Shareholder Lawsuit Against Directors to Bar Control of ESOP Votes and Recover Corporate Funds

(December 4, 2003)

A shareholder lawsuit was commenced on December 4, 2003 against the directors of Farmer Bros. Co.  A copy of the complaint can be downloaded from the link below.

The action seeks injunctive relief barring management's voting control of the stock purchased by the company's ESOP, approximately 8% of the outstanding shares, and also recovery from the individual directors of the estimated $35 million corporate funds used to purchase stock for the ESOP. According to the allegations, the use of corporate funds for ESOP purchases violated applicable federal laws and was intended to entrench management to the detriment of minority shareholders.

All the company's current directors and the recently resigned director who now serves as corporate secretary are named as individual defendants. These are the same individuals who are identified in the Franklin Mutual proposal for a shareholder vote to determine whether their conduct met the standards required by California statutes for corporate indemnification.

The lawsuit is brought on behalf of a plaintiff class that includes all Farmer Bros. shareholders other than the company's officers and directors, any entities controlled by defendants, and the company's ESOP or its beneficiaries.

The shareholder representing the plaintiff class is Leonard Rosenthal, Professor of Finance at Bentley College and a frequently quoted expert on shareholder rights. Other Farmer Bros. shareholders will be advising Professor Rosenthal on their views of investor interests to guide his conduct of the litigation. Plaintiff's counsel is Goodkind Labaton Rudoff & Sucharow LLP, an experienced advocate of investor interests which had previously acted as legal counsel for the March 2003 arrangements to authorize a shareholder Delegate's demands for information.