In Re Fuqua Industries, Inc. Shareholder Litigation

752 A.2d 126 (Del. Ch. 1999)

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Nature of the Case

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Facts

Abrams’ (Ps) alleged wrongs was a claim that Ds engaged in a series of transactions designed to entrench Fuqua's (D) board. In May 1997, this Court dismissed all of Ps' class claims, and all their derivative claims save one. The surviving derivative claim concerns the decision of Fuqua directors to exempt Triton from 8 Del. C. § 203 and to repurchase 4.9 million Fuqua shares, both for the alleged purpose of increasing Triton's control over Fuqua, entrenching Fuqua's board and, consequently, denying Fuqua shareholders a change of control premium. Shortly after Ps filed their third amended complaint in 1998 against Fuqua and six former directors of Fuqua, Ds moved to disqualify Abrams and Freberg as inadequate plaintiffs to prosecute the derivative action. Ds contend that because Ps are demonstrably unfamiliar with many of the facts and allegations of the suit prosecuted in their names and because they exercise little if any, control over the suit, they should be disqualified as derivative Ps on adequacy grounds. Mrs. Abrams has held Fuqua shares (since converted to Metromedia) for over thirty years. The quantity of her holdings has ranged from as much as 12,008 Fuqua shares to the current level of 8000 Metromedia shares. The decision to purchase Fuqua shares, as most all of Abrams' investment decisions, was made jointly with her husband, Burton Abrams, a retired trial attorney. During the long pendency of this litigation, Mrs. Abrams fell ill. As she concedes, her memory and faculties have suffered as a result. In a 1998 deposition, it was evident that Mrs. Abrams lacked a meaningful grasp of the facts and allegations of the case prosecuted in her name. Alan Freberg, the second derivative plaintiff in this action, purchased twenty-five Fuqua shares in 1989. Freberg's deposition testimony evidences that his knowledge of the case is at best elliptical. Ds argue that before his 'cram' session immediately before the deposition, Freberg knew absolutely nothing about this matter and had not even been privy to the third amended complaint.