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In re Fuqua Industries, Inc. Shareholder Litigation | 752 A.2d 126 (1999)
Generally, a plaintiff in a shareholder derivative action must be an adequate representative of the shareholders in the action. In determining whether a plaintiff will be an adequate representative, courts consider eight factors. These include economic antagonisms between the plaintiff and corporation, the remedy sought by the plaintiff, whether the plaintiff is the driving force behind the litigation, lack of familiarity with the litigation, other litigation pending between the plaintiff and corporation, the magnitude of personal interest compared with interest in the derivative action, vindictiveness toward the corporation, and the degree of support received from shareholders represented. In the case In re Fuqua Industries Shareholder Litigation, the Delaware Court of Chancery considered whether a plaintiff was an adequate representative in a shareholder derivative action.
Fuqua Industries was a publicly traded multi billion dollar conglomerate based out of Atlanta. Virginia Abrams and Alan Freberg were both shareholders of Fuqua. Abrams owned a substantial number of shares for over 30 years, and Freberg owned 25 shares.
In nineteen ninety one, Abrams and Freberg sued Fuqua separately in the Delaware Court of Chancery, alleging that the company engaged in self dealing transactions. Both Abrams’s and Freberg’s complaints were later amended and consolidated into a derivative and class action suit.
Before filing suit, Abrams’s husband, a former trial attorney and Fuqua shareholder, sent oral and written communications to Fuqua’s officers and directors complaining of managerial misconduct. After Abrams’s husband didn’t receive a response, he and his wife sued, and he took responsibility for finding and communicating with counsel to represent Virginia Abrams.
While litigation was pending, Abrams became ill, and her memory suffered. In a deposition, she was able to provide a general understanding of her claim but couldn’t give many details.
Further, during Freberg’s deposition, it became evident that he knew very little about the case. In fact, Fuqua alleged that Freberg was just, quote, “a puppet for his fee hungry lawyers,” unquote, in the action.
Subsequently, Fuqua moved to disqualify Abrams and Freberg as representative plaintiffs in the action on the ground of inadequacy. The Delaware Court of Chancery reviewed the motion.
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