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[Letterhead]
Mitchell Partners, L.P.
3187-D Airway Avenue
Costa Mesa, California 92626
(714) 432-5300
Fax (714) 432-5303
September 12, 2002
Keir D. Gumbs, Esquire
Division of Corporation Finance
Securities and Exchange
Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re:
Farmer Bros. Co.
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Shareholder
proposal for independent board
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August 26, 2002
letter addressing Rule 14a-8
Dear Mr. Gumbs:
In response to the
August 26, 2002 letter from Wilmer Cutler & Pickering on behalf of Farmer
Bros. Co. management, Mitchell Partners, L.P., does not believe that
management's stated intention to exclude our proposal for an independent
board ("Proposal") is consistent with either Rule 14a-8 or the interests of
shareholders.
First, however, we
should state that we have no objection to making revisions to clarify our
Proposal or its Supporting Statement. We had hoped that the proposed
procedures and explanations were adequately stated within the 500 word
limit, but would welcome the Staff's advice of any matters which may confuse
or mislead shareholders. It should be noted that Farmer Bros. management
had not informed us of any concerns about the clarity of our Proposal prior
to seeking your concurrence to exclude it from the Company's proxy
statement. We would nevertheless welcome their advice now, if offered
constructively for the purpose of properly informing shareholders rather
than as a justification for depriving them of the right to vote.
Addressing the
expressed belief of Farmer Bros. management that our Proposal may be
excluded pursuant to Rule 14a-8(i)(6), we do not understand their
arguments. Management seems to question the right of shareholders to
establish any qualifications for directors, and to claim that any such
qualifications would conflict with shareholder rights to elect directors, or
could not be implemented. Although their letter refers to California law,
Farmer Bros. management has not actually identified any specific provision
which would be inconsistent with establishing qualifications or restrictions
for directors. We are not aware of any such law, and if one existed it
would certainly disrupt currently accepted practices. In fact, our
Proposal's requirements of independent directors are similar to those which
have been successfully implemented by an increasingly large proportion of
publicly traded companies, and are also similar to those of the recent
Sarbanes-Oxley Act as well as the long-standing Investment Company Act of
1940.
Farmer Bros.
management's argument that the Proposal cannot be implemented for procedural
reasons is inconsistent with our reading of the Company's bylaws. We are
not aware of any restriction, in the bylaws or in California law, of the
board's authority to increase or decrease the number of its members and to
fill vacancies, or to adopt such other procedures as they see fit to
accommodate the increasingly common requirement of majority independence.
We provided one procedure ourselves within the Proposal's 500 word limit,
giving any director the authority to call a special meeting for the election
of directors in the event that a majority of directors are not independent.
We will be pleased to add more provisions or periods for compliance to our
Proposal, if the Staff believes that such revisions would benefit
shareholders.
The arguments
presented by Farmer Bros. management relating to Rule 14a-8(i)(8) appear to
confuse the establishment of qualifications with the process of electing
directors. For one thing, our Proposal has been submitted for voting at the
same shareholder meeting which will elect directors for all of the seats on
the Company's board. And, as noted above, there are no restrictions on the
board's authority to adopt provisions accommodating any transition
requirements. Again, though, we are willing to revise our Proposal if the
Staff believes that the definition of additional procedures or periods for
compliance would benefit shareholders.
Referring to Farmer
Bros. management’s arguments based on Rule 14a-8(i)(3), we would not have
expected anyone to interpret our statements as they suggest. For example,
we said in our Supporting Statement that the Proposal “will also establish
processes, including the restoration of cumulative voting, for
representation of shareholder interests.” Farmer Bros. management has
claimed, on page 7 of their letter, that this simple statement “unduly
characterizes cumulative voting as the key to shareholder representation,
failing to explain the practical effect of cumulative voting: to increase
the voting power of minority shareholders.” We do not believe that our
statement would be interpreted as meaning that we consider cumulative voting
to be “the key” rather than one of many keys to representation of
shareholder interests. But we agree with Farmer Bros. management that our
Supporting Statement could be improved by adding an explanation of
cumulative voting for any shareholders who maybe unfamiliar with its
operation and benefits. We were unable to fit such an explanation within
the 500 word limit, understanding that supporting statements are optional
rather than required in shareholder proposals. We would welcome an
exemption from that limit to add this further explanation.
Finally, we note that
Farmer Bros. management has not provided any California legal opinions in
support of their interpretations of applicable state law. We therefore
assume that there is no need for us to do so.
Please let us know
what additional information you may find useful. Our intent is to present a
Proposal that will benefit shareholders, and we will welcome your guidance.
Very
Truly Yours,
Mitchell Partners, L.P.
By James E. Mitchell
General Partner
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