1) the negotiations through August 11, 1983, with Security Pacific; (2) the decision by the board of Duff & Phelps on November 14, 1983, to seek bids for the firm; (3) miscellaneous conversations between Hansen and employees of Security Pacific during the fall of 1983, which Jordan says may have been renewed overtures; (4) the serious negotiations during December 1983 between Duff & Phelps and Security Pacific, after the manager who nixed the deal on August 11 changed his mind; (5) the board's decision to allow Franchik to keep her stock; and (6) the formal settlement agreement signed by Franchik on December 21, 1983. Duff & Phelps, on the other hand, believes that Jordan quit on November 16, 1983, that nothing after that date matters, and that nothing before that date needed to be revealed.

Judge Leinenweber concluded that the agreement in principle approved on January 6, 1984, was the first thing that needed to be disclosed. Because Jordan sold his stock no later than December 31, Duff & Phelps did not violate any duty to disclose. Jordan v. Duff & Phelps, Inc., Fed.Sec.L.Rep. (CCH) p 92,724 (N.D.Ill.1986). The court followed the holding of Judge Shadur in Guy v. Duff & Phelps, Inc., 628 F.Supp. 252 (N.D.Ill.1985), that because Security Pacific is a public corporation, the governing approach is the price-and-structure rule of Staffin, rather than the different approach Michaels applies to close corporations. The court stated: "When at least one of the parties to acquisition negotiations is a publicly-traded company, an agreement in principal [sic] to the acquisition by both corporations must occur before either corporation has a duty to disclose the fact of negotiations to a stockholder." Fed.Sec.L.Rep. at p. 93,517. The district judge allowed that the negotiators may have settled the terms of the deal before December 31 but continued: "Although the negotiators may have agreed before December 31, 1983, the corporations did not agree until action by their Boards of Directors or other authorized agents." Ibid. (emphasis in original).

Judge Leinenweber also concluded that even if wronged, Jordan is not entitled to relief. Id. at 93,518. He is not entitled to rescission because he is not employed by Duff & Phelps, and the Agreement ties ownership to employment. (The Franchik exception, according to the court, was at most a breach of the Agreement; because the Agreement was an arrangement among the shareholders, only unanimous consent could modify it.) He is not entitled to damages because the Security Pacific deal fell through.

Michaels holds that close corporations that purchase their own stock must disclose to the sellers all information that meets the standard of "materiality" set out in TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976). See Michaels, 767 F.2d at 1194-97. Michaels also holds that the special "price and structure" rule, under which public corporations need not disclose impending negotiations for their merger, does not apply to close corporations. See also Rochez Bros., Inc. v. Rhoades, 491 F.2d 402 (3d Cir.1974); Thomas v. Duralite Co., 524 F.2d 577 (3d Cir.1975); Nelson v. Serwold, 576 F.2d 1332 (9th Cir.1978); Holmes v. Bateson, 583 F.2d 542, 558 (1st Cir.1978); cf. Arber v. Essex Wire Corp., 490 F.2d 414, 418 (6th Cir.1974). A jury would be free under Michaels to conclude that the board's decision of November 14 to seek a buyer for Duff & Phelps--coupled with the fact that at least one putative buyer thought Duff & Phelps worth $50 million, which casts an important light on the prospect of a profitable conclusion to the search--was "material" under the standard of TSC Industries. That is, there is a "substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder" and "would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available." 426 U.S. at 449, 96 S.Ct. at 2132 (footnote omitted).

Duff & Phelps replies that Michaels is inapplicable. The district court agreed, but we do not. The rationale for the price-and-structure rule, which we adopted in Flamm, is that firms may need secrecy to obtain the best price. Flamm, 814 F.2d at 1175-77. To tell one stockholder of a publicly traded firm is to tell all, letting the cat out of the bag. Security Pacific therefore was entitled to be mum about its plans and to insist that Duff & Phelps also keep matters secret. But a whisper in Jordan's ear would not have revealed anything to the public. Hansen and other members of the executive committee of Duff & Phelps's board already knew about the negotiations, and apparently Hansen had been whispering in Franchik's ear. Because it is possible to inform shareholders of closely held firms about ongoing negotiations without informing the public--because indeed the firm need tell only the few investors from whom it buys stock during the negotiations--Michaels rather than Flamm supplies the definition of materiality here.

A jury could find that the information withheld on November 16 is "material". A jury also could find that December 30, rather than November 16, is the date of the "sale" of the stock. If December 30 is the date of sale, the information withheld then was "material" under Michaels and TSC Industries as a matter of law. By then the negotiating teams for Duff & Phelps and Security Pacific had negotiated the price and structure of the deal. (We need not decide whether, had Duff & Phelps been a public firm, it could have withheld notice to the market at large until the boards approved this agreement in January.) So there are two linked materiality questions for the jury: whether the information withheld on November 16 was material, and whether the sale took place on November 16 or December 30.

Duff & Phelps insists that nothing after November 16 matters. A person who sells stock through a broker has several business days to deliver the certificates; the sale is nonetheless final--with price and disclosure obligations fixed forever--on the date of the deal rather than the date of delivery. Duff & Phelps treats the letter of resignation on November 16 as an irrevocable sale with deferred delivery. Yet if the "sale" occurred on November 16, then under the Agreement the stock would have been valued as of December 31, 1982. That Duff & Phelps valued the stock as of December 31, 1983, may persuade a jury that it treated the "sale" as made on that date. Moreover, Jordan insists that other employees were allowed to withdraw their resignations, and that he could have done so as late as December 31--if, say, his wife and his mother had reconciled. A cabinet officer who resigns (and has the resignation accepted by the President) is out of office and cannot stick around without being nominated and confirmed again; but private parties may decide to give less finality to resignations. The terms on which resignations may be withdrawn may be implicit parts of the relations between Duff & Phelps and its employees, and Jordan is entitled to an opportunity to demonstrate that he could have remained at the firm. If he can prove this, then December 30 rather than November 16 is the date on which the materiality of the firm's omissions must be assessed.

All of this supposes that Duff & Phelps had a duty to disclose anything to Jordan. Most people are free to buy and sell stock on the basis of valuable private knowledge without informing their trading partners. Strangers transact in markets all the time using private information that might be called "material" and, unless one has a duty to disclose, both may keep their counsel. Dirks v. SEC, 463 U.S. 646, 653-64, 103 S.Ct. 3255, 3260-66, 77 L.Ed.2d 911 (1983); Chiarella v. United States, 445 U.S. 222, 227-35, 100 S.Ct. 1108, 1114-18, 63 L.Ed.2d 348 (1980); cf. Barker v. Henderson, Franklin, Starnes & Holt, 797 F.2d 490 (7th Cir.1986). The ability to make profits from the possession of information is the principal spur to create the information, which the parties and the market as a whole may find valuable. The absence of a duty to disclose may not justify a lie about a material fact, but Duff & Phelps did not lie to Jordan. It simply remained silent when Jordan quit and tendered the stock, and it offered the payment required by the Agreement. Duff & Phelps maintains that it was entitled to be silent, as Dirks could trade in silence and tip off his friends, even though it could not have lied in response to the questions Jordan should (in retrospect) have asked but did not.

This argument is unavailing on the facts as we know them. The "duty" in question is the fiduciary duty of corporate law. Close corporations buying their own stock, like knowledgeable insiders of closely held firms buying from outsiders, have a fiduciary duty to disclose material facts. Kohler and Michaels rest on this duty, as do some of the earliest cases of trading by insiders on material information. The "special facts" doctrine developed by several courts at the turn of the century is based on the principle that insiders in closely held firms may not buy stock from outsiders in person-to-person transactions without informing them of new events that substantially affect the value of the stock. See, e.g., Strong v. Repide, 213 U.S. 419, 29 S.Ct. 521, 53 L.Ed. 853 (1909), and the cases discussed in Comment, Insider Trading at Common Law, 51 U.Chi.L.Rev. 838 (1984); cf. Janigan v. Taylor, 344 F.2d 781 (1st Cir.1965); but cf. Freeman v. Decio, 584 F.2d 186 (7th Cir.1978) (Indiana law does not allow the corporation to recover insiders' profits on trades made with special knowledge); Robert Charles Clark, Corporate Law 311-12 (1986) (the common law duty to disclose to selling investors was quite limited).

Because the fiduciary duty is a standby or off-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. It is a violation of duty to steal from the corporate treasury; it is not a violation to write oneself a check that the board has approved as a bonus. We may assume that duties concerning the timing of disclosure by an otherwise-silent firm also may be the subject of contract. Section 29(a) of the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78cc(a), forbids waivers of the provisions of the Act, and here the critical provision is Sec. 10(b), 15 U.S.C. Sec. 78j(b), and the SEC's Rule 10b-5, 17 C.F.R. Sec. 240.10b-5. But a provision must be applicable to be "waived", and the existence of a requirement to speak is a condition of the application of Sec. 10(b) to a person's silence during a securities trade. The obligation to break silence is itself based on state law, see Dirks, Chiarella, and Barker, and so may be redefined to the extent state law permits. See, e.g., Toledo Trust Co. v. Nye, 588 F.2d 202, 206 (6th Cir.1978) (there is no liability under the securities laws for failing to disclose information that has been made irrelevant by contract, in Nye a contract allowing someone to purchase shares at a formula price on a date certain). But we need not decide how far contracts can redefine obligations to disclose. Jordan was an employee at will; he signed no contract.

The stock was designed to bind Duff & Phelps's employees loyally to the firm. The buy-sell agreement tied ownership to employment. Understandably Duff & Phelps did not want a viper in its nest, a disgruntled employee remaining only in the hope of appreciation of his stock. So there could have been reason to divorce the employment decision from the value of the stock. Perhaps it would have been rational for each employee to agree with Duff & Phelps to look to salary alone in deciding whether to stay. A contractual agreement that the firm had no duty to disclose would have uncoupled the investment decision from the employment decision, leaving whoever was in the firm on the day of a merger to receive a surprise appreciation. Some might lose by leaving early; some might reap a windfall by buying just before the announcement; all might think it wise to have as little as possible said in the interim.

Yet an explicit agreement to make all employment decisions in ignorance of the value of the stock might not have been in the interests of the firm or its employees. Duff & Phelps was trying to purchase loyalty by offering stock to its principal employees. The package of compensation contained salary and the prospect of appreciation of the stock. Perhaps it paid a lower salary than, say, Underwood Neuhaus & Co., because its package contained a higher component of gain from anticipated appreciation in the stock. It is therefore unwarranted to say that the implicit understanding between Jordan and Duff & Phelps should be treated as if it had such a no-duty clause; we are not confident that this is the clause firms and their employees regularly would prefer. Duff & Phelps has not identified any firm that adopted such a clause explicitly, and the absence of explicit clauses counsels caution in creating implicit exceptions to the general fiduciary duty.

The course of dealing between Jordan and Duff & Phelps suggests that the firm did not demand that employees decide whether to stay or go without regard to the value of the stock. It apparently informed Jordan what the book value was expected to be on December 31, 1983, so that Jordan could decide whether to leave in November (receiving the value as of December 31, 1982) or stay for another six weeks. The firm did not demand that Jordan depart as soon as it learned he had switched loyalties; it allowed employees to time their departures to obtain the maximum advantage from their stock. The Agreement did not ensure that employees disregard the value of the stock when deciding what to do, and neither did the usual practice at Duff & Phelps. So the possibility that a firm could negotiate around the fiduciary duty does not assist Duff & Phelps; it did not obtain such an agreement, express or implied.

The closest Duff & Phelps came is the provision in the Agreement fixing the price of the stock at book value. Yet although the Agreement fixed the price to be paid those who quit, it did not establish the terms on which anyone would leave. Thus cases such as Toledo Trust and St. Louis Union Trust Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 562 F.2d 1040 (8th Cir.1977), do not assist Duff & Phelps. These cases dealt with agreements calling for valuation at a formula price on a fixed date. In St. Louis Union Trust the date was the death of the employee, the formula was book value. The court of appeals held that there was no need to pay the employee's estate a different price, just because a few weeks later Merrill Lynch went public at a higher price. The employee presumably did not take the possibility of a merger into account in deciding whether to die, and the formula price made "disclosure" irrelevant. Toledo Trust, too, discussed a buyback triggered by death. (The contract allowed a departure from the formula price, but as the court observed, the variance clause "merely stated the truism that parties to a binding contract of sale can mutually agree to sale terms different than those set forth in the contract." 588 F.2d at 206.) Jordan, though, exercised choice about the date on which the formula would be triggered. He could have remained at Duff & Phelps; his decision to depart was affected by his wife's distress, his salary, his working conditions, the enjoyment he received from the job, and the value of his stock. The departure of such an employee is an investment decision as much as it is an employment decision. It is not fanciful to suppose that Mrs. Jordan would have found her mother in law a whole lot more tolerable if she had known that Jordan's stock might shortly be worth 20 times book value.

The securities acts apply to investment decisions, even those made indirectly or bound up with other decisions, such as employment or entrepreneurship. E.g., Landreth Timber Co. v. Landreth, 471 U.S. 681, 105 S.Ct. 2297, 85 L.Ed.2d 692 (1985) (combined investment-entrepreneurship decision); Norris v. Wirtz, 719 F.2d 256 (7th Cir.1983) (securities laws apply to a sale of stock by a trustee when the beneficiary has a right to disapprove the transaction, even though the beneficiary does not negotiate its nature or price); Sulkow v. Crosstown Apparel Inc., 807 F.2d 33, 37 (2d Cir.1986) (collecting cases applying Rule 10b-5 to stock that could be sold only at a formula price or to identified buyers). The position of this court that Sec. 10(b) and cognate provisions of the securities laws were designed exclusively to protect passive investors, Sutter v. Groen, 687 F.2d 197, 201 (7th Cir.1982), was rejected in Landreth and, e.g., United States v. Naftalin, 441 U.S. 768, 775-77, 99 S.Ct. 2077, 2082-83, 60 L.Ed.2d 624 (1979). There must be an "investment" decision, to be sure, see Rand v. Anaconda-Ericsson, Inc., 794 F.2d 843 (2d Cir.1986); Harris Trust & Savings Bank v. Ellis, 810 F.2d 700, 703-04 (7th Cir.1987); but Jordan unavoidably made one. That he took the value of stock into account is evident from the timing of his departure. A few thousand dollars' increase in book value led the Jordans to stay in Chicago an extra six weeks. How long would they have stayed for the prospect of another $620,000?

Our dissenting colleague concludes that all of this is beside the point because Hansen could have said, on receiving Jordan's letter on November 16: "In a few weeks we will pull off a merger that would have made your stock 20 times more valuable. It's a shame you so foolishly resigned. But even if you hadn't resigned, we would have fired you, the better to engross the profits of the merger for ourselves. So long, sucker." This would have been permissible, under our colleague's interpretation, because Jordan was an employee at will and therefore could have been fired at any time, even the day before the merger, for any reason--including the desire to deprive Jordan of a share of the profits. The ability to fire Jordan enabled the firm to "call" his shares, at book value, on whim. On this view, it is foolish to say that Duff & Phelps had a duty to disclose, because disclosure would have been no use to Jordan. (Perhaps this is really an argument about "causation" rather than "duty", but the terminology is unimportant.) But Duff & Phelps itself does not press this argument, and in civil litigation an appellate court ought not put words in a party's mouth and use them as the grounds on which to decide. E.g., Bonds v. Coca-Cola Co., 806 F.2d 1324, 1328-29 (7th Cir.1986). The district court has not had an opportunity to address such a claim, and Jordan has not been asked to respond to it. Perhaps Duff & Phelps does not want to establish a reputation for shoddy dealing; as our dissenting brother observes, a firm's desire to preserve its reputation is a powerful inducement to treat its contractual partners well. To attribute to a litigant an argument that it will take every possible advantage is to assume that the party wishes to dissipate its reputation, and the assumption is unwarranted.

More than that, a person's status as an employee "at will" does not imply that the employer may discharge him for every reason. Illinois, where Jordan was employed, has placed some limits on the discharge of at-will employees. E.g., Palmateer v. International Harvester Co., 85 Ill.2d 124, 52 Ill.Dec. 13, 421 N.E.2d 876 (1981); Zick v. Verson Allsteel Press Co., 623 F.Supp. 927 (N.D.Ill.1985) (discussing Illinois law). We do not disparage the utility of at-will contracts; this very panel recently recognized the value of informal (meaning not legally binding) employment relations. Miller v. International Harvester Co., 811 F.2d 1150, 1151 (7th Cir.1987). See also Kumpf v. Steinhaus, 779 F.2d 1323, 1326 (7th Cir.1985); Richard A. Epstein, In Defense of the Contract at Will, 51 U.Chi.L.Rev. 947 (1984). But employment at will is still a contractual relation, one in which a particular duration ("at will") is implied in the absence of a contrary expression. E. Allan Farnsworth, Contracts 532 n. 29 (1982). The silence of the parties may make it necessary to imply other terms--those we are confident the parties would have bargained for if they had signed a written agreement. 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. "[T]he fundamental function of contract law (and recognized as such at least since Hobbes's day) is to deter people from behaving opportunistically toward their contracting parties, in order to encourage the optimal timing of economic activity and to make costly self-protective measures unnecessary." Richard A. Posner, Economic Analysis of Law 81 (3d ed. 1986). See also, e.g., Morin Building Products Co. v. Baystone Construction, Inc., 717 F.2d 413, 414-15 (7th Cir.1983); Martindell v. Lake Shore National Bank, 15 Ill.2d 272, 286, 154 N.E.2d 683, 690 (1958); Restatement (Second) of Contracts Sec. 205 (1979).

Employment creates occasions for opportunism. A firm may fire an employee the day before his pension vests, or a salesman the day before a large commission becomes payable. Cases of this sort may present difficult questions about the reasons for the decision (was it opportunism, or was it a decline in the employee's performance?). The difficulties of separating opportunistic conduct from honest differences of opinion about an employee's performance on the job may lead firms and their employees to transact on terms that keep such disputes out of court--which employment at will usually does. But no one, not even Professor Epstein, doubts that an avowedly opportunistic discharge is a breach of contract, although the employment is at-will. E.g., Coleman v. Graybar Electric Co., 195 F.2d 374 (5th Cir.1952), discussed with approval in Epstein, 51 U.Chi.L.Rev. at 980-82. See also, e.g., Wilkes v. Springside Nursing Home, Inc., 370 Mass. 842, 353 N.E.2d 657 (1976). The element of good faith dealing implied in a contract "is not an enforceable legal duty to be nice or to behave decently in a general way." Zick, 623 F.Supp. at 929. It is not a version of the Golden Rule, to regard the interests of one's contracting partner the same way you regard your own. An employer may be thoughtless, nasty, and mistaken